'Meet the Press' transcript for May 31, 2009

MR. GREGORY:  Eric Schmidt, is America, is the United States still the global leader in manufacturing?

MR. ERIC SCHMIDT:  It, it can be and it should be, because we have the best scientists, the best technology, the best manufacturing processes worldwide. Some industries have run into trouble, too much capital, too much inventory, as we've talked about.  But the fact of the matter is that there's a great opportunity for the laid off workers who are very highly skilled to move into new industries.  New--for example, the energy industries, in batteries and that sort of thing.

MR. GREGORY:  Right.

MR. SCHMIDT:  And America can be a leader in other industries, just because of General Motor's failure.

MR. GREGORY:  I want to show you the, the cover of The Economist that is out this weekend, "Business in America:  Its next problem is big government." And you've got Uncle Sam with all the leverage, with all the control over American business.

Anne, how big of a problem is this?  How does the investor factor in the government's role in trying to, to rescue this economy in terms of its impact on business?

MS. MULCAHY:  Well, I think it's a delicate balance.  I think all of us understand the need for the government to intervene and take the actions they did, whether it was for the financial services industry or the stimulus plan, but I also think there's a need for an exit plan, that this has to be one that's thought through.

MR. GREGORY:  Right.  But do you think there is an exit plan?  Have we heard from this president, from this Treasury secretary where the off ramp is for all of this intervention in the market?

MS. MULCAHY:  I think we've heard the intent, I don't think we've heard the details.

MR. GREGORY:  Mm-hmm.  Eric:

MR. SCHMIDT:  The stimulus package was designed around a two-year window, and literally be done in two years.  It's very important the government get out of business and let business do its thing.  The most important thing to remember, I think, is that jobs, wealth are created in the private sector.  That's about capitalism.  The other thing that has to happen is we've got to change the rules so we don't end up with all these organizations that are too big to fail again.

MR. GREGORY:  Right.

MR. SCHMIDT:  And go have to bail them out again.  We've done a fine job bailing them out, let's only do this once per lifetime.

MR. GREGORY:  Well, but that's also the question, Jim, which is there is a, a dynamic in the American economy where jobs are lost every year, where businesses go under; and yet we've determined, the government has, that GM is too big to fail, so it's going to have a 72 percent stake, likely, at the end of this, in General Motors.  That's a scary prospect.

MR. OWENS:  Yeah.

MR. GREGORY:  You've got the federal government going to run General Motors.

MR. OWENS:  Yeah.  I think that's fundamental unhealthy.  The federal government needs to be in and out, they need to help get the restructuring done.  But I think fundamentally the American public, I think they want to choose the best vehicle, the best car, and American manufacturers need to be focused on competing.

MR. GREGORY:  Right.

MR. OWENS:  And having the, the best product, best product technology and be cost competitive, and they should also focus on export.

MR. GREGORY:  What happens to GM?  What kind of company is it on the other side of this?

MS. MULCAHY:  Well, I think it's, it's a smaller, it's a leaner company for sure.  Clearly it is a company that will have the ability to invest in the future vs.  just protect the past, which it has been.  That's hugely important to being able to respond to what really are the requirements to really produce the kind of vehicles that Jim's talked about.  And they have got to get a break from the legacy and move on and focus on the future, and that means they'll be smaller and they will be a leaner--they will have to make tough choices...

MR. SCHMIDT:  And they're...

MS. MULCAHY:  ...about what they do.

MR. SCHMIDT:  They're also going to be highly incentivized...

MS. MULCAHY:  Absolutely.

MR. SCHMIDT:  ...to get all that government money back out.

MS. MULCAHY:  Exactly.

MR. GREGORY:  Right.

MR. SCHMIDT:  Because the last thing you want is the government in your board room telling you what to do.

MR. GREGORY:  Let me talk about the economy more generally.

MS. MULCAHY:  Right.

MR. GREGORY:  Again, we're on the floor of the stock exchange.  Several months ago the Dow was at about 6500, it closed just above 8500.  And the market, in terms of charting a direction, has been upward.  It's not falling. It maybe comes back a little bit if there's overconfidence, but it's generally from 6500 to 8500.

Eric, has confidence returned?

MR. SCHMIDT:  Well, I would say we're exactly on schedule if you look at what, what has happened.  We had the huge stimulus package, the intervention globally in all the financial markets, more than $10 trillion of capital guaranteed or generated literally out of thin air to recover from the banking crisis, which is largely behind us.  Looks like sometime over the summer will be the business low, sometime in the early part of 2010 we'll see the unemployment high.  We're in a classic recovery of a very long and hard recession.  The question now is what's next?  What kind of a recovery?  What happens in 2010?  What happens in 2011?  We're right on schedule.  And if you're one of these people who's, for example, trying to refinance your mortgage right now at the lowest rates possible, or you trying to sell your house at a much lower price, you can sell it.

MR. GREGORY:  You two are seeing maybe a slightly different environment. It's very difficult for Xerox right now, it has been for the, for the balance of the year.  What do you see out there?  Is there renewed confidence?

MS. MULCAHY:  Well, I think some things are working better, there's no question.

