few. >> cliff, thank you for joining us today. good talking to you. that does it for us today. join us on monday. "squawk on the street" starts right now. all right. you are looking at live pictures of us. now you're looking at live pictures of gm headquarter where's the company is announcing its emergence from bankruptcy. that's right. they are out of bankruptcy. ceo fritz henderson to begin speaking at any moment. as soon as he begins we will take you off there live. good morning, everybody. i'm mac haines. >> i'm rebecca jarvis. the wall street post report that aig set to pay millions more in bonuses. financial blogs and others all fired up about this. but if you do the math, $2.4 million, aig allocate to the 40 execs comes out to $60,000 a head. sounds more like the cost of doing business than lavish compensation packages. if you're an investor, the thing

you should really be outraged about is since the aig's reverse stock split at the end of june, shares have been more than cut in half. what happened to all of that counteparty stuff, t, mark, the 100 cent on the dollar that got paid through to their counter parties. that sort of disappeared. >> yeah. you noticed that. let's check out the futures. they weren't too good earlier. they're still not good. we're down 6.90. we needed 0.38 to fair value. 40, 60 points on the dow at the open. once again, it is now official. they are officially out of bankruptcy. this morning the -- what the procedure is. i guess the court says -- >> you've been cleared for the asset sales and what not, or case dismissed, exactly. your legal background is stronger than a lot of folks. >> but not in bankruptcy. no, i didn't really know much

about that. but the bad assets remain behind. the good assets are now in the new company. i'm sure when fritz henderson begins to -- there he is. let's hear. >> good morning. exciting day for general motors. today marks the beginning of a new company, our company, one that will allow every single employee, including me, to return to the business of designing, building, and selling great cars and trucks and serving our customers. there's nothing that we want to do more than that. a lot of people thought we couldn't move through the 363 sale process as fast as we did. i want to thank everyone involved for truly amaying effort to make it happen. from the gm team, our team of excellent advisers, and most importantly, to the u.s. and the canadian government, the automotive task force and the taxpayers of the u.s. and canada who have been the key part in making this happen. we deeply appreciate the support we've received during this

historic transformation. and we'll work hard to repay the trust and the money that so many have invested in gm. the last 100 days has shown everyone, including ourselves, that a company not known for quick action can, in fact, and indeed move very fast. starting today, we want to make that intensity, the decisiveness, and the speed of these last several weeks and then transfer it from the battlefield triage of the bankruptcy process to the day-to-day operation of the new company. and this will be the new norm at general motors. all of you have copies of our press release so i won't go into the detail of the makeup of the new general motors. instead i would like to talk for a few minutes about my three priorities for the new gm, three very simple ones. customers, cars and culture. let me take them in that order. first, customers, i place them first because they need to simply be our top priority, our only priority in many ways.

at the new gm we need to make the customer the center of everything. we're going to be obsessed with this because if we don't get this right, nothing else is going to work. it's that simple. with the quality gap, substantially eliminated, one of the new frontiers in the automotive industry, we think, is going to be customer service, true customer service, which makes it that much more important that we make the customer the center of our universe. we're committed to listening to our customers, responding to consumer market trends, empowering the people of general motors who are closest to the customer to make decisions, and seek opportunities every day for direct communication between our customers and employees at every level, starting with me. next week we're launching a tell fritz website for consumers or anybody to share their ideas, concerns, suggestions with the senior management. i'll revideo and respond to input every day. of course, other executives and i will continue to reach out to customers through on going

electronic communications. starting in august, thank goodness, i'll go on the road every month to meet with consumers, dealers, supervisor pliers, employees in the u.s. and abroad to key partners. i'll be asking other members of my management team to do the same. this is something i've done throughout my career and i assure you i welcome this opportunity again. together and individually we need to listen to the questions, ideas and concerns of the people who matter most, those are the people who own and drive general motors' cars and trucks. and use that information to build better cars and trucks and provide better levels of service going forward. i am personally committed to being closer and more available to consumers than ever before. more importantly, we're determined as a leadership team to make gm owners t s ths the m excited and loyal consumer base in the industry. our focus on consumers will extend beyond gm, through gm, and through our great dealer network with a leaner and

healthier network we will be able to focus more resources on providing customers with the best level of service. our dealers have committed to making the changes necessary to improve the total customer experience for gm vehicle owners. we're working on new ways, for example, to make car buying even more convenient for consumers, including innovative new partnership with ebay, for example, in california, an experiment, if you will, which is intended to experiment with potentially revolutionize how people might buy vehicles online. consumers will be able to bid on vehicles just like they do on the ebay auction. including the option of choosing a predetermined buy it now price. think of it as a physical option for vehicles reinvented for the online consumer. we'll be testing this and other ideas with our dealers over the next few weeks and hope to expand and build upon them in the coming months. in all cases, our goal is to make the shopping and buying process as easy as possible for gm customers on their time and on their terms.

stay tuned. second major focus for gm that i have, that we have as leadership team is really simply about cars. so i've said many times in the last 100 days and i frankly said throughout my career, there's never been a successful turn around in the global automotive industry without a focus on both the cost and revenue side of the business. you get tv to do it on both sides. to win, we need to stabilize and, in fact, grow our business around the globe and particularly here in the united states. and that means building more of the gorgeous, high quality, fuel efficient cars, trucks and crossovers that consumers want and get into the market faster than ever before. toward that end, we plan to launch ten vehicles in the u.s. and an additional 17 outside the u.s., actually over the next 18 months. we are going to drop the word competitive from our vocabulary in the area of product development. going forward our aspiration, our objective and the objective of tom stevens, the entire

product development organization is to create products that consumers can judge as best in class. and anything less, is just simply not acceptable as an aspiration. we may not always reach this level but if we don't set that level for ourselves, we won't accomplish our goals. the goal is to have -- our vision is clear, to design, build, and sell the best vehicles in the world, something that general motors was known for many years ago and something we need to re-establish. one way we'll achieve this goal is by focusing on, for example, in the u.s. four car brands, chevrolet, cadillac, buick, and gmc. populating these four brands with just 34 name plates next year down from 48. this emphasis on fewer, better entries will enable us to devote more engineering and marketing resources to each model like the products we're launching in the u.s. this year. the vehicles like the smoking hot chevrolet camaro and the equinox, buick terrain, and cts

sport wagon. and you'll see in the products we're launching around the world the same sort of passion, cars like the chevrolet viva in latin america, shea rchevrolet coming this fall in europe. a key to our product focus is a continued emphasis on the environmental technology. we're road testing preproduction chevrolet volt now. we blan to bring the car to market before the end of next year. we announced a new small car last month to be built right here in michigan. it will add to our growing portfolio of u.s. built, highly fuel efficient vehicles and restore about 1400 direct jobs in this country and many more indirect jobs. in this country and in our home state of michigan. this was a business decision. it's about producing fantastic, beautiful small cars and earning a return on it with highly competitive manufacturing facilities and labor agreements. we're making advance battery

development a core competency from the new gm. you can expect more news this summer. we have already made a number of important announcements and we will continue to bang the drum to make sure that we get our job done in terms of advanced battery development. in short, the products and technologies we're launching this year and next are clear demonstrations of our long-term commitment to exciting design, great fuel efficiency, and world class quality. these are the cars, trucks and crossovers that will put us back on the consumer shopping list and the road to profitability and success. finally, we're working to change -- we must change the culture at gm. with a focus around customers and products, speed, accountability, and risk taking. there's a lot of work to do here. we need to start at the top. we have a new board of directors, general motors, led by our new chairman ed whitaker who is with us here today.

