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Quest Means Business
Seven Dead in Philadelphia Train Crash; Infrastructure Concerns; Not All Train Passengers Accounted For; Eurozone Growth Outpaces US; European Stocks Lower; Greece Back in Recession; Young People Leaving Greece
Aired May 13, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
PAULA NEWTON, HOST: Wall Street seemed downright bored with itself today. Disappointing US retail sales number meant the Dow gave up its
early gains and finished absolutely flat. It's Wednesday, the 13th of May.
Tonight, new information on the deadly train wreck in Philadelphia. We'll be live at the scene of the crash.
Also tonight, Paris powers ahead. France's finance minister predicts a surge in investment.
And let the battle begin. While the fight between the US and OPEC is only getting started.
I'm Paula Newton and this is QUEST MEANS BUSINESS.
Good evening. It is an absolute disastrous mess, says the mayor of Philadelphia. "I've never seen anything like it in my life," he said. An
Amtrak train carrying 238 passengers and 5 crew derailed Tuesday night on the outskirts of the fifth largest city in the United States. Now, it was
en route from Washington to New York on one of the busiest stretches of the track in the country.
The National Transportation Safety Board says the train was going twice as fast as it should have been hitting more than 160 kilometers an
hour approaching a turn where the top speed should have been 80. More than 200 people were injured as the train came to a halt in a heap of twisted
metal.
So far, seven have lost their lives, eight are in critical condition. A short time ago, Philadelphia mayor Michael Nutter said the search for
passengers remains vigorous and active, and he described the scene.
(BEGIN VIDEO CLIP)
MICHAEL NUTTER, MAYOR OF PHILADELPHIA: To see it in the daytime is almost indescribable. It is painful and it is amazing -- it is incredible
-- that so many people walked away from that scene last night. I saw people on the street behind us walking off of that train. And I don't know
how that happened, but for the grace of God.
(END VIDEO CLIP)
NEWTON: Yes, many people were tossed around like rag dolls in those cars. Rene Marsh pieces together what we know so far about the accident.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Keep crawling, OK?
UNIDENTIFIED MALE: Where am I crawling to?
UNIDENTIFIED MALE: Crawl.
UNIDENTIFIED MALE: Crawl forward, sir.
UNIDENTIFIED MALE: Keep crawling.
RENE MARSH, CNN AVIATION AND GOVERNMENT REGULATION CORRESPONDENT (voice-over): Passengers making a desperate escape from New York-bound
Amtrak train 188.
BETH DAVIDZ, AMTRAK PASSENGER: The car started to fill with smoke, so obviously, we were all trying to get out of the car. I remember somebody
in the car just saying stay calm.
MARSH: According to a source briefed by investigators, the train was traveling over 100 miles per hour as it approached a curve with a 50 mile-
per-hour speed limit. Seven cars jumped the tracks.
UNIDENTIFIED MALE: Notify Amtrak to shut down the entire Northeast Corridor. We have a major event here.
MARSH: Emergency responders rushed to the scene.
UNIDENTIFIED MALE: We have people on the track and a couple cars overturned.
MARSH: People onboard say as the train passed through Philadelphia and negotiated the turn, the train started to shake.
UNIDENTIFIED FEMALE: We were in the front seat, and this huge red suitcase just came flying at me. Our train was actually on its side, so it
pushed me onto the side of the train.
MARSH: Video obtained by CNN shows the train moments before the fatal crash. You see it passing by, then flashes of light.
NUTTER: As we know it, often referred to as the black box, that has been recovered. It is now in the Amtrak Operations Center in Delaware for
analysis.
MARSH: The train's recorders will tell investigators exactly how fast the train was traveling. Back at the site, the primary focus hours after
the fatal crash is the recovery operation.
DAVIDZ: At first, thought, it was just kind of like, whoa, what just happened kind of thing. And just being glad that -- it stopped. You're
alive. OK, now what?
(END VIDEOTAPE)
NEWTON: Now, just 36 hours before the crash, unions, business, and government officials came together in the nation's capital to sound a
warning: under-investing in America's infrastructure is dangerous and costly.
Vice President Joe Biden has said he's probably taken more than 8,000 round trips on Amtrak in the last 36 years as a member of the US Senate.
He said the idea that there's even a debate about the need to invest in infrastructure is mind-blowing. Tuesday's derailment happened on Amtrak's
Northeast Corridor, which connects Washington, New York, and Boston.
That system carries 50 percent more passengers today than it did 15 years ago. And remember, Amtrak says that's despite deteriorating
infrastructure and chronic under-investment.
[16:04:57] Get this, though: earlier today, the US House Appropriations Committee rejected increased funding for Amtrak capital
improvements. Lawmakers are considering a bill that would cut government funding to Amtrak by some 15 percent.
Peter Goelz is the former managing director of the National Transportation Safety Board, and he joins me now from Washington. I mean,
we know that none of these issues are new to you in the slightest. When we look at rail travel, though, infrastructure in general in this country,
take this route right here, Peter.
