this is nightly business report with tyler mathisen and susie gearing. in the fast lane, auto sales surge in may and when the detroit automakers do well, a lot of other companies and their stocks may follow. dials in, dow component at&t is doing something we don't often see, raising its full-year revenue forecast for the second time. so, why did the stocks trade lower? payday, seattle approves the nation's highest minimum wage. will it mean higher prices, lower employment and why should a city set wages at all? all that and more tonight on nightly business report for tuesday, june 3rd. good evening, everyone. american consumers were busy buying cars in may and lots of

them. every major american automaker reported sales that were way above estimates and if this keeps up, the industry is on track to sell nearly 17 million vehicles this year. it hasn't seen that many since 2005. now, the gains were across the board, chrysler sales up 17%, it was helped by surging demand for jeeps. general motors rose 13%. and that's despite recalling millions of cars. and ford had its best may in a decade. sales were up 3%. investors likeded what they saw. gm shares rose more than 1%. ford also higher today. phil lebeau has more on why sales were red hot in may and look ahead to how the summer is shaping up for the automakers. >> a big day for the auto industry, as most of the major automakers reported may sales that were much better than expected. depending on the automaker, they beat street estimates by between 2 and 6%. and a couple of storylines stand out. first of all, recalls, particularly at general motors

are not keeping people out of the show room. gm, in particular, reported sale gains of 13% for the month of may. almost doubled what many were expecting. also, this is not a case of the industry sweetening the deal in order to push metal in the show room. in fact, the average incentive last month was just under $3,000, roughly where it's been for the rest of the industry all year long. and fine linger the big focus now will turn on what kind of inventory levels we see for the remainder of the summer. with this may, many are wondering if sales will remain this robust in june, july and august. and if that happens, will automakers have to increase production? at this point, almost everybody agrees, it's little too soon to say that the industry's ready to build more cars and trucks. by the way, june sales, they are expected to be strong but not as strong as they were in may. phil lebeau, nightly business report, chicago. so, which other companies may be benefiting from last

month's blowout auto sales? get some answers from jamie albert teen, vice president with stiffle equity research. jamie, welcome. good to see you. when i thought of which companies might be a beneficiary here, i thought of some of the companies like masco that make auto interiors, johnson controls, the engine makers. you go a different way. you like a couple of dealers. >> he do, indeed. i think one of the things i would highlight from the may sales results, two things. the first is retail sales strength across all the manufacturer, virtually all the manufacturer reports were highlighted today. it tells us that's more than sort of fill in the fleet channel, if you will. and the clearest way actually to play the retail sales strength is through the retailers. we look at auto dealers, like penske and lithia and quite frankly, in group one, are three buy rated auto dealer names. we think there is a really good opportunity here to benefit from the new vehicle surge, as well as some of the dynamics in

public service markets as well. >> tell us more about the parts and service area because i guess you get a car and you are still have to service it and you don't necessarily have to go to your dealer. >> there's warranty service, zero to 40-year-old vehicles and customer pay, i think where dealers have a tougher time retaining customers and lose some share to the aftermarket, but the fact that we are seeing new vehicle sales surging earlier in the decade, just now getting that benefit point warranty side of the business and parts and service, their highest profit channel or vertical, if you will. so, that's really strong indicator for earnings growth in the year ahead. >> one of your choices there was monroe muffler. another was lk hugh, i believe. >> so it's a little bit counterintuitive on the service side. i think as a result of more consumers replacing vehicles rather than repairing, it's gonna constrain the comp sales recovery i full, at monroe. that's really good for m & a. that's one of the most fragmented markets in all of retail.

we like the acquirers, net share gainers as a result. we recommend mnro. on the lkq side, their auto distribution company, we have also been hearing in addition to sales strength at the retail channel, vehicle miles traveled have been continuing to increase and the outlook for the summer is actually quite strong. more vehicles on the road tends to make for more collisions and lkq is a big distributor in the collision and body market. >> jamie, you heard our report and phil was saying this so far, the sometimes are that june is not going to be as strong as the may was. what do you see for the next couple of months for how the auto industry sales are going to go and what do you think of kbchlt m and ford? >> well, first, on the industry, i think you're going to have to see more months in the sort of mid-16 million territory to get to most analysts, including yoursu!zk) first year. we are still modeling 16.25 million units for the full year, full percent industry growth but not likely we will trend higher