i've asked ed to come up and make a few remarks. ed, please? welcome, ed. >> thank you, fritz. well, good morning. and it's a pleasure to be here. this is a great day for general motors. thank you, fritz, for introducing me. i'd like to also express my appreciation to everyone who's played a role in launching this exciting new company. and it is an exciting new company. i think you could appreciate how challenging it is to turn around a complex business like it is. there have been a lot of long hours, there's been a shuttering of plants, there's been some painful layoffs. and i salute everyone who has worked to bring general motors this far this fast. i agreed to be chairman of general motors because, like so many people, i've always admired this company. you know, for 100 years, general

motors was among the world's greatest companies. it deserves to be there again. and it will be there again. perhaps more than anything else, i agreed to take this job because i know most americans want this company to succeed. and i think that speaks volumes, many volumes about the potential of this company, the potential we have, and the great opportunity we have to make it happen. no misunderstand now, there's still a lot of work to be done to get gm where we need it and where we want it to be. but we certainly have the fundamentals at this company. the number one fundamental is its people. we have great people at this company, and they're going to make great things happen. along with that, we have the technology. we certainly have the products. and we have the drive to succeed. so we're all excited about that. the employees i've met as i've

been around the company, which is a short time, and the board members that i have met and know are up to this challenge and they're going to be a great part of this turn around story. i'm a big believer in strong leadership. we have that in fritz and in this top management team. i know they're poised to make great strides in the near future. and you're going to see a lot of action around general motors. i like of tell you this, we all want to win, and we are going to win. it's exciting. we're going to put forth our very best efforts. we appreciate the efforts of everyone else who has helped us get to this point today. and i look forward to being the chairman of general motors. and thank you for listening to me and for attending. and fritz, i'll turn it back to you. >> thanks, ed. appreciate it. thank you. really appreciate ed's

attendance here with us. let me also add my thanks to board member kent cressa who up until today was operating as chairman of general motors, especially for his work and continuing to build the new board of directors. i would also like to thank the prior board members who left the gm board and i look forward to working with ed, the new board, with a renewed and continued dedication to world class standards of corporate governance. beyond the new board we're also changing the structure of the company today. we announced -- first thing we're going to do is announce that the two senior leadership forum decision making forums we use, automotive strategy board, which is made of of regional presidents as well as global functional leaders and automotive product board which is made of, in essence, the asb and product development leadership, is going to change. for these two groups will be replaced by single, smaller executive committee that will meet weekly to anticipate and respond to customer and market

needs. this team will focus on business results and products, brands and customers. much of our work will be done outside of our headquarters here in the renaissance center. at design, at our proven ground in mill ford, at operations around the the globe and places where we can connect to people developing our cars, trucks, technology, people who develop them and the people who sell them. this move alone will cut the top-level decision making team, the size of it, in half. we're also removing layers of management. reducing the number of u.s. executive business 35% overall u.s. salaried employment by 20% the end of the year. very difficult moves. significant sacrifices made by all, including our salaried workforce here in the u.s. this is all about, however, flattening the organization and driving broader spans of control. we're eliminating the matrix structured we've employed simplifying the organization to establish clear accountability for performance. the bottom line is business as

we've known it and as we've had it up today, business as usual is over at general motors. it's a new era. we have to have the highest expectations for ourselves and everyone associated with the company must realize this and be prepared to change and fast. a significant change that comes from this involves our regional structure. going forward, as i am the president and chief executive officer of gm, working closely with ed, but as part of that, in addition my global responsibilities and as part of my global spontsibilities i take responsibility for our operations here in north america. this means we're eliminating our north america president position and north america strategy board and an entire level of management. global functional leaders will have responsibility for running their parts of the business here in north america. in addition to replacing the existing regional structures we'll be coordinating our global operations under one group. to that end i'm pleased to

announce that nick riley will take responsibility for gm international operations, reporting to me, part of the executive committee, and nick and our international operations will remain headquartered in shanghai, china. the existing regional strategy boards are being eliminated, removing a layer of management. the regional strategy boards help strengthen gm's presence in key markets but given the changes in the industry and our company we're taking a more streamline approach to running the business. it also reflects realization that we need to run the business going forward through more collaboration and then shared power structures, including in europe. the european business is brated as an integrated business but our expectation going forward will be a minority position and work with our european business as a key partner but we will not have direct management responsibility for the business going forward. details of this new structure including key leadership changes will be communicated later this month. all of this is aimed at reducing bureaucracy and driving more accountability in a much stronger customer focus.

to help us put an even greater focus on the customer going forward, we've asked the vice chairman to be responsible for all creative elements of our product and customer relationships. i will announce today we're unretiring bob lutz and we asked bob to fill this critical new position. as you know, actually probably -- as everybody knows, bob announced that he planned to retire, he made the announcement earlier this year and he changed his mind and we're very grateful for that. bob has a passion for this responsibility. and from my perspective, this is the best way i knew of to prevent bob from recycling through another set of eoms. bob and tom will partner with ed to guide the creative elements of design but design remains part of product development. bob's responsibilities behind creative design, however, will include brands, marketing, advertising, and communications. they will report to him and it's his job to integrate those activities and provide

accountability for consistent messaging and results. bob has a proven track roord of change and unleashing creativity in the design and development in cars and trucks and this new role will allow him to take a further step in the parts of gm that connect directly with consumers. bob will report directly to me and be part of an active member of the newly formed executive committee that i spoke of a moment ago. the announcements today reflect an approach to speed and decision making that we want to be key characteristic of the new gm. we had planned for a bankruptcy process of between no more than 60 to 90 days. we took the earliest part of that period which is approximately july 31st and we wanted to have the organization and the cultural related elements of change by july 31st. the judge decided the stay ended, we had the opportunity to close in 40 days and we did. so now we'll move in the next two to three weeks to finalize the organization moves. it was important for us to move, to close, and we'll make adjustments quickly and have the

people in place by the end of this month. we have great cars and trucks and crossovers today. we have a product line brimming with new and exciting entries. we have the important parts of the business necessary to make general motors great again. our dealer network is outstanding and will be even better on a right size basis of opportunities going forward. compared to the old gm, we have a significantly stronger balance sheet, a much stronger cash position and very competitive cross structure. in fact, for example, in terms of debt, our u.s. debt is approximately $11 billion in addition to about $9 billion in preferred stock. that's just in the capital structure side of the business. on the cost structure side of the business we feel we're very, very competitive. going forward, we pledge to be transparent in our financial and other reporting. i think ray young described it best. we'll be the world's most public private company. we expect to have that

transparent si. it will be taken public as soon as practical expected next year. while we're required to pay off government loans by 2015, our goal is to repay those loans much sooner. at gm, we take these loans very personally and we take paying them off as a key financial goal. the represent an enormous obligation to our fellow taxpayers and we will move quickly to pay them off. in short, gm has what it takes to excel. but with no interest whatsoever today in making excuses, nor in debating the past, we need to be accountable for this. from this point on, our efforts are dedicated to customers, car, culture and paying back the taxpayers, both the loans and in creating real value for shareholders in the shareholders in many ways, whether it was the taxpayers who were providing capital or the bondholders and the other creditors of the old gm who have a stake in the company, it's about a creating

values, sacrifices are being made, which are i'm mensz, aimm worth it. we know we have to back these promises. and our commitment is that we will. thank you very much for your time this morning. let's now open it up for questions. >> we're going to start with phil lebeau. those of you on the -- sorry, those of you on the phone, again if you want to ask a question, please push star1 and we'll cue you in. we will start with phil. >> fritsz, there's an expression you can't teach an old dog new tricks. why should we believe that the new gm will be different, more responsi responsive, more nimble than the old gm? >> well, i talked about a number of changes today. and the interesting thing, phil, if you look at where you spend your time as a leadership team and i think about the last two krae years, the problems that we've been working to solve, we're not all done but we have a huge amount of them behind us.

this basically frees us up to spend our time where we need to spend our time, product, customers, brands, winning in the marketplace. in the end we simply have to prove ourselves. we have to see what we do and then have to see what results we have. and that's how we'll prove ourselves. i do -- i think your point is you can't teach an old dog new tricks is true. i also pointed out to my management team, einstein's definition of insanity, doing the same thing over and over again and not expecting the same result. we know we have to change. today is about the beginning of that change and it's our job to prove to you and to everybody that we can get that job done. >> i'm going to move to mary. >> all right, phil lebeau got in the first question. we're going to take a commercial break now as gm emerges from bankruptcy, and you are now the new proud owners. you have questions. who can give you the financial advice you need? whe will you find the stabilitand resources to keep you ahead of thispi? these are tougquestions.