Three accidents in the last year and a half. Is that a problem with infrastructure? Are they accidents, or are they accidents that could be
avoided if that money is put into infrastructure?
PETER GOELZ, FORMER MANAGING DIRECTOR, NTSB: Well, I think the argument can be answered yes and yes. Can these accidents be avoided?
Well absolutely they can be avoided with the installation of positive train control systems, which are part of much of the European rail system and the
new Asian systems.
These are systems that would prevent over-speed accidents like we saw here in DC -- I mean here in Philadelphia last night, and then outside of
New York just a few months ago. So, there needs to be a continuing investment.
These systems are expensive. The system was not in place in this area in part, I think, because there is a convergence of a number of different
rail track systems at that area. And it's a very complex issue to put these systems in place.
But secondly, it's also a human factors issue. Engineers need to follow the rules. And they need to have the right kind of sleep, they need
to have good health. And these kinds of issues in the New York accident, the engineer was actually either dosing or was distracted when he entered
the turn at over two times the speed. We'll find out what was the -- behind this event very shortly.
NEWTON: Well, when you look at trying to travel safely, commuters in the Northeast Corridor, but all over the United States, really, they're
wondering, look, is this about politics now? Are we mixing up the two issues?
There is the lack of infrastructure, and I know many people in Washington think, look, the government shouldn't be the people putting
money into infrastructure. It should be done by the private sector, they do it better and more efficiently. But is that commuter that wants to get
there quickly and get there safely, are they confusing the politics with the issue of safety on their rail systems?
GOELZ: Well, there -- the issue of where you get the money to pay for these infrastructures is one that's been under severe debate over the past
10 or 12 years. And the US Congress is simply not going to put money into Amtrak. They've been cutting it, and they are not supportive of it.
And they've not been supportive of passenger rail systems for a number of years. And it, frankly, is extremely short-sighted.
NEWTON: Peter, we have to say in relative terms, train travel is still one of the safest bets, right? Is it not?
GOELZ: Absolutely. Train travel is extraordinarily safe. As the vice president said, he's taken it over 8,000 times in the last 20 years
and has never had a problem. So, it is extraordinarily safe. But it does get a great deal of attention.
And if you talk to the administrators of the lines, they will all tell you that there are challenges in terms of capital investments.
NEWTON: When you look at Europe and Asia, and you just talked about how fast they're going, you're talking about trains going twice the speed
of the trains in the United States.
And yet you have witnesses from that crash saying basically, we felt like we were flying, not even connected to the rails before we hit the
point of the crash last night. What does that say to you about the future of rail -- of train -- commuter train transit in this country?
GOELZ: Well, a decision has to be made by government, both state, local, and federal, of is train travel important? California has made the
decision under Governor Brown that they're going to invest in a high-speed dedicated rail link between LA and San Francisco. In Florida, they are
developing a high-speed link as well. And it's going to be costly.
The key is trying to -- the challenge sometimes is trying to retro-fit rail lines that are hundreds of years old in some cases, 150 years old,
that are passing through communities that still have grade crossings on them. North of New York, there are at least a dozen grade crossings on the
main line.
South of New Work to Washington, there are none. But it costs billions of dollars to eliminate those grade crossings. It's going to take
major investment to upgrade the rails, and it's got to be a partnership.
[16:10:05] NEWTON: Now Peter, this investigation is just underway now, it's continuing. You heard the mayor of Philadelphia there saying he
can't believe that they didn't have as many deaths as they should have had. Is that what you think when you look at the video and you look at what
happened on the rail?
GOELZ: Well, it certainly is -- the mayor is quite accurate. These are rail cars that were built, I believe, in the 1970s. They are heavy,
they were moving at a high rate of speed. The physics tells you that there is going to be terrible destruction if they go off the tracks.
And one of the -- I think one of the major components of this investigation will be the crash-worthiness of the cars, whether the inside
of the cars can be designed in a better way to limit injuries, and does Amtrak need to upgrade their rolling stock to the newest standards?
NEWTON: Yes, and certainly a tall order right now going forward with all of this debate in this country. Peter, thanks so much, appreciate your
insights.
GOELZ: Thank you.
NEWTON: Erin McLaughlin, as we said, is in Philadelphia. She now gives us a quick update as to what is going on. Erin, it's hard to believe
right now that they are still looking for victims. When do you think they'll get to a point where everyone can be accounted for at least?
ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: That's unclear. Authorities here simply aren't saying. But you're right, Paula, they are
still searching for potential victims of this tragedy.
In the overnight hours, they initially expanded that search area, they were out looking with sniffer dogs. And then into today, this morning,
they expanded that area yet again. They think that it is possible that someone could have been thrown from the train on impact.
And that's because not all 243 people that they believe may have been onboard the train have been accounted for. The mayor gave a press
conference here in Philadelphia a short while ago. He said the majority has been accounted for.
He said that they are making good progress in that regards, but they are still asking for people who may have been onboard that train to call in
to notify authorities, to notify them of their whereabouts.
