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QUEST MEANS BUSINESS

Oil Markets On Alert; Donald Trump Warns Iran of Consequences Like Never Before; Financials and Tech Shares Saw the Strongest Gains; Ryanair, the Largest Airline In Europe Saw their Profits Sink Some 20 Percent; A Chinese City is Signing a Deal for U.S. Hyperloop Train System; U.K. Government Not Opposed to Death Penalty for ISIS Members; German Football Star Mesut Ozil Leaves National Team; Arrests Made over Acid Attack on Young Child in the U.K.; Fiat Chrysler Faces Leadership Crisis; Head of Jeep Takes Reins at Parent Company Fiat-Chrysler; Ozil Targets Sponsors Over Decision to Quit German Team; Jeremy Hunt Warns of Hard Brexit, Says the U.K. Would Blame E.U. for a No-Deal Brexit; U.K. Steelmaker Caught Under Strain from Trump and Brexit; European Shares Close Lower, FTSE MIB Hit By Fiat-Chrysler. Aired: 4-5p ET

Aired July 23, 2018 - 16:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN INTERNATIONAL HOST: The bells ringing here on Wall Street. Dow Jones Industrials very little change over the course of the

late afternoon sessions, just about even Stevens and we'll show you the numbers to see exactly what I mean. A lot of your banks ringing, one, two,

three - that was a bit of a wimpy gavel, trading is now over, start of a new week, it is Monday, it's July 23rd.

Tonight, oil markets on alert. Donald Trump warns Iran of consequences like never before. A leadership crisis at Fiat-Chrysler. Another boss

quits as the Chief Executive remains gravely ill. And Mesut Ozil slams his sponsors for not sticking by him when things get tough.

I'm Richard Quest, live in the world's financial capital, which is rather a misty financial capital, rainy and misty, but fear not, we will still be

heading course, I'm Richard Quest, in New York where I mean business.

A very busy hour ahead for us. As you'll hear our exclusive interview with Jamie Dimon and why he thinks the White House got it all wrong on China.

We're also going to have earnings from Google's parent company any minute now, and we'll take you inside the British steel mills facing threats on

multiple fronts, a squeeze by tariffs on one side and Brexit on the other.

We begin tonight now of course with the fire and fury over oil. Moments ago, President Trump told reporters he has no concerns about provoking

Iran. The war of words between the President and the President of Iran has caused alarm on oil markets. Now, there was a spike, not a huge one, but

there was a spike in prices to $74.50 on Brent blend. By Monday morning though prices have moved back as investors turned their attention to the

problems of oversupply in the market.

The movements started after the President sent his all caps tweet to his rival, President Rouhani, "Never ever threaten the United States again or

you will suffer consequences, the likes of which few throughout history have ever suffered before. We are no longer a country that will stand for

your demented words of violence and death. Be cautious." The President - the U.S. President that is, was reacting to this threat from President

Rouhani.

(BEGIN VIDEO CLIP)

HASSAN ROUHANI, PRESIDENT OF IRAN (Through a translator.): Don't play with the lion's tail. This will only lead to regret. You will forever regret

it. We have been the guarantor of the regional waterways security throughout history. Remember, we established the security of oil shipping

routes in history. Don't forget this.

(END VIDEO CLIP)

QUEST: Now, the oil shipping route in question is the Straits of Hormuz. It is the oil world's most important chokepoint and if you join me over at

sub screen, you'll see exactly what I mean. Here you have the strait - it's a strait, not straits - Strait of Hormuz from the Persian Gulf out

towards the Gulf of Oman, and you see it here, to Oman down to Iran and the UAE.

It links the gulf with the Arabian Sea and one third of oil tanker traffic goes through it. That is 18.5 million barrels a day. Now, there is

nothing new about the strategic importance of the Strait of Hormuz. I mean, if you go back to the 50's, 60's and 70's, it was well known of

course, the importance of this particular area, but closing it off or any form of dislocation or disruption, well that's a different matter, because

now, you are choking off Asia's biggest economies - China, of course, Japan, India, South Korea, and Singapore - all receive their oil through

the Strait of Hormuz.

You'll see exactly what I mean. If you think about it, it comes from here, it comes out through the Strait of Hormuz, goes out and then across over

towards Asia.

Denton Cinquegrana is the chief oil analyst of the Oil Price Information Service (OPIS), and he joins me now via Skype. The issue of course is very

clear. We see from our graph and our map, the strategic importance, so why wasn't there a greater reaction in the market today as a result of the

threats?

DENTON CINQUEGRANA, CHIEF OIL ANALYST, OIL PRICE INFORMATION SERVICE: Big question because I was expecting a much higher response as well. Market

turned around, it went lower today actually as you illustrated before. A lot of talk about more supply coming from the - to market from places like

Saudi Arabia. So, Saudi Arabia and Russia. U.S. production has reached 11 million barrels a day. The dollar was a little bit stronger, too. So,

there's that correlation when you have a stronger dollar, oil tends to drop and vice versa.

[16:05:10]

CINQUEGRANA: So, you had a couple of other things - the trade war stuff that remains a concern. Possible currency wars, but the rhetoric is

certainly being ramped up.