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okay. we're setting up for the open. the futures closed the electronic session down 6.90. 7 1/4 below fair value, ibd indicating a loss of about 50 on the dow at the open. >> meantime, look at cisco. shares pre-market in focus. 1500 to 2,000 jobs to be cut there. that is according to thomas wisele. they say they're aggressively cutting costs up to a billion dollars in cost will be cut om costco. - ( truck enne rumbling ) - hey, wt wait wait wait

wa wt, one more thing one more thing! one more tng.

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and at the nasdaq, hogan and hartson. and the center for learning and development. >> and our market reporters are standing by. the nyse, nasdaq, nymex, cme group. hey, bertha. >> i'm at the ford here, we have ford opening lower. market trying to figure out how to play it. what happens now with ford with both gm and chrysler post-bankruptcy. a couple of dow components in the news this morning that are both weighing on the index. we've got ibm getting cut over at goldman sachs to a neutral from a buy. on valuation, up 21% year to date. goldman sachs is very positive and upping an attractive rating when it cams to the hardware sector they do see some buying here. they're also cutting western digital on valuation as well. chevron, which also trades here at the moment looking at 61.73.

chevron was out offering any specific members warns the down screen operation really not hurt by apparently translations in the second quarter. also they said that the high prices really were not very good for them. the benefits of the weaker dollar really offset what happened to them as far as margins. watch the downstream players likely to suffer today. exxon late yesterday, moved higher on major find in canada with record to a well with natural gas. shah group a big loser this morning, missing on the third quarter. even as it upped its cash flow guidance. they do expect to see more money but higher expenses beat them up. citi this morning is outlining what is going on wits two units as it prepares to focus on citi corp. versus citi holdings. >> good morning, bertha. we are off to a slightly lower open here, down .3 of a percent

or 4 1/3 points here, despite the fact that we've got a whole bunch of relatively bullish analyst calls coming out in tech. i mean b across the board. i know it is so five years ago, but, dude, you're getting an upgrade at dell. we've got goldman sachs turning bullish on the whole hardware sector. but dell in particular, it's raising from a hold to a conviction buy. in other words, goldman sachs is pounding the table on this one and it's not alone. credit swiss raising the wise target on dell. also making a call on apple this morning. even though they're still below consensus, they are raising their estimates on apple. we've got come mass wisell partners, yahoo! for yahoo! that company upgrading the shares from underweight to market weight. finally, yesterday we had a bullish call on broadcom move the chip stocks higher this morning. neediman companying upgrading novellis opening the closing

bell. sharon at the nymex. sharon? >> it's hard to believe a year ago at this time talking about oil making a run for 147 a barrel. today we're looking at oil below $60 a barrel and poised to have the biggest weekly decline since january. demand, the big concern. of course, overhang of supply is also another worry in this economic environment. the international energy agency out today with its monthly report, saying that if we hold on to the forecast for demand being down almost 3% this year, it actually raises forecast for demand for 2010. here's another big bearish point. they actually see crude supplies and not opec countries increasing over 300,000 barrels. the tightness in supply that a lot of folks were thinking were going to happen in the second half of the year that may not happen. we're looking at the strength of the dollar also weighing on oil and across the board in a lot of these complex. we have gold, silver and copper all lower. rick santelli, a lot of folks

here are scratching their heads trying to figure out why is the dollar stronger when obama just talked about the fact that we're probably not going to see a recovery for some time? >> maybe we should have an investigation. it isn't trading off the fundamentals. you know, if you consider the dollar index as sharon's talked about, even taking a step back where it's more interesting, it's had a wild week in terms of how it's traded the top and bottom 1 1/2-month range. but on the week, the dollar index right now is virtually unchanged. not true on treasuries. it has been a week of lower interest rates. if you look at a ten-year note hovering at 3.33, that's an easy one to remember, it's down seven basis points on the day. it's down about 16 basis points on the week. so we want to keep very close eye oint, especially considering it's been a week of supply and that really did not hurt the market. now, let's go back to mark haines. >> all right, thank you, rick

santelli. stocks trading le ining lower o friday morning. corporate earnings kicking into high gear next week. how to get ready. david joy, chief market strategist with river source investments joining us. and robert lowe's portfolio manager with the integrity growth and income fund. robert, start with you. last time you were here you said we were in the middle of a 20-year secular bear market. >> i did. >> can you change your mind? >> i have not, mark. >> all right. >> i think we have seen about $30 billion in destruction of assets on a $200 trillion asset base over the last year or so. that's simply not going to be rebuilt for 10 or 20 years and lit support probably a 10% to 15% lower level of spending, employment, economic activity. so this is the first balance sheet recession we've had since the 1930s of any significance.

and they take years to rebuild through savings. >> david joy, any joy where you are? >> well, i think that even if we are in a secular bear market, there is a very good chance that we're in the early stages of a cyclical bull market because of all the reflation that's going on around the globe. so i'm not sure i have a 20-year time horizon, but if you look out over the next 12, maybe 18 months, i think stocks are going to start to move higher, particularly, you know, in areas like industrials, energy, materials. a lot of infrastructure rebuilding that has to occur around the globe. >> robert, given your thesis, what do you do right now? >> i think you be very conservative. the biasis to the downside, i agree we've been in a secular or in a cyclical bull market up trend. when it's up 30% or 40 hrs, you get very defensive because it's probably going to head lower from here. so i think you stick to very conservative sectors like

medical equipment and diagnostic equipment makers, things like that. >> david, i see in the notes that you are interested in some of these energy names. we've seen energy get whacked over the last seven sessions, really. in russia right now we're watching the ruble come up significantly, in part because of that country's exposure to the oil markets. what do you think about energy and what are your price targets as far as oil is concerned for the rest of the year? >> well, i think what we're going through now is a little bit of a correction. oil prices got ahead of themselves. we're also seeing some seasonality there. as you mention, dollar strength isn't good. i think this is all in response to the market's conviction about a recovery being on the horizon, being severely tested here in the short run. i think we're going to get that correction. and when we do, that recovery, and when we do, i think the dollar weakens. i think energy prices resume their climb. i think $70 is probably a pretty good price target for year end.

>> robert, you are willing to take a chance on an energy stock, right? planes, pipelines? >> i am. yeah. i think it has a good high dividend. it's well supported by cash flow. i think that's the kind of conservative companies investors should being looking for. they need something to lower the capital gains hurdle in a difficult and volatile market and a weak economy. i think the way you do it historically has been companies with gooding well-supported high dividends. >> high quality corporate bonds also look good to you? >> yes, they do. we do not own them but they look to me like a lot better bet than treasuries at this point. >> david, a lot of financials on deck to report their earnings coming up next week. and they're not one of the groups that you say you're interested in right now. is that something you would short ahead of its earnings? >> well, there are certain parts of the financial sector that we think are going to do well,

particularly with this quarter's earnings. companies with exposure to capital markets activity. sort of the old, what we used to call, investment banks, anyway, as well as asset managers. the commercial banking industry itself, with one or two exceptions i think is going to be challenged in terms of, you know, resorting -- reverting back to their previous earnings capability. i'm not sure i would short them but i think certainly i would stay away from the commercial banking sector by and large. >> gentlemen, thank you very much. david joy, robert loest. up next shs we're going to go up to sun valley. julia boorstin is talking chrome and bing with the ceo of google. and aig treasury and more all in this morning's faber report. you're watching "squawk on the street" here on cnbc. we are first in business worldwide. and we'll be back in just a minute. hey mom i need some minutes. i justave yosome at the restaurant.

