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QUEST MEANS BUSINESS
Bank Execs Forfeit Pay Over Scandals; Mexican Minister Warns Trump Over NAFTA; United Drags Passenger Off Flight; GM Falls to Number 2 Behind Tesla; Toyota to Invest $1.3 Billion in U.S. Plant. Aired 4-5p ET
Aired April 10, 2017 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] ISA SOARES, CNN ANCHOR: ...for a flat finish after what has been a very choppy start. It is Monday, April the 10th.
Tonight, bankers behaving badly. Two chief executives replaced over scandals both at Wells Fargo, as well as Barclays.
Mexico's economy minister tell us time is running out for Donald Trump to renegotiate NAFTA.
And a passenger is dragged off a United flight dragging the airline into a new PR disaster.
I'm Isa Soares in for Richard Quest, and I too mean business.
A very good evening to you. Tonight, to banking scandals that go right to the top of executives at two major banks are accused of being too slow or
indeed, to hostile. First let's take you to the case of Wells Fargo. Is clawing back $75 million from these two executives. They were in charge of
staff across the company created millions of fake accounts in the reins of actually real customers. Former CEO John Stumpf, loses $28 million. A
report from the bank says he was too slow to investigate the widespread deceit. The former head of community banking is losing even more. The
bank says Carrie Tolstedt was unwilling to fix the large-scale fraud.
All total Wells Fargo executives have had to forfeit, get this, hundred and $180 million. And that is indeed, the largest claw back ever in the
banking industry. Christina Alesci has been covering the Wells Fargo scandal since it burst open since it burst open and she is in New York.
She joins us tonight. And Cristina, it has certainly taken quite a while to get here. I was I was going through some of the report and the findings
are indeed quite damning, aren't they? One quote I found was this, "A branch manager had a teenage daughter with 24 accounts, an adult daughter
with 19 accounts..."
This really shows how this unethical behavior was partly really the culture for which these two -- these are the top leader to take responsibility.
CRISTINA ALESCI, CNNMONEY CORRESPONDENT: That's right and now the question is, has the bank done enough? A, to make sure this doesn't happen again to
consumers. And B, to hold its executives accountable who are responsible for the kind of culture that led to the sales practices.
On the first front, consumers it seems like the bank has done a lot to make sure this doesn't happen again. Consumers for example, now getting email
when a new bank account or a new credit card is opened under their name. On the executive side of the equation the answer is really unclear. Look,
about four executives were fired in the situation. At the same time going back to 2002, you're talking about 5,300 lower level, basically branch
workers, were let go for questionable activity. And those people say, they were just doing their job. Listen.
FORMER WELLS FARGO EMPLOYEE: It was the norm to just open sales unethically. It was what we were taught and we just did it.
ALESCI (voice-over): More than six months after the fake accounts scandal damage Wells Fargo's reputation there's been very little accountability at
the top. Attorney Michael Kade represents former Wells Fargo employees.
MICHAEL KADE, ATTORNEY: I can understand if one district manager was putting pressure on the people below him or her. But if this is going on
nationwide you would think that there's somebody above the district manager that is putting pressure on the DM to get something done.
ALESCI: When news of the scandals spread CEO John Stumpf, left the bank following a fiery congressional grilling.
ELIZABETH WARREN, U.S. DEMOCRATIC SENATOR: It's gutless leadership.
ALESCI: And so did the head of the retail bank Carrie Tolstedt. The bank is now holding back some executive compensation. But both Stumpf and
Tolstedt walked away with millions tied to a rising stock price, boosted by aggressive sales tactics.
Stumpf said the bank never told employees to commit fraud. But many former workers say the pressure led to that.
FORMER WELLS FARGO EMPLOYEE: We had a lot of pressure. I remember as a teller, you know, we had the bankers just on our backs --
ALESCI (on camera): To get the clients.
FORMER WELLS FARGO EMPLOYEE: -- to get the client that I had as a teller standing up to get them sitting down with the banker. We would look at a
phone number and maybe misconstrue one in the numbers. Oh, is your home number still at 1-2-3-4? Even though on the screen it said, 1-2-3-4-5.
And so, it was just anything to get them to our desk.
ALESCI (voice-over): In fact, she claims everyone at the branch, herself included, was either lying to customers or complicit in it. Another former
employee explained how simple it was to open a fake account.
FORMER WELLS FARGO EMPLOYEE: So, it's pretty much like you signing a blank paper and then the rest of the information is filled in saying, "Oh, this
is just to reopen, you know, your saving account or reactivate your savings account."
[16:05:03] But when the customer leaves they can put 10 accounts on there and then open it in the signature is there. And even if the customer calls
to complain, "Well, Mr. customer, your signature is there."
Alesci: At best, customers with unauthorized or unnecessary accounts were confused and hassled. At worst, they were hit with overdraft fees and some
saw their credit scores suffer.
(on camera): How did you get the idea in your head that if I don't do this unethical thing I'm to lose my job. What made you think that?