They also say it may be possible that someone who had a ticket for the train didn't actually get onboard, and that's why the discrepancy in
numbers here. Paula?
NEWTON: Yes, some 18 hours later and still not everyone accounted for. I know they'll keep trying in the next few hours. Erin, thanks for
the update. Erin McLaughlin live in Philadelphia for us.
Now, France takes an unexpected bow after showing some of the world's strongest economies the way. I've been speaking to the French finance
minister about it. Hear what he had to say. That's up next.
(COMMERCIAL BREAK)
NEWTON: The eurozone economy grew faster than the US in the first quarter. Yes, hard to believe. The 19-country euro area delivered its
best performance in almost two years with growth of 0.4 of a percent.
I know, maybe not what you were expecting, but compared to US output on the other hand, it was up just 0.2 percent. Now, that was well below
expectations of 1 percent.
Almost every eurozone economy was up in the three months to March. The expectations were in Finland and Greece both, which fell into
recession. They were the exceptions. And of course, Lithuania.
[16:15:00] The big positive surprise was France. GDP was up 0.6 percent, even outpacing Germany, which has been sluggish. Now, I've been
speaking to the French finance minister, Michel Sapin, about those growth numbers. He told me the big thing now is for the recovery to go the
distance.
(BEGIN VIDEOTAPE)
MICHEL SAPIN, FRENCH FINANCE MINISTER (through translator): It's a strong first quarter for France. It's a quarter of growth, of economic
activity, which his higher than what we had predicted. But we did know that the recovery was present in France.
I want to underline that it's an expansion rate that's higher than the eurozone average and twice the rate in Germany and in Britain. So, a real
recovery. But now it needs to last.
NEWTON: Yes, and I wanted to ask you that question. Can you be sure that it will last? Can you be sure that it is a durable momentum that you
are now seeing in your economy?
SAPIN (through translator): Today, growth in France is carried by household consumption and exports. It's also down to the effects of the
euro, which has a value that is better adapted to the situation. And it's also thanks to a gentle pick-up in business investment.
So that this growth is durable, what we want, what we are looking for, what we wish for is strong business investment. We've taken new measures
to encourage this investment, and I have no doubt that in the weeks, the months to come, this investment were surge, and that French growth, like
European growth, will nourish itself, which is the best way to have long- lasting growth.
NEWTON: I have to ask you a tough question, though, about Greece. It continues to be a drag on the European economy. What are your worst fears
when it comes to Greece?
SAPIN (through translator): Of course the question of Greece, of its future, its future in the eurozone, its destiny, and the conditions so that
it can keep living in the eurozone, it's a very important question for all of us. But it is in no way as important as it was five years ago, or even
three years ago, because in Europe, we've taken measures.
For example, in terms of robustness, security, support for the European banking system, it's no longer exposed to the Greek risk. We've
also taken measures to avoid contagion from one state to another, so we have the means to avoid the genuine concern from four years ago, which is
the risk of contagion from Greece to other fragile countries.
We're a lot stronger in Europe in withstanding the difficulties in Greece. The real topic is a political one. The eurozone is not there to
shrink, but to grow, and we do not want what would be considered by all not an economic danger but a political failing.
NEWTON: OK. And I understand you, you're saying it's a political question, and you're saying that Europe is in a much better position than
it was. But do you think there is now zero chance that Greece will leave the eurozone? Zero chance?
SAPIN (through translator): When you ask the Greek people the question, they want to stay in the eurozone. The same with the Greek
government of today. If you ask them the question, they say they want to stay in the eurozone. And none of the countries in the eurozone want
Greece to exit.
So, the political determination is there and it is shared. Now we have to find the technical terms, because we must respect the wishes of the
Greek people, but the Greek people must also understand that we have our own people, and there are rules in Europe, and they must be respected.
Our talks are going forward. The situation is much improved from a few weeks ago. There is still some work to be done -- a lot of work -- but
there is no Plan B. The only plan is for Greece to stay in the eurozone.
NEWTON: Yes, and I think polls have shown that many people in Greece agree with you. But to another difficult European topic, that's Britain.
They just had an election. The Conservative government there says for sure there will be a referendum. At what point do you think that that hurts
Europe, for Britain to continually be, well, we're staying in, but under which rules?
SAPIN (through translator): Once again, you have to respect the people and the government. The new British government wishes to question
the British people on its place in Europe. I'll be clear: Great Britain's place, for us at least, is of course in the EU. It has its own economy,
but it has its place in the EU.
So, if the British, the British government, want to talk about improving the way Europe operates, then that is legitimate. They want to
discuss simplifying how Europe operates, we think it is sometimes too complicated ourselves, too much bureaucracy. We must simplify all of this.
But it must be done with the existing treaties.
(END VIDEOTAPE)
NEWTON: And we are live now to Paris where we're joined by Ludovic Subran. He's chief economist at Euler Hermes, a credit insurance company.
