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Quest Means Business
Greece Bundles Four IMF Payments into One; Investors Eye Greece's Long-Term Potential; Pickens Says Saudis Made the U.S. the Swing Producer of Oil; Chinese Supertankers Hold Millions of Barrels of Oil at Sea; "Make, Create, Innovate". Aired 4-5p ET
Aired June 04, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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[16:00:04] RICHARD QUEST, CNN HOST (voice-over): NASA is ringing the closing bell. That's one of the astronauts who's been on the space shuttle
and up to the space station. Something tells me we're not going to get a wimpy gavel here.
We didn't.
The market is closed. It is Thursday. It's the 4th of June.
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QUEST (voice-over): Tonight: (INAUDIBLE) Greece delays its debt payments to the IMF -- not so fast. Christine Lagarde sends a warning to the Fed
(ph) on when to raise rates.
And also tonight:
(BEGIN VIDEO CLIP)
T. BOONE PICKENS, FOUNDER AND CHAIRMAN, BP CAPITAL: Is it wrong? Is it right? It's what it is.
(END VIDEO CLIP)
QUEST (voice-over): It is what it is, says T. Boone Pickens, who tells me oil is still the game for him on the eve of the OPEC meeting.
I'm Richard Quest in New York where, of course, I mean business.
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QUEST: Good evening. Greece has a new deadline to pay back the IMF. Only a few hours ago, Athens asked the International Monetary Fund to be allowed
to bundle its June repayments, thus pushing the due date back to the end of the month. Greece was scheduled to pay more than $300 million.
Join me at the superscreen and you'll see when the money was all meant to be paid.
Now it was meant to pay $336 million on Friday along with three other major payments, which was meant to be here, $379 million, $379 million -- a
variety of payments, all were meant to be paid during the month of June.
And now all these payments have been rolled into one massive payment of $1.8 billion that will be paid or should be paid, intended to be paid on
June the 30th.
The move to bundle the debt is allowed under IMF rules. It's a rule that is very rarely used. In fact, it was 1970s that it was first put into
place. Before the bundling announcement was made, Germany's chancellor told CNN regardless to what happened on payments, that Greece needs to make
the harsh economic reforms to stay in the Eurozone.
Angela Merkel sat down with our own Fred Pleitgen. And Chancellor Merkel told him a solution to the crisis -- remember, it's this very crisis,
unlocking that, that will provide more money to Greece, that will allow them to make these debt repayments, that both sides needed to have big
efforts.
Fred sent us this report from Berlin.
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FREDERIK PLEITGEN, CNN CORRESPONDENT: Richard, Chancellor Angela Merkel showed herself to be very concerned about the situation in Greece and the
prospect of Greece possibly defaulting on its debt. Now she says that's going to be a major topic at the G7 summit, which, of course, she will host
here in Germany.
Now she says that the main Eurozone countries are going to have to be flexible when dealing with Greece. But she also said that it is the Greeks
that are going to have to put in place those very harsh reforms.
ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): Of course to find a solution -- and I want a solution just like all my European
colleagues -- we need big efforts by both sides. We, the partners from the Eurozone, have to show solidarity and I am glad the IMF is also engaged.
At the same time, Greece has to be willing to undertake the necessary reforms because, in the end, a country brings itself on a growth course by
its own efforts.
And we have other European countries that have undertaken harsh reforms, like Ireland. They went through such a program and now have the best
growth in the Eurozone. That is the kind of course Greece needs to get on. And that is why it is tough negotiations, but they are clearly aimed at
keeping Greece in the Eurozone.
PLEITGEN: And of course, Richard, finding a long-term solution to this whole problem of Greek debt to the Greek economy, that's something that, of
course, Angela Merkel and many other Eurozone leaders are aiming to do.
But the big question, as we've talked about so many times, is what is the best way to do that. The Germans, of course, want the Greeks to increase
VAT. They want structural reforms. They also want the Greeks to get real about pension reform as well.
But of course there is a backlash from the Tsipras government; they're not sure how much they can actually sell to their people. So certainly it
still is a very difficult situation. And that's something that Angela Merkel reflected today as well -- Richard.
QUEST: And, Fred, one quick question: I beg your pardon. My -- forgive me. I thought there was room with me, but he's not at the moment.
Thanos Vamvakidis is the head of the European G10 Foreign Exchange Strategy for Bank of America Merrill Lynch Global Research. He is live for us in
London now.
We look at what was announced. We look at what was announced today but with the idea of the bundling up.
How significant is that? And how much of this bundling up is purely designed to prevent having to pay until the end of the month?
THANOS VAMVAKIDIS, EUROPEAN G10 FOREIGN EXCHANGE STRATEGY, BANK OF AMERICA MERRILL LYNCH GLOBAL RESEARCH: Clearly this was a matter of inevitably,
given the delays that we had so far in the negotiations. Greece had the money to repay the IMF tomorrow.