FORMER WELLS FARGO EMPLOYEE: I mean, they would just tell us that. It was verbalize. We just, again, always had pressure from management, and upper
management. They were witness to what we were doing. I mean, they coached us. Because they had to sign off on everything.
ALESCI (voice-over): Wells Fargo says, this is in the past now. It's number one priority is rebuilding trust in the bank has made fundamental
changes to reduce the pressure on workers and ensure customers are aware of new accounts opened.
Banks paid $185 million so far in fines. Although, it still faces more than a dozen investigations and lawsuits. But just like the financial
crisis, jail time for senior executives is unlikely.
ALESCI: So, you heard it right there, while a lot of fines have been paid there are still a question over whether there was any criminal activity on
behalf of the executives or the workers involved here. And on that front, there are open investigations. The Department of Justice is looking into
this. So is the Department of Labor, which is not criminal. But my point is, there's a lot more to this story that will come out over the next
couple of months.
SOARES: I can imagine Cristina, but also, executives walked away with compensations. Do we know at this point how much exactly they were making
while these practices were going on? Any idea?
ALESCI: That's an excellent question and because these practices may have started as far back as 2002. You really have to go back and look at the
stock price. Where was trading at in 2002. How the executives were compensated, because their compensation was tied to the stock price for the
bank. So, you'd really have to go back and look at how much they made over those several years, and for a long time actually, not just several years.
But the reality is, we asked the bank several times today, OK, the executives are forfeiting $180 million. You forced them to do that. How
much are they keeping? And the company couldn't answer that question.
SOARES: Right. Interesting as well, Cristina, because they probably -- we might see more compensation for victims. Because I was looking at the
report and the finding of the mis-selling further back, isn't it? Initially it was only going as far back as 2009 and that's where that $110
million settlement goes back to. But it seems this report goes even further back. So, are we looking at perhaps more compensation here?
ALESCI: Well the executives today on the calls with reporters, both the directors on the board and the new leader of the new CEO of the bank, on
both calls with reporters they reassured reporters, this is their only plan to date. They don't have additional plans to claw back more compensations.
So, it looks like from the company standpoint, it is done with its internal investigation and clawing back executive pay. With that said, will they
face external pressure to perhaps to do more? Maybe. We're going to have to see how this plays out over the next couple of months.
SOARES: Absolutely and see how they rebuild that trust, crucially important as well. Cristina Alesci there with that fascinating
documentary. Go to CNNMoney to see that full report. Thanks very much Cristina.
Now, over in the Barclays C suite, the CEO is facing what the bank calls a significant compensation adjustment. We don't know exactly how
significant. Jes Stally has admitted he asked investigator to try and identify an anonymous whistleblower. Now, the whistleblower sent a letter
raising concerns about a senior executive hired by Barclays, said he was just trying really to protect a colleague who he believed was being
unfairly attacked. Well, regulators are now investigating.
Oliver Parry is head of corporate governance policy at the Institute of Directors, speaking with me a short time ago, he said the CEO's actions had
huge ramifications at Barclays as well beyond.
OLIVER PARRY, HEAD OF CORPORATE GOVERNANCE, INSTITUTE OF DIRECTORS: Clearly, he felt he had to involve himself in that process and personally
looks to intervene. Now clearly, this has huge ramifications for the role of whistleblowers based at Barclays, but more broadly speaking in the city
SOARES: Could it use the argument that maybe has a personal nature to the letter, that could it be morally defensible for him to step in, in other
words, because he's trying to protect another colleague who he probably thought was partially done right.
[16:10:00] PARRY: Sure. I mean I don't want to speculate exactly the contents of the letter. But clearly what procedures would dictate us
should have been referred to the compliance department immediately. The role of the compliance department is to deal with these like any wrist
department, away from the executive management of the team. That's what should've happened. Clearly, he intervened and this is where we are today.
SOARES: In a post crisis world, you know, whistleblowers play a very important part -- they are a very important weapon, aren't they?
PARRY: They are.
SOARES: Talk to us why they are important.
PARRY: They are the eyes and ears effectively for the financial conducts authority in the U.K. and other financial regulators. Where whistleblowers
identify problems within a company, it is important that they are enabled to actually pass information onto the regulator who can then proceed with
the investigations. Where whistleblowers don't feel confident, or being able to do that, then clearly there is a breakdown in the system and
something needs to be addressed.
So, it's absolutely crucial that the integrity of the whistleblowing process is upheld.
SOARES: Where do you think this is going to go? Because clearly, he's taken -- Barclays has taken some money out of him, his bonus. Many people
would say that's a slap in the wrist only. Do you think this would pacify regulators? Do you think this goes far enough?
PARRY: Well, think there's another dimension to that, and clearly the regulators are going to be pouring over the details and looking at whether
or not the chief executive Barclays operated in a fair and balanced manner. But clearly the board have taken immediate steps. They've looked to reign
in its executive to pay and clearly the next stage is whether or not shareholders the forthcoming Barclays, again, how confidence in the board's
decision making, but also the chief executive.
SOARES: Of course, this is worrying for the chief executive, but also for Barclays. It paints a very bad picture for Barclays. Do you think, or in
any way it paints a culture -- unethical culture perhaps at Barclays that still has not been cleaned up.