In terms of what we just heard from the French finance minister, he seems as confident as he can be that this will be sustained growth at whatever,
some would say, pathetic level, but it is growth --
(LAUGHTER)
NEWTON: -- nonetheless. He's saying. What do --
(LAUGHTER)
NEWTON: What do you see. Hey look, if you're in France and you don't have a job, that would seem pretty pathetic. But at this point in time,
what do you see in the stats that you're looking at. Can they sustain this?
[16:20:03] LUDOVIC SUBRAN, CHIEF ECONOMIST, EULER HERMES: Well, I think it was really high time for France to finally have its moment, right?
We've been waiting for it for the past seven years. And this quarter is finally making us the leader in the eurozone in terms of contribution to
growth.
The problem, indeed, is that it's all due to consumption. You will tell me that it was the same in the States, it was the same in the UK, it
was the same in Germany last quarter. So, it was our time for disposable income and for private consumption to basically pick up. The real question
is, indeed, the pass through when it comes to prices and to investments.
So, the problem, indeed, is there is no incentive now for the private sector to invest, and the investment gap in France is huge, it's 60 billion
euros, it's a lot of money.
So, the question is really how sustainable this is. I think the policies are going in the right direction. I think the euro and the
eurozone is going in the right direction. But today, the question of a forward visibility when it comes to taxes, when it comes to demand, is
really basically the main problem to sustain this level of growth for France.
NEWTON: And Ludovic, what you're bringing to a point here is real reform in Europe. There's been lots of blah blah blah about this for years
and years and years.
Do you think that the euro members are getting to a point and just saying look, we can't afford to just have talk shops about this? We need
to reform our economies that put us on sustainable engines of growth, not just on the backs of consumers, but get to that manufacturing, get to the
high-tech sectors.
SUBRAN: I think the problem is that the stars have aligned. Today, the cost of financing the imports, the energy bill for oil, and also the
euro are lower, so basically there is a good momentum that actually is not good an incentive for the structural reforms, and especially the reverse of
the manufacturing sector to be further boosted by structural reforms.
So, the question is really how committed the leaders of the eurozone are for further wave of reform. I think that all say that they are
committed. The question is how far are they ready to go, because there is still sustainable problems that need to be addressed.
And France, it's definitely the competitiveness and the labor costs that are basically causing a lot of offshoring of many of the industrial
and manufacturing sector.
NEWTON: It is what is it at this point. The growth was good, we'll take it, and I think the French finance minister said he'll take it as
well, moving on to the next quarter. Thanks so much, appreciate the update, there, from Paris.
SUBRAN: Thanks. Bye-bye.
NEWTON: Now, even with the strong growth report, European shares ended mostly lower. They were hit by weaker than expected US retail sales
numbers for April. Shares of Tui slid 4.5 percent. The tourism company says it's phasing out two of its British holiday brands. Now, last year,
it merged its UK and German businesses.
While people in Greece wait to learn their economic fate, there are many, especially the young, who decided to just move on rather than wait
for the upturn. Find out what that means for the generation taking its talents elsewhere.
(COMMERCIAL BREAK)
NEWTON: Greece is back in recession. Its GDP numbers are the black spot on an otherwise strong growth report for Europe in the first quarter.
Of course, the Greek crisis is much more than just numbers. It's an upheaval that's turned lives and communities upside down.
Young people have been leaving the country in great numbers looking for better opportunities elsewhere. Tadhg Enright is live at CNN London
for us with the latest on the brain drain.
[16:24:59] Greece is still absolutely enraptured in all of these crazy negotiations with Europe. The government having emergency cabinet
meetings, the bailout still being renegotiated. In the middle of all this, Greeks saying look, we want to stay in the eurozone. And this brain drain
issue, isn't this part of the reason why, they want to have other markets to go to?
TADHG ENRIGHT, CNN INTERNATIONAL CORRESPONDENT: Yes, absolutely. This whole Greek crisis, it's just like the bad dream that won't end. And
last year, of course, the Greek economy did bottom out, and it started growing again for the first time since 2009.
And since then, though, Greece has a new government, which is now playing hardball in those debt negotiations. That's raised the prospect
once again that Greece could leave or be expelled from the euro. All that uncertainty has put that recovery into reverse gear and delays the
homecoming dream for thousands of young Greeks who've had to quit their homeland.
(BEGIN VIDEOTAPE)
HARILAOS GEKAS, GREEK ENTREPRENEUR: I've made a couple of successful businesses my own, and I would prefer these businesses were built and set
up in Greece rather than the UK.
ENRIGHT (voice-over): Meet Harilaos Gekas, 27 years old, an ambitious Greek entrepreneur in economic exile in London. He's among 200,000 young
Greeks who've left the country since its financial crisis began.
GEKAS: Either in London, generally UK, Germany, and France, all around the world rather than in Greece.
ENRIGHT: With half of young Greeks unemployed at home, it's hardly surprising many are going abroad to find work. But highly educated
emigrants who took a survey by the European University Institute said their reasons for leaving were more complex.
Only 21 percent said it was because of unemployment, 19 percent blamed low wages, 28 percent said their quality of life was poor, and 50 percent
saw no future for themselves in Greece.