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week. taking on microsoft's bread and butter. the operating system market, our julia boorstin at the allen and company conference in sun valley where she sat down with google's ceo eric schmidt. hey, julia. >> good morning, rebecca. in his first interview since google's announcement on tuesday, eric schmidt tells me the new chrome operating system will be a game changer. it will be free. it will be open source. it will host all of your data on the web. access your documents, music, everything, from any computer. the big question is what kind of competition this poses for microsoft's windows. >> microsoft is certainly a very, very successful operating system vendor. it's probable the case that people will continue to buy microsoft products for a while and they'll also buy these new netbooks. because they're going to get some benefits from the new netbooks that the microsoft offerings can't but they'll still want some of the applications that microsoft has. >> schmidt said that for a while, people will probably continue to purchase microsoft

products. so i pushed him on that time frame and whether he really thinks google's new chrome operating system will eat into microsoft's market share. >> well, again, we don't know about what the future will hold. we do know that people will flock to these new kinds of products. what we don't know is what it displaces. it may very well be that these products are so inexpensive that people will continue to buy the existing products and these will be additional. >> well, the chrome operating system or chrome os may be on the horizon. google remains focused on advertising which does provide the vast majority of i've revenue. the company isn't announcing earnings until thursday but eric schmidt did have this to say about business. >> we're not immune because we know our advertisers are sophisticated and when consumers change their behaviors online, advertisers adjust their bid and indeed that's what occurred in our march quarter. >> as will remain core to google's business and despite any slow down the company does

continue to expand. eric schmidt told me he thinks the company's next billion dollar business will be display ads. we'll have more, rebecca, more from our interviews here at the sun valley conference coming up in "power lunch." >> thanks so much, julia boorstin. up next, ultimate fighting championship president dana white, are consumers still willing to shell out 50 bucks to watch this weekend's big fight? and at the top of the hour, treasury secretary tim geithner goes before the house to get grilled about new regulations and rules for derivatives. barney frank and the fireworks start, we'll take you there live. today the'a way to save mo for retirement, with annuities from fideli.

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you're watching cnbc's "squawk on the street." >> look at that. you know, more hubbub about aig, probably going to hear about today "the washington post" writing a story saying, can you imagine paying $2.4 million in bonus toes 40 top execs.

that comes to about $60,000 a person. hey, listen, it's within reason. aig, of course, a ward of the state, probably will be for quite some time to come. the largest recipient by far of taxpayer dollars, if you will. not that $180 billion you hear so often. we corrected that a few weeks back. closer to $130 billion. we're talking real money here, aren't we? as for today's story in the "post" this relates to various buckets, if you will, of bonus payments that are and have been contractually agreed to by aig and a number of fronts. from my perspective, the largest one is not one that's discussed today, which is what is still $230 million worth of bonuses due to employees at aig sp, that is the unit run by sam originally, or not originally but until not that long ago. that was responsible for a good deal of losses at aig.

they're owed $230 million in 2009. originally it was $327 million but then you're talking about $97 million in at-risk pay which, of course, they're not going to get. that's a big number though. aig continues to try to work that number down. people leave. you don't have to pay them their full bonus. the idea is you want to orderly winddown of this unit, which has caused so much pain for all of us. another bucket is retention payments for senior executives who are hired after the government took over. and here's where at least today's story is. there's 2008 performance bonuses for all employees, including $9 million worth of bonuses for the 40 top executives. the top executives didn't get any. the 40 below them get $9 million in bonuses. they get some of it in march, another quarter of it in mid july and the final quarter of it in september based on hitting various internal targets. this is what the latest brouhaha perhaps is about.

of course, all of this comes because aig, along with citi, for example, where i spoke on a number of top managers recently, are dealing with ken feinberg, the government-appointed czar, if you will, of executive pay. i'm talking to people at citi, feinberg has been going over things at aig, communicating with them about, well, what are you going to pay, how are you going to pay it? they're trying, of course, to meet any objections he might have and be fair as much as they can. and by the way, that's the same process going on in a number of places including citi group where he's going over lists and everybody's trying to figure out what they're going to pay everybody here in 2009. so it will be interesting to see. then you look at american aig which, by the way,since that reverse split 20 l/1, it's been nothing but a disaster. it did nothing for the stock. of course, people don't figure out how many shares are outstanding when it comes to aig. we will continue to have various

points of stories and outrage and everything else as they continue to try to wind down this financial disaster. rebecca, back to you. >> thanks, david. it will be interesting to see how ken feinberg decides on this. and if that becomes a precedent for decisions going forward. >> it will be. and you know, actually that's where i would like focus more of my reporting because that's an interesting dynamic, is negotiations with these corporations and trying to determine what people should be paid and whether or not that will have any implication as well for the rest of the industry, which is hard in some ways to imagine. you're talking about those, of course, with the government owns some. >> right. >> a significant amount of equity and others where it owns absolutely nothing and, therefore, has no power. >> thanks so much, david faber. ultimate fighting championship, ufc for short, they have trumped boxing. they've become a billion dollar business on occasion of the 100th event tomorrow in las vegas. darren rovell is joined by a special guest. >> when the ufc started 16 years

ago it would be hard to imagine the mixed martial arts organization would make it to its 100th show and one of the man who turned it to the giant is din dana white who joins us las vegas. we all know there's a recession going on. last time we talked you said business was up 20% in the first quarter. the tickets sold out before it hit the general public. what's your confidence as to the number of pay. her. view buys? >> it sold out in an hour and a half and sold out closed circuit at the mandalay bay and another one at the mgm now for closed circuit. all of our polling right now is showing we're going to do well over a million buys for this fight. >> we know you scored nice blue chip sponsors, bud light, harley-davidson,burg ber king. we heard they're going to charge sponsors $100,000 for sponsors of ufc fighters. what is this about? >> we have this sport right now where guys can, you know, fighters can actually get

different sponsors. i have the ability to tell them no. so rather than tell these guys no because we have a sponsor that would be the same, what we're working this thing out where guys end up just paying us a certain percentage and then they can sponsor whoever they want. >> the last champion that everyone was introduced to was chuck lidell uf krerksc 71. you have now brock, he is fighting tomorrow. huge part of the ufc now. how important is it for resner to win tomorrow for the ufc? >> that was one of the things i was railly worried about. chuck lidell was really our only big star in the beginning. we have so many stars now from brock rerks brock to forest, i could go on for two minutes about the stars. we created a lot of stars here

on the ufc. >> unlike many sports, you still have a great growth story to tell. i know you've been pushing out that you think that ufc is going to be bigger than socker in 10 to 15 years in worldwide popularity. what's your greatest fear for the business? >> well, i can tell you right now, this coming up for this event saturday, we're going to be in 75 different countries in 17 different languages. televangelist televangeli tele aviv is showing it. my biggest fear is time. as fast as this thing is growing, we don't have -- there isn't enough time in the day. you have to sleep. other businesses have to shut down and go to sleep at night. if it wasn't for, you know, time, we would grow a lot faster. >> dana, thanks so much. let's get to some breaking news. >> thank you. rick santelli here on the floor of the cme group. we just had the preliminary july

university of michigan sentiments survey and it isn't pretty. we moved from 70.8 from last look last month to 63.6. expectations were pretty much for an unchanged look. slightly at or above 70. and, of course, response of the market place isn't huge but we are seeing continued buying in treasuries pushing yields down and they were already down half a dozen basis points on the ten-year prior and the equity markets, of course, as you are probably watching on your ticker, is giving up some ground. we want to pay particularly close attention to the weekly close, especially from the supply side of treasuries, look for options this weekend. settlement, when you write this check for that is next week. back to you. >> all right, rick. thank you. straight ahead, treasury secretary geithner, he is minutes away from testifying before a bigommittee on capitohill. we'll be there. d#: 1-345-2550 "i'm rethinkin everything...