PARRY: What I tend to do is that we are still living in a post-financial crisis world. There is still a long shadow cast on banks across the globe.
So, clearly this is out by reputation. So absolutely, is one of the reasons why you see the board has acted so swiftly in order to deal with
this. But absolutely does not help Barclays and does not help banking's reputation at all.
SOARES: Do you think it's gone far enough?
PARRY: Well I mean, clearly, this is a matter for regulators and this is clearly a matter for the board. So, the next big step for me is the AGM.
Shareholders need questions answering with respect to what he knew and why he decided to intervene on such a personal level.
SOARES: Oliver Parry there. What that controversy didn't do Barclay shares any harm. The session they rose slightly in London even as bank
shares around Europe fell. Some of the major indices they all ending lower. Red arrows right across the board.
In Spain, the IBEX as you can see there, down almost 1 percent. Dragged down the shares of Banco Popular, shank almost 9 percent. The bank is
looking to raise more capital. Basically, clean up its balance sheet. It's been way down. Priced a bit by toxic assets.
Let's have a look at the U.S. markets. A choppy day of trading on Wall Street and stocks ended, as you can see, pretty much flat. The Dow ended
up just two points or so. Energy shares were the biggest gains boosted by a rise in oil prices. Shares of Wells Fargo fell 0.6 percent. They're
still up nearly 16 percent though over the past year.
Now, reports of banks behaving badly come as President Trump argues banks need fewer regulations, not more. And he's ready it seems to swing the
axe. He has echoed people like J.P. Morgan CEO, Jimmy Dimon, who argues U.S. banks are no longer too big to fail. Neel Kashkan, oversaw the
Troubled Asset Relief Program, or TARP during the financial crisis. He is now the president of the Minneapolis Federal Reserve and he says taxpayers
could still end up putting the bill in the event of a new crisis. He told my colleague, CNN's Zain Asher, he knows how the system can be made safe.
Take a listen.
NEEL KASHKAN, PRESIDENT MINNEAPOLIS FEDERAL RESERVE: It's true the banks are stronger than they were going into the last crisis. But we've analyze
this and the risk is if another crisis hits the taxpayers might be on the hook yet again. So, what I'm advocating for is increasing the equity,
that's the down payment banks have to put on their investments. That is a buffer against losses in case they make mistakes in the future. So,
progress has been made. But unfortunately, we cannot declare victory yet.
ZAIN ASHER, CNN CORRESPONDENT: So, banks actually have to show every single year, as part of Dodd/Frank, a living will to regulators showing
what they would do in the event of bankruptcy. So, based on those metrics, how are they doing?
KASHKAN: The biggest banks in America are bigger than they were before the crisis. So, there's more concentration. And the concern is, you know, in
2008 I was one of the first responders trying to stop that crisis from devastating the economy. Big banks can bring down other big banks. It's
like dominoes. And we have not yet figured out a way to stop those dominoes from falling. You know, banks ask us, your viewers and you and
me, to put down 20 percent when we buy a house. That 20 percent down payment is designed to protect the banks. If we make the banks put 20
percent down on their own investments, we can protect the taxpayers. They haven't done that yet.
[16:15:00] ASHER: Just a few days ago, Donald Trump gave a speech to American CEOs and Americans sort of business leaders, and he said that bank
CEOs are petrified of the regulators. They are petrified, they can't move. He talked about getting a major haircut to Dodd/Frank. What are your
KASHKAN: I think we can simplify regulations and streamline them once we make sure the biggest banks have enough capital, enough buffer to protect
themselves and to protect the taxpayers of getting possible mistakes.
ASHER: What would you change about Dodd/Frank though, specifically?
KASHKAN: I think for example, community banks are being smothered by regulations. And community banks are not risky for the economy. But there
being caught in the same net. So, we need to separate the biggest banks from the little banks. Three of the small banks to serve their communities
and make sure the biggest banks are no longer too big to fail.
ASHER: As you know, Daniel Tarullo, head's last day at the Fed on Wednesday. You know, he was someone who is a staunch advocate of
regulation. Are you worried that the Trump administration is going to try to replace him by nominating someone who is a little bit more lenient
towards American banks?
KASHKAN: I mean, obviously, that's up to the president who he chooses to nominate. I think if there's bipartisan consensus. I think Americans on
both sides of the aisle want to address the two big to fail issue. And I also think there's bipartisan consensus, let's relax regulations that are
smothering community banks. If the president chooses to appoint somebody that believes in those principles, I think we're going to be in good shape.
SOARES: That's Neel Kashkan there speaking to our Zain Asher.
While the U.S. Secretary of State is meeting his G7 counterparts and really trying to hammer out a United position on Syria. But it seems the Trump
administration may be divided about his own position. We're live at the G7 talks in Italy, next. Do stay right here with QUEST MEANS BUSINESS.
SOARES: Welcome back. Now climate change, free trade and immigration, they're the issues that the G7 was meant to talk about this week in Italy.
