>> tom: as gas prices rise, so do the sales of small cars, giving a boost to some u.s. auto makers. >> the fundamentals for the auto industry are very good. this is an industry in recovery. for the consumer, it's going to get more expensive to buy a car. >> susie: and it may be harder to find the car you want because of the disaster in japan. you're watching "nightly business report" for tuesday, may 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. general motors zoomed back to the top sales spot last month on strong sales of small cars like its chevy cruze. >> tom: susie, g-m and ford had a great month; they outsold many of their japanese rivals. that's the latest indication of the supply disruptions stemming from japan's earthquake and tsunami. sales at general motors rose 27% on its compact cars and crossovers, chrysler jumped 22%, while ford saw a 16% increase.

toyota sales were only up a single percent as the auto maker experienced supply shortages. >> susie: as diane eastabrook reports, the shift to more fuel- efficient cars, combined with a recovering economy, is good news for u.s. auto makers. >> reporter: it's taken a few years, but u.s. consumers are finally in a car-buying mood again. guggenheim securities' john casesa credits an aging vehicle fleet and an improving economy. >> incomes are finally growing, unemployment is diminishing slowly, and consumer confidence has bounced back. >> reporter: the robust demand is helping auto companies make a lot more money. in april, vehicle transaction prices were up 1% over march, while incentive spending was down 4%. but industry watchers warn the recent buying spree could run out of gas, and higher fuel costs are part of the problem. in many markets, pump prices are up over $4 a gallon, and casesa says consumers on a tight budget

could get sidelined if gas goes higher. >> it's hard to say at what price higher gas prices will choke off auto demand, meaning prices have to get so high that people don't have enough left over for discretionary purchases like an automobile. >> reporter: higher fuel prices could steer more buyers away from trucks and sport utilities to smaller vehicles. but they might have a hard time buying the compact cars they want. the disaster in japan has thrown a wrench into the production of vehicles and parts, primarily for toyota, honda, and nissan. honda has already warned dealers it will run short of its popular civic later this summer, and toyota says it will have production delays of some vehicles into the fall. that's prompted george magliano, senior economist for i.h.s. automotive, to lower his sales forecast for the year. >> our forecast currently has been reduced to about 12.7 million units, and originally, we were up at 13.3 million for this year.

>> reporter: magliano says, if consumers can't buy japanese small cars, they might opt for domestic ones instead. that could benefit general motors and ford, but probably not chrysler. >> the issue today with chrysler is that, of the detroit three, they have the biggest reliance on trucks and big cars, and they've really got to develop those small cars in order to really get the consumer into their dealerships. >> susie: diane eastabook joins us now with more about the outlook for the auto industry. diane, that was an interesting story about all of the changing trends that are going on. i know you've been out talking to a lot of the auto dealers. what are you hearing from them in terms of what is available and what is not? >> well, susie, if you're looking for a pickup truck, you won't have any trouble getting one of those. and you shouldn't have any trouble getting a large s.u.v. or a medium-sized s.u.v. what is really going to be a problem are the small

compact cars. i spoke to a hyundai dealer yesterday, and he says he is selling out of the elantra as fast as he gets them. they have been very, very popular with costumers. >> i was at the new york auto show, and i was talking to the people at hyundai, and there was a lot of interest in their new cars. >> hyundai has gotten a lot of buzz. it is a combination of things: it's good marketing, it's a good product, and it is a good price point. and hyundai raised incentives in april so it could cannibalize sales from japan. and it was fairly successful in doing that. >> susie: tell us about toyota. what is going on for toyota? >> it has been a tough year for toyota. we had the recalls last year. earlier this year we had the tsunami. toyota is really facing a lot of head winds. analysts say keep in mind this is a company that has strong cash reserves, and

it has a very loyal following. so they think that the company will likely bounce back in 2012. >> susie: and we're seeing -- talk about bouncing back, we're seeing that chrysler is doing better. good enough that it is already talking about going public, and tab -- taking the stock shares to the public. what do you think its success or failure is going to hinge on? >> what a story chrysler is. because a year ago, a lot of the analysts i talked to pretty much had written off chrysler. and it had one good quarter. and it posted a profit it announced today. i think we have to watch how the company does the remainder of the year. that may be a gauge as to high potential buyers are going to view that stock. >> susie: it's an interesting story there. an interesting trend you told us about. thanks so much, diane. >> you're welcome. >> susie: and we've been talking wit diane live from c >> tom: here are the stories in