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the university of michigan consumer sentiment index plunging well below estimates to 64.6, down 10% from the month ago. gm's ceo says the company can succeed and predicts they'll repay $50 billion in loans ahead

of a 2015 deadline. and the trade deficit drops to a nine-year low. that's cnbc's.com news now. i'm matt nesto. welcome back to "squawk on the street." i'm hampton pearson reporting live on capitol hill where tim geithner is set to testify before two house committees about regulation of over the counter derivatives, three headlines from the treasury secretary, greater oversight and transparency of derivatives will make the overall u.s. financial system more stable, now the administration wants higher capital and margin requirements for derivatives not cleared through regulated counter party. says geithner, quote, conservative capital and margin require lts will help ensure that dealers and participants make good on the protection they have sold. finally, geithner says treasury, the s.e.c. and cfdc are making progress on deciding which transactions will fall under which regulator. drafts legislation, he says, is in the works and on the way.

mark? >> all right. thank you, hampton pearson. let's find out how this is playing out in the early market action. kick things off with bertha coombs who is here with us at the big board. bertha? >> thank you, mark. certainly that michigan consumer number not receiving happiness here on the street. we've got both the dow and the s&p 500 poised for the fourth straight week of losses, as a lot of investors continue to worry about whether this stimulus, whether the economic recovery is going to take hold. alcoa set things off more or less positively with the earnings report. we're getting a big earnings warning coming from chevron that is weighing down on energy shares. although chevron didn't give actual numbers, they said hi prices really hit their margins. they also said the currency translation didn't help. and they're down in operations, really going to drag results for this second quarter. that today is weighing on the energy markets in terms of the stocks. we've got the refiners all

trading to the downside with anticipaon they'll have similar problems. technology, a standout today. although ibm trading dot downside. goldman sachs is is loving hardware and upping the rating on the group but it cut ibm saying on valuation that they want to cut there. the rest of technology really moving to the upside. and really telling today is that we've got retailers moving to the up side today. abercrombie and fitch had been higher. right now lower on the back of the michigan number but macy's holding in as the unchanged rate. doesn't make sense to boost up retailers if consumers aren't ready to spend. let's move on over to the nasdaq and mike huckman. >> thanks, bertha. and we just saw some weakness creep in here at the nasdaq. right now it's up only .3 of a percent. the nasdaq trying to avoid the worst week in about two months. helping it to stay above water though are a bunch of bullish analyst calls in tech. these start with cisco where you have the analyst saying that

company's previously announced cost cuts could go deeper than expected. that stock is slightly higher. so much for goldman sachs raising dell to a conviction buy. that stock went negative just a couple minutes ago. we do have credit swisse raising ep estimates on apple. it's up by more than 1%. thomas upgrading yahoo! to the equivalent of a hold rating. novellis is up 1 1/2%. to a needham to buy. that is helping it move higher by half a purse right now. for more, check out my blog. you can follow me on twitter at mhuckman. and now over to sharon at the nymex. >> we will do that, mike. we are looking at oil prices here that are below $60 a barrel in london and here in new york. this is the first time since may that brent crude prices have been below $60 a barrel. keep in mind when you look at where oil was a year ago to where it is today, a lot of it has to do with demand and a lot of traders here are waiting to

see some of those profit reports next week to see where demand stands for some of the major consumer stocks. that's maybe giving us a good indication of where we're going. really can't blame this week's slide on the dollar. rick santelli pointed out the dollar index flat on the week. as srb index has fallen 5%. in that we have metals that are down as well. gold, silver, copper, all down about 3% to 6% over the course of the week. it will be interesting, rebecca, to see how much of this slide has to do with people getting out of the market, concern about the possibility of tighter regulations. we'll get that the report from the cfdc today to see how many noncommercial traders were among the sellers this ek. >> thank you, sharon epperson. > straight ahead, treasy secrary geithner is gng to testify before t joint hearing. could someone toss me an elen sixteenths wrench over he?

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we're back. s a an analyst says, cisco could be cutting up to 2,000 jobs in the near future. amazon and google are set to report earnings later this month. majestic research, john, good morning. thanks for being with us. >> good morning. >> i was reading over your notes. it's fascinating. let's start with google. i'm reading expectly between the lines, the two main drivers of business are, key word --

>> yeah, now, key words are, i put in the word, farfignugen and google will have sold ad strks th s that will pop up. >> consumer word, peedia shows up at the top advertisement for that because they're a relevant ad for that word. >> how are they doing? >> we saw an acceleration on the back half of the quarter for google. what's happening is q-1 and most of q-2 the ad prices on the ads have been falling. consumers have been buying less stuff online and therefore the value of that ad was declining. the back half of q-2 we saw stabilization. one, we saw the price of the ad stop falling and we saw consumers start searching more. their demand for products was actually increasing. what that meant is two things. one for this quarter it means that google is doing 30 million better than people expect on a

gross revenue basis globally and, two, probably more importantly you're thinking of q-3 and q-4, trajectory entering those quarters is current street numbers are too low. >> john, how important is this earnings cycle to the tech names? in particular, we're just looking at the fact that tech names have either out performed or underperformed the market. they've been this wild card out there when it comes to stocks. >> yeah, this earnings cycle is going to be particularly interesting for internet stocks because, if you remember back to last year the thing that was happening last year, stimulus chex were being sent because consumers the back half of q-2. for the internet it benefited travel and consumer electronics. you saw a lot of people buying flat panel tvs and a lot of people traveling with this checks. the question, i think, this quarter is are people bog to look through the comp of q-2 and q-3 and the comp becomes easy to back half of the year? the the question is are you going to look through it and look to the guidance or be concerned about it as we're going through it. >> there's also the head-to-head

competition between google and microsoft heating up in operating system land but also on the internet side. how does that shake out? >> absolutely. that is a very important question and the question i've been asked most about this quarter from investors. we've seen search arrow being increased by 210 basis points. so about 2% of the market they've taken since they launched. now, the key question here is three months from now will they maintain that share. one of the things that we've seen in the past -- >> how much do they need to make it a very profitable venture? >> they need to get to critical mass, which is 10% to 15% of the market at least. i think more likely a lot of people advertisers would like to see them have 20% volume before they start putting meaningful dollars on there. today they have 7 1/2% share. >> let's switch gears to sam zone. what are you sigh going on there? >> amazon's business accelerate through the quarter for a variety of reasons. the first and most important is that they're selling more inventory that they own versus third-party inventory. the story last quarter versus this quarter is stagnant. they're lick questiquidating a

inventory. what we're seeing this quarter is basically the opposite of that, that inventory from the brick and mortar world is dried up. amazon selling its own stuff. and so their revenues have been accelerating through the quarter. we're expecting 17% year on year growth which is above the street consensus. >> don't we have a lower margin on the third party stuff, too? >> that's right. the key point is last quarter gross margins were so good because they sold so much third. party stuff. revenues will out perform now. we expect downside on the gross margin side. >> you didn't come here to talk cisco but it's big news today, maybe cutting 2,000 jobs. how does that play into forecast? >> i'm not sure it relates to internet stocks there's much of a -- a lot of cross currents going there. i'm not sure it's got a big take away. >> is cost cutting going to be something that helps these companies in the future or has that dried up in terms of profit sniblt. >> i think the one company in myspace, the internet space may

have yahoo!. >> okay. thank you, jon aiken. >> thank you. >> fciting subject. we are still waiting for treasury secretary geithner to have the opportunity speak. >> patiently awaiting his turn. >> yes. right now it is -- as soon as they're done and the secretary starts, we'll take you back to the hill li. "squawk on the street" back in two minutes. yeah, i'm looking for car insurance that isn't going to break the bank. you're in the right place. only progressive gives you the option to name your price. here. a price gun? mm-hmm. so, i tell you what i want to pay. and we build a policy to fit your budget. that's cool. uh... [ gun beeps ] [ laughs ] i feel so empowered. power to the people! ha ha! yeah! the option to name your price -- new and only from progressive. call or click today. wait wait, one more thing, one more thing!