than that throughout the strong summer selling season. as it relates to ford and gm, i think ford is really more focussed now on a product transition them scaled back production to some degree. they are selling down older units to make way for their more refresh models, not the least of which is the f-150 coming late this year, early next year. gm is a different story, as phil mentioned in his segment, the recall impact has been nil. as we have expected, toyota recalls earlier in the decade subjected, there's not a connection to market share erosion, so, gm in the short term, i think, any selloff related to recalls is an incredible buying opportunity for them specifically. >> jamie, thank you very much for helping us tonight. jamie albert teen, stiffle equity research. >> thank you. and sticking with cars, some news today about the people who make a lot of those american cars. the united auto workers voted to raise membership dues by 25%. that's the first increase in 47 years. the historic vote will shore up the union's struggling finances.

the increase goes from two hours of pay per month to two and a half hours and it could raise an additional $15 million a year. a little bit of profit taking on wall street today with the dow and the s & p 500 closing just below monday's record highs. the major averages were down slightly, even though a new report showed strong pickup in factory orders for april. here's a look at the closing numbers for a tuesday. the dow fell 21 points, the nasdaq down 3. the s & p slipped a fraction. now, among the decliners in the dow today, at&t. and that's surprising, because today, the telecom giant raised its full-year revenue forecast for the second time. that's after signing up more wireless subscribers. but shares slipped a fraction. here's morgan brennan with a look at what's behind the company's rapid growth and why the stock didn't respond. >> it's the second time at&t has upped its 2014 outlook and it speaks to a larger shift in how the telecom giant is making money. the stronger forecast comes from

higher sales of wireless devi s devices, driven by the growing popularity of pricing plans like the next program. next-to-last customers to buy smartphones without a contract, using a monthly installment plan to upgrade more frequently and at the phone's full price, meaning at&t doesn't have to shell out for a costly subsidy, something that's long been associated with two-yearannsx contracts. next field 40% of smartphone sales in at&t's fourth quarter around this quarter, drive more than half of all phone sales. experts say it marked a fundamental shift away from subsidies, but at the expense of wireless services. >> thought process here is that the consumer has more visibility in terms of what they are firing handsets versus what they are paying for service and what at&t has done with their service plans is they have reduced the pricing plan for the service plans to be more competitive in the marketplace. >> reporter: at&t is adding new monthly customers, expected to gain more than 800,000 in the second quarter. that would be the biggest

quarterly increase since 2009. but investors are non-plussed. the stock barely moved on the news, ending the day down half a percentage point. that's because it's not yet clear whether at&t can translate its growth in revenue into growth in profit. >> put and takes, from a relative perspective, clearly seeing some benefit from the equipment side. however, you know, obviously, the existing base being priced down could be negative longer term. >> reporter: analysts note at&t has many moving parts now. pricing competition is fierce among wireless providers like competitor t-mobile. and of course, there's the merger. at&t has proposed to buy satellite tv provider, directv, for $49 billion. that faces a steep approval process and analysts have questioned the move. for nightly business report, i'm morgan brennan. still ahead, what office landlords are doing to manage not only where you work but also where you live and play. that's coming up.

the city of chicago is taking on big far ma. it is suing five of the world's largest painkillermakers, accusing them of hiding the health risks of potent drugs, like oxycontin. of violating local laws against false advertising, conspiracy, insurance fraud and consumer fraud by marketing the painkillers as "rarely addictive" and the city says that listed benefits lack any scientific support. the companies named in the lawsuit are activist, endo health solutions, janssen pharmaceuticals, a unit of johnson & johnson, perdue farm la andself lon, a division of tefa. meanwhile, cries the country in seattle washington, an

historic vote raising the city's minimum wage to $15 an hour. it will be phased in over three to seven years and will be the highest minimum wage in the country. and double the current federal rate of $7.25 an hour. so, will this be a test case for other american cities and states and does $15 an hour make economic sense? gary better plus, an economist at the brookings institute spores a minimum wage hike and jane shirk, at the heritage foundation, is opposed. james, let me -- first of all, welcome, gentlemen. and james, let me begin with you. why are you opposed to it? you think $15 doesn't make economic sense, huh? >> you need more than good intentions. you need good results. we are talking about an already weak economy, where businesses are struggling with the cost of the affordable care act and obamacare and now you're proposing doubling the cost of hiring entry level workers? the only way they are going to be able to respond is by cutting jobs and raising prices. >> i assume you like or embrace