tonight's "n.b.r. newswheel." oil prices ended lower in new york trading, as traders focused on signs of weakening u.s. fuel demand. light sweet crude for june delivery settled down $2.47 to just over $111 a barrel. blue chip stocks ended virtually unchanged as investors dumped energy stocks. the dow added a fraction, the nasdaq lost 22 points, and the s&p 500 off more than 4.5 points. big board volume topped one billion shares, while nasdaq volume climbed to nearly two and a quarter billion shares. businesses ordered more machinery, vehicles, and computers in march. the commerce department says factory orders rose 3%, marking their fifth straight monthly gain. nearly two million homes along the gulf and atlantic coasts run the risk of hurricane damage. roughly two-thirds of those homes are outside federally- defined flood zones, according to a report out today by research firm core logic. the homes most at risk are in virginia beach, new orleans, tampa, miami, and long island.

and the number of americans owning television sets has dropped for the first time in 20 years. the nielsen company says just under 97% of u.s. households own tvs. that's down from just under 99%. it cites two reasons for the decline-- poverty, and a switch to watching video on computers and mobile devices. still ahead, our "word on the street" is "defense." after the killing of osama bin laden, we look at three national defense stocks with the potential of standing up to pentagon cutbacks. >> susie: one of the key architects of the financial reform overhaul now has a new target. congressman barney frank is taking on the federal reserve. he introduced a bill today to prevent the presidents of fed banks from having a say in interest rate policy. critics say that would reduce the fed's independence when it comes to setting the interest rates consumers and businesses pay. darren gersh reports. >> reporter: every couple of months, you'll see a federal reserve bank president on "nightly business report."

but did you ever wonder how they got to be a reserve bank president? they are selected by boards of directors at those reserve banks, boards that are overwhelmingly made up of business leaders and bankers. and for barney frank, the congressman who co-wrote the financial reform bill, that is the problem. >> to have people who are simply picked by private citizens who have a disproportionate, vested interest, for example, in higher interest rates setting this government policy is undemocratic. >> reporter: frank has introduced a bill to restrict voting on interest rate policy at the federal reserve to the chairman and six governors who are appointed by the president and serve as permanent members of the fed's key policy-setting committee. that committee is called the federal open market committee, because the decisions made right here at this table result in hundreds of billions of dollars of securities trading hands in the open market. and buying and selling

securities is the main way the fed helps set interest rates on everything from treasury bonds to business loans. every year, five of the open market committee members are drawn from the 12 reserve bank presidents from across the country, who rotate as voting members. reserve bank presidents are often the loudest critics of fed policies that have kept interest rates low and raised the risk of inflation. calling to end their voting rights is a political move, argues the cato institute's mark calabria. >> any time there starts to be voices that say "inflation is getting out of control, we need to do something about it," you tend to hear some complaints that, "well, stop listening to those regional fed presidents, you know. they're just fronts for the banks and they don't really care about the working people." >> reporter: economist mark zandi thinks the fed's structure has worked well. he says bringing the reserve bank presidents to washington helps reduce the risk of fed group-think. >> there are very few dissents, historically, but those who dissent are reserve bank presidents.

they are the ones who sort of break up the consensus thinking that goes on. >> reporter: but frank argues his bill will make the fed more accountable. >> every time we have forced the federal reserve to comply more with the norms of democracy, they've benefited and the economy has benefited. >> reporter: with republicans controlling the house, frank's bill is unlikely to become law. but it is another reminder of how politically charged the fed's role has become in the wake of the financial crisis. darren gersh, "nightly business report," washington. >> tom: overseas, portugal has reached a deal on a bail-out from the european union and international monetary fund. the country will get $115 billion in aid. in exchange, portugal will have to slash its budget deficit to 3% of its gross domestic product in the next two years, compared to over 9% last year. other details, like how much the country will have to pay in interest, are still under wraps.