Now after an unexpected U.S. missile strike, the meeting is being dominated by the war in Syria. As you can imagine, foreign ministers are scrambling
to form a united front against Russia. And figuring out what should be done next. U.S. Secretary of State, Rex Tillerson, visited a Tuscan
village earlier. The site of a Nazi massacre of 500 civilians in World War II. He used the opportunity to restate America's commitment to swiftly
punish those who commit war crimes.
(BEGIN VIDEO CLIP)
REX TILLERSON, U.S. SECRETARY OF STATE: we remember the events of August 12, 1944 that occurred in Sant' Anna. And we rededicate ourselves to
holding to account any and all who commit crimes against the innocence anywhere in the world. This place will serve as an inspiration to us all.
[16:20:00] SOARES: Nic Robertson is at that meeting in Lucca in Italy. Nic, a very good evening to you. President Trump's change of heart which
led as we know, to that airstrike in Syria. Has clearly, shifted the dialogue with the G7, Nic. What is your sense there tonight of their
strategy? Is there a United strategy here?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: A unified voice does appear to be emerging. It's the British, the French, the Germans, the
Italians, the Japanese, the Canadians, is the foreign ministers of all those countries who are here meeting with secretary Tillerson. What we're
hearing from the British, and we've heard it just in the last few minutes, about a telephone conversation Between the British Prime Minister, Theresa
May, and President Trump in the United States, saying that there is a window of opportunity here to persuade the Russians to take a different
course in Syria.
We've heard a very similar message echoed here today by the British foreign Secretary, Boris Johnson. He had originally planned to go to Moscow
himself today, but had decided to stay and work with G7 partners to try to build a unified voice. This is how he characterized what the G7 foreign
ministers want to do to help and strengthen Rex Tillerson's position when he goes to Moscow on what they want him to achieve there. This is what he
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH FOREIGN SECRETARY: If I think about the position of Vladimir Putin now. You know, he's detoxifying the reputation of Russia by
his continued association with a guy who has flagrantly poisoned his own people. And so, what we're trying to do is to give Rex Tillerson the
clearest possible mandate from us as the West, the U.K., all our allies here, to say to the Russians, this is your choice. Stick with that guy,
stick with that tyrant or work with us to find a better solution.
(END VIDEO CLIP)
ROBERTSON: The G7 is doing something, the foreign ministers meeting is doing something that is quite extraordinary here to broaden that mandate.
Tomorrow they're bringing in the foreign ministers from Turkey, from Saudi Arabia, from Jordan, from the United Arab Emirates, also the Qatari Foreign
Minister, and this is all an effort again to strengthen Tillerson's hand as he goes to Moscow. This is quite extraordinary that they would bring these
other partners into what was this quite limited G7 meeting, Isa.
SOARES: Let's talk about that window of opportunity. What tools they have to persuade the Russians. Will the carrot and stick approach work with the
Russians? And if that doesn't work, Nic, what next? What do they have up their sleeves?
ROBERTSON: Russia has already bristled at the thought that the United States is going to try to dictate terms in Syria by this one bombing. And
is said along with Iran, that such actions could cross a red line. Now we've heard from Sean Spicer, the White House spokesman today, saying that
there could be more strikes in the future. There is a stick here. Russia's already responded to that stick.
But I think another part the collective message, will be one that says to President Putin, look, if you don't try to work for a cease-fire in Syria,
if you don't try to work for this political transition, that after all Russia agreed to at the UN Security Council Resolution 2254. Which
underpins the current peace talks in Geneva, which is the political transition away from Assad. If you don't do that then there's a potential
of more sanctions.
So, bluster from Moscow and Tehran are at the possibility of more U.S. strikes is one thing, but for Putin that can be damaging. The thought of
more sanctions over the longer term. But really, I think we're in a position right now where the White House and the Kremlin are really staring
each other down. And it's not fully clear to us yet of what the collective message from here in Lucca will be. And quite what the nuances of the
White House's position will be going forward either, Isa.
SOARES: We'll find out whether threats and the incentives do indeed work. Nic Robertson there for us in Lucca, in Italy. Thanks very much, Nic, good
to see you.
Take you over to Mexico. The economy minister wants the Trump administration to hurry up and renegotiate NAFTA before actually is too
late. Changing America's trade deal with Mexico and Canada was a major campaign promise for Donald Trump, if you can remember. Now Mexico says
it's ready to talk and it seems that Washington is dragging its feet. Ildefonso Guajardo, spoke to CNNMoney's Patrick Gillespie. He said Mexico
held elections next year and there's no guarantee the next president will come to the table at all.
ILDEFONSO GUAJARDO, MEXICAN ECONOMY SECRETARY: It will be in the best advantage of the countries involved that we finish this negotiation within
the context of this year so we can have it approved the latest by early 2018 or the second quarter of 2018. Why?
[16:25:00] Because wherever I negotiate nobody will be able to make sure that we will deliver, because you don't know the outcome of the elections.
So, the incentives are there for us to really set an objective of the negotiations. The latest by the end of 2017. Now if that is going to be
possible, depends if they notify the U.S. Congress on time. Because they went into recess on the --
PATRICK GILLESPIE, CNNMONEY CORRESPONDENT: They have not triggered their consultation period.