[16:05:00] But they didn't have the money to repay the IMF in mid-June and there was no way they can have a deal by mid-June in order to receive more
official funding.
So at this stage, it's actually good news that they requested to move all the payments to the end of June and the IMF has accepted it. The important
thing is to take advantage of this delay and in the next three weeks, seven agreement (ph).
QUEST: Now the -- OK. But the bundling as such, not being used since 1970s with Zaire (sic), it's an extremely -- it's a rare operation. It
sends the message -- what I can't understand, is it saying the message, we haven't got the money or we have got the money but we're going to put
pressure on you that we think we can get a better deal by ratcheting up the pressure?
Which do you think it is?
VAMVAKIDIS: It is just the result of the fact that we will support we have a deal back in April, then in May and we still don't have a deal. It is
better from this point of view to move the payments to the end of June rather than have any suggestion in which there is -- which have missed an
IMF payment. If there is a deal in the meantime, honestly nobody would care but the payments have been moved.
QUEST: Right. But if there is --
(CROSSTALK)
VAMVAKIDIS: But it is important to have a deal.
QUEST: Right. But you see, this is the problem, because if they haven't managed to get a deal with a $300 million payment on Friday, and knowing
that the other deals or all the other payments are expected during the month, why do you think that there is more chance of getting a deal by the
end of the month? They haven't managed it so far.
VAMVAKIDIS: That's indeed a very good question. We do have two proposals on the table, one from the European side and one from the Greek side. The
two proposals are far apart and in order to be able to agree by the end of June and avoid a Greek default, everything has to go right from now on.
They need to agree most likely by the end of next week.
Then the Greek parliament has to approve it. The European parliament still have to approve it. And most likely the Greek side will have to implement
some of the parallel (ph) actions in order to get funding at the end of June.
And let's not forget, at the end of June is not only the deadline of the IMF but the current program ends, which makes it very difficult for the ECB
to continue following the Greek bonds without an agreement in the meantime.
QUEST: In a word, is it your understanding that a deal is imminent?
VAMVAKIDIS: Not so far. The two sides are far apart and we need substantial compromises from both sides in order to have an agreement.
QUEST: Thank you, sir. Thank you for helping us understand our way through this.
European shares closed the day lower. The DAX in Frankfurt was up more than half a percent. London's FTSE also ended the session down more than 1
percent. And a similar picture in Athens; but of course the roller coaster, Athens, over the past few days has been quite extraordinary.
And many investors are now running away from Greece, fearing the economy is going to take years to recover if indeed it ever does.
There are those who are embracing the unknown, seeing it as a value play. Clare Sebastian met two such investors, who are waiting in the wings to
profit from a turnaround.
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CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): Entering stage right: Hans Humes, CEO of Greylock Capital, an investor in Greece since 2011, he
now has around $1 billion, mostly in bonds and some stocks.
HANS HUMES, CEO, GREYLOCK CAPITAL (voice-over): Our business is about buying cheap and selling more expensive and things Greek have certainly
gone pretty cheap.
[16:10:09] SEBASTIAN (voice-over): And entering stage left, Meb Faber of Cambria Investment Management. He bought into Greece last year at much
smaller levels. He now has around $9 million invested in stock.
MEB FABER, CAMBRIA INVESTMENT MANAGEMENT (voice-over): There's a Greek quote from the famous investor, John Templeton. He says, don't tell me
where things look best. That's the wrong question. Tell me where things are most miserable.
SEBASTIAN (voice-over): Two men who searched for high returns has made them minor players in a debt crisis unfolding many miles away in Athens,
Brussels and Berlin. They're not content to be spectators despite the very real risks.
FABER (voice-over): We've been largely wrong. The Greek stock market has continued to go down over this period.
SEBASTIAN (voice-over): As Greek stocks fell by a third in the past year, Faber held his ground.
FABER (voice-over): Greek stock market could go up a lot. We're talking about 50 percent, 100 percent, even 200 percent over the next 10 years, 5-
10 years, and do really well. But you have to have a really long-term point of view.
SEBASTIAN (voice-over): Hans Humes knows better than most the value of a long-term view. He was part of the team that choreographed the Greek
private debt restructuring in 2012.
HUMES (voice-over): I think the chance of there being any further haircut imposed is infinitesimal.
SEBASTIAN (voice-over): When Greek bonds recovered after 2012, he made money. Now he's sticking to the same script.
HUMES (voice-over): Sovereign debt doesn't go to zero, most by definition. So it could get ugly. But I don't think we'll lose effort.
FABER (voice-over): Our favorite is to go from truly miserable just to slightly less bad. That's where some of the strongest returns can come.
SEBASTIAN (voice-over): As this crisis has unfolded, most of the financial community has taken its seat right here in the audience, watching and
reacting to every little event on the stage. For those who decided to get up and participate, they say the trick is to stay calm and wait because not
even the most shrewd of investors know how this particular drama will end - - Clare Sebastian, CNN, New York.