QUEST: Now, would you agree with me that if the Strait of Hormuz did actually in some shape or form get blocked or there was some form of

dislocation, away from threats, but real action, then we're in a different league. Then, we're into $150.00 maybe $200.00. I see some people have

even been talking of $200.00 per barrel if there was real action.

CINQUEGRANA: Yes, we tried to put it an actual number on that, but yes, we would certainly see a spike in triple digits would certainly not be out of

the question if something like that were to happen.

QUEST: The level of supply bearing in mind the recent OPEC conference which agreed essentially to increase supply from Saudi and others. Are we

at a position of where the glut is now starting to really push prices down?

CINQUEGRANA: I don't think we're reaching glut that is like we saw in 2016 and 2017, if you remember, Venezuela, their production is really

struggling. Libya is on and off again with rises in production and then it falls apart again. Nigeria is always another question mark, so I don't

think we're really even close to approaching glut status once again like we were just a couple of short years ago.

QUEST: Good to see you, sir. Thank you. I appreciate it. Thank you.

CINQUEGRANA: Likewise.

QUEST: Chief Executive of JP Morgan is worried that Donald Trump's trade wars could derail the U.S. economy. Jamie Dimon spoke exclusively to CNN's

Christine Romans at an event for the bank's Entrepreneurs of Color Fund, where he said the President was attacking the right problems in the wrong

way.

(BEGIN VIDEO CLIP)

JAMIE DIMON, CEO, JP MORGAN CHASE: The way to look at trade, the President has raised serious issues that are pretty accurate around China that need

to be fixed. We want NAFTA done. I think Mexico is a wonderful neighbor. We want NAFTA done, and to be torturing Mexico this way and my opinion is

dead wrong and it should be fixed, we thought that what the President should do is work with Mexico, work with Canada, do TPP, work with our

European allies and our Japanese allies and go to China with a common front, not against them, but this is the way the modern world should deal

with trade or particularly around IP, state-owned enterprises and all of these various issues.

Now, we have a kind of a little bit of a trade war, trade skirmish - however you want to define it with our allies and China, so if somehow, if

the President's team do a great job, maybe we'll have a great outcome, but I would remind folks, the President's team has already said there would be

no retaliation. They've already been wrong.

If you do another $200 billion of tariffs in this national security about cars, I think that you're getting pretty there close to having - reversing

some of the benefits that we've seen in the economy.

CHRISTINE ROMANS, CNN HOST: Trade adviser to the President in the White House tell me with great confidence that the economy is so strong that this

is exactly the time for them to be addressing these issues with China and with Europe and bringing back steel jobs. Do you buy that, that it is so

strong this is ...

DIMON: No, I don't buy that, and I'd be a skeptic. I think their argument is after the fact. I think you should do the right thing in trade whether

the economy is strong or not.

ROMANS: You once said of the President - of Trump, he's the President of the United States, I believe he's the pilot flying our airplane. I would

ask you, you support him because he is the President of the United States obviously. But is it clear what the flight path of this airplane? Do you

see the strategy in where he is going here?

DIMON: I don't agree with all of the policy of the President. I've already spoken about trade and immigration, and so - but I still want to

get immigration done and if he was - if we can help get it done, we're going to be there, so you can't take this up off the plane field.

One of my daughters sent me a note about getting involved and that I shouldn't be involved like that and she gave me a Martin Luther King quote,

and I called her up and said, "Julia, sweetheart, you're right, but Martin Luther King didn't think about the plane field." He'd be calling the

President every time he can't defer this agenda, and so that's what business does.

I think it's a mistake to say this because business is trying to work with government, that they're supporting every policy of the government. That

just is not true.

ROMANS: Are you happy with the tax cuts overall? I mean, there's a lot of money flowing now when you look at the corporate - the quarterly earnings

reports. A lot of stock buy backers, there's been some criticisms, which I think you don't buy that the stock buybacks somehow are favoring companies

and the rich and the shareholder - the investor class and not the worker class.

DIMON: We focus on the business taxes and they should be competitive. I think it's a really bad idea to say, "I am willing to accept an

uncompetitive global tax system," and you think you're doing a good job for America. So, in the individual side, I might have done different things.

You need a competitive tax system for the future health of the economy of the United States of America. This is the most prosperous economy the

world has ever seen. We need to make sure it's that way because it's good for our people.

A lot of companies came out and raised minimum wages, did some capital expenditures, but the fact is, the benefit is cumulative over time, as

capital gets retained and redeployed, dividends and stock buybacks are simply redeployment of capital to a better and higher use. And so you

might get higher dividends and you might buy something with it. Someone else may reinvest it. It might go to a venture capital. It might go to

different things, but it needs to be reinvested. You can't use it yourself.

[16:10:10]

DIMON: So, this is notion is somewhat - it's a bad thing. It's a bad idea. And remember, our shareholders, 100 million individuals through

pension plans, they're also veterans, retirees, teachers, union folks that we work hard to benefit our shareholders and that's a huge mass of society.

It's not like a few rich people.