GUAJARDO: They have not triggered it. And they think they may trigger it by the end of April. If that happens they will be starting the
negotiations anywhere at the end of July, the beginning of August.
GILLESPIE: and when you met with the Secretary Ross, there was a bit of confusion at your meeting in Washington. He said the United States is
considering bilateral talks with Canada and Mexico, or a trilateral talk. You said we must negotiate all parties at the table. Will all parties be
at the table for the NAFTA negotiations?
GUAJARDO: Definitely, because NAFTA is a trilateral agreement. Can you imagine negotiating who's supporting bilaterally? What the term is, the
original content is impossible. We are producing cars together. We are doing planes together. So, it doesn't make any technical sense. Probably
in the oral agenda on trade, you'll do bilateral things, of course. Because the immigration issues or the security issues are different. But
in trade the only thing that makes sense is to have trilateral negotiations.
GILLESPIE: Do you have any more clarity on the U.S. trade policy? Obviously, there were threats of tariffs during the campaign and early in
President Trump's term. Are you preparing for tariffs?
GUAJARDO: These negotiations on NAFTA is about to update NAFTA, modernize the agreement and definitely strengthen value in the North American region.
We cannot go back. We cannot introduce tariffs. We cannot do quota management. This is the kind of trade that used to be done in the 70s. We
want to look forward and to enrich and increase the volume of trade we do. Tariffs and quotas are part of the past.
GILLESPIE: If there are any signs of tariffs, you are prepared to counteract?
GUAJARDO: If the talks start being about introducing tariffs that do not exist, the problem is that we are opening, like I say before, the Pandora
box. Because I'm going to have Mexican interest groups lobbying me to introduce in NAFTA tariffs for everybody. So, the corn guys are going to
ask me to introduce a 30 percent tariff on corn in Mexico, or the apple guys from Chihuahua, and I'm sure that the apple guys from Washington state
or the corn guys from Iowa wouldn't like tariffs on corn or apples coming back into NAFTA. So, it is not in the best interest neither of the United
States or Mexico to introduce tariffs.
GILLESPIE: Did you ever expect yourself to be in the shoes? You know, have you found yourself -- could you imagine yourself defending an
agreement that you originally negotiated?
GUAJARDO: Sometimes life is full of surprises. I have never not even as of last year I thought that we would be in this situation today. But
fortunately, every challenge has the opportunity to converted into a winning proposition. I do believe there are very good chances that we can
end up with a much better agreement than the one we have.
SOARES: Very good answer there from Ildefonso Guajardo.
Now, when your flight is overbooked, airlines usually offer passengers compensation to encourage a few passengers to stay on the ground. Well,
have you ever seen an airline do this. The disturbing footage is put in a spotlight on a major U.S. carrier. We'll tell you the story after the
[30:00:00] SOARES: Hi, I'm Isa Soares, coming up on the next half hour of QUEST MEANS BUSINESS United Airlines has a big problem after a passenger is
hurt while literally being dragged off the plane.
And change at the top of US auto industry now the country's most viable carmaker doesn't sell that many cars. First these are the top news
headlines we are following for you this our right here on CNN.
The White House press secretary says he cannot imagine a stable and peaceful Syria with president Assad in power. Those comments from Sean
Spicer come just days after the US missile strike on a Syrian airbase. Now Spicer said the White House strategy involves defeating ISIS and creating
an environment for leadership change.
The Egyptian Cabinet announced a three-month state of emergency following Sunday's deadly attacks at two Christian churches. Funeral services were
held on Monday for some of the victims, at least 45 people were killed on Palm Sunday, the start of the Christian holy week. ISIS has claimed
responsibility and has promised more attacks.
A woman has been killed and two children injured in a shooting at a San Bernardino California elementary school, police say it was a murder suicide
in the gunmen also killed himself. The two children are listed in critical condition. The rest of the students were evacuated to a local high school.
Opposition protesters in Venezuela are back in the streets after a break to observe Palm Sunday, demonstrators 107 Supreme Court justices replaced
after he now reversed ruling that would've transferred power from national assembly to the court. Venezuela also banned a popular opposition leader
from holding political office for 15 years.
A little while ago Canada and Mexico and the US launched an unprecedented three-way bid to host the 2026 men's football World Cup. 60 of the matches
will be held in the US, with 10 each in Canada and Mexico. The only time that multiple countries have hosted the World Cup was in 2002 when South
Korea and Japan did.
Let us bring you back to business news now, United Airlines apologized after shocking video emerged with a passenger being literally dragged off
and overbooked flight, take a look.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Hey, hey, hey, come on.
UNIDENTIFIED FEMALE: My god, what are you doing?
UNIDENTIFIED MALE: Come on.
UNIDENTIFIED MALE: Busted his lip.
UNIDENTIFIED FEMALE: Oh, my god, look at what you did to him. (END VIDEO CLIP)
SOARES: Well, this is what the company had to say, the company CEO in fact says this. "This is an upsetting event to all of us here at United. I
apologize having to re-accommodate these customers.