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QUEST: Now one note of clarification I think I misspoke when I said it was of course, Zambia in the 1970s that used the procedure in the IMF to bundle
payments up.
And indeed, it's believed to be the only time that that procedure, which was approved by the executive board, it's the only time apparently it has
been used.
T. Boone Pickens in the 1950s drilled his first oil well. So he certainly knows a thing or two about what the price of oil might do in the weeks and
months ahead. He joined me earlier today to give us his views on the OPEC meeting.
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16:18:11]
QUEST: In an aircraft hangar just outside Dallas, the former governor of Texas, Rick Perry, announced that he's running for the presidency of the
United States.
Governor Perry boasted that, in his words, on day one of his presidency he'd allow U.S. oil drillers to export their crude into the global market.
The industry titan, T. Boone Pickens, says he's not supporting Governor Perry for president. He's going for Jeb Bush. But he agrees with Perry on
this point.
Life's been very difficult for the U.S. energy industry ever since the price of oil started falling in the middle of last year. I sat down with
Mr. Pickens earlier and started our conversation. I asked him if he thinks Middle East producers are attempting to push the American frackers out of
business.
(BEGIN VIDEOTAPE)
PICKENS: I don't think they were trying to push us out of business. I think they were trying to get us to slow down. No question they didn't
like the things that were happening in the oil industry because they've been stable. They had been able to control by adjusting up or down. And
they just said not this time. You do it.
They switched the swing producer from the Saudis to us, the United States. And the reason they did that is because our production went up a million
barrels a day per year for five years. We went from 4 million barrels to 9.4 million. We're the ones, the United States are the ones that
oversupplied the market. We can't do it like the Saudis can. I mean, the king says shut it -- slow it down or increase or whatever.
The United States is a free market and we -- nobody says shut down in the United States. So what shuts it down? Very simply are the economics.
QUEST: And that's the biggest difference between the U.S. being the swing producer and the Saudis being the swing producer. One does it by political
fiat; the other does it by economics.
PICKENS: That's exactly right. That's exactly what you have.
Now, is it wrong? Is it right? It's what it is. I mean, that's the only real asset the Saudis have.
QUEST: I've been in North Dakota for the last couple of weeks.
PICKENS: What did you see there?
QUEST: I saw an industry that has reformed, restructured and become more efficient at lower prices. And I'm assuming it's the same in Texas.
Is it better for an industry to be stable and steady than --
(CROSSTALK)
PICKENS: You would like to be stable. I mean, any industry would. Like we say, everybody making money, you know, good jobs, everything, that's a
perfect industry. And but we oversupplied it and then we saw the price fall and that hurts.
QUEST: OPEC is meeting tomorrow. OPEC meets tomorrow and will decide -- there will be no change in production.
PICKENS: I don't think so. If I -- if you said you have to -- that you have to take either -- produce more or less, you can't say it'll be flat.
I say it'll be flat. But now you've forced me to say if they do anything up or down, they'll go down, not up.
QUEST: You still enjoy oil?
PICKENS: Sure, I do. That's all I know is oil and gas. I mean, I'm kind of a lightweight on everything else. I worked for a major oil company 3.5
years. Then I left and I drilled my first well six months later. That was in 1955.
QUEST: And you've never looked back.
PICKENS: No. You know what Satchel Paige said, "Don't look back, they may be gaining on you."
(LAUGHTER)
(END VIDEOTAPE)
QUEST: A motto and model by which we can all live our lives.
All this week, we've been taking you to the battlegrounds of this oil showdown. On the eve of the OPEC meeting in Vienna, the signs are that the
policy won't change. And as we've shown you that has major implications across the globe.
We've been to North Dakota, to Williston, North Dakota, where the boom may be over, the frackers are adapting but the industry is still growing.
We've also taken you to Fujairah (ph) in the UAE, where producers keep pumping oil to drive down the prices -- or at least not at least to raise
them by cutting production.
And now as we move the map on, we take you to Malaysia, off the Malaysian coast, where China is paying to store crude in giant oil tankers, waiting
for the price to rise and protecting themselves against any dislocation.
CNN's Andrew Stevens reports.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN CORRESPONDENT (voice-over): The price of oil may have recovered a little bit in the last few weeks but nowhere near enough to
stop the pain for the big producers like Saudi Arabia or for the fracking industry in the U.S.
But there is one clear country whether here: China. And China is buying big . It doesn't get any bigger than this.
This is the world biggest supertanker, the TI Europe, now at anchor in the Strait of Malacca, brimming with millions of barrels of oil destined for
China. Beneath these gleaming white decks about 1.5 meters or so under my feet is 3 million barrels of oil spread across 21 tanks.
The latest shipment arrived just three weeks ago, 950,000 barrels of Algerian oil. But the oil is coming from just about everywhere, especially
from China's biggest supplier, Saudi Arabia, which see Beijing as a key client after using some of the U.S. market to frackers.