the concept of a minimum wage to begin with, but why should the government, and especially a city, be engaged in the business of setting labor prices? >> well, it's little easier to justify to the federal government, the federal government is raising the minimum wage on a nationwide basis. it means that fundamentally, employers get to take wages out of the negotiating with their workers. the minimum wage workers are receiving this minimum wage and it has a much less severe, adverse employment affect. you just do it in one city the danger is that in that one city, businesses in that city are going to lose out to businesses thatvk8;= are in the suburbs, the minimum wage remains lower. that's the danger here. >> mm-hmm. let me ask you, james, go back ájuáu of all, what do you think of what gary just said and also, what you be in favor of a higher minimum wage higher than what

the obama administration proposed of 10 and change or do you want to keep things status quo? >> i think it makes more sense if you're going to have a minimum wage, to do at the state or local level, learn the federal level. $15 an hour i think is going to hurt a lot of people in seattle. that would be like dropping a nuclear bomb if -- on the economies of west virginia or arkansas. you've got huge differences in cost of living across the country. and something that in an urban area, would be quite painful in would be absolutely devastating in rural and areas with lower cost of living. so, i don't think you would want one federal grade r you would want to allow the flexibility for local areas. but roughly speaking this is a weakened economy. the the affordable care act is making it harder to hire less skilled workers for full-time position. an unprecedented level, which is what 10.10 an hour would be is a huge mistake. >> your point is that at $15 an hour the businesses in seattle may lose out because over in

bell view, the minimum wage maybe $10 an hour and they can charge less. >> correct. >> i want to come back to the question i asked initially, why do we need a minimum wage in the first place? you seem to answer by saying that we need it because it takes a salary negotiation off the table when you're dealing with low-wage workers. but why philosophically is minimum wage a good idea? >> a, something that a great majority of american citizens support. they think that the federal government should put its thumb on the scale, helping low-wage workers earn standard of living through their own efforts, it brings them closer to the middle income level. and b, it is a very easy kind of labor regulation to enforce. it is much cheaper than raising taxes and redistributing money to people. those are the two main advantages. it agrees with american views about how low-paid labor should be paid and second, it is much

cheaper to do than most other ways of making poor families better off. >> let's just get you to respond to what james was saying this is not a good thing for the economy because it's not fully recovered right now. do you agree with that? some do argue that if you raise wages for the lowest workers, they are going to have more money to spend. and that would be a good thing for the economy. sort of like a catch-22 here. >> i think that we want to keep it straight r are we talking about raising the federal money him or just one city's minimum? from what i understand, the seattle area is actually doing quite well. it's -- in spite of having the highest minimum wage in the country on a state basis in washington, the washington economy's doing pretty well. but in particular, the seattle economy is doing pretty well, which i think is the reason seattle is the first city to enact such a high minimum wage. they feel prosperous. they feel like they can give the low-paid people in the city a wage hike and that's what the citizens elected their mayor to

do and that's what the mayor's trying to do >> all right. gentlemen. thank you both very much for joining us. really appreciate it. gary better plus with the brookings institute and james shirk at the heritage foundation. the purchase price for hill shire brands is fattening up, that is where we begin tonight's market focus. pilgrim's pride upped its offer for themaker of jimmy dean sausages to $55, valuing the company at about $6.7 billion. that trumps a $50 a share offer from tyson foods. the new price is a nearly 50% premium to hill shire's closing price before the takeover bid on may 27th. that was $45 a share. hill shire shares popped another 9% to 58.65 while shares of pilgrim's pride fell 2% to 25.34 and so did tyson. it closed at 42.08, down 3%. dollar general says it expects gross margins to improve as it focus on more profitable products like accessories.

the discount retailer reported lower-than-expected profit but the company reiterated the full-year outlook, it is continuing to open new shore stores. that sent shares up to 56.41. a rough day for casino stocks. las vegas sands, wynn resort, mgm all tim belled after a deutsche bank report that said cow gaming revenue was up less than expected last month. all three companies were down at least 2.5%. sands closed at 7544. win at 20823, in. gm 232538. another high-profile investors betting big on fannie mae and freddie mac, carl icahn. the billionaire investors bought $51 million in common shares of the mortgage companies from mutual fund manager, fair home funds. bill ackman is another activist investor who has a large position in that company. shares of fanny up 4 1/2% to

4.64. freddie rose more than 3% to 4.59. soaring green coffee costs is rising prices. the products will go gown 9%. smucker is the owner of folgers and dunkin' donuts. shares rose a fraction to $102.94. and panera is changing up the recipe for its menu offerings. the company will remove all artificial colors, flavors, sweeteners and preservatives from its food by the year 2016. it didn't say how much the effort will cost or whether it will impact prices. shares were off slightly to $154 and change. a changing landscape in the real estate market. the commercial sector is trying a new business approach to catch up with the housing sector where price and sales have been soaring. the number of office building landlords are now turning to technology to lure small tech startups and hopefully rent out vacant office space. diana olick has our story.

