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Quest Means Business
Future of Malaysia Airlines, HSBC to Cut 50,000 Jobs, Pivots to Asia; S&P Downgrades European Banks; European Stocks Sink; Dow Extends Losing Streak; EU Rejects Greek Plan; Romanian Parliament Blocks Investigation Into Prime Minister; NASA Says Greenhouse Gases to Change Our Weather; Nissan Aiming for Zero-Emission Cars
Aired June 09, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:05] (NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: Markets have snapped the losing streak, but only just. It's Tuesday, the 9th of June.
Tonight, paralyzed with shock. The new boss of Malaysia Airlines tells us how he will turn the carrier around.
A massive restructuring at HSBC. The so-called world's local bank cut 50,000 jobs across the globe.
And from a job at the White House to a job at McDonald's. The strange career path of Robert Gibbs.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
Good evening. Tonight, the new CEO of Malaysia Airline says his carrier is emerging from paralysis as a result of the loss of two aircraft
in 2014. The disappearance of MH370 remains a mystery, and MH17 was shot down over eastern Ukraine.
Christoph Mueller took the reins at the airline last month and says cutting costs is a crucial first step. He's already ordered 6,000 layoffs.
Malaysia Airlines is today urging staff to ignore union calls for strikes over the job cuts.
At the International Air Transportation Association meeting in Miami, Richard Quest asked Mr. Mueller what the new airline will look like.
(BEGIN VIDEOTAPE)
CHRISTOPH MUELLER, CEO, MALAYSIAN AIRLINES: The most important thing we have to do first is to bring the cost down. Our cost disadvantage is
approximately 20 percent to our main competitors, and that has been mushrooming over the years, so we'll have to reset the system with regard
to our effective cost, with regard to our processes. So we will create a completely new company September 1 and start with a clean sheet of paper.
RICHARD QUEST, HOST: When you start, will you change the name? That's what everybody wants to know. I know you've said you haven't made
your decision. Will you change the name?
MUELLER: That is a very interesting question, because since the tragedies of 2014, the loyalty to our brand has even increased in our home
market, Malaysia. So, it's something we have to maintain because it's precious. The loyalty of our customer has increased.
But this is unfortunately not the case in foreign markets, where our brand, our code and certain flight number combinations of course remind
people of a very tragic events. And so far, we are currently discussing that, not only amongst us in the company, but we do discuss it with our
customers, both domestically and abroad.
QUEST: And I would imagine that the argument is really the same on both sides. It hasn't changed, has it? Some will say the brand is
damaged, others will say it's still the national carrier, it has to be maintained. Where do you stand?
MUELLER: Purely legally speaking, we are truly creating a new company. It's a new legal entity with a new aircraft operating
certificate, with employees with a new work contract. So, naturally you would start with a new name anyhow.
So, we have to find the balance in keeping the loyalty of our existing customers, but really suggest that this is a new company with a fresh
product, with a new strategy serving the customers in a completely different way.
QUEST: Did you find an airline or a company that was in shock?
MUELLER: It was not in shock, it was a little bit paralyzed. I would rather describe it as paralysis. Everything was happening a little bit in
slow motion. It's almost really like the shock of 2014 was still imminent.
And that's the reason why it's important that we work on the morale of people, that we try to motivate the entire new workforce. We will move in
a new building. We really try to create a new fighting spirit. That has suffered. The fighting spirit has suffered.
QUEST: And the problem you've got, of course, is you need to rebuild morale, rebuild the fighting spirit, whilst at the same time driving down
costs. Now, you did it at Air Lingus. It's going to be much more difficult at Malaysia.
MUELLER: Well, I would describe it, really, as a task every soccer coach most probably has in taking over a team which is about to drop out of
the second league with the ambition to play again in the first league and even take the lead.
It's a long march. You have to do it at the same point in time. And again, after the news of last week with regard to the headcount reduction,
with regard to the terms and conditions, the pain for the staff is over after September 1st.
QUEST: Commitment in terms of MH370 and the process. The first compensation claims were paid just in the last week or so. What can you
say on that in terms of commitment?
[16:05:07] MUELLER: Even though it is a new company, the new company, of course, will live up to the obligations and tasks and
responsibilities of the task. So, we keep on taking good care of the next of kin.
We will, of course, hope that the search will be successful. Let's not speculate that it wouldn't. We all hope that we put an end to that
story. But again, even the new company will step into the obligations with regard to MH370, with regard to the next of kin going forward.
(END VIDEOTAPE)
LAKE: The cuts at Malaysia Airlines pale in comparison to those announced by HSBC. The world's third-largest bank plans to cut 50,000 jobs
around the globe. It is a major restructuring that follows a difficult few months for the bank. And as HSBC closes up shop in some regions, it is
looking east for growth. Nina Dos Santos explains.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: HSBC, the world's local bank.
NINA DOS SANTOS, CNN BUSINESS CORRESPONDENT (voice-over): HSBC has described itself as the world's local bank. But today, the lender is
beefing up its business in Asia. And as part of the change in strategy, about a fifth of its workforce will have to go
DOS SANTOS (on camera): All in all, HSBC is cutting some 50,000 jobs here. Half of those positions will be eliminated completely, while the
other half will be lost once the under-performing units in places like Brazil and Turkey are sold off.
