captioning sponsored by wpbt >> paul: 39 days down, one to go. general motors says it will leave bankruptcy protection tomorrow. tonight, a look at the new, leaner g.m. >> the biggest risk right now is doing nothing because the current economic situation is such that we can't fix the economy without fixing healthcare. >> susie: we talk health care reform with kathleen sebelius, secretary of health and human services. >> paul: from discounters to shops at the mall, the nation's retailers can't seem to shake the recession. its a trend likely to continue as more and more consumers tighten belts. and get down to the business of saving. >> susie: one of uncle sam's biggest investments took a big hit today. shares of a.i.g. plunged, after one analyst said there's a good chance those shares are virtually worthless. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for thursday, july 9. "nightly business report"

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>> susie: good evening, everyone. the coast is clear for general motors to get out of bankruptcy, tomorrow morning. g.m.'s stint in chapter 11 was a record: just 39 days, much quicker than expected. the automaker is still working tonight on finalizing details to sell most of its assets to a new company. that new and improved g.m will be leaner and greener and its biggest shareholder will be the u.s. government. diane eastabrook has more on the road ahead for the new g.m. >> reporter: a much smaller and hopefully nimble general motors steers its way into an increasingly competitive global auto market. gone are laggard brands hummer, saab, saturn, and pontiac. more than 22,000 employees. 1,300 dealers and more than a dozen plants. what remains are the chevrolet, cadillac, buick, and gmc brands. more than 68,000 employees and 4,100 dealers. but despite the streamlining,

g.m. has accomplished in bankruptcy, global insight auto analyst rebecca lindland says the company is not out of the woods yet. >> they've been in the hospital and they aren't going to just spring back to health. there has to be a measure of patience so we do want to see continuing steady progress. the patient needs to start feeling better every day. >> reporter: while both the u.s. economy and economies around the world are still sputtering. last month the company's sales were off more than 30% compared to the same period a year ago. lindland says plunging home values and rising unemployment are keeping many consumers from showrooms. she doubts the economy will make a u-turn anytime soon, making a quick recovery for g.m. extremely difficult. >> they have to get the consumer back into the showrooms and they have to get new consumers into the showroom, at the same time preserving existing customers

which is really going to be tough because there are a lot of people who own a g.m. product now that are kind of offended that they took government money and they went into bankruptcy and they may not buy another general motors product. >> the flip sigh is is now that the government and taxpayers own a huge chunk of general motors, they might want to show pride of owner-and buy g. m. products. >> that's very interesting. does g. m. have a product that people want and is it still peging the company's future to that chevy volt? >> they actually do have some interesting products and in fact rebecca was telling me today that she right now is test driving the new chevy camaro and absolutely loves it. they also, chevy is also coming out with the equinox. buick is coming out with the lacrosse. those have all gotten very good marks from analysts who had a chance to look at them. as far as the chevy volt goes,

g. m. has said all along that it still plans to bring that vehicle out, that's the plug-in, late next year, and as far as i know those plans have not changed. >> susie: but let's just say that people don't buy those cars and sales don't pick up. does g. m. have to go back to the government and ask for more money? >> a week or so ago president obama said that's it, it wasn't going to be giving g. m. any more money. but of course this is a huge company, it still has a huge influence on our economy, and if it's still struggling in 12 to 18 months, who knows, the government may change its mind. >> susie: does, go g. m., do you think, rush out of bankruptcy, or did it do everything it needed to do? >> i think it did accomplish what it needed to accomplish. the company has said and analysts have said for the past few years that this is a company that had too much capacity. it needed to close plants, it needed to cut the number of employees it had, it needed to pare the number of brands that

it had, it needed to cut its legacy costs and it also needed to reduce the number of unprofitsable dealerships it has in the united states. and it did that in bankruptcy. but as you know, you cannot cost cut your way to profitability. so the challenge for g. m. going forward is to sell vehicles, and that's what it needs to do to survive. >> susie: so i'm interviewing chris henderson tomorrow, the c.e.o. of general motors, as you know. what do you think is the next big test for henderson? >> i think the test for then der on and g. m. is product. and nay need to sell product. and it's not just selling product, it's convincing consumers that they have quality products. one of the things that has dogged g. m. for the last 20 or 30 years is that they don't have good quality products. back in the late 70s, early 80s, there were some quality issues with a lot of the vehicles they were producing. actually, in the past five or six years they've been turning out some really good products. the problem is they still have

that quality reputation. they've not overcome that with kurms, and that is something they really need to sell to the american public. >> susie: sounds like a lot of work to be done. thank you so much, diane. diane estabrook joining us from chicago. >> paul: wall street opened narrowly mixed with the dow losing 13 points while the nasdaq posted a six point gain early on. stocks began to firm up as a investors welcomed news weekly jobless claims dropped a much larger than expected 52,000. adding to the firmness, a report that china's auto sales were up sharply. by 2:30 the dow was up 40 points and nasdaq up 16 points. light volume on the rally made it vulnerable to a selloff trimming the gains.