VICKY PRYCE, AUTHOR, "GREEKONOMICS": I think losing these people is a pretty worrying development that's taken place. Now of course, many may go
back when the situation improves. In fact, I'm sure they will, because the Greeks generally love their mother's cooking and they love the weather, so
they just don't want to stay abroad.
But what we have seen in the past is that there is a big diaspora of Greeks, and they tend to do very well when they're abroad. The important
thing is not to lose these people forever.
ENRIGHT: And that's what they're trying to do in this little room at the London Business School. These expats have created a Greek network in
the UK, rallying support, offering expertise, and raising money to help their economy back home.
EFFIE KYRTATA, CO-FOUNDER, RELOAD GREECE: We've been called the lost generation, the brain drain, the one that does not make an impact, and we
all feel this has to change. And if it does not come from us, our generation, and we leave Greece behind, then nothing will happen. So, we
have to do it now.
MARKOS KIOSSEOGLOU, CO-FOUNDER, RELOAD GREECE: Yes, we have clearly seen that people really want to do something. A lot of young people are
abroad. They have skills, they are studying in good universities, and they're afraid of going back. But at the same time, they want to find a
way to help.
ENRIGHT: And here's how Harilaos is helping. His business is a social network for travelers to help them find travel buddies and negotiate
group discounts.
GEKAS: We need to employ other people as well.
ENRIGHT (on camera): And your idea is to employ those people in Greece.
GEKAS: To employ these people in Greece. Greece has a villa mind. We want to give them the chance of work from Greece. Instead of coming
here to the UK, we can set up businesses in Greece. And we can succeed globally.
(END VIDEOTAPE)
ENRIGHT: The flip side of the Greek crash is that it's now very cheap and therefore can be a very attractive place to do business. But only, of
course, while there's stability and certainty about what's around the corner. These seemingly unending negotiations over its debt certainly
don't foster the confidence to invest. Paula?
NEWTON: But as you see, there are some very patriotic Greeks that are just itching to go back there and do some business. And so we'll see if
there is any kind of recovery to speak of in the months to come. Appreciate that report, thank you.
Now, Facebook unveils a new way to read the news. Some major media players are going along with it even though it could be bad for their own
websites.
(COMMERCIAL BREAK)
[16:30:25] NEWTON: Hello, I'm Paula Newton. There's more "Quest Means Business" in a moment when we look at Facebook's attempt to bring
traditional media inside the social network and the Canadian finance minister tells me Saudi Arabia is succeeding in its oil strategy.
Now before that, the news headlines this hour.
The U.S. National Transportation Safety Board says the train that crashed near Philadelphia was traveling faster than 160 kilometers per hour
when it came off the tracks. Now the crash happened in an 80-kilometer per hour zone. Seven people were killed and hundreds were injured.
Gunmen are laying siege to a guesthouse popular with foreigners in Kabul. One person who escaped tells CNN he believes dozens of people are
still trapped inside. Afghan police say Special Forces are surrounding the Park Palace Guesthouse and trying to get in but they're under fire from the
assailants.
These are the first pictures we're getting from the scene and we'll continue to follow this story and bring you the latest developments as we
get them.
The jury in the sentencing phase of Dzhokha Tsarnaev's trial is beginning its deliberations. Jurors will decide if the Boston Marathon
bomber should be sentenced to death. They are being asked to weigh up the aggravating and mitigating factors with the help of 24 pages of questions
on each count.
Pakistani authorities are investigating a horrific attack on Shia Muslims in Karachi. Gunmen ambushed a bus today killing at least 43
people. As Michelle Stockman reports, several groups are claiming responsibility including an offshoot of ISIS.
(BEGIN VIDEOCLIP)
MICHELLE STOCKMAN, JOURNALIST: A brutal mass shooting on a bus carrying members of the Ismaili Muslim community took place in Karachi
Wednesday morning. Police said that six gunmen boarded the bus and shot passengers execution style, most of them directly in the head.
The bus was driven directly into a hospital parking lot in the aftermath of the attack and hospital staff described a horrific scene - the
bus and bodies riddled with bullets, everywhere pools of blood.
Three militant groups have claimed responsibility for the attack. Two of them are splinter groups of the Pakistani Taliban and one claims to be a
branch of the Islamic State. CNN however cannot verify whether these groups coordinated between themselves nor can CNN authenticate a message
claiming responsibility by the Islamic State that was transmitted over social media.
What we do know though is that these groups have carried out several acts of violence against religious minorities such as Ahmadis, such as
Christians and against Shia Muslims. And in this case though the Ismaili community is a subset of Shia Islam, this is the first time that militants
have attacked this group in such a manner.
This is usually a very apolitical group though well known in Karachi's business community. They generally keep a low profile.
The chairman of the Human Rights Commission here in Pakistan said that this is a very disturbing attack because it shows that the definition of
what it means to be a Muslim is narrowing here in Islam - at least in the eyes of extremist Sunni militants.
Michelle Stockman, CNN Islamabad.