China has now overtaken the U.S. to become the world's biggest oil importer, a first for the world's second biggest economy. Demand is so
high there's not enough space to store it in the country. So the TI Europe and other vessels nearby are being turned into floating storage tanks
placed between the Gulf of Africa and China. This insatiable demand, say analysts, is being led by a strategic imperative, to build up the country's
oil reserves.
RICHARD MATTHEWS, RESEARCH ANALYST: Most developed country have around 90 days' stock. So if they couldn't import any more crude oil, they have 90
days' worth of supply to keep themselves going.
China doesn't have anywhere near that level at the moment. So it's developing its own reserves.
STEVENS (voice-over): Coming up strategic reserves are critical for this energy hungry nation but it's not the only driver of China's oil demand.
Even as GDP slows to 7.5 percent or even less, the new normal, as it's now called, it's still consuming a steady 10 million barrels a day helped in
part by a new love affair with gas-guzzling SUVs, lower gas prices has seen sales across the country soar by a whopping 48 percent in the first three
months of this year. And the good news for these drivers and for the Chinese government, some analysts say there's little sign of oil prices
going anywhere but back down.
JEFF BROWN, PRESIDENT, FACTS GLOBAL ENERGY: We actually think the market's way oversupplied right now. We think it could drop below 50. It's
obviously been going in the other direction. But when we look at the length of the market and how much oil is just out there and is going -- and
the inventories are going to continue to build, it just doesn't look sustainable to us.
STEVENS (voice-over): And that makes ships like these at a cost of $40,000 a day an attractive option. For a cashed out China a rare chance to stock
up cheaply on the very lifeblood of its economic might -- Andrew Stevens, CNN, Malacca, Malaysia.
(END VIDEOTAPE)
QUEST: Now that's what you call a big ship.
In a moment, technology that watches you and watches what you watch. The life-changing potential of the eye tracker as we have "Make, Create,
Innovate" next.
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[16:27:32]
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QUEST (voice-over): Seems these days we're looking at technology wherever we go. Nowadays technology that's not only looking at us but looking back
at us, specifically looking at our eyes. From commercialization to helping people with disabilities, this new technology, it has a huge potential.
Nick Glass reports in this edition of "Make, Create, Innovate."
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NICK GLASS, CNN CORRESPONDENT (voice-over): Our eyes are constantly moving, taking in this or that, checking our mobile phones, scanning shop
windows. There's always something catching our attention.
I'm in Sweden to meet an inventor who's helped track our natural eye movements in all wondrous detail. He's used that technology to help us
interact without our machines, our gadgetry by just looking and seeing.
JOHN ELVESJO, SWEDISH PHYSICIST: So we have invented an eye tracking system that tracks exactly what you're looking at while you're free to move
around.
GLASS (voice-over): John Elvesjo is a Swedish physicist. Now 37, he was just 21 when he made his eye-catching breakthrough while looking for
something else. He was using a camera to determine the precise flow of objects passing in front of it.
ELVESJO (voice-over): As I was doing that, I accidentally turned the camera around and it locked onto my eyes. That's when the idea really
came.
GLASS (voice-over): And this is what Elvesjo developed from that revelation, a thin strip of cameras and sensors, the eye tracker. This is
embedded into technology like this laptop, projects emit twin beams of infrared light into the eyes, creating patterns on the cornea.
A camera and a sensor records these patterns and uses this information to work out where are eyes are focused, our so-called gaze point, tracking
them as they move.
ELVESJO (voice-over) From founding the company, we definitely had a very detailed plan and priority on who we should develop products for.
GLASS (voice-over): One of the first users was British BMX gold medalist Stephen Murray. He was paralyzed from the shoulders down after an
accident in 2007. He now uses the technology to run his online business.
ELVESJO (voice-over): There are a lot of fascinating applications of eye tracking. But providing help to communicate to people that desperately
need it is extremely satisfying.
GLASS (voice-over): A large shopping center in Stockholm like so many others around the world, but one window shopper is a little different.
Elvesjo is wearing glasses fitted with his eye tracking technology and they are recording what grabs him, be it shoes or a baseball cap. The marketing
men instantly realize the potential.
So they want to know what catches people's eyes.
ELVESJO (voice-over): Yes. So companies that work within (INAUDIBLE) marketing, big brand owners, they are of course interested in what gets
seen and what does not get seen.
GLASS (voice-over): There are other companies like Samsung, developing their own eye tracking technology for their smartphones. But Elvesjo hopes
his approach, using infrared light, could be used in our laptops, TVs and even our cars.
ELVESJO (voice-over): In a car, for example, (INAUDIBLE) you're changing lanes and you have not looked over your shoulder. You haven't checked the
rearview mirror. We detect that your eyelids are dropping down, you know, that slow, after lunch meeting thing. We can act on that.
GLASS (voice-over): And he thinks this is just the beginning. Soon all our gadgets, all our machines will know what we want in the blink of an
eye.