(END VIDEO CLIP)

QUEST: Jamie Dimon, now it was a choppy day on Wall Street. Choppy day of trade. If you look at it, pretty much for most of the session, while

volume was low, the market was down and then you get this afternoon where it was literally just bouncing around a couple of points up, a couple of

points down, and when all was said and done, the market is off 13 points - just a fraction or so.

Financials and tech shares saw the strongest gains. Alphabet shares were up five percent after hours. Their earnings have just come out. I shall

tease you liberally. I say, we'll talk more about Alphabet shares in just a moment.

Iran got one tweet from President Trump. Amazon and "The Washington Post" got two. Mr. Trump repeated his often made criticism, that Amazon pays too

little to use the U.S. Postal Service, which the President calls Amazon's delivery boy. Mr. Trump went on to accuse "The Washington Post" of being a

lobbyist for Amazon, that's owned by Jeff Bezos who owns the - the head of Amazon, and attempting to shield Amazon from antitrust claims.

Amazon's stock dipped when the market opened. Shares have returned and recovered. They closed off less than 1 percent. CNN's Jeff Zeleny with me

from the White House. He's not letting up on Amazon, is he? What's behind this?

JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: He's not Richard. I mean, the question of what's behind it seems to be a question of ego, it

seems to be a question of personality. President Trump clearly does not see eye to eye with Jeff Bezos. He clearly is trying to sort of wrap in a

business argument with his broader attack on the media, and of course, the Washington Post covers this President aggressively as several news

organizations, but it's unclear if President Trump actually believes that Jeff Bezos is directing sort of the stories and the editorial direction of

"The Washington Post." He is not. In fact, he rarely is in the newsroom, I am told. He does not have a role in that.

But the President clearly seizing on his broader fake news argument, if you will, to try to tie into this antitrust argument and the Postal Service.

He's been talking again and again and again about how Amazon is essentially responsible for the decline of the Postal Service, that simply is not true.

Amazon of course gives them a lot of business. You can discuss the negotiated contract if Amazon should be paying a higher rate or not, but

they are certainly not to blame for that. So, it was just more of the same this morning, but interestingly, a lot of rants on Twitter, I think 17 or

so in the last 24 hours or so, Richard.

QUEST: And is there any indication that the attacks on Amazon will lead to any action? I mean, so far the President is on his own, but I don't hear

anybody in Congress saying that they need to actually tax (inaudible) - it's a private contract between two parties, so I don't see any actual move

other than noise and bluster.

ZELENY: I think that's right. We have not heard anyone else joining in the criticism here. Of course, if any cities across the country including

here in Washington, D.C., the local authorities - Republicans and Democrats both sides are eager for Amazon to look for and build its second

headquarters in their cities, so Amazon comes with a lot of jobs in the supply chain, other matters here.

So President Trump is criticizing it. I do not hear a lot of that echoing up on Capitol Hill and as for what it means in terms of antitrust policies

and laws, it's hard to say, I mean, from a regulatory standpoint. It could have some effect, but so far, it does not appear that it has.

QUEST: Jeff Zeleny is at the White House and we thank you. Good to see you, sir.

ZELENY: Sure.

QUEST: As we continue tonight, we get to business on the move where RyanAir, Alphabet and Hasbro, the prices have all been moving and we will

tell you exactly why. After the break, it's "Quest Means Business" live in New York.

[16:15:00]

QUEST: RyanAir, the largest airline in Europe saw their profits sink some 20 percent. The reasons were soaring staff costs. Now, as for the Chief

Executive, Michael O'Leary, he is worried - he is always worried about something. He is worried about Brexit and the fears of a hard Brexit,

which he says are underestimated.

A different toy story - oh come on, that was good - for Hasbro, makers of the Nerf gun, well, the Nerf gun be testament and if you look underneath

it, you'll see things like, more of a recovered ground, plus the Toys R' Us bankruptcy. As with this, my favorite, Twister shares soared as a result

of that with some 14 percent and Hasbro 1.2 percent. Alphabet has much to celebrate. The earnings beat expectations, the revenue is up 26 percent.

The stock is up in after-hours trading. We'll talk more about it as we have business on the move.

Joining me to put this into perspective, Paul La Monica. Good to see you.

PAUL LA MONICA, CNN CORRESPONDENT: Good to see you, sir.

QUEST: These Alphabet results, what actually did they show?

LA MONICA: They showed that Google owner Alphabet continues to dominate online search and online advertising. Revenues were up 26 percent per a

year ago, strong growth and profits. They did break out what the numbers were including the big E.U. fine that they are appealing. They still have

a $3.2 billion profit even with the fine, without that fine, it's $8.3 billion earnings beat estimates. This is a company that now has $102.25

billion in cash balance sheet ...

QUEST: How much?

LA MONICA: $102.25 billion in cash on the balance sheet. Of course, that's still less than half of what Apple has, but it's by no means any

less potatoes.

QUEST: A $102 billion in cash.

LA MONICA: All of these big tech companies have these hug war chests right now. Google, Alphabet - well, they are the same - Apple, Microsoft - all

of them, even Facebook and Amazon are building lots of cash.