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welcome back. barney frank making a couple of comments ahead of timothy geithner's comments. let's listen? >> we will be talking about further expansion derivatives and undoing some of the decisions not to deal with them in the past. we will be talking about a number of other areas where we will be making some important substantive changes and giving the regulators the authority to do things. with regard to the derivatives, the gentleman from oklahoma is correct. they play an important role. the problem we have is this. the role of the financial sector is to be an intermediary between people who are engaged in the productive activity of the

economy and people who have the money that they need to do that. the goal of the intermediaries is to gather up money in reasonably small amounts from large numbers of people and have them available to those people who will do productive activity. i believe one of the problems we have seen in the past couple of decades is that there's become a confusion between ends and means. that is, activity that is a very important means to the end of productive activity has become, for some in our society, an end in itself. our job is to try and separate those things out. where we have instruments, activities, entities that are an important means to gathering the funds that our private sector economy needs to do productive activity, we need to protect that. we need to make sure it's done with integrity. we need to give funds to investors who are afraid to invest. you protect people with integrity from those who might

try to cut corners. you give some encouragement to those who should be investing. our job is to reduce the extent to which there are things that go on for their own sake. i believe we are capable of doing that and i'm very pleased, chairman peterson and i, and our committees, are well on our way in cooperation with the administration to adopting such rules. i now recognize the ranking member of the financial services committee, gentleman from alabama, mr. bacchus. >> thank you, mr. chairman. as the chairman, the ranking member of the agricultural committee have said, derivatives serve an important function in the market -- >> ah, they are going on, aren't they? >> on and and and on. >> all right. we will take a quick break. make a little money from mother ge and themaybe they'll let ge and themaybe they'll let m geithner talk. whn give youhe fincial advice you need? where will you find the stility and resources to keep you ahead ts rapidly evolving wor?

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we're back. let's look at the market and the internals. right now is dow i down, as you can see the the nasdaq is clinging to a small gain. actually not so small. half of 1%. so let's see what things look like internally. dow down 14. as you would expect, not really that many more losers than

winners, about 200. nasdaq, which is in positive territory, and just barely positive on the advance decline line as well. so it all makes sense. let's go downstairs to rebecca. >> hey, mark. i'm here with your buddy gordon charlop, great to see you. market is essentially treading water here. consumer sentiment number wasn't looking pretty today. worst since march. >> yeah. we're just not getting any data that's inspiring anybody in the room right now. we're in this holding pattern, rebecca. and it is really going to be that way until next week when we start to get the big numbers, particularly from the financials. that will determine which way this market goes. next week will be very interesting. >> what's most important in that financial sector and what's the key point of data that you're looking for out of the annings story? >> obviously, you know, it's just earnings in general, where they're going. but also what they're forecasting, going forward. you get news, tidbits like we

got yesterday of chevron and some of the other companies that we've seen, leads people to believe that we may not see earnings season. guys are looking for. the bar is set kind of low, but even so, if we can't make these numbers, if the consumers aren't spending, if the demand isn't there, and even footballs sant carry this thing through, we're going to be in trouble and we can start to see this thing track further. >> one of the things we've seen, alcoa coming out better than expected, retail sales data is better than expected but less bad, doesn't appear to be good enough. at least as of the data points we've received so far. is that something you see playing out throughout earnings? >> alcoa, interesting yesterday, because the numbers came out and then it didn't really support the stock all that way. >> right. >> start to languish again. >> it was huge, but in the actual market trading day, not that much. >> we're seeing a lot of that. a lot of the good news now is no longer being supported. seems that people are starting

to become risk adverse again. seemed to come into play out of the mortgage market, the yields are getting lower but not translating to the consumer which doesn't help in the housing market. there's just a lot of things out there that aren't adding up to a healthy economy right now. we didn't get much from the g-8. that was a non-event. just not a lot for investors to hang their hat on now earnings next week, very important. if not, could do gown town. >> i'm sorry to cut you off, gordon. we have timothy geithner, hi testimony finally beginning. have a great weekend. beree get to this hearing, which is the important need to bring comprensive oversight and regulation to the derivative market i want to make a fe broader pois about the imperative of comprehensive reform. there isome who suggested we're trying to d too much too soon, that we should waitor more opportune moment. there are me who beginng to suggt that we don need comprehensive change even though

the costf this isisas been brutally damaging to milons of american, ndreds of ousands ofbusinesses, tonomies aroundheworld, and to confidence inur financial system. there are someho will argue that by making regulatis arter and stronger weill desty innovation. and there a even some who argue that we should leave sponsibility for consume protection for mortg and consumer credit products largely where it is today no in my vw these voices are essentially argue that we maintain the status quo, and at's not something we can accept. it's noturprise that we're having this debate. it's the typical patternof the past. as crisis srts to rede, the impes to reformtends to fade in t face of the complexity o the task and opposition by the economic and institutional interests that a effect. it's not surprising because the reforms proposed byhe prident and the reforms that the two committees are diussing would substantially

alter t ability of financial institio to choose their regulator, to shape e content of future regulation, and continue the financial practices that wereucrative for partsof the industr for a time but to ultimately proves so damaging. this is whwe have to act and why we need to deliver very substantial change. y regulatory fo of this magnitude requires th siting how to strike the right balance between fincial iovation and efficiency. on the one hand,nd stability and protection on the otr. and we failed to get this balance right in the past and i we do notchieve sufficient form, we will leave ourselves weaker a a nation, weaker as an economy, and more vulnerable to future crises. e of the most snificant deveents in ourysm during rectecades has been the substantial growth and innotion in the market for devatives, in particular, the over the counter derive market. cause of enormo scale and the critil rolehese instruments play in these markets, establiing a mprehensive frork of oversight r derivatives is

crucial. althoughderivatives bring very important benefits to our economy,by enabling cpaes to managerisk, ty also pose very substantial challenges. under our regulatory system, as it has existed, institutions were allowed to sl very large amounts of protection agains certain risks without adequate capil to back those commitments. most conspicuousnd most damaging examples ofhis were the insurance companies and aig. bas were able to reduce the amount of capil theyeld against risk b pchasing protectionrom thinly publicized insurers subject little or no margin requirements. the cplexity of the instruments overwhelmed the checks and balances risk management a supervision, weaknesses thawere magnified by judgment of the credit rating agencies. thesfailures enabled a bstantial increase in leverage both osi and within the banking system. inadequate enforcement authority

and information made the system mo vulnerable to fraud and rk manipulation. and because of a lack of tranarent si in the otc derivativemarkets the government and market participants did not have enou information abt e location of risk exposures or the extent ofutual interconnectn among firms. this lack of visibility gnied the crisis intensifi causing a very damang wav of deleveraging and margi creases, classic margin spiral, contributinto general breakdown in cdit markets. now, these pblems d derivatives were not the sole or the priiple cause of the crisis but they made the crisis more damaging and they need to be addressed as part of comprehensive reform. proposals of eform are designed to protect the stalkt of the financial stem, to prevent markanipulation and to providereater tnsparent si and to proct consumers and investors tounsophisticad paies. this proposed plan will provide strong regulaon and transpcy for all otc