(END VIDEOCLIP)
[16:35:02] NEWTON: Facebook has started allowing news organizations to publish stories directly to its site. It may not
seem revolutionary but it could be. It is now hosting content from nine partners including BuzzFeed, "The New York Times" and NBC. Now, under the
old model when a Facebook user followed a link to a news story, it took them to a completely different website and that means it took a lot of
time.
What's happening now is you have to think about it as stepping outside Facebook's walled garden. Now the new system on
Facebook's iPhone app will change everything. If you click on what Facebook calls an instant article, you see the whole thing without ever
leaving Facebook. Sounds like a good deal for Facebook, doesn't it?
Publishers can incorporate ads in those articles, keeping the revenue or they can settle for ads served up by Facebook which
would take a share of the income. Shaul Olmert is the co-founder and CEO of PlayBuzz, a website that focuses on viral content and that way you're
kind of similar to BuzzFeed. Why is this revolutionary if you think it indeed is?
SHAUL OLMERT, CEO, PLAYBUZZ: So I think it's very early to tell. This experiment has launched today and because of
Facebook's great footprint in the market and their big influence.
When Facebook is starting something, it could have a lot of consequences for the entire ecosystem. But experience has shown
that in the past Facebook has launched a couple of experiments and not all of them were proven successful.
Those that benefit in the ecosystem that made sense for other publishers and for end users, survived and became part of the way
Facebook does business and those that didn't were diminished Facebook themselves. So it's an experiment and it's yet to be determined whether
it's - whether it really does resonate with end users and benefits the entire ecosystem.
NEWTON: When you say resonate with end users, how is this good for everybody involved? Because it just still seems like a
zero sum game - that at this point in time the publishers are capitulating and saying, `Look, without Facebook we're just not going to get the same
amount of eyeballs on our articles.'
OLMERT: Sure, so Facebook is in a great position of power because it is by far the number one most active source of web
traffic for digital publishers including cnn.com and many other traditional publishers. As a result, publishers are very much aligned and are trying
to cooperate with what Facebook does.
I think that Facebook is trying to solve an actual problem. Their justification that the solution will speed up the load time
for articles, it's something that I personally don't relate to - I don't think that's the key problem. But I think that publisher's websites are
still designed to serve the old-fashioned way of digital quantum consumption in which a user goes to a website and reads a few articles.
That is no longer the popular case. Today most users consume content by going to Facebook, going to Twitter, going to
other social media outlets, seeing their newsfeed and then clicking on links.
So, you know, I think that Facebook is trying to encourage publishers to redesign their publication - their digital
publications - in order to address this consumption better. And that is, I think, you know, something very smart that is definitely overdue.
Now it's down to the details. Will the solution of instant articles that they launched today truly answer this need or not? I
think it's very early to tell. I think that it only launched a few hours ago.
We've seen a couple of examples. I think that even Facebook themselves have not, you know, don't have a clear roadmap of
exactly how it's going to turn out. We'll have to wait and see how it gets adopted by users and if indeed it creates a favorable user experience.
If it does, then by all means it's good news for publishers and for the entire industry.
NEWTON: Yes we'll see. It's not exactly a social good at this point - as you said Facebook wants to try and solve a problem
but they also want that revenue.
We appreciate your time on this and your insights. Thank you so much.
OLMERT: Thank you.
NEWTON: Now, there's flying by private jet and then there's bizliner - an apartment in the air. It's the Boeing business
jet. I'll take you on a tour in just a minute.
(COMMERCIAL BREAK)
[16:41:34] NEWTON: Cannes rolled out the red carpet today for the start of the world's most glamorous film festival and if you're heading
to France, I wish I were and thinking of making a grand entrance. Uber says it's offering private helicopter rides on demand. But that might not
be enough for some, not grand enough for some.
When I visited Boeing's headquarters in Seattle, Washington, I found out that sometimes bigger is better.
(BEGIN VIDEOCLIP)
NEWTON: Do they name the planes?
DAVID LONGRIDGE, PRESIDENT, BOEING BUSINESS JETS: Oh yes, you bet. They'll paint a name right there - yes, absolutely. So would I too.
After you.
NEWTON: Yes, I hear you. It's tough to imagine. But Boeing executive David Longridge is the down-to-earth sales guy pitching planes
that in the skies are like - well - an airborne apartment, a flying flat, a Boeing 737 without all those annoying passengers.
Most people are used to thinking of small private jets as being - I just said - small. You had said this is a bit like going from what? A
small bungalow to -
LONGRIDGE: A castle.
NEWTON: The competitive edge here? Space - headroom, leg room, meeting room and then this room.
LONGRIDGE: And this part is the part that really usually gets people's attention because this is - well, I don't really know how to
describe it except -
NEWTON: (LAUGHTER).
LONGRIDGE: -- I wish I could fly like this all the time.
NEWTON: They call it the Mile High Club - just you know.
(LAUGHTER)
LONGRIDGE: Well, I think one of the main things is the ability to be a lot more functional in the airplane while you're flying. You've
got all this space here. We're sitting in the lounge behind this dining room/conference room, behind that is an office.