QUEST: But what you do with it because I mean, I suppose you do have to be biting especially remember, Facebook paid $17 billion for what's happened

...

LA MONICA: Yes, we have seen companies buying things. They are spending more on R&D.

QUEST: What's the weak point in the earnings so far? I mean, I realize you've only had 10 minutes to look at them, but what's the weak point do

you think?

LA MONICA: I didn't see anything particularly troublesome at first blush. I think that one of the biggest criticisms with Google will continue to be

that they are spending a lot of money on these businesses that may never yield any profits, that's part of the bigger Alphabet division, the things

like having internet access via balloons and things of that nature.

QUEST: Right, but this - the other projects. I mean, how much of Alphabet is Google and how much of Google's revenues and the significance of the

company is the rest?

LA MONICA: This is still a company that's dominated by, not just search anymore because YouTube is increasingly an important part of the picture as

well, but the other bets division of Google is still a tiny fraction of the overall company.

[16:20:11]

QUEST: Let's turn to Tesla. Tesla had a difficult day and once again, it's arguably the result of their own misfortune in terms of comments.

Look at the price cost of 3 percent today.

LA MONICA: Yes, Tesla, I think really is facing this problem right now of when are they ever going to be profitable? Are they ever going to be like

a mature Detroit, if you will or some of the big auto companies in Tokyo, in Germany, people want this company to generate profits on a consistent

basis and you have Elon Musk asking suppliers reportedly for - to get some money back to help them out with profitability. That's not exactly the

sign of a healthy company.

QUEST: But when I was talking to one particular broker, who was talking about their view on the stock price, they have the stock price down in a

160 or something by the end of the year or middle of next year, so the downward pressure if the market believes that that 303 is unsustainable or

anything like it?

LA MONICA: I think it's going to be very difficult to try and figure out what is a fair value for Tesla because you can't look at it like a GM, a

Ford, a Toyota and any other major auto company.

QUEST: But they are the competitors.

LA MONICA: Right, they are the competitors. I mean, you have to compare them, too in terms of vehicles sold, but because of the fact that it's a

much higher growth or expected to be higher growth someday type of company, people aren't valuing it on a pure earnings or revenue basis the way they

are with these other large auto companies.

QUEST: We've got more results this week, haven't we?

LA MONICA: We have a lot of them. You're going to be busy on the staircase if that still exists.

QUEST: Have you heard that it's not?

LA MONICA: Oh my gosh, I saw the little conveyor belt, but the staircase is gone.

QUEST: No. Thank you, Paul La Monica.

LA MONICA: My apologies.

QUEST: "Future Forward." A Chinese city is signing a deal for U.S. Hyperloop train system. The trains will be built in Tongren City in the

Guizhou province. The plan is to speed it up to a thousand kilometers an hour.

Earlier on "QUEST EXPRESS" at the stock exchange, the CEO of Hyperloop said China could make it happen faster than other countries can.

(BEGIN VIDEO TAPE)

DIRK AHLBORN, CEO, HYPERLOOP TRANSPORTATION TECHNOLOGIES: We are able to build and operate much cheaper than high speed rail for example. So, all

of our feasibility studies so far have shown roughly construction cost from $20 million to $30 million per kilometer, but we estimate that in China, we

actually might be able to build it much cheaper.

QUEST: The one big problem is, I mean, the theory is good, and the limited practical examples that have been built so far seem to be good, but there's

no full scale up and running project and I'm wondering, China is taking a risk in deciding to build this?

AHLBORN: No actually, we are now in the commercialization phase, so we are building a full scale prototype interlude in France, all the tests so far

have been done, but you need to really build a full sized system to really make everything work. I mean, the technology is not really the hurdle.

The technologies have been working for quite some time. There is - it's more an integration issue, right?

So, you have to bring all of these technologies together and make them work in a perfect way.

QUEST: Right, what's fascinating is that it is China that is taking the risk here. Once again, it is China that is being forward looking and

saying, "Look, this might work. It might solve a very real problem." This is different, too in many places in the West, which is tinkering with

Hyperloop, but nobody is committed.

AHLBORN: Well, we actually do have some other commercial projects already, so we are working with the Emirates and Abu Dhabi. The Ukrainian

government has some attempt to build a commercial system and now, China of course is a very big player. China is a leader when it comes to high speed

rails. They have the highest spending when it comes to infrastructure and they have problems, right? The cities are overflowing, so we need to solve

those issues.

QUEST: When do you think this will be up and running? Give me - I won't hold you to it, sir. I won't hold you to it, I promise you, but give me a

rough idea of when I might put my bum on a seat?

AHLBORN: China is always very aggressive, so our time estimates are a little bit more conservative. We estimate that roughly within three years,

we should be able to go and ride in the first Hyperloop together on the first 10 kilometers. But, our Chinese colleagues are very aggressive and

believes that they can do it much faster.

(END VIDEO TAPE)

QUEST: And he almost promised me a seat on that first one, but I shall hold him to that. Well, because if I am going along, you're going along as

well.