>> susie: some major banks will soon be saying "no" to the state of california's i.o.u.s. bank of america and wells fargo are among the firms that will stop accepting the notes tomorrow. the state began issuing i.o.u. warrants to creditors last week after it couldn't close a $26-billion budget gap. the i.o.u.s pay 3.75% if held until october 2. california congressman brad sherman is urging banks to accept them, saying now's not the time to point fingers.

>> sacramento has made some mistakes, but it was in an effort to provide perhaps more education, more health care for poor people than the state could afford, big banks made a mistake trying to provide more luxury jets for their executives then they could afford, i don't think we should have the banks lecturing sacramento. >> susie: the securities and exchange commission is expected to decide those i.o.u.s should be treated as a form of municipal debt. that makes them subject to anti-fraud and other provisions of security blog. >> paul: one million. that's the number of americans who've caught the h1n1 virus since the flu swept the country in april. with infection still spreading, the government is aggressively working to get a vaccine out to the public. the administration also hosted a summit today at the national institutes of health to be sure americans are ready for a potential flu pandemic this fall. health and human services secretary katherine sebelius is urging the states and the

public to stay vigilant and the feds are launching flu.gov, a website with tips and information on the virus. >> susie: sebelius and the obama administration are also pressuring congress to come up with healthcare reform bills before the august recess. earlier today i talked with sebelius about that. my first question: despite all the cost cutting concessions from hospitals insurance companies, and drug firms is that real reform? >> well i would say that cost reductions are a piece of it. but what we're tying to cost reductions is a higher quality system. what we know is whether its in hospitals or too often in doctors offices or it health clinics around the country that some americans get very high quality health care and some do not. we have a very erratic distribution system in terms of quality. we know that there are systems in various parts of this country that are much higher quality day in and day out at a much lower

cost so we're trying to not only reduce costs but tie reduced costs to higher quality. >> susie: secretary sebelius, most americans are in favor of health care coverage for everyone. but they're not happy with they find out how much it's going to cost and how it will impact your own care. so how are you going to sell the obama plan to the american public? >> well, i think americans who have coverage right now know that they're a day, a month, ayear away from losing that coverage because it's unaffordable or they can lose their job or their family can have an existing held condition and be locked out of the market. so no one is safe. those who are unhered need access to the system. those who are hered are within precarious stems of losing that health coverage. the comprehensive reform is about everybody, it's also about changing from the sickness care that we have to wellness care and a truly healthier america. >> susie: can you really pay for national health care without some kind of tax increase? >> i think right now congress

is coming to the table with payment plans. the president put on the table for congress to consider about $660 billion worth of savings, money that we're spending right now in the current system that can be redirected. and then about $330 million in revenue raisers. and his prefered approach is to look at the itemized deductions, take that back, cap the top itemized deductions to 28%, back to the days that we were when ronald reagan was president, it would affect the top 1 or 2% of americans, it would raise the additional money and that combination would pay for the health plan. but the president has made it clear, we're not going to add to the deficit. this is going to be paid for. >> susie: that's exactly the point, the one thing that worried the economists that i talked to is that budgeting for this health care plan is over a 10-year horizon. but what about the next ten years, they're nervous about the long-term fiscal problems, especially since we've already wracked up some huge deficits

to solve this current financial crisis that we're in. >> well, again, i think when you hear people use the term a trillion dollars, first of all, that's pending over a 10-year period of time, so spending for a health plan is likely to be in the category of a hundred million dollars a year. that's step one. secondly, over 2/3 of that money is in the current system, we're not talking about new money. and we also think that a lot of the implementation of health technology to lower medical errors and make people healthier and the implementation of wellness and prevention strategy will save billions of dollars as we go forward, and they are not scored by congress. so we've got some additional saves on the horizon if we can truly achieve comprehensive reform. >> susie: what do you see as the biggest obstacle to getting the health care bill through congress? >> well, i think it's getting a bill through the house and the senate, they're

approaching it in slightly different fashions. i'm encouraged by the number of common ground issues that are emerging, how to address the unhered population with the new health exchange marketplace, the fact that small business owners need to be protected and encouraged to get into the marketplace, building on the building blocks of the current employer based plan and strengthening that. how we move forward with prevention and wellness care. so there are a lot of common themes around hering all americans and lowering costs for everyone. >> susie: what if health care reform is done wrong? what are the risks of that? >> well, i don't know what kind of done wrong means. i think that the biggest risk right now is doing nothing. because the current economic situation is such that we can't fix the economy without fixing health care. we can't fix the economy without lowering costs and having a higher quality care at a lower cost for all americans. so doing nothing, i think, is the biggest looming obstacle