>> well, the blue chips here on the new york stock exchange inked out ever so small in the positive side. nasdaq and the s&p are both down, and it looks like pfizer was a big reason behind what happened on wall street. >> certainly a big reason behind the dow jones industrial average, but still able to hold on to the thinnest of gains. let go ahead and get everybody updated on tonight's mark focu "market

another muted day for stocks, with investors moving into defensive-oriented sectors. telecom stocks were the strongest group of the broad market, thanks to pre-paid wireless service provider metro p.c.s. shares jumped more than 10% as volume quadrupled. this is a new 52-week high tonight. it's less than 25 cents away from a two-year high. earnings were strong as new subscriber growth continues. energy was the weakest stock sector, pushed lower by chesapeake energy. it's the second largest producer of natural gas in the u.s. shares dropped almost 6%. this takes us to its lowest price since this pop in february, when it floated an idea that it may spin off its service operations. while oil production rose overall, output from south texas

fell because of a shortage of tanker trucks, and well drilling interrupted by the local winter deer hunting season. alcoa led the dow industrials, rising 2.6%. shares are less than $1 away from a new 52-week high. market rumors around a possible buyout of alcoa fueled a threefold increase in volume. an analyst at interactive brokers says the rumors center around miner rio tinto making an offer. earnings from dow component pfizer came in this morning one penny ahead of estimates, and even compared to a year ago. revenue fell thanks to a drop in sales from cholesterol medicine lipitor. shares were off, falling three- quarters of a percent, the

biggest loser among dow stocks. this is the past 180 sessions. tonight's low matches the low from three weeks ago. several media stocks were moving after the closing bell tonight. cbs closed down 1.6% during the regular session, but jumped 4% after hours. it blew away estimates and raised its dividend. comcast was up 1% after this closing price. earnings came in as expected. disney was off a half percent, and dish network fell 2%. disney sued dish, claiming the satellite tv provider violates its copyrights by offering the starz movie channel for free during a promotion. disney allowed starz to show disney movies only as long as starz remained a premium channel. sears, and k-mart parent sears holdings, fell hard-- off 10% on heavy volume. it warned of a wider than

predicted loss. the company okayed another stock buyback, but that didn't help shares today. a different type of consumer company, clorox, also warned of weak demand, and it's the latest to raise concerns of higher commodity prices. clorox shares fell almost 4% to their lowest price since february. sirius/x-m radio was among the most heavily traded stocks, as it usually is. today, it broke out to a new 52- week high. strong auto sales helped drive subscriber growth. finally, another multi-week low for silver. this is the past 180 session for the silver trust exchange traded fund. it dropped another 5% today. it's off 15% from its high last week. and that's tonight's "market focus."

>> tom: even before the death of osama bin laden, defense spending had come under pressure, and that may continue. president obama's nomination as new defense secretary, current cia director leon panetta, is a former congressman who was the chair of the house budget committee. that brings us to tonight's "word on the street"-- "defense." debra borchardt is a reporter at thestreet.com. >> tom: nice to see you, debra. >> nice being here. >> tom: what is the outlook for defense contractors, knowing the spending debate going on in washington, and the coming down-draw on troops in afghanistan. >> we definitely know there is going to be cuts in defense spending.

leon panetta is known for his willingness to cut spending, and that's why he was put in that position. and obviously, budget cuts are happening all over the place. so really what we did was took a look at the countriecompanies that would benefit from the defense spending cuts. so i like to call they have defensive defense stocks. >> tom: these are maybe two-ringed defensive stocks. companies that are efficient for a pentagon dollar. estarline technologist is the first one, that the first one analysts pointed to. and avionic controls, the stock is up near its most recent high. >> what i like about this company is they are known for retrofitting and upgrading airplanes, aircraft, and land vehicles. so when you're trying to get a little more life out of these vehicles, they're turning to this company to do that. and boeing just hired them to retrofit 50 tanker jets. it is a great play on defense-spending cuts. because if they're cutting back on buying new

equipment, then they're going to want to fix up the stocks they've got. >> tom: with the stock near its most recent high, what are analysts expecting? >> i'm starting to see a lot of technical analysts that they're being put in a position where it is going to break out. that it really could keep going. >> tom: you also have found c.a.c. i., an information technology and support firm, and clearly we've seen the role that technology seems to play more and more in iraq. trick>> it makes sense. even if you're company, in defense or not in defense, you can spend a lot of money on your i.t. make sure you're not sending too many units to the wrong place. caci are starting to continue to book contracts and keep booking orders for departments that are needing to save money.