(END VIDEO CLIP)
SOARES: Incidentally, it appears re-accommodate is the technical term for dragging you out of your seat and then off a plane. Then the statement
continues, we are also reaching out to this passenger to talk directly to him and further address and resolve the situation.
Just reaching out to him, Ben Schlappig writes about aviation on his blog "One Mile at a Time". He joins me now from Los Angeles, then as a seasoned
traveler, and correct me if I am wrong here. If a flight is overbooked, they offer you some sort of compensation for you giving up your seat. Have
you ever encountered an airline that has done what United did, forcibly removing a passenger who had paid for his seat?
BEN SCHLAPPIG, BLOGGER: I have a few times seem passengers involuntarily denied boarding which means they did not want to give up their seats but
there were not enough seats available. But this is just next level, this is horrible to watch, to see somebody dragged off. He's bleeding from his
mouth, he runs back on the plane then, this is one of the worst things of ever seen happen on the plane. So, this is really embarrassing.
SOARES: Do we know why he was bleeding, I know we have seen footage of him how he got these injuries?
[16:35:00] SCHLAPPIG: What happened was the police came on the plane to remove him because he refused to leave. And nowadays it is pretty common
for airline employees to call the police to enforce policies which is a pretty sad reflection of the airline industry, and when he refused to get
up the police used force and they ripped him down from the seat, and it seems his head hit the armrest and that cause bleeding from the mouth.
SOARES: OK, let's talk about that, you said they called the police to enforce policies, talk us through these policies, I think I need some
clarification, I always thought that passengers have rights when it comes to flights overbooked. You pay for your flight, you have a right to sit in
a chair, unless of course you choose willingly not to. So, what do the rules say, the law?
SCHLAPPIG: Unfortunately, airlines have to look for volunteers when a flight is oversold, that's the fortunate part rather, the unfortunate part
is that when they do not get enough volunteers that they are allowed to involuntarily deny boarding to people. So that you have to offer them
cash, but unfortunately even if you booked to take on a flight that does not guarantee a seat. So, the compensation is often as high as $1350 but
in this case, that won't get the guy to his destination as he was hoping. So, there is conversation but you can be forced off the plane even if you
have a confirmed seat as we saw here.
SOARES: Right, so how much, do you know how much the compensation was, surely what they should've done was just avoid this PR debacle and really
offer more money, $1000, $2000 wouldn't that have been cheaper than the cost perhaps to its reputation and indeed the potential loss business.
SCHLAPPIG: Totally, that is the embarrassing part here, and that is where the airlines don't empower their frontline employees, so the gate agent did
not do the right thing, so typically the agents will ask for volunteers. In this case they were offering $400, and when nobody took that they raised
to $800, still nobody took that. But they absolutely should have gone higher. The problem is that they were probably not empowered to do so,
because management sets these limits on the compensation. I think that is the problem, they didn't have an incentive to do a better job, so they said
OK, we will just kick them off. And when he refuses, we will just call the police and remove him that way. So, it is a sad way to do business but it
seems that is what is going on here.
SOARES: It is a sad way to do business, and it seems to be not great PR for United because remember last month the airline was accused of sexism
after borrowing two teenage girls from boarding the flight because they were wearing leggings. So. what does this mean for United? How does this
leave United? Have you spoken to any passenger was basically saying to you, I am not traveling United because of this debacle?
SCHLAPPIG: A ton of people, and that also happen with the last situation. This is their second big snafu in less than a month, and what is
embarrassing to me here is that the CEO of United he just mentioned that we are sorry that this pastor had to be re-accommodated, the term he used,
which does nothing to account for the fact that he was ripped off the plane physically, that he was bleeding. I think that doesn't even begin to cut
SOARES: Re-accommodate means also reaching out to this passenger to talk to him directly, perhaps he should apologize to this passenger, we shall
wait to see where this story goes, Ben Schlappig, always great to get your insight, thanks very much, good see you.
Now General Motors is no longer the most valuable knocked off its perch by an electronic rival, we will have the details for you after this.
[16:40:00] (COMMERCIAL BREAK)
SOARES: Welcome back to QUEST MEANS BUSINESS, I wanted to tell you about the story that is quite fascinating, it is a company that is losing the
money and compared to its rivals sells hardly any cars in fact, yet Tesla is now the most valuable automaker in America. Shares rose more than 3
percent this session making it worth more than $51 billion. Tesla now overtakes General Motors, both companies went public in 2010, in GM's case
after coming back from bankruptcy. Tesla's offer price was $17, GM's was $33 you can see there.
Get fast forward seven years, GM shares are still worth about $33, while Tesla shares have rocketed as you can see there just over $312. John Davis
is the creator and host of "Motor Week", he joins me, and John this is incredible for our viewers who no doubt who will be screaming at the
television screen and asking themselves how is that possible? How can a company lose money, not sell that many cars, and be the most valuable
JOHN DAVIS, HOST, MOTOR WEEK: Because of one person that is Elon Musk, and he has everybody's attention. It is really the Apple Steve Jobs kind of
thing played all over again, and that is was keeping the price up so high. I mean it has gone up 70 percent just in the last four months.