ELVESJO (voice-over): With eye tracking you can tell your (INAUDIBLE) what you need to tell it much faster. It's a faster way to communicate and it
can't tell you will supply all this wonderful technology. But I'm 100 percent sure that a machine that knows what you're looking at all the time
can behave better, can understand you.
(END VIDEOTAPE)
QUEST: "Make, Create, Innovate."
Hewlett-Packard's chief executive's warning the U.S. could lose its competitiveness. Meg Whitman's been speaking to Poppy Harlow and that will
be after the news headlines.
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[16:30:23] RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Hello, I'm Richard Quest. There is more
"Quest Means Business" in just a moment when the drones are ready for takeoff at easyJet.
The chief executive Carolyn McCall on this program tells me why flying robots are the future. And some people growing up want to be astronauts,
others grow up wanting to ring the closing bell. Joseph Acaba has done both and he'll be live from the floor of the New York Stock Exchange.
And before all of that, this CNN and this network the news always comes first.
Jack Warner, one of the former FIFA executives indicted by the United States says he will reveal an avalanche of damning evidence against FIFA
and its president Sepp Blatter. Warner released this political broadcast that aired in his native Trinidad in Tobago.
It's titled, "The Gloves are Off." He describes himself as being a heartbeat away from Sepp Blatter for 30 years. He says he no longer has
any reason to not to hide what he knows.
(BEGIN VIDEOCLIP)
JACK WARNER, FORMER FIFA VICE PRESIDENT: I have, in these circumstances, decided I will no longer keep secrets for those persons who now seek
actively to destroy this country's hard-won international image.
(END VIDEOCLIP)
QUEST: In China, 77 people are confirmed to have died in the cruise ship disaster on the Yangtze River. Crews are now preparing to right the
capsized vessel. Officials say their decision to begin righting the ship is an acknowledgement that it's unlikely anyone is alive inside.
Only 14 people are known to have survived the disaster.
At least 76 people were killed in an explosion at a gas station in the capital of Ghana. Some reports put the number as high 90 dead. The gas
station was packed with people seeking shelter from torrential rain. The investigators believe the explosion was caused by fire that spread from a
nearby building.
Families near the Ramadi Dam in Iraq are fleeing their homes in fear of an ISIS attack. ISIS has closed off much of the dam and that's limited the
water supply to pro-government tows downstream.
This new amateur video appears to support witness accounts that show the Euphrates River is now low enough to walk across in parts. The fear is
that ISIS may do just that and attack nearby towns.
Greece has a new deadline to pay back the IMF. The International Monetary Fund is allowing Athens to bundle its June payments all into one. At least
more than $300 million due on Friday, that and three more payments are totaling $1.8 billion will be round (ph) due on June the 30th.
Meanwhile, Angela Merkel says harsh reforms may eventually be needed for Greece's economy. She was speaking ahead of this weekend's G7 Summit. The
German chancellor told CNN negotiations with Greece are designed to keep it in the Eurozone. Mrs. Merkel said both sides would have to compromise.
(BEGIN VIDEOCLIP)
ANGELA MERKEL, GERMAN CHANCELLOR, VIA INTERPRETER: Of course to find a solution, and I want a solution just like all my European colleagues, we
need big efforts by both sides. We the partners from the Eurozone have to show solidarity, and I am glad the IMF is also engaged.
(END VIDEOCLIP)
QUEST: The stock markets in New York couldn't muster much of a rally on Thursday - quite the opposite. They ended up falling a good chunk. If you
look at the numbers, the Dow Jones Industrial opened lower and it really went all the way down. And then if I'm not mistaken, that's the lowest
point of the session give or take a few points.
It was down 170 - nearly 1 percent - with similar losses on the S&P and the NASDAQ. Greece was the reason that delay in the payment to the IMF.
And staying with the IMF on a separate matter, most unusually, the IMF is now wading in to the question on when U.S. federal - when U.S. interest
rates - should rise. The IMF's urging the Fed to wait until next year to raise rates even though most in the market believe a raise in rates will
happen in the third or fourth quarter of 2015.
The IMF's managing director Christine Lagarde has warned the Fed chairman and the Fed they must consider the implications on global markets.
(BEGIN VIDEOCLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: Regardless of the timing, higher U.S. policy rates could still result in
significant market volatility with financial stability consequences that go well beyond the U.S. borders.
[16:35:05] In weighing these risks, we think that there is a case for waiting to raise rates until there are more tangible signs of wage or price
inflation than are currently evident. So in other words, we believe that a rate hike would be better off in early 2016.
(END VIDEOCLIP)
QUEST: Blunt remarks from the managing director. And you'll recall Janet Yellen in a speech just a week or so ago made it clear that it was more
than likely than not that a rate rise date independent would happen before the end of the year.
The chief executive of Hewlett-Packard says she's worried about the future of American competitiveness in a global economy. Poppy Harlow sat down
with Meg Whitman and asked Meg Whitman about that and if HP expects further layoffs ahead of its becoming split into two companies.