[16:25:05]

QUEST: As we continue tonight, on top of the day's business headlines, in just 90 seconds, try our Daily Briefing podcast, updated twice a day before

and after the bell rings on Wall Street and you can just Alexa or your Google Home Device. CNNMoney/briefing and if you're being polite, you'll

say "Please, Alexa."

As we continue, it's a hard act to follow, Fiat puts a new man at the helm or behind the wheel as illness is forcing Sergio Marchionne to step down as

Chief Executive.

Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. The Chief Executive of Fiat has some serious and difficult tasks

ahead and already has to fill top jobs that people had left. There's double trouble for British steel companies. We're going to take you to the

heart of England's steel industry, and as we continue tonight, you are watching CNN and on this network, the facts always come first.

The White House is defending President Trump's Sunday night Twitter attack against Iran calling it consistent with his previous comments. Mr. Trump

declared that if Iran threatens the U.S. again, it will suffer consequences which in his words, "few throughout history have ever suffered."

Police say the man suspected of shooting 14 people in a popular area of Toronto on Sunday was 29 years old and a native of the city. He exchanged

gun fire with officers before fleeing and took a bullet, but it's not clear if that's what killed him. An autopsy is scheduled for the coming days,

and the gunman killed two people and wounded 13.

The U.K. government says it would not object if two British members of an ISIS cell were executed in the United States. The two men are believed to

be responsible for beheading hostages in Iraq and Syria.

[16:30:00] While the U.K. government typically does not cooperate with foreign governments where the death penalty is on the table, it says, it

will share information with the U.S. in this case.

The German football star Mesut Ozil is stepping down from his country's national team and raving racism and disrespect, and he says he's been

subjected to on account of his Turkish heritage.

A spokeswoman for German Chancellor Angela Merkel said his decision has to be respected. Four men have been arrested in connection with a suspected

acid attack on a three-year-old boy in the English city of Worcester. The toddler suffered serious burns on his face and arms.

Police have detained three men in London after they arrested the third on Sunday. They say it's not clear why the boy was attacked. The leadership

crisis at Fiat-Chrysler after the chief executive was forced to step down over the weekend.

Now, in New York, the shares of Fiat-Chrysler closed lower to stuff, nearly 2 percent following two resignations. First of all, Sergio Marchionne who

quit after 14 years at the helm -- declining serious grave health issues.

And the head of the Jeep division is now running the company, Mike Manley has to replace both himself and also the head of Fiat-Chrysler Europe who

quit this morning. Rebecca Lindland is the executive analyst at Kelley Blue Book who joins me from Stamford, Connecticut.

Good to see you as always. We do need to pass this quite carefully. First of all, let's begin with Marchionne and I mean, it's very said that we have

to talk in such terms, but the understanding is that we're talking about grave illness.

REBECCA LINDLAND, EXECUTIVE ANALYST, KELLEY BLUE BOOK: Yes, we are and that it's important that the listeners understand the viewership understand

that he was basically forced to resign because he became gravely ill on Friday evening.

And Saturday, the board met and really kind of de facto, put him into a position where they know he cannot return to the company. But my

understanding is that he is gravely ill in a hospital in Zurich, Switzerland. So they've asked Mike Manley to take over.

As you said, he has been running Jeep really very masterfully and also Ram Pickup trucks.

QUEST: So --

LINDLAND: So he's well positioned.

QUEST: Has he taken over -- I mean, obviously Marchionne is not coming back in that sense to the job --

LINDLAND: Right --

QUEST: But has Manley been given the job or is he taking it on a temporary basis whiles the search is underway.

LINDLAND: Initially, there was some confusion about whether this was just an interim position, but now we've read that he is now given the position

and they are not conducting a search.

Manley was one of the top three contenders for this position, and so I -- but the transition was supposed to happen in April of 2019 --

QUEST: Right --

LINDLAND: Which is why there was already a plan in place.

QUEST: The decision of the head of Europe to go, we're hearing this because he didn't get the top job. If --

LINDLAND: Right --

QUEST: I mean -- look, that's not unique, that does happen --

LINDLAND: Yes --

QUEST: When people don't get the top job, it affects --

LINDLAND: Yes --

QUEST: But I can't help feeling, there's a sour taste here that he's gone so quickly at a time when the company is in crisis. He could at least wait

to a couple of weeks and to help the new man out.

LINDLAND: This is why I love being on with you, Richard, because that was exactly my thought. It's a bit egregious I think --

QUEST: Yes --

LINDLAND: Because of the circumstances with which Manley has been assigned. This is -- this is a total shock, Marchionne, you know, was in

relatively good health, he had shoulder surgery a couple of weeks ago and then had very massive grave complications.

So I agree with you, I was very -- it didn't sit well with me really, that Otto Vitter(ph) would just resign like this. It's not unusual, but I

thought it would have been a professional great -- professional gracefulness --

QUEST: Yes --

LINDLAND: If he had stayed.

QUEST: And --

LINDLAND: Yes --

QUEST: Now, let's talk about -- so Manley has to appease himself and head of Jeep --

LINDLAND: Yes --

QUEST: And he has to replace --

LINDLAND: Yes --

QUEST: The head of Europe. But he's been at the top of the company for some time. So one is not expecting strategic change of direction, are we?

