Marketplace 5/31/2001

It's Thursday, May 31, 2001

Five point six billion dollars would be a colossal lottery jackpot but as far as the Pentagon is concern, five point six billion is just a pittance. The Bush administration today sent to Congress a request for this amount of emergency spending for the Department of Defense. Among other things, the sum will cover fixing the USS Cole which was bombed by terrorists, recovering the bodies of nine Japanese civilians whose died in a collision with a U.S. submarine and covering the extra costs of high energy prices. President Bush pledged during his campaign to beef up military spending, but this is not what the Pentagon had in mind, as Marketplace's John Dimsdale reports from Washington.

Dimsdale: "A third of the extra money is for improving salaries, benefits and living conditions for military personnel. A half a billion dollars is needed for aircraft and ship repairs, and there's additional training for military aviators.

But with the first Republican in the White House in eight years, advocates for a stronger military called the supplemental request inadequate. Frank Gaffney is the president of the Center for Security Policy."

Gaffney: "I think its established that the defense department needs more. I believe they need more quickly. This supplemental is a step in the right direction. I think its too small a step, personally."

Dimsdale: "For example, Gaffney says the military desperately needs to replace aging equipment. Earlier this year, defense department officials were talking about a request closer to ten billion dollars."

Farrar: "Many people in the defense community thought when President Bush came to town, that this was going to be the heyday and resurgence of large defense budgets."

Dimsdale: "But Jay Farrar at the Center for Strategic and International Studies says that was before penny pinchers in the White House got ahold of the budgetary reins."

Farrar: "People who have been put in place in the Office of Management and Budget have made a pledge to hold down government spending increases to roughly four percent where during the Clinton administration government spending ran at roughly seven to eight percent."

Dimsdale: "The Pentagon's comptroller told reporters today that defense can expect substantial increases in budgets for 2002 and 2003. In the meantime, they'll have to wait for the completion of a thorough review of military operations that's expected to be complete this fall.

In Washington I'm John Dimsdale for Marketplace."

Two developments making news in the advertising industry today could have major implications for the media world - especially broadcasters. DaimlerChrysler says it's going to shift much of its huge advertising budget away from television, while the biggest advertiser in the world, Proctor & Gamble, is trying out a new ways to buy advertising. From New York, Marketplace's Bob Moon reports:

Moon: "Seen any good commercials lately?"

Commercial: "We think we’re expressive, stylish and agile..."

Moon: "Or maybe I should ask, seen any memorable CAR commercials lately? Anything that’s burned itself into your consciousness? Perhaps this unforgettable slogan that Chrysler tried a few years back..."

Commercial: "We are Chrysler...engineered to be great cars!"

Moon: "Surely you’ve SEEN a Chrysler commercial. With spending of one-point-six billion dollars a year, DaimlerChrysler is the third-biggest advertiser in America. But the company says consumers are almost numb to Detroit’s usual pitch. So it plans what it characterizes as a “long term and significant shift” away from T-V ads toward entertainment and fashion-related marketing. What does that mean? At Advertising Age, writer Wayne Friedman is guessing it’ll involve more creative ways of cutting through the ad clutter:"

Friedman: "They could be doing more promotional type of things. Getting involved with a movie, say, where they have a car in a movie and they might build a promotion around it. Which they believe, you know seemingly, has more impact these days. Especially in a cluttered environment."

Moon: "Chrysler’s marketing chief blames rising T-V ad prices for the move to explore other forms of marketing. That’s a growing concern of major advertisers. Take the 300 million-dollar deal that the nation’s fourth-biggest advertiser, consumer products giant Proctor & Gamble, just signed with the Viacom media empire that runs CBS, MTV and Nickelodeon. It could eventually expand to such other Viacom outlets as radio and billboards.

Ad Age’s Friedman says this could be the start of the big entertainment conglomerates leveraging their diversity, and it could help the big networks as they struggle to bring in more ad money:"

Friedman: "If they can eek out gains, where they can do some of these cross-media deals, and that can represent maybe one percent of their business, two percent of their business, over the coming years, it’s new-found money for them."

Moon: "Friedman says Chrylser and P&G might appear to be headed in opposite directions, but they’re trying to accomplish the same thing: get the biggest bang for their buck in an increasingly noisy advertising environment.

In New York, I’m Bob Moon for Marketplace."

After a brief meeting with his lawyers today at a federal prison in Terre Haute, Indiana, Timothy McVeigh decided to seek a delay of his June eleventh execution for the Oklahoma City bombing. His attorneys say the decision wasn't easy for one for McVeigh - who had indicated previously that he was prepared to die, but he told them the government must account for FBI files withheld during the bombing trial. McVeigh's attorneys plan to ask for a hearing to investigate, what they termed: "fraud upon the court" by federal authorities. Attorney General John Ashcroft has said repeatedly that he will fight any further delays.

The Ford-Firestone divorce is getting testier. Last week we heard that Firestone was divorcing Ford after being partners in the automotive business for a century. Ford said they were replacing all Bridgestone/Firestone tires… with other companies' products. Today there's word Firestone is in Washington asking the feds to investigate the safety of the Ford Explorer itself. Firestone has maintained that Ford Explorers have a tendency to tip over, and Ford said it was Firestone tires that separated…prompting massive recalls last year. Almost 200 people lost their lives in accidents linked to Ford Explorers and Bridgestone/Firestone tires.

And that's the top of our news for Thursday, May 31, 2001. Today, the Dow Jones Industrial Average went up 39 points, about a third of a percent. The NASDAQ went up 25 points or one and a quarter percent. Details when we do the numbers.

Rundown
Eurogovernment
With the U.S. economy now flagging, European leaders are reevaluating their zeal for forming a United States of Europe. The Economist's David Manasian and Marketplace's Stephen Beard have the details.


Kozmonauts
It once looked so promising, yet Kozmo, the online delivery service, finally closed its doors this spring. Finding themselves ill-equipped to deal with the structure of more normal 9 to 5 jobs, the out-of-work Kozmonauts talk with reporter Jeff Brady.


Online Record Stores
Though all your music shopping needs can be a mere click away, you may still like to visit old fashioned, bricks and mortar record stores. But as Marketplace's Laura Sydell reports, prospects might be risky for neighborhood retail music stores in the future.


Letters From Our Listeners
They come in every day, and every two weeks we read them. The good, the bad, and the ugly...Marketplace host David Brancaccio reads listeners' thoughts.


Look-Ahead
Coming up on 6/1: It's the Tony Awards! The Oscar may be famous for bringing big Hollywood bucks, but back on Broadway, there is still plenty to be gained financially by winning a Tony. That, plus the latest in business news, on Marketplace.