derivative oducts, most standardized and customized and strong supersion and regulation for all otc derivaveealers and otr paicipants in these markets. no we propose to achieve these goals with the following broad steps. first, we prose toequire that a standardized derivative contracts be cleared through, well regulated cenal counter parties and executed either on regulated exchanges regulated electronic trade execution systems. central clearin makes possible the substition of a regulated clearinghouse between the original cnter parties to a transaction anwith central clearing t original counter parties no longer have credit to each other, they replace that with credi expose to a clearihouse baktd by financial safeguards that are established through regulation. second, we propose to eourage bstantially greater u of standardized otc derivatives and thereby facilitate a mor substantial migration of these otcerivatives on to central earinghouses and exchanges. we will also require, t

regulators police any attempts by market participantto use cuomization toavoid central earing and exchanges andn this context we will impose hier capital a margin requirements forcounter parties using customize and nonsteshy clear derivative products to account for their higher level of risks. third, we prose to require that all c derivative alers anall mor market participants subject to substantial supervisn of gulation, including appropriately conservative capital margin requires and strong business conct stdards to better eure that dealers have the capital needed to make od on the protection they provid fourth, we propose steps to make the otc derivative marke fully transparent. relevant regulators whhave access on a confidential basis to all transactionsin individual market participan. the publi will have access to open positns an trading volumes. to bring about this high level

of transparency will require the fcc and cfdc to have til onll c derivatives and to ades and to provide infoation on all otc derivative trades to a regulated trade repository fth, propose to pvide them with cle imded authority to take regulatory d civil action against fraud, market manipulationnd othe abusein these mas and workit the fcc and cfdc to tight the standards at govern who can participe in these markets. an finally, we willontinue to rk closely with our international counter parts to help ensure that our regulatory regime is matched by similarly effected efforts in other countrs. for these are obal markets and these standards to be fective have to be alied and enforced on a global basi w, with thesereforms, we will brg prottion that exists in her financial markets,

otections that exist to prevent fraud and manipulatio in other markets, and to preserve marketintegrity. they will have full enenrcemenauthority. firms will no longer be abl to use derivatives t make commitmentith inadequate capital. no dealers willes skate oversight. and weill bring e financial stabilityromoting benefits of central clearing to the impoant markets. now, turning these proposals into law will require complex judgments and some of these ments willnvveassigning jusdiction over particular transactions and particular paicipants to r regulatory i want to say we've been working closely as we have with the fcc and cfdc over the lastfew nths to develop a sele, pragmatic allocation of duties and have made substantial progress. and i want to join the chairman in compliments chairman sapiro

and chairman glensler in woing so closely and productively together. asongress moves to craft legislatio aremoving along withther relevant agencies to the reform. just as an example, w provided deiled legislave language for the establisenof the consumer protection agency to the congress justast week. the fcc is moving forwa with new rules togovern and reform edit rating agencies. and the fcc announced hearings on whether to impo limits on speculion in energy derivatiin order toampen pric wings and to require new disclosure b derivative trers. those are examples of tngs we are doing as you mov forward to consider legislation. we welcome th xhimtment of these committees a congressional leadership to move forward in legislation this year. this is enormously comiced project. it important we get it right. we sha responsibilitfor fixing the system and we can on do that with comprehensive reform. i look forward tonswering your questions and talking throh the rangef impornt complex

issues we face in the reform efrt. thank you, mr. chairman. >>thank you, mr. secretary. d we he about, i think, eight or nine minutes before a vote. i'm going to go ahead with a couple of qstns here. first of all, we, in our bill, you know, we opose mandatory clea. and if they n'be cleared, then we give the cftc the requirement they t some mar an collateral requirement the transaction. one the questions that i still ve, you know, apparently you're not ready to give us a detailed response on how thiss going to rk, but you know,f you mention broadefinition of standardized or presumption of standardized have cleared -- >> you can continue to watch this on dotcom, obviously timothy geithner finishing up his comments there. you can continue to watch the hearing about cds, the state of them going forward. we are going to continue now with our live programming here on cnbc. general motors emerging from

chapter 11 after only 40 days in bankruptcy protection. and our phil lebeau is outside the company's headquarters in report with general motors cfo ray young. phil, over to you. >> thank you, rebecca. it has been a whirlwind 40 days for general motors. ray young, cfo, joining us first on cnbc. ray, give me perspective. you are out of bankruptcy now. the big question is, how long before this company gets back in the black? can you safely predict right now that it's 2011? when do you say you're back in the black? >> when we did our viability plans we had a lot of announcements during our cost structure in the future, our revenues in the future, our viability plans state that we will begin to ebit positive, earnings and interest before tax basis, next year. and that's what we're trying to strive towards. but frankly, we're focused on operating cash flow. cash is king. earnings is nice but cash is

even more important. so for our objective is to be in the positive next year. that's what we're working towards right now. >> how negative is the cash flow going dob? >> this year is going to be a tough year in terms of operating cash flow. we've done a major adjustment in terms of inventories in america. it's been significant in the first half of this year. by anticipating that as market recovers in the second half of the year as it stabilizes and as we actually start winning back customers after the bankruptcy, our objective is to significantly minimize that cash flow burn as we get our cost structure in line of fourth quarter this year. >> before bankruptcy you were operating essentially at about 1500 to $2,000 cost inefficiency relative to the foreign out to makers. that is a deficit. he had that advantage over you. have you eliminated that or will that be eliminated once you finish shedding those jobs? >> just two elements here.

it's getting our labor cost per hour competitive with the transplants. the v-bus settlement with the uaw is a significant enablelr t do that. we believe on a labor rate per hour basis we're basically closing the gap with the transplants. secondly, as you pointed out, there's going to be a large attrition program being executed in order to reduce the size of the hourly workforce in the united states. both of these would get our labor cost competitive with the transpla transplant. >> you're going to be within, what, $100 here? competitive is relative. so what are we talking about? >> no, our objective is to be basically in line with our transplants are. so from our perspective, we believe we have a very credible plan to get there. >> you have closed that gap when it comes to cost efficiency per vehicle. but in terms of revenue generated per vehicle, you're still operating at a deficiency. you've got to get that sticker price up and in terms of the transaction price, you've got to get that up as well. that's going to take a longer time. >> that's actually where we're

going to spend most of our time. the new management team is going to be spending most of its time on the revenue side of the business because we know how to take out costs. that's well under way. so from a revenue perspective that's part of the reason why bob lutz has been appointed in this new position, in order to coordinate both the product, creative product side as well as creative marketing side. you need to do both in order to help with the revenue side of the business. in effect, create brand equity in our products. we've seen successes, for example, there's new chevrolet malibu, we've been able to move the price point up on that particular vehicle and very, very competitive versus the camry. so we know we can do it, we just need to do it for every product we launch right now. that's our objective. >> that's the key. you have to do it for every product you launch. we hear about the malibu on a regular basis. we talk about it on the time on cnbc. why hear back from people is they talk about the malibu but they don't talk about all the other products that are just kind of lagging along. >> what's interesting is all our recent launches have been successes in terms of achieving improvements in terms of price.