LINDLAND: You know, I don't think so. You know, somebody asked me recently if we thought that they were going to tear up the five-year plan

that was revealed in Italy at the beginning of June where I was there to hear it.

[16:35:00] I don't anticipate Manley making those kinds of changes. He is very much a loyal lieutenant to Marchionne, and what he really needs to do

is execute on Marchionne's plan. He was very integral there, he was right up there with Marchionne, John Elkann also the head of the company.

So I think that Manley --

QUEST: Right --

LINDLAND: Faced, a reputation precedes him.

QUEST: Finally, let's talk about the Elkann family, I once interviewed John Elkann many years ago in Italy. Do they still play much of a role?

Are they still involved on a daily basis?

LINDLAND: Well, John Elkann is -- I -- they -- you know, when you have a leader as dynamic and strong and successful as Marchionne, you're going to

let him run. So I think that maybe we'll see a little bit more involvement as they reassign.

Keep in mind, Tudor(ph) and Marchionne had five or six other titles within the family of foundation. So they've assigned -- they've now had to put

different CEOs in place at each of these different levels --

QUEST: Right --

LINDLAND: In different companies. So I think that he will be involved during this transition.

QUEST: Good to see you as always from Stamford, Connecticut, thank you for joining us.

LINDLAND: Likewise, thanks.

QUEST: Now, as we continue, it started with a picture of a German football star with a Turkish president and it then ends with Mesut Ozil also

quitting his country's team in disgust and the sponsors are left to deal with the fallout. We'll be back.

(COMMERCIAL BREAK)

QUEST: Mesut Ozil is quitting the German national team over the response to this photograph of the Turkish president, and says his sponsors bear

some of the blame. Now, Ozil's announcement on Twitter had an entire section devoted just to sponsors.

This is the recent Mercedes campaign featuring him, they are a major sponsor of the German national team. But in his open letter, Ozil accused

an unnamed sponsor of dropping him from their promotions and seem to bring up (INAUDIBLE).

He said it hurts me they would do so. He said, "for them, it was no longer good to be seen with me and called the situation crisis management. This

is all ironic because a German ministry declared their products have a legal and authorized software devices in them.

And I'm writing, thinking this is worse than a picture with a president of my family's country. As I said before, partners should stick with you in

all situations."

[16:40:00] The company is Mercedes, Mercedes Benz, and he says the company is looking into the claims, but at the same time, Ozil praises Adidas

sponsors for being loyal. Today, Adidas said it regrets that he is quitting the German team.

Isn't it strange story, the size and range that he would quit in such a way over a picture with President Erdogan and then lambast in such a way.

Kevin Kelly is co-president of the BigBuzz marketing group and joins me now.

And it is a strange story, isn't it?

KEVIN KELLY, PRESIDENT AND CHIEF GROWTH OFFICER, BIGBUZZ MARKETING GROUP: Absolutely.

QUEST: I mean, the reason why he's gone, the decision just to uptick in such a way.

KELLY: It's disappointing in the brands, isn't it? You know, I think that it's so often they fall into a crisis management posture, right? It really

is an opportunity for them to show their colors, stick to their values.

And the problem with so many brands is that they don't really know where their values lie. They're following the money and most of their actions

are dictated.

QUEST: So let's go through this bit by bit. First of all, the picture of him with the President Erdogan which is his father -- I mean --

(CROSSTALK)

Meet the president of a country anyway. Whatever all may think of his politics --

KELLY: Exactly, yes.

QUEST: He's still the president of Turkey. But what happens after that, he's complaining he didn't get support from his sponsors. What was he

hoping for?

KELLY: I think he was hoping for some loyalty, right? So I think that what we've seen from Adidas and from his other brands that have stuck by him is

what you want to see.

They have done their due diligence, they know who he is, right? And you know, these athletes are passionate, right? And so they will stick to their

values, it was nice to see that he did, and he made a choice that was --

QUEST: Sure --

KELLY: A very difficult one.

QUEST: He comes up feeling again with this one, it's such the lower end of anything that's gone wrong. That the --

KELLY: Right --

QUEST: All he has is a picture with the president of a country that --

KELLY: He didn't sleep with the wrong person --

QUEST: Yes, he didn't sleep with the wrong person, there's no scandal involved. He's got a picture of himself with a president of a country that

his family comes from. And out of this, so from the sponsors point of view, you're Mercedes, what are you thinking tonight?

KELLY: Oh, I'm rethinking if I'm Mercedes, right? I'm thinking that something we talk about emphasis all the time, discouraging, creativity,

they've shown no courage, they need to find a way to re-evaluate and show some courage and find a way to support him.

QUEST: Yes, what does support him mean? And there's something of a -- this is why I'm having difficulty in this thing --

(COUGHING)

Excuse me, there's one criticism for this picture, but what does supporting mean? Coming out and making a statement, putting out a press release --

KELLY: Greatest thing they could do, in all these situations, what we've done is we failed to look at the details, right? We react to something that

looks seemingly offensive, right? But the reality was it's some country.