>> reporter: in a sparse space in crystal city virginia, more than a dozen small companies barely stand out from each other, but they are plugged in, into a fund that aims to serve them at every level. >> what we are doing kind of doing it top down from here. we are saying, hey, let's dangle all this money in front of the high group companies and make them a compelling offer of where they can live, work and play. >> reporter: venture capitalist paul sang has funded hundreds of startups but recently, he noticed a new niche. >> the gap now is in the middle, where you have some revenue, whether it's a million bucks in revenue,self on ten people working for you, to raise the money you need at that gap but also hard to find office space. where do you actually put them? >> reporter: if you're sang, new $50 million crystal tech fund, put them here, in a collabora collaborative work space owned by tornado, one of the nation's largest publicly traded groups which also happens to be an investor in the fund. >> crystal city has always been

and will continue to be sort of a strategic value oriented location. we happen to have 26 buildings, 8 million square feet in this location. >> reporter: the shrinking federal budget cost some of the usual government and defense tenants so sheer sought out a new strategy. >> what we mean by that is, you know, the creative types, the younger types, you know, what we call in this area the stem types, science, technology, engineering and math. >> reporter: types like patrick smith. >> wither creating a network of chefs that make healthy meals. >> reporter: smith's power supply is beneficiary at the crystal tech fund and tornado tenants. >> i can grab paul and ask his opinion on something, talk to one of the other companies. there's a lot of synergies. >> i think when people look back at what they are looking back here, think this is the view of the diagram, venture capital, high growth companies.

>> reporter: in fact, they are already planning to convert one of their office buildings into a 250-unit apartment building so some of these new tech workers could have a very short commute home. for nightly business report, i'm diana olick in crystal city virginia. coming up, automakers want a bigger share of the lucrative chinese market, but what do china's consumers want when they buy a car? we will take you to the show rooms in beijing. finally tonight, the u.s. isn't the only place to see cars rushing out of showrooms, the same thing is going on in china and that's thanks to the growing

middle class there consumers are eager to buy many of the same luxury brands american buyers will lust after. as we are shown, buying a car in china is a whole lot different. >> reporter: the man behind the wheel is just the person carmakers want in their dealerships. jam jo as well. an upwardly mobile professional in beijing. after seven years of driving a volkswagen polo, he is upgrading his car and we are going shop i with him. >> the car gave me the freedom. i do like this, the options of freedom the car make. >> reporter: first, the goes online, chinese people have little brand loyalty so purchasing a car requires extensive research. >> the internet, somebody else is just the real power of social network. >> reporter: car buyers here are influenced by word of mouth and most preserve big cars. as part of his three-week

search, joy is checking out the same subaru suv his friend has. >> suv, all my families, my family members, my mother, my father, myself and my wife, all five persons have a car. very important to me. >> reporter: jow visited ten dealerships, narrowed his choice to six brands, none are chinese. are you finding yourself more attracted to foreign branded cars as opposed to chinese branded cars? not really matter? >> i'm chinese, but i like to place more price for the brands and quality. >> reporter: like audi, he likes this extra long sedan. >> enough for me. >> i think for my son, he grow up. >> reporter: final price for his new a 4 l, $40,000, within his $50,000 budget. what do you think it says about where you are in your life and in your career?

>> years ago, i get my first job, i don't -- i can buy a luxury brand like audi, but after years, i buy it. oh, wow, it's good. >> reporter: for nightly business report, i'm eunice own in beijing. >> i would buy it it's good. >> that is nightly business report for us tonight, we want to remind that you this is the time of year your public television station seeks your support that makes programs like business report possible. >> on behalf of your public television station, thank you for your support. we will hope to see you right back here tomorrow night.

tonight... man: the beatles. cassius clay. this was the toppling of the order. malcolm x: we want freedom by any means necessary! barry goldwater: extremism in the defense of liberty is no vice! man: it was a door to our future. once we went through it, there was no going back. "1964," on american experience. nasa announcer: lift-off! the clock is running. pilot: they have mass casualties up here. ringside announcer: schmeling is down!