on the horizon that people just back away from the table and say we're not going to do anything at all. and with a we need is this momentum to continue, we need a bill on the the president's desk in the fall, and that's what he's asked for, and i think that's what we're going to have. >> susie: hopefully we can get back to you and talk to you when that happens. secretary sebelius, thank you so much for your time. >> thank you,. >> susie:y. >> susie: the latest sales results om the nation's retailers show just how difficult it is to turn shoppers, into spenders. many leading chains reported a drop in same store sales last month. consumers are anxious about

their jobs so they're putting more money into the bank or paying down debt. and as erika miller explains, that's causing a seismic shift in the economy: >> reporter: before the recession, shoppers didn't hesitate to satisfy cravings. nowadays, it's all about savings. >> you can't spend it if you don't have it. i'm not spending as much. >> i'm thinking twice before i purchase items i don't actually need. >> reporter: economists call it the biggest change in consumer spending since world war ii. consumers call it living within their means. >> now we're careful. we're on a tighter budget. food budget. house budget. we're on a much tighter budget. >> i look very closely to what i can spend and you know, there's a limit and that's it. >> reporter: the national savings rate now stands at almost 7%, the highest in more than 15 years. the rate was negative before the financial crisis. economist david wyss says the party is over.

>> i think we're at the beginning of a significant change. we've been going through a period of about 20 years now of declining savings rates. now i think we're going to go into a similar period of rising savings rates. as we get back to more normal behavior. >> reporter: but for all the belt-tightening, there has not been much progress in reducing debt. last year, total u.s. household debt peaked at $13.9 trillion. now it stands at $13.8 trillion. some economists think consumers will have to pay off roughly a third of that before the load becomes manageable. the process of debt reduction is expected to be painful, and slow. some economists believe it will take six to eight years before household balance sheets are healthy again. that has big implications for the economy. the obama administration hopes investment in green energy and healthcare will replace much of the loss in consumer spending. in any case, economist cary leahey says its important to keep your eye on the long term. >> we have to save more and spend less.

but unfortunately at this phase of the business cycle, with the economy very weak, and the unemployment rate poised to move above 10%, what's good for us in the long run is very bad for us in the short run. >> reporter: erika miller, "nightly business report", new york. >> paul: now, let's take a look at some stocks in the news tonight. u]uóñ]

and those are the stocks in the news tonight, susie. >> susie: paul, if you're an investor in cerberus capital's main hedge fund, don't count on cashing out anytime soon. cerberus says that because of the weak marke ts it can' testing testing

madoff's lawyer did not give a reason for his client's decision. madoff was sentenced last week for masterminding one of the biggest financial frauds in u.s. history. he still doesn't know where he'll serve his time. the u.s. bureau of prisons will make that decision. >> paul: for millions of people it wasn't a simple game of tag. new york's attorney general plans to charge social networking web site tagged.com with invasion of privacy and deceptive marketing. the company is accused of luring new users by telling them a friend has posted photos to share. there were no photos. instead, tagged allegedly raided users' private accounts for email addresses. tagged says it has temporarily stopped the practice. euquu@@

>> susie: here's a look at what's happening tomorrow: volatility continued in oil today, as prices dropped below $60 a barrel.

the administrations plan to clamp down on respect laters in the energy market. tonight's two tonight's two ways to play says that plan is both good and bad. here's kevin depew of minyanville and minyanville's kevin depew. >> there's an old saying on wall street, its not the price, its the volatility. which is true, especially when we are talking about things like crude oil. high prices for oil depress consumer spending, but even worse than high prices is volatility. over the past two years, oil has risen by $80 a barrel and fallen by more than a $100 a barrel before doubling to its current level. such volatility, caused by speculators, not real demand, damages both consumers and producers. the answer is simple: increase government supervision of and restrictions on speculative trading in oil. >> incredible. even after last years failed attempt to curb oil speculation, the bureaucrats are at it again, seeking to impose limits or possibly outright ban it. this kind of misguided populism sounds great: who wants to defend a bunch of greedy commodities traders? but the reality is that speculators serve an important

function by increasing liquidity and making it easier for end users to hedge against higher, or in some cases, lower prices. because this has been tried countless times before, the consequences of intervention in commodities markets is easy to predict: a government guarantee of higher prices. >> susie: that's "nightly business report" for thursday, july 9. i'm susie gharib goodnight everyone. and good night to you paul. >> paul: goodnight susie. i'm paul kangas wishing all of you the best of good buys. "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

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