It's something that he thought strongly about to support his family. So if I'm Mercedes, I'm going to say -- I'm going to look deeper into what he's

doing and support those things.

QUEST: We've seen --

KELLY: Education, child support, right? Paying for life-changing -- what was the quote? Life-changing surgeries for kids in Russia.

QUEST: We see this in this country with the NFL, the kneeling and the whole question of sponsors for -- I mean --

KELLY: Great example --

QUEST: We can -- we can be (INAUDIBLE) and say sports and politics and sporting controversy should not mix. But that is just naive.

KELLY: It is right? What pays for that football game to be on -- the NFL television, "Nbc" and all these networks, right? These players are so

passionate, you've got to understand, right? This person earns his way onto the field, he earned his way onto the team and he's earned his way onto all

of your screens.

So one guy said, hey, I have an opportunity to have my voice heard. And I will say also that not one person who raised their fist or kneeled down on

the field ever meant any disrespect to the military.

I think it's -- again, it's a matter of we haven't taken time to look at the details of the situation.

QUEST: Good to see you, sir.

KELLY: Thanks so much --

QUEST: I deeply appreciate it --

KELLY: My pleasure --

QUEST: Thank you. As we continue tonight, the U.K. foreign secretary says Britain could crush out of the single market by accident. And claims

Britain would blame the E.U. for years to come.

[16:45:00] (COMMERCIAL BREAK)

QUEST: Britain's new foreign secretary says the European Union needs to change tactics while there's a risk the U.K. will leave the E.U. without a

deal. Now speaking of his first day overseas trip after taking over from Boris Johnson, when Jeremy Hunt said a hard Brexit would hurt the British

economy and the U.K. public would blame Brussels for the damage.

(BEGIN VIDEO CLIP)

JEREMY HUNT, FOREIGN SECRETARY, BRITAIN: And without a real change in approach from the E.U. negotiators, we do not face a real risk of no deal

by accident. And that would be incredibly challenging economically.

My real concern is so that it would change British public attitudes to Europe for a generation.

(END VIDEO CLIP)

QUEST: Few areas would feel the effects of a hard Brexit as it's known, more than Britain's industrial heartland where decades of decline have

already pushed many of its once thriving businesses at the edge of extinction.

Steel makers though are finding themselves uniquely caught between a trade war with the U.S. and Brexit uncertainty in Europe. Cnn's Anna Stewart has

sent us this report from western England.

(BEGIN VIDEOTAPE)

ANNA STEWART, CNN CORRESPONDENT (voice-over): Heat, crush and mould it. This is high grade steel and that's heading to the United States and the

E.U.. Peter Davies' own steel work employing around 200 people.

PETER DAVIES, OWNER, ORIGINAL STEEL SERVICES: Steel is the basic commodity that drives the west midlands.

STEWART: Once the beating heart of industrial Britain, now this region is caught between a rock and a hard place, Brexit and U.S. tariffs. The

uncertainty putting hundreds of thousands of dollars in new investment on hold.

DAVIES: For the first time, I think in my life, I am genuinely worried. If you're a multinational or you've got billions at the bank, then it's

fine. You can ride all these things, but we haven't. We live day-to-day.

STEWART: The steel he sells to America is highly specialized, used in railroads and mining equipments, it's not subject to tariffs yet. But he

worries his factories could become collateral damage in President Trump's trade war.

DAVIES: This is an e-mail from one of our major American customer asking what the impact will be on the steel tariffs.

STEWART: Davies says the two sides should negotiate instead of retaliating further.

DAVIES: They are literally like kids, you know, I'm going to slap this -- I'm taking the whole -- you can have my back. The problem is that this is

real people, real jobs.

STEWART: And many of the workers here, it's the only job they've ever known. They sympathize with tariffs to protect those who are in the

industry. Cheap steel from China and automation have forced hundreds of small factories to close in recent years.

[16:50:00] Many voted for Brexit for the same reason. Andrew Rich; the operations director is one of them.

ANDREW RICH, OPERATIONS DIRECTOR, BROMFORD IRON & STEEL: When I look around me, the decision is typically worse --

STEWART: But are you worried now the E.U., this is quite damaging for this industry especially your boss.

RICH: Yes, I am, I'm not sure what's going to happen after the Brexit, we'll find out about -- we need some certainty.

STEWART: And yet, he says he wouldn't change his vote.

DAVIES: A lot of them are sort of Sanguine, it will be a ripe, they don't roll over in the middle of the night, thinking, oh, my God, where am I --

STEWART (on camera): And that there's no job --

DAVIES: That's my job, that's my job, you know, I'm paid to worry.

STEWART: His company source for steel from Germany, and if the U.K. crushes out of the E.U. without a deal, his cost could spike. What will

that mean for your business?

DAVIES: It could mean closure. We would probably lose up to 50 or 60 percent of our market, and that would be devastating.

STEWART (voice-over): Until then, workers here can only hope that politicians keep hammering away at a deal. Anna Stewart, Cnn, West

Bromwich, U.K.