SOARES: But this really does show doesn't it extent to which investors have bought into Elon Musk's vision. That electric vehicles will
eventually rule the world. It is all about products that have captivating consumers and shareholders, alike isn't it?
DAVIS: Yes, it is, but it is also about premium, basically you can look at say General Motors again, their new Bolt EV easily does everything they
knew Tesla model three will do, and probably for less money. But it doesn't have that premium cachet, of course, the question is when Tesla
starts building 100,000 or more a year of the new model 3, will they lose some of that prestige? But obviously, their fans are betting that they
will do just fine.
SOARES: I was looking at some of the numbers, and Tesla delivered fewer than 80,000 vehicles last year to GM's more than 10 million. It is
probably an obvious question, but shouldn't the market care more about real profits and cash flow, rather than the potential new market value of the
business, this new spirit of innovation.
DAVIS: Absolutely, right now Tesla is eating cash almost as fast as they can raise it, on the other hand, GM is actually giving back cash. I think
they made $12 billion last year, they're probably going to make that much money this year. So, when you look at making an investment for the long
term, clearly that everything that GM is doing right and Tesla is doing wrong which shift you that direction. But there is no accounting for this
Apple Steve Jobs effect, and the fact that every time Elon Musk opens his mouth, basically everyone is captivated. And his rockets are doing well.
You know, it is really a personality driven stock price.
SOARES: Do you think John at all, that perhaps some of the other companies, the other automakers perhaps they are doing something wrong? It
is not just the hiring surely?
DAVIS: Obviously, he got there first by bringing out a reliable mass- produced car, even though it was an expensive one in the model S that had all of this mileage from being pure electric that no one said was possible.
And he is looking at the world that even if the US does not move toward electric cars very fast, Europe and Asia are probably going to do it
faster. So, there is a global market here, I think he is going to do just fine. It is all about return on investment though, and when you look at
his stock price it may be a very long time if ever we see his kind of profits to justify over $300 a share. It is not about the product, the
product so far is very good, and the new model three looks like it will be a good car.
SOARES: That is critical to his ambitions for Tesla, isn't it?
SOARES: John Davis there, thank you very much, good to see you.
Now Toyota is making a major new investment in the United States. The Japanese automaker is plowing more than $1 billion in upgrading its biggest
factory in the state of Kentucky. It is where the Toyota makes its top- selling Camry according to cars.com. The Camry is the most American car there is based on where it is assembled and where the components come from.
The Toyota was third in that American-made index.
[16:45:00] While speaking earlier, the man who runs the Kentucky plant told the Zain Asher in new investment is part of long-term strategy.
WIL JAMES, PRESIDENT TOYOTA MOTOR MANUFACTURING: We have been working on this program for quite some time. The idea of introducing a Toyota new
global architecture platform to some of our new products is not a new concept. We just happen to be blessed here in Georgetown to be the first
in North America to be able to introduce it with a 2018 Camry. So, this really is just a continuation of the strategies that Toyota has been
putting in place for quite some time.
ZAIN ASHER: Donald Trump as you know his focus has been on jobs, jobs, jobs creation especially when it comes to car manufacturers. I know that
this $1.3 billion investment is not technically creating any new jobs. So, what is the money going towards?
JAMES: What this TNGA program does is it really gives us an opportunity to update and revolutionize our plant. We have got a lot of new technologies
coming in and a lot of equipment and different processes as a part of this program. But our plan is also 30 years old, so although we have been
investing hundreds of millions of dollars every year, over at that time some of our equipment needs replacement. To this provides an opportunity
to retool with new technology, and also allows us to modernize some of our equipment and positions us very well for not just the products today, but
for flexibility in our product lineup going forward.
ASHER: It is all about upgrades and modernization as well, but as you know, some of it is also going towards assembly technology. I'm curious
what that means especially when it comes to automation. Will there be an investment in automation when it comes to this $1.3 billion money that
you're putting towards this plant?
JAMES: The predominant automation if you will, that we are doing with this investment is just modernizing some of the robotics and things that we have
in the plant. We have 8200 full-time employees right now, and our number is increasing, as a matter of fact over the last seven years we have
increased our headcount by 700 in preparation for this all-new Camry. So, our structure is not about, this TNGA program is not about reducing
headcount. And we use automation to assist the team members in their work not to try to replace team members. So, we are pretty excited about this
TNGA program, we are pretty excited about this investment.
ASHER: So, the automation is not going to lead to job losses?
JAMES: No, this will not lead to job losses.
SOARES: Wil James, there. 100 days, two giant economies, and one very contentious issue. The US and China have put a tight clock on negotiations
after Donald Trump met his Chinese counterpart Xo Jinping, if you remember last week, and really play down fears of a trade war. Matt Rivers reports
from a town in the US were trade with China is creating jobs and bringing new hope.