You have the ability to have showers onboard the airplane far more easily than you do on a conventional business jet. Once you've flown
in a plane this size, it's very difficult to go back to the smaller type.
NEWTON: So you're talking bedroom, bars, showers, kitchens, entertainment rooms -
LONGRIDGE: Yes.
NEWTON: -- everything.
LONGRIDGE: Everything.
NEWTON: And the Boeing has enough space for it.
LONGRIDGE: Absolutely. And we sell this aircraft in three different sizes. The one you're in if you can believe it is the smallest
one.
We make another one that's about 20 feet longer than this and then another one that's about 20 feet longer than that. So we sell it in
three flavors - this particular model. We'll also sell you a 787 or a 747 or a 777 if you like. Whatever plane Boeing makes, we'll put the pieces
together to allow you to customize it in a business jet format.
NEWTON: Who's buying? Billionaire tycoons, heads of state, royal families. Their identities strictly confidential. The price tag is
not -- $80 to $90 million. And can you believe that's the selling point here? When you could pay up to $60 million for a much smaller private jet
- no headroom, now shower, no bedroom - you understand the level of sacrifice we're talking here. The super rich, the super busy, the super
indulgent are thinking, "Why not trade up?' And there it is - people are buying the wide bodies.
LONGRIDGE: Lots of them. Nine 747-8s, 13 787s, nine 777s, I mean, it's breathtaking.
NEWTON: To fly less than a couple dozen people, sometimes only a handful of people?
LONGRIDGE: That's right.
NEWTON: Business jets are a small revenue generator for Boeing. About a dozen planes a year are sold, a total of 228 VIP jets are
in the skies right now and counting.
[16:45:09] And with the private jet business staggering all with its growth potential, Boeing wants the bragging rights that come with
controlling a piece of this very niche market.
(END VIDEOCLIP)
NEWTON: Some incredible insight there into how the other people fly. That wouldn't be me. (LAUGHTER).
A new report looks at an escalating battle between the U.S. and OPEC. The two sides are fighting to dominate global oil production. That's
next.
(COMMERCIAL BREAK)
NEWTON: U.S. stocks closed nearly unchanged after some disappointing data on U.S. retail sales. You know everyone here was
expecting more given the harsh winter. They thought there would be some pent up demand, there was not.
Shares at the department store chain Macy's ended lower, falling some 2.4 percent. Now the company's latest profits were below Wall
Street estimates. It said the strong dollar was bad for spending by foreign tourists.
Now the International Energy Agency meantime says the global oil market has become quite a battleground with the U.S. and OPEC and the
tussle over market share. OPEC and U.S. are both trying to maintain oil supply and that's putting pressure on oil prices.
Global crude production is now about 2 percent more than demand. Now the first round in this fight may have gone to OPEC. The IEA
says the U.S. appears to have blinked last month with producers reducing the number of rigs in use, leading to a slight dip in output.
The agency says this battle is just getting started. The U.S. still has a chance to strike back. Joining me now from the IEA
headquarters in Paris is Antoine Halff. He is the head of oil and markets for the International Energy Agency.
I want to take out a quote from your report which was kind of stunning. "The first step in a plan that includes ramping up output and
aggressively investing in future production capacity," you are saying from OPEC you haven't seen anything yet. What tells that, that this isn't over
yet?
ANTOINE HALFF, HEAD OF OIL & MARKETS, IEA: Sure. Well you know, this all started when OPEC decided in November not to cut production
at their last meeting - last ministerial meeting.
Everybody expected them to capitalize and support prices but they decided to keep capacity, to keep production and to put pressure on
higher-cost production from the U.S.
But this was not the end of the game, and since then they've increasing production dramatically. The Saudis particularly producing
about 10 million barrels now for two months at record highs.
Iraq has managed despite all odds to revisit the highs of pre- 1979. Libya in the middle of a civil war manages to keep up supply. And the Gulf States, particularly Saudis but also the Kuwaitis of the UAE are
adding rigs, you know, just as the U.S. is dropping the rig count and cutting spending.
They are increasing the recount, increasing production and increasing their investment in future production capacity.
NEWTON: So why do you think though that the OPEC plan hasn't worked for the long term? I mean, do you still expect non-OPEC members to
strike back and say, `Look, we are not shelving our long-term plans here on oil and gas production.'
[16:50:06] HALFF: Well we've seen, you know, messy spending cuts, but they had been accompanied by savings in terms of costs. Costs
have come down as well, efficiencies have improved. We are starting to see in the U.S. now the effect of the spending cuts and the drop in the
recount.
For the last month or so, we've seen the decline in production for the first time in years and we started to see stocks in Cushing and
elsewhere diminish.
So that's a signal that investors have been seizing on to push the price up and we've seen a price recovery - the price had gone up more
than 15 percent over the last few weeks - last month or so.
But at the same time, this increase in price has given producers a new lease on life because of being able to lock in futures
prices and not in pockets (ph).