(BEGIN VIDEOCLIP)
MEG WHITMAN, CEO, HEWLETT-PACKARD: We are through the vast majority but I suspect there will be more fine-tuning you know over the next couple of
years --
POPPY HARLOW, JOURNALIST FOR CNN: Any idea - 10,000 more, 20,000 more?
WHITMAN: We haven't actually decided on a particular number yet. It will depend on what we see between now and the end of the separation. But there
is more work to be done to get these companies exactly where they need to be.
You will recall we were on a five-year journey and we're separating effectively at year four. So there's another year of this turnaround
journey that each of these two companies will have to pursue on their own.
HARLOW: Economy, economy, economy. That is going to be number one in this election.
WHITMAN: Yes.
HARLOW: How concerned are you about the U.S. economy?
WHITMAN: So, listen, I'm pretty concerned about the U.S. economy because we now live in a global world. We compete - as for the United States --
we compete against Britain, we compete against China, we compete against Japan, we compete against Mexico.
And we have to have a very effective tax policy, a very effective investment policy for R&D. We've got to fix our education system or we're
not going to have the pipeline of science, technology, engineering and math that's going to be required for this next generation of business.
Every business today is a technology business. I mean, the agriculture business. I was out in the Central Valley not too long ago. The tractors
look like our network operations center here at HP. You know, they are --
HARLOW: So computerized.
WHITMAN: -- everything is computerized. How they're watering the plants is all cherk (ph) irrigation to exactly get the right soil content so they
don't waste water.
HARLOW: So if you're so concerned about the U.S. economy, who leads this country best next?
WHITMAN: Yes, it's very difficult to say right now, right? There's so many people who've gotten in. I will obviously because of my political
background will follow this with great interest. I will ultimately support -
HARLOW: You're a Republican.
WHITMAN: -- I am a Republican. I will ultimately support the candidate that I think will be the best for the American people and creating jobs and
improving our competitiveness versus the rest of the world.
It's too early for me to decide who that is right now, but you can imagine I'm following it with great interest because I think this election's going
to be a very, very important one for your kids, for your kids, for our grandkids.
We've got to set this company up for the next American century. We were the beneficiary of the, you know, 1900s to 2000, -
HARLOW: Yes.
WHITMAN: -- the American century. If we're not careful, this will not be the American century. But we have every -
HARLOW AND WHITMAN, SIMULTANEOUSLY: If we are not careful, it will not be the American century.
HARLOW: That's scary.
WHITMAN: It will not be. It's scary. But here's the opportunity - we have all the intellectual capital, we have incredibly entrepreneurial,
hardworking people all over this country. We've just got to pull it all together to do a bit better job of competing.
And I think it can be done, but time is a-wasting.
(END VIDEOCLIP)
QUEST: Meg Whitman talking to Poppy Harlow. Now, one U.S. company that's beating the competition is AutoNation. It's the auto retail giant, it has
sold its 10 millionth vehicle. The company marked the milestone with a 15- story sign across from its headquarters in Fort Lauderdale in Florida.
We're always glad to have the AutoNation chief executive Mike Jackson with us who joins me now from California. Now, did you give the buyer, sir, of
the 10 millionth car - did you give him a decent discount?
MIKE JACKSON, CEO, AUTONATION: (LAUGHTER). Richard, we gave the ultimate discount in that we gave him a brand new Toyota for absolutely free in
celebrating -
QUEST: Ah! That's (inaudible)
JACKSON: -- having achieved our 10 millionth car. And imagine in the history of automotive retail, no one's ever come close to sell 10 million,
so doing it one at a time across America is quite something.
So we've been celebrating from coast to coast for last two days.
QUEST: I'm curious as to what you think. Christine Lagarde at the IMF is saying to Janet Yellen at the Fed - don't raise rates this year. Move it
into next year when we get better evidence.
[16:40:00] Now, your industry is so interest rate-sensitive, do you think a rate rise to be put off until next year?
JACKSON: Well, Richard, I heard that remark and my reaction was sort of well, keep your opinions to yourself. You know, I think the Federal
Reserve's doing an outstanding job and in full disclosure I'm vice chairman of the Federal Reserve in Atlanta.
My personal view is the U.S. economy is out of crisis. It's not growing at the rate everyone would like, but we're out of crisis. And where the rates
are now were put in place during the crisis and it would be healthy for the U.S. economy to send a signal by raising rates very slowly, very gradually
and stopping much sooner than you normally would.
I think it would be good for the U.S. economy. It would say to people they're savings are worth something again, capital allocation would begin
to be made on a different basis. So I - my voice is saying - you know, the U.S. economy is ready to get off a crisis rate after six years.
QUEST: And let's turn back to your own industry - the car industry. The Takata airbags issue is one of a scale that we've never seen anything like
it before in terms of recall, in terms of delay of dealing with things.
How concerned are you that this incident was able to last so long and is so big?