MATT RIVERS, CNN CORRESPONDENT: Moraine, Ohio just south of Dayton is an area that used to be, it used to be filled with factories and manufacturing
jobs. There used to be cheap breakfast specials across the street, but this is the Rust Belt. So, the restaurants closed, the jobs left in the
factories rusted out.
What does that do to a town?
SHANE REFFERT: It just destroys.
RIVERS: We met Shane, a local in a place where Moraine has pinned its hopes.
Fuyao Glass, a Chinese company opened this new $600 million plant last October in the center of this small Ohio town. It supplies auto glass to a
resurgent industry in Detroit and elsewhere. More than 2000 people now work here with plans for hundreds more.
REFFERT: Makes you feel good as a person, makes you feel more complete, I mean you are needed somewhere.
RIVERS: For decades, this plant was occupied by General Motors, they made trucks and SUVs but a close back in 2008 and laid off thousands. This SUV
right here is the last one I rolled off the line before GM shut its doors. And that windshield is the first one that Fuyao made after it took over.
Fuyao is a Chinese company that has invested $1 billion overall into US operations. But if the whole made in America thanks to China concept feels
like ironic, they could be because of this.
DONALD TRUMP. U.S. PRESIDENT: We can't continue to allow China to rape our country that is what they are doing.
RIVERS: The president campaigned on anti-China rhetoric accusing it of stealing millions of American jobs. Jobs he says that he will bring back.
His tough talk resonated with people in this part of Ohio. The factory sits in Montgomery County which voted for Obama in 2008 and 2012, but went
narrowly for Trump in 2016. It is one of the key counties that delivered him the presidency.
[16:50:00] And yet here in Moraine there are thousands of people relying on a Chinese company for a paycheck. CNN met Fuyao's chairman in Beijing.
RIVERS: Why hasn't the president's rhetoric about China scared you off?
CAO DEWANG, CHAIRMAN, FUYAO GLASS: I'm a businessman, so is Trump, I think his threats are just campaign talk.
RIVERS: The company has faced accusations of low pay and safety violations, there is a drive to unionize workers. Fuyao is addressing the
concerns and plants should be here permanently. We asked Shane what he would be doing otherwise?
REFFERT: That is a tough question trying to find another good job, which is very hard here in Dayton.
RIVERS: The hope is that Fuyao will bring back other local jobs to an area that was until recently all about what used to be, now focused on what
SOARES: You are watching QUEST MEANS BUSINESS, it is happy hour for bars across India, new law that aims to stamp out drunk driving is wiping out $1
billion of revenue along with it. We will take you to India next.
SOARES: India's government is facing a backlash after the sale of alcohol was banned within 500 meters of a national highway. This is part of an
effort to stop drunk driving but a lot of bar and restaurant owners say is killing off their business. Our Ravi Agrawal is in New Delhi.
RAVI AGRAWAL, NEW DELHI BUREAU CHIEF: Indian trucks, they are a familiar and colorful sight on the roads here. They and their drivers are also the
main target of a law banning the sale of liquor 500 meters from state or national highways. According to local watchdogs, there are 60,000 fatal
accidents on Indian highways every year. 70 percent are linked to alcohol.
The Supreme Court law mostly aims to curb access to small roadside liquor shacks. But the new rule has also caught some bigger establishments in his
500-meter net. We visited the swanky Cyber Hub sitting near Delhi that has been built around highways.
Take a walk inside, there is a long row of restaurants and bars and it keeps going on and on and on. As of April 1, none of them can serve booze.
I am at a bar called Beer Cafe except despite the name, there is no beer here, they are out of beer because they are not allowed to serve it and
that is a problem because why would you come to Beer Cafe if you didn't want to drink beer. Around me, it is all empty. The manager says business
is down 99 percent.
[16:55:00] Rahul Singh runs a Beer Cafe chain across India several of his published fall within the new 500-meter rule.
RAHUL SINGH, OWNER, BEER CAFE: We serve beer, that is what we do. I am not just a restaurant. Yes, we have food and stuff, but people come for
beer and they have food with it. Beer first, food later.
AGRAWAL: No beer means no revenues. I asked Prince Singhal, the founder of the coalition against drunken driving, if the 500 meter-rule is
PRINCE SINGHAL, FOUNDER, COALITION AGAINST DRUNKEN DRIVING: We all understand they are in a closed area which has seating, where people can
sit down, people are secure, safe, but this is absolutely welcome, this move by the Supreme Court is a welcome move. And I should say this is the
AGRAWAL: Business owners like Rahul Singh say they are all against drinking and driving, but rules like this one just muddy the waters.
SINGH: Impact is not for today, impact is for the future. Where's my certainty of business. Where will I do business because tomorrow this
could be 1 kilometer?
AGRAWAL: For all the business uncertainty in India, one thing will stay certain for now, India's highways need to be dry ways.
SOARES: If you have missed part of the show, we have a new way for you to enjoy QUEST MEANS BUSINESS you can now download it as a podcast. It is
available from all the main providers or you can listen at cnn.com/podcast where you will have Richard always with you, if that is what you want. And
that is QUEST MEANS BUSINESS I am Isa Soares in London. The news continues right here on CNN. Do stay with us, thank you.