(END VIDEOTAPE)

QUEST: Now, of course, nothing to do with the west of England is in the midlands as I said. The head of U.K. steel for the EEF industry groups

says jobs losses from this combination of trade tariffs and then Brexit uncertainty could make the industry unsustainable.

Speaking to Bianna earlier, Gareth Stace said steel makers are already seeing the effects on their balanced sheets and it could get a whole lot

worse.

(BEGIN VIDEO CLIP)

GARETH STACE, DIRECTOR OF U.K. STEEL: From what we've seen with the 25 percent tariff tax slapped on all of the vast steel is that we've seen some

jobs canceled in terms of orders that were on the water.

We've also seen some American customers of the U.K. Steel sector where they've just had to pay that tariff. But this is the short-term reaction,

but the longer term reaction is going to be -- that we're going to see a damage to this market for us.

Which is our second biggest export market after the E.U. It's some $500 million worth in 2017. So anything that puts that risk is going to have a

significant impact on our sector.

BIANNA GOLODRYGA, CNN CORRESPONDENT: Yes, 10 percent of your steel is actually sent to the U.S. You mentioned having 25 million tons of steel

needing to find a new home. What is doing -- what is being done now to avoid a glut of steel in the U.K. as we have seen just a couple of years

ago.

STACE: Well, as soon as we now knew that President Trump was going to slap this tax on our steel, we looked to the European Commission in Brussels to

take swift, firm and effective action.

What they've done and we've seen that coming later this week is what's called safeguard measures. And that actually limits the amounts of steel

that can come in globally onto the U.K. -- sorry on to the E.U. market.

And that will limit that surge, anticipate its surge of steel that will now go to the U.S. market that needs to find a new home to go to.

So we're very pleased that the European Commission has taken that swift action, because if it didn't, we'd have a double one(ph), not only do we

have a tax slapped on our steel that goes to the U.S., but we also see our market just flooded with steel, the price would go down and we would find

that there were jobs at risk in our sector in the U.K. like we saw in 2015, 2016 which was the worst steel crisis in the U.K. steel sector and well

over a generation.

GOLODRYGA: And there's real consequences obviously first and foremost jobs. Talk about the number of jobs in the U.K. alone that are dependent

on this production and if in fact you do go back to the 2016 levels, the crisis that you've seen there. What kind of impact will that have, not

only on jobs, but the economy as a whole?

STACY: Well, in 2015 and 2016, we lost 5,000 to 6,000 jobs in our sector. Let me put that into context. We employ currently today, about 31,000

people directly in the steel sector, and you multiply that by four or five times in terms of indirect jobs.

So we lost a significant proportion. You know, if we were to lose the similar proportion, we would then potentially become unsustainable sector

in the U.K., and that could lead to severe problems and we don't want to go there.

Because actually, you know, the future really for the steel sector in the U.K., in Europe and actually globally should have a brighter future than we

see at the moment.

GOLODRYGA: Tell me, what is a bigger concern right now, the 25 percent steel tariffs coming in from your number two export being the U.S. or

Brexit negotiations?

STACY: Well, I think the tariffs, the 25 percent tariff is an immediate and short-term concern. You know, I'd like to think we can find some

resolution there.

[16:55:00] I was hoping that when President Trump came over to London and Scotland last weekend, that he would bring a gift with him and that gift

would be that he would exempt the U.K. from the tariffs, that didn't happen.

But the Brexit concern is such an unknown, it's unprecedented as you've said before. We've never seen -- we've never seen this in the last 40

years, we don't know what it's like to be out of Europe. And therefore, it's just totally unknown territory.

And that's why it's very concerned for all businesses lesser than the steel sector, because we thrive on free trade in the global steel sector, and if

we limited that in any way in the U.K., we'd have problems going forward.

(END VIDEO CLIP)

QUEST: As we head towards the top of the hour, and let's just remind ourselves how the European markets traded, where they all went down pretty

much across the section. Not huge losses, the worst was being in Milan with the MTA which was off nearly 1 percent.

The Italian shares were pulled down of course, fairly obvious by Fiat- Chrysler which is a major part of the market. And the Dow, what a day for the Dow, strange sort of day. Down but -- and then happened, the movements

were very small, and as a result we are off just a fraction and the tad(ph) still holding on of course to 25,000.

As we continue, I will have our profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, so the U.K. foreign secretary has spoken the truth, I dare not speak his name, that they could crush out of -

- the U.K. could crush out of the E.U. without a deal and there will be dire consequences as a result.

Nothing new about that, nothing startling about it. What's interesting is that he said it and he's put it on the table which is why when Theresa May

and her cabinet now go around Europe trying to sell the Chequers agreement, it becomes so crucial.

At some point, these other countries are going to have to say to the commission, either block the U.K. in the eye and let them go without a deal

or we're going to have to make some movement in terms of the single market, we're going to have to give them something.

Now, I do not know how this is going to play out, but I do know time is tight(ph) towards October. And what's even more significant is the reality

that if there's no deal, it would be pretty disastrous for all concerned. Never let you say you haven't been warned.

And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable,

we'll do it again tomorrow.

END