JACKSON: Richard, you're absolutely right and I am shocked, dismayed. I think it's a black eye for our industry. Imagine that the first reports of
difficulties go back to 2004.
The first recall was in 2008 - some four or five thousand units only - and to have mushroomed today to almost 35 million units in the United States
and with the supplier, Takata, only recently saying that they're defective. And it's unclear that even the canisters we're putting in today really
fully resolve the problem.
This is unacceptable for our industry. It's now swept up 13 different manufacturers who have used Takata as a supplier. And I would say the
recall system in the U.S. is broken. This is a black eye for the industry -
QUEST: Right.
JACKSON: -- when you have something like this it needs to be discovered sooner, and there needs to be a more comprehensive answer -
QUEST: Right.
JACKSON: -- than what we have today.
QUEST: Final brief question, Mike. You've told us about the 10 millionth car, do you remember car number one that was sold?
JACKSON: (LAUGHTER). Oh, Richard, you got me there, I have to admit.
QUEST: Ah!
JACKSON: (LAUGHTER). I'm at a loss for words. I don't know what the first one was, but I can tell you this - you know, we've sold over one
million Toyotas, over one million Chevys, over one million Fords -
QUEST: Good God.
JACKSON: -- and it's been great and we can't wait to do the next 10 million and we're going to do the next 10 million faster than the first 10
million.
QUEST: All right. Just let me know when nine million, nine hundred and ninety-nine thousand nine hundred ninety-nine have been sold -
JACKSON: (LAUGHTER).
QUEST: -- so I can be the 10 millionth.
JACKSON: I'll send you an e-mail.
QUEST: And get me -
JACKSON: I'll send you an e-mail - you got to be in the right place -
QUEST AND JACKSON, SIMULTANEOUSLY: -- at the right time.
QUEST: And get the car free. Good to see you, Mike, thank you. As always, knowing my luck, I'll be the 10 millionth and first customer and
there'll be no discount for me.
Right, an incredible feeling to walk in space. One of the few astronauts daring enough to make a spacewalk and spend time on the Space Station joins
us next because he rang the closing bell. "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: NASA touched down at the New York Stock Exchange a short time ago, ringing the closing bell.
(BEGIN VIDEOCLIP)
(NYSE CLOSING BELL RINGS)
(END VIDEOCLIP)
QUEST: It's all part of a NASA program to raise awareness of the International Space Station. And one of those ringing the bell was Joseph
Acaba, an astronaut who spent a good deal of time on the Station. He joins me now from the floor of the New York Stock Exchange.
Good to see you, sir. Ringing the bell of the Exchange is one of those things - one of those rights of passage to close the --- to close the
trading day. But what's the significance? Why are you at the Exchange?
JOSEPH, ACABA, NASA ASTRONAUT: Yes, well good evening. We are here as part of a tour that NASA does called Destination Station and we're trying to
highlight the science and the commercial aspect of the International Space Station.
QUEST: Do you think - bearing in mind, sir - no moon landings, the shuttle - no shuttles. Bearing in mind all these things, do you think space - the
International Space Station - can capture the imagination of the younger generation in the way perhaps it did for yourself and for many people
nearer my age?
ACABA: Without a doubt I think it can. And, you know, it's evidenced every time I go out and whether I'm talking to school kids. Today I was
over at Merck and talking with the scientists there. It doesn't matter what age group, what the background is, you know, the American public is
very, very excited about what we're doing in space.
So I think we are capturing their imagination and we're doing a great job at it.
QUEST: You spent, sir, more than a few hours, more than a few days in space - both on your first shuttle mission and when you went and spent
time. Remind us how you long you were on the Space Station and tell us what it was like.
ACABA: So my first mission was in 2009. It was a two-week flight on the space shuttle going to the Space Station. And my most recent was in 2012
and I spent four months on the International Space Station and it was awesome.
It's a great place to live, it's a great place to work and the stuff we're doing there's pretty exciting. So I can't complain one little bit.
QUEST: Final thought - in terms of that Space Station - the tens of billions - hundreds of billions - that it cost, I don't expect you to tell
me - obviously you're going to say it's been worthwhile. But if I ask you what has been its worth? I mean, in a - besides, you know, we push
boundaries forward - what has been its worth?
ACABA: Yes, so it's definitely worth the investment and, you know, you can look at it and what's exciting about it today is half the research we're
doing is to help NASA continue to explore, to go places we've never been before and that's how we learn.
But the other half of the work that we're doing there is to benefit life on earth. And I think you can - you can go online, you can look at the NASA
website -
QUEST: Right.
ACABA: -- and there are just so many different things that we call spinoffs from the space program. So it has definitely been worth the
investment.
QUEST: I promise you we will not hold it against you, sir, we will not hold it against you that the day you all chose to rise at the Stock
Exchange, the market fell 170-odd points. It's not your fault, we won't blame you.
ACABA: Thank you. Thank you very much for not blaming me for that. I just go where they tell me.