MR. GREGORY:  Right.

MS. MULCAHY:  Credit markets are working better, I think there is some, some positive signals.  I think that I would characterize it as we've seen a, a flattening out.  We're not in a spiral down.  But I think the big question mark is the pace of recovery.  And for most of us it would be difficult to plan for a--any kind of aggressive, positive uptick right now.

MR. GREGORY:  Right.

MS. MULCAHY:  So I think there's a fairly conservative view as to we may have leveled out, but it is very unclear as to when things will improve.

MR. GREGORY:  Let me stay on this point, because one of the really important parts of--and it's a complex part of our financial system--is access to credit.

MR. SCHMIDT:  Mm-hmm.

MR. GREGORY:  Now, so for the consumer, I'm feeling the pinch in terms of my credit card, in terms of my rate, or if I want to get a loan for something. But for businesses, too, you're feeling a pinch.

So, Jim, what kind of access are you getting to credit?  Are, are you getting less?  Are the terms stricter?  And how is it impacting business?

MR. OWENS:  Well, we're a--fortunately have a pretty strong balance sheet and have an A, A1/P1 rating, so.  But the credit crisis in the fourth quarter has severe impact on our business, and commercial paper markets literally almost shut down our ability to issue medium-term notes in our finance subsidiary.

MR. GREGORY:  Explain exactly what that means.

MR. OWENS:  Well, medium-term notes would be three- to five-year notes which we would go to the market with in the financial markets, and then we would slice those down and be able to lend to the small contractor.  And when those markets kind of shut down around the world, our ability to finance the small contractor essentially was in question.  So what's--the good thing is there was a, a real seizure in global credit markets in the fourth quarter.  In the first quarter they began to get a little better, and in, in the last couple of months they have improved dramatically.

MR. GREGORY:  What about the jobs picture?  Are you, are you going to rehire? Has the stimulus allowed you to rehire?  You got in this flap with President Obama a little bit about he said you'd be able to rehire.

MR. OWENS:  Yeah, well.

MR. GREGORY:  You said not so fast.

MR. OWENS:  Well, a little timing issue here.  Essentially, I mean, we've had to--you know, our demand for our products has dropped.  We sold $51 billion worth of products globally last year, demand this year's going to be in the mid 30s.  So a, a, a very large drop in demand for our products, therefore employment.  So we have had to continue reducing employment, and I'd say we will probably not be able--in a position to rehire until mid next year as we see these markets begin to recover.

MR. GREGORY:  At Xerox?

MS. MULCAHY:  We're hiring, but very modestly.  I mean, if you look at net head count, it's still coming down because that's what our intent is...

MR. GREGORY:  Right.

MS. MULCAHY:  ...until we're sure that things are improving.  So I worry about that.

MR. GREGORY:  Right.

MS. MULCAHY:  I think that's a big problem right now.

MR. GREGORY:  And, Eric Schmidt, you know, one of my favorite questions to ask you is about the consumer, and what are some of the top searches on Google that indicate the mind-set of the consumer; the person who's looking for a job, maybe out of a job?

MR. SCHMIDT:  It's mortgage refinance.

MR. GREGORY:  Hm.

MR. SCHMIDT:  And job listings.

MR. GREGORY:  Yeah.

MR. SCHMIDT:  We know people are looking very, very hard for bargains right now.  We know people are in the market, people are active, the markets are beginning to clear.  Inventories, as you know, are declining, which is a good sign.

MR. GREGORY:  Let me ask you about the stimulus plan, a hundred days since it's been signed.  Is it working?  Are, are businesses seeing it?

MR. SCHMIDT:  They're beginning to.  The stimulus plan was, remember, a two-year program, and we're just at the beginning of that.  It takes a while for all those shovel-ready projects to get through the bureaucracies at the state and local level, and that money is beginning to flow.  People are getting to be, be hired.

MS. MULCAHY:  Mm-hmm.

MR. SCHMIDT:  You won't really see the economic impact in terms of both inventories and revenue and jobs till much later in the fall just because the amount of time it takes.

MR. GREGORY:  Are you seeing it, Jim?

MR. OWENS:  Well, I think what we're seeing right now, and I've been talking to our dealers all around the country, people are starting to bid work again. And this is--there's about $70 billion in the stimulus package.  Keep in mind, that's about 6.5 percent of total U.S. construction, that level of spending. But it'll have a positive impact and I think we'll start to see that kick in through the summer and into the fall.  I wouldn't be surprised if we don't need to come back with additional stimulus.

MR. GREGORY:  The, the White House, I know, is bracing in this coming week for a jobs report that is going to be grim, with the unemployment rate climbing above 9 percent.  And so I still go back to the stimulus.  As you travel around the world and as your business in other parts of the world, are you feeling more of the effect of stimulus plans in places like China than you are in America?

MS. MULCAHY:  Well, I think that, you know, China's probably the exception, because China clearly has put a tremendous amount of money very quickly.  I think the U.S. is, you know, very much right behind China in terms of the aggressive nature of the stimulus and the timing and the pace of the stimulus...

MR. GREGORY:  Right.

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