And also if you look at countries that look like they're facing tremendous difficulties like Russia with the ruble collapse, the
international sanctions, the price drop of petrol price (ph) with a corruption scandal on top of the price drop, they are actually doing great.
Petrogas Brazil has managed to increase production by 17 percent in the first quarter of this year. This is all the result of
investments that'd been made years ago and that they're finally paying off.
At the same time, Russia is doing quite well. It's increasing production by almost 200,000 barrels per day year on year in the last
month. And this is due to the tax system that's very flexible -
NEWTON: Right.
HALFF: -- and the ruble is playing in favor of producers -
NEWTON: But -
HALFF: -- there because it's reducing costs.
NEWTON: But let me interrupt you there for a moment. When you are a consumer anywhere globally, why shouldn't you be cheering the fact
that the world is awash in oil and that that will continue given the play that Saudi Arabia made in November?
HALFF: It's fantastic on paper but in fact it's not really giving the economy a huge boost. And in fact you've seen the IMF since the
beginning of the price collapse in June reduce the - its forecast of GD growth, not increase it.
There's various reasons why the price drop is not really such a boon to the economy, partly because the economy's not doing that great -
the recovery is very slow. Also because the dollar strength is playing against savings for consumers.
NEWTON: Right.
HALFF: It's kind of an offset. If you were in a country like, you know, European countries or Russia -
NEWTON: Right.
HALFF: -- the strength of the dollar is -
NEWTON: Right.
HALFF: -- splitting away at the savings you get on the drop in oil price.
NEWTON: And - yes. And the statistics coming out of the United States today with U.S. retail sales down, the consumer is not taking
that money from oil savings and spending it. Those stats bear you out.
Thank you very much for your insights on this. Appreciate it.
Now, those low oil prices are having an impact on Canada's economy. Earlier I spoke with the finance minister Joe Oliver and asked
him how Canada's oil sector can possibly cope.
(BEGIN VIDEOCLIP)
JOE OLIVER, CANADIAN FINANCE MINISTER: Clearly it has an impact on marginal producers which I think was the Saudi objective in the
first place. You know, the solution to low oil prices are low oil prices because they drive out marginal high cost of producers and it increases
economic growth, so both the supply and demand side adjust at a different level.
It does have an impact on Canada as I said and it impacts on royalties, on taxes received by governments because the oil sector is not
doing as well. But other sectors benefit. We have a highly-diversified economy and, you know, they will benefit - some of them will benefit - from
lower energy prices and a lower dollar.
NEWTON: I wanted to move on now to trade - the trans-Pacific partnership in particular. Here with the Democratic Party in the United
States and with President Obama, trade's become a blood sport. I mean, he's had to go up against his own party.
Canada is also participating in these negotiations. You and your government big advocates for this trade partnership. Why? What will
it do or the Canadian economy and more specifically for Canadian workers?
OLIVER: We see the advantage of moving to greater trade with an area of the world which is going to experience the most growth over the
next 25 years.
In fact, the estimates are that over 90 percent of global economic growth will come from non-OECD countries. So it's very important
we're part of that. When we got into office in 2006, there were five free trade agreements that our country was involved in, now it's up to 43
including Europe.
And so we see this as a natural extension. We've entered into free trade agreement with South Korea and we want to access a trade
agreement which is going to encompass 800 million people and $27 trillion in economic activity -
[16:55:04] NEWTON: But the controversy seems to come in here in the United States, and you know people like Senator Elizabeth Warren
here, a Democrat, saying, `Look, it is not good for workers in North America.' Why do you think it will benefit the workers here?
OLIVER: Well we believe free trade is beneficial and the proof is NAFTA and all the free trade agreements that we have signed. Every time
there's a major free trade agreement, there are people on the other side and every time it seems that their proven wrong.
We see tremendous benefits in getting tariffs down, it reduces costs for consumers, it increases economic activity, it enhances
productivity. So we are great believers in this and while there are those always who want to be protectionists, they aren't on the right side of
history in my opinion.
(END VIDEOCLIP)
NEWTON: And we will be back with more "Quest Means Business" in just a moment.
(COMMERCIAL BREAK)
NEWTON: The chairman of the Dutch bank ABN AMRO has made a public apology after being forced to cancel a pay rise for executives. Now
the bank was preparing to go public again six years after a bailout that left it under government ownership.
But its IPO has now been postponed amid an uproar about the plans for generous pay hikes. Now bank chairman Gerrit Zalm issued a
statement saying, "We sincerely regret the increase in fixed salary and the impact it has had. We understand that it will take more time for the
public to regain confidence in ABN AMRO."
Meanwhile, Facebook is being congratulated for deciding to give its workers a pay rise. The company announced its contractors and other
vendors doing low-paid jobs will now be paid a minimum of $15 an hour which is well above the legal minimum wage and will get paid time off for
sickness and vacations.
Now the White House said it has applauded that decision.
And that's it for "Quest Means Business." Richard Quest will be back here tomorrow. I'm Paula Newton, thanks for watching.
END