QUEST: (LAUGHTER). That's the best excuse I've heard about a market fall. Good to see you, sir, thank you very much indeed.
ACABA: OK, thank you for having me. Thank you.
QUEST: The market - the market as you'll see is now under 18,000 as we looked at those numbers.
[16:50:00] EasyJet unveiled its newest safety inspector. It's a flying robot. Now why is a drone being used by an airline when normally aircraft
stays far away as possible from the flying drones? Chief executive of easyJet (RINGS BELL) after the break.
(COMMERCIAL BREAK)
QUEST: For obvious reasons, airlines are usually extremely nervous when drones come buzzing around their planes. Not so easyJet. The airline has
announced a drone has successfully carried out an inspection of one of easyJet's Airbus A320, 319 planes. Now you're going to hear all about it
from the carrier's chief executive in just moment.
EasyJet was one of the best performing stocks on the FTSE today after it announced passenger numbers up more than 7 percent in May. EasyJet plans
to bring drones into service at its engineering bases across Europe within the next 12 months.
It believes the drones will better able the airline to look for damage, to service the planes and in doing so, it will enable the planes to be brought
back into service more quickly.
I spoke to chief executive Carolyn McCall. I asked Carolyn why the airline was using the flying robots instead of the manual checks for safety
inspections.
(BEGIN VIDEOCLIP)
CAROLYN MCCALL, CEO, EASYJET: Soon drones will help us reduce our aircraft on the ground when we have tech - technical delays and they reduce the
amount of time that you would spend manually checking an aircraft for either lightning strikes or any damage that's not visible to the eye.
So at the moment we do that all manually. It's not automated. Manual processes always carry more risk than automated processes. So the drone is
much more efficient and it's also automated which makes it much more reliable.
So actually it's a win-win if we're - and the drones when you see them working, it's an amazing thing. I mean, they collect a lot of data, the
keep the data so you know you've stored the data, you know what that aircraft has done last year compared to this year, where the damage has
been. It's an incredible step forward actually. It's very innovative.
QUEST: Do the drones fly themselves in the sense of somebody here manually flies the drone over the aircraft or are they preprogrammed on a particular
way that they fly over the aircraft?
MCCALL: At the moment they are preprogrammed. That's what we're testing and trialing. They are preprogrammed. Of course they have supervision.
But they are preprogrammed to fly within a meter of the aircraft and go right the way around it, collecting data and looking via the camera at any
damage on the aircraft.
QUEST: You're also going for 3D printing for part of the - as part of the cabins -
MCCALL: Yes.
QUEST: And I know also a lot of work's been done on 3D printing for engines, for nozzles and not so much hot, critical parts.
MCCALL: Yes.
QUEST: Again, what's the philosophical point of all of this?
MCCALL: I think the philosophical point is when you have 3D printing, you can - it's the speed with which you can get components and parts and it's
also the number of parts.
[16:55:07] So Ian Davies, our director of engineering was explaining that in one nozzle there are about 50 different parts, and 3D printing would
reduce that dramatically and you would get a better result. You know, you would get a better result for it.
So, again, this is all about efficiency, productivity and actually, Richard, what's really important is this is all about making travel easy
and affordable for passengers. It's very customer-centric because it means that we will remain very punctual as an airline, we will be even more
reliable than we are today and we won't have as much tech issues because technical issues can take hours and hours, sometimes days to fix on
aircraft.
All of this reduces the - it really reduces the time the airport - aircraft - are on the ground.
QUEST: As the chief executive, you have to balance the cost of these developments with the perceived benefits and the real benefits.
Now, you know as well as I do, there's never any shortage of technicians and engineers who'll happily have you spend money in one direction or
another. So how do you balance that -- what you decide is the correct spend?
MCCALL: So I think we partner very, very well. We - I said this actually only three minutes ago. I said, you know, one of the best things about
this innovation day has been that all our partners have been really willing participants in helping us develop technology which will improve us as an
airline but improve the passenger journey. And that's the criteria we use.
You know, is this going to be just something smart or clever that looks great? That's not what we're interested in. We want smart and clever that
reduces delays, that reduces, you know, the time passengers would be spending on an aircraft going to where they need to go.
So our criteria's actually quite simple and we - because our partnerships work so well, you know, we actually have the risk in terms of new
technology but we also have the cost.
QUEST: Carolyn McCall, the chief exec of easyJet. We'll have a "Profitable Moment" (RINGS BELL) after the break.
(COMMERCIAL BREAK)
QUEST: "Profitable Moment." Pardon the immodesty, but what a program! We had - yes we had - Angela Merkel on it, Meg Whitman of Hewlett-Packard,
Carolyn McCall of easyJet, the CEO of AutoNation, T. Boone Pickens in oil industry and an astronaut from NASA. And that - (RINGS BELL) - is "Quest
Means Business."
I'm Richard Quest in New York. Whatever you're up to in the hours ahead, two bells, - I hope it's profitable.
END