you'll see that in terms of the new equinox and the camaro, no incent 2ives on the camaro righ now. every product we launch right now is going to be a winner. it has to be a winner. and we've learned a lot from the malibu experiment. we're going to replicate that in terms of what we're doing to do in the future. >> steve wagner from the auto motive task force has been meeting your executives yesterday. how much influence is the task force going to have from here on out or is this essentially it handed the keys back to you guys and they said, it's yours to do now? >> it's going to be the new board. the new board which ed whitaker is finalizing right now is going to be very much accountable for the results of the new general motors. and the management team, the new general motors management team will be accountable to the board and, frankly, 330 million shareholders being the u.s. citizens in north america. so i think what you're going to see is the task force will gradually transition out in

terms of their involvement. and the new board as they get up to spe in terms of our company, they will be holding us accountable. >> was there any surprise, maybe that's not the right word, but surprise within the headquarters when they said, bob lutz is not retiring. in fact, bob lutz is taking a bigger role in this company and bob lutz, who sometimes says things that make a lot of people in general motors go, ah, is going to be the man in charge of marketing and communicating with the public for gm. >> i think this is indicate i've of what the new general motors is about. bob, as you know, sometimes unpredictable in what he says, he speaks his mind. he's very, very transparent. as fritz indicated, any other oem in the world would love to have bob lutz. bob, after he understood what new general motors is about, he said, hey, i want to be part of this turn around. so we're absoluted delighted. >> you're ready for the unpredictability. ipo, looking into the middle of

next year for ipo on the new gm? >> ourn't object i've is to do an ipo as soon as possible. we do have to close the books of the new gm attend of this calendar year. it will take a quarter to do. so technically the earliest possible will be the second quarter of next year, technically speaking. but we're going to have to look at how equity markets are going to be acting. we're going to look at how the industry's acting. from our perspective we would like to do it sooner than later. >> second quarter, potentially early next year. >> earliest. >> what you're saying is that's not done. that's not a done deal. in other words, if the market and the overall economy and the market for ipos is not looking good, you'll hold offer. >> we will hold off. at the same time, we do want to repay the loans to the u.s. and canadian taxpayers as soon as possible. these loans are six years in duration. to the extent we can accelerate repaying the loans we will be very much happy to do that. >> u.s. taxpayer, when do they get their money back? >> it's a combination of just not the timing, also the value. therefore, i expect the u.s.

government or the trustees that will administer the shares will be looking toward vol yooume. >> how do you measure fritz henderson from here on out, he said in his texas draw, he makes money for his company. that's how we will look at his performance. >> general motors out of bankruptcy after 40 days. guys, stick around. all day long well have more first on cnbc interviews. fritz henderson, and at 4:00, maximum bob, bob lutz, you don't want to miss what he has to say first on cnbc. back to you. up next, earning season about to learn into full swing. how to get ready in your friday trade. >> but first, oh, trish. no trish? oh, no trish. >> but still a great show on "the call" coming up. we need to send an expert. walking, talking...

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pretty much the way it's been all morning. dow down about 50. nasdaq clinging to a slight gain. on the dow, financials getting hurt the most. ge, citi group -- >> b of a also negative. obviously big earning weeks coming up next week. a lot of financials in focus on deck to report. and on the nasdaq, as we heard from john, our guest earlier, also a lot of big things coming up in tech land. it's sort of been the outcast. crude oil also ticking down today, with the trend that we've seen. 59 bucks a barrel. who would have thought that. and you also saw, what's interesting to note as far as crude oil is concerned, one of the big gainers when crude oil prices goes up. russia getting hit very hard today. their ruble just getting smacked around in light of this crude oil slide. t >> we'll bback with more. dot go away.

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welcome back, everyone. coming up at the top of the hour

we will have the latest on geithner's testimony there on capitol hill. we're also going to talk about just exactly what the role of over the counter derivatives should really be. some people say they should be all together, would that really work? our panelists are going to face-off on that. bailout recipient aig already had quite a scandal over the bonuses it handed out must months ago. now it's talking about handing out millions of more dollars. just exactly how is that going to fly? it's trying to get approval from the white house. we're talking about whether or not those payouts are just fitd in today's "call of the wild." plus, water stocks in a world of global stimulus spending. we're going to look at how you can profit from hthe2o. mark, back over to you. >> thank you, trish regan. all right. it's the end of a topsy-turvy week on wall street. so what can you do with your money today to rest easy over the weekend? time now for that fan favorite

friday trade, charlie smith, chief investment investment off fourth fifth capital group. good morning. can you hear me charley? >> yes, i can. >> can you give us a rest-easy kind of trade? >> rest easy with verizon, i guess. we've owned verizon for years and we believe it's recession resistant. they are seeing competition from prepaid phone cards and that's hurting your volumes a little bit. with a nice 6.5% yield and expenses for the fios buildout, i think cash should remain good. it's underperformed this year-to-date. if the markets continue to be weak, verizon is a good name to own. >> let's bring in peter. what is your sleep easy trade for the weekend? >> i have an etf that speaks to the chinese consumer indirectly.

pej. it's very difficult to get exposure to the chinese middle class that is growing faster than any other middle class on the planet. this is an etf that has exposure to consumer discretionary and three of the largest holdings within this etf have significant growing portfolios in china, specifically starbucks, walt disney, companies of that nature. and intrachina trade and tourism is absolutely booming. it can take years of double-digit growth. this is a way to get exposure for that. there is no real pure play for this concept of this theme. >> peter, does it concern you at all the instability in the country right now, the fact that the president of china had to leave the g-8 to attend to that? >> we spoke about that last week and that is a great point. that is in the western part of the country where very little consumer discretionary capital is actually in the hands of the

chinese people. that is an issue that has more to do with the independence of a province, a strategically significant province where you see intra-asian trade. that is not where the consumer discretionary strength lays. it's more in the eastern areas of the country where you have higher concentrations of population, real domestic growth, real domestic growth in terms of consumer appetite for the things most of the rest of the world is also after. much of that is in starbucks, walt disney and many of the other companies that are a part of this play. >> all right. charley smith, outside of the area of stocks, you, like many others, like high-quality corporate bonds. >> yes. >> why? >> well, yield turning on a and aa is very attractive. the equity premium is not

particularly large today. particularly if we are going to see continued weakness in the economy, all the liquidity that flowed in from the fed and treasury effort the last six months have slowed toward corporates. i think it's going to continue. >> all right. peter kenny, one of the things you didn't mention, price line. >> price line. the equivalent of priceline in china is something called ctrip. they've seen double-digit growth for eight consecutive years regardless of what's happened domestically. you can look at the point made by rebecca earlier about the unrest in the western provinces. that doesn't have any impact on 90% of where that population belt is. i would tend to say you are seeing that kind of growth, that kind of growth in consumer discretionary capital. that kind of demand for intrachina trade and tourism. i think that is a trend that we are just going to see a massive move forward in. >> thank you very much. >> thank you, mark. >> peter and charley. up next, a check on the market my name lake,

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>> oil is down again. >> oil down below $60. down about a buck. the bright spot today, the nasdaq. >> technology names, you have yahoo hanging in there. cognizant hanging in there. this has been the case we have seen with technology lately where it tends to buck the trend of the overall markets. >> and we are -- uh-oh. i think we're right at the neckline of the dreaded head and shoulders formation. >> david faber weighing in? >> it's funny how many guys are technicians this week talking about head and shoulders. >> i always thought it was a shampoo. >> so i did. we have earnings starting next week. interesting, there are any number of people who sort of have seen the earnings so to speak, who i speak to. they don't tell me what the earnings are, but they see a cross section whether they be an

attorney close to a company or pr person. will be very interesting to see these numbers. things are not going to look particularly good. that's just anecdote. doesn't mean it will be borne out in fact. we'll see that when earnings season begins in earnest next week. interesting to see if the move up in the markets will be borne out by these numbers. >> the question then is what's bad good enough? it was good enough for the first quarter, but the second quarter are we looking for more? are we looking for something tangible to hang our hats on to say things are actually moving in the direction where we were hoping they were moving? >> based again on what i'm hearing, i would be hard-pressed to imagine that would be the case. it may continue to be less bad, rebecca, which perhaps the market is willing to accept. actual recovery, then we'll see what outlook is. i have a feeling a lot of people are going to say the environment

remains hard for us to figure out and to navigate at this point to give you an outlook. again, we will see. hard to say now without seeing a press release. >> yeah, and we're going to play that game next week. it's bad, but better than expected. >> right. >> and who knows how that all settles out. have a great weekend. >> you, too, mark. >> and we're done for the week. thank you very much for watching "squawk on the street." i believe my colleague erin is back on monday. i'll see you then. >> it's good to be here. i'm rebecca jaries. in europe, it's closing bell. stocks are mostly lower after university of michigan's consumer sentiment index came in below con seven yus. that index dropping to about 76 this month from 70 a