it is an easy sell to your boss. let me do this so i can save money. >> tom: saradine is a bit of a different one. it's an armored manufacturer, and from below $20 a share, and now closing the door on $50. >> right. they make an advanced ceramic product, and it is used in body armor. $230 million in new ordering, and $260 in back orders. and their technology is not only used in defense, but health care and oil services. they've got a se ceramic korean that is much better than a steel screen. they've used their technology into other areas and really expanded themselves. >> tom: how about any ownership positions yourself, debra? >> no, i don't have any. >> tom: debra's article

is a at thestreet.com. debra borchardt with the thestreet.com. >> susie: here's what we're watching for tomorrow: weekly updates on mortgage applications and crude oil and gasoline inventories. quarterly results from anheuser busch inbev, kellogg, whole foods, and tesla motors. speaking of tesla, we'll talk to its c.e.o. about what's next in its pipeline of sporty electric vehicles and how it's changing the car buying experience. the justice department says deutsche bank is guilty of mortgage fraud, a billion dollars worth of it. the agency is suing the german bank, claiming it lied to join a government program that insured mortgages, then chose mortgages for its portfolio not caring if the loans were sound. the lawsuit's one of the first targeting a major bank over alleged mortgage abuse. deutsche bank says the allegations are unreasonable and unfair, and it'll fight the suit. >> tom: meanwhile, b.p. has chosen not to fight a

$25 million civil penalty to settle claims over an oil spill in alaska five years ago. the energy company also will install new systems to keep better control over its pipelines on the north slope. the u.s. attorney general in alaska says b.p. admitted it took shortcuts in how it ran and maintained its pipelines.

>> susie: for the first time, new census data show americans 45 and older are a majority of the voting-age population. that could pose a problem for politicians looking to cut back medicare and other benefits for seniors. but tonight'commentator thinks lawmakers need to stand firm. she's maya macguineas, director of the fiscal policy program at the new america foundation. >> i am going to get a lot of hate mail for this one, but here i go-- we have to stop pandering to seniors. the headlines screamed this week, "ryan budget puts seniors in play," referring to house budget committee chairman paul ryan's budget that would overhaul medicare. democrats are gleefully contemplating how to turn this into a campaign message extraordinare, and the competition to woo seniors will be fierce this next election.

but here is the problem-- we already spend the largest share of our budget on seniors. the major programs, social security and medicare, are squeezing out other important priorities and have been for years. and as a result, we are shortchanging investments in the economy and, importantly, children. if we want the economy to be strong for the next generation, we have to make major structural changes to the budget, and seniors who can afford to be should be part of the solution. our fiscal situation is a huge mess, decades in the making, and we are going to need shared sacrifice-- not political pandering-- to fix it. i'm maya macguineas. >> tom: just a reminder-- you find us online at nbronpbs.org. there you can comment on our blog or watch any programs that you may have missed. or you can follow us on twitter at "biz report" or my personal feed at hudson nbr.

if tweeting isn't your thing, friend us on facebook at "biz report." finally, say good-bye to the goodyear blimps as we know them. some new models and a new look are on the way. goodyear is teaming up with a german firm to build three new blimps to start flying in 2014. the new models will be bigger, fly faster, and carry more passengers. they'll cost about $21 million each. susie, goodyear's blimps have flown above the world's most watched news, entertainment and sporting events for more than 85 years. >> susie: it's always a moment of excitement. we say, look up, there is the blimp. >> absolutely. a different kind of gas price it is worried about. >> susie: that's "nightly business report" for tuesday, may 3. i'm susie gharib.. good night, everyone, and good night to you, too, tom. >> tom: have a good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in: to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org.