On the front line of the cuts, 12 percent of branches will close as customers move towards internet banking and self-service machines.
DOS SANTOS (voice-over): The changes are part of the CEO Stuart Gulliver's major restructuring plan, designed to save the bank $5 billion
annually by 2017 and to increase returns to shareholders.
In a statement, Gulliver said, "We recognize that the world has changed, and we need to change with it. The world is increasingly
connected, with Asia expected to show high growth and to become the center of global trade over the next decade."
Since becoming CEO four years ago, Gulliver has presided over a more slimline firm, slashing 87,000 positions and trimming the number of
countries in which the bank operates by 15 to 73.
One nation HSBC could also bid good-bye to in the face of high taxes and red tape is the UK. Perhaps in favor of its original home in Hong
Kong, where it was founded in 1865 as the Hong Kong and Shanghai Banking Corporation.
MARTIN ARNOLD, BANKING EDITOR, "FINANCIAL TIMES": Well, it would be massively significant, both sort of symbolically important. Politically,
if HSBC does decide to leave the UK and move its headquarters, it would be pretty damaging for the government to lose what is one of the world's
biggest banks from having its headquarters here in the city of London.
DOS SANTOS: HSBC won't decide where it wants to be based until the end of the year. But either way, 2015 hasn't been easy for it. The
company apologized after it was fined for manipulating currency markets. It's found itself embroiled in tax avoidance scandals and money laundering
probes, while yearly profit plunged 17 percent in 2014.
This week's cuts may restore HSBC's balance sheet, but when it comes to healing the business's reputation, that may take longer.
Nina Dos Santos, CNN, London.
(END VIDEOTAPE)
LAKE: Today's cuts are part of a broader restructuring that reflects a shift of power in the banking world. Here are the challenges. First,
lifting profits in the US, Canada, and Mexico. Second, closing down under- performing businesses in Brazil and Turkey. And finally, separating retail banking and trading businesses in the UK as required under new laws.
As it restructures its business in the west, HSBC is looking east. The bank's CEO says he wants to seize growth opportunities in China and
across Asia. Brian Caplen is the editor of "The Banker," and he joins me now in London. And Brian, what do you make of these moves that Gulliver's
putting in place? Does it go far enough?
BRIAN CAPLEN, EDITOR, "THE BANKER": Well, I think it's going to be difficult to say quite so early. We've already seen one wave of
restructuring, as you said there. The problems the bank has is high costs and getting return on equity to an exceptional level for the shareholders.
So, we had one big crack at that, where we saw in retreat from 20 different countries, and we saw a lot of jobs go.
Now, this is like a second wave. So, now we're seeing another 50,000 jobs go. And this is really much more major, because we're going to see
Brazil and Turkey sold off, and they're major operations.
So, what we're going to be left up with, I think, is it's not going to be really a global bank anymore, serving customers of all types in all
parts of the world.
[16:09:59] We're going to see a regional bank focused on Asia, and focusing on certain kinds of business, very much the sort of commercial
banking side, and also the wealth management. Less on the investment banking side, and frankly, less on the retail side.
LAKE: I want to talk about the opportunity and risks that that shift presents. But just stand by for us for a moment. I do want to get your
reaction to news just coming in, and that is -- this just into CNN -- that S&P has downgraded a handful of banks in the UK and Germany. The ratings
agency warns the banks may not be able to count on state support during a crisis anymore.
The banks downgraded include Deutsche Bank, Commerzbank, Barclay's, and Royal Bank of Scotland. What do you make of that? Is that something
that investors should be paying attention to, or is this something they've already factored in?
CAPLEN: Well, to be honest with you, that's a sort of part of a kind of longer-term shift. So, when we had the financial crisis, obviously, we
saw governments step in and bail out banks with taxpayers' money. It was a hugely unpopular decision, and frankly, everybody said this its not how
capitalism is supposed to operate. You're in the private sector market, you're supposed to suffer with you risks.
So, what we've seen over the last few years is a process of regulation where you've seen banks have to gain, add more capital, and conform to some
strict regulations on liquidity and funding requirements and sort of the -- ratios of banking.
So, I think the next step then is that the government can stand back and say look, you guys, you're on your own if you get into a crisis next
time. And the rating agency's really reflecting that trend.
Of course, but the real thing is, it is the proof of the pudding when it happens. When a bank goes under, it's a significant bank, we still
can't be sure the government won't step in, because there's so much economic and political fallout from it.
LAKE: Yes, absolutely, and that is the moral hazard built in that even this far out from the financial crisis, many people believe we still
haven't found a solution. Brian Caplen, thank you so much for joining us tonight.
Now, HSBC shares initially rose in Hong Kong before falling in London trade. Most European stocks ended lower on Tuesday. Investors are nervous
about the impending deadline for a Greek debt deal. Shares in Athens rose just 0.6 percent.
In the US, the Dow extended its losing streak to a fourth day. As we were going into closing bell, it looked like it was going to break it, but
it dropped just below. The Dow bounced between positive and negative territory all day, in fact, before closing two points in the red.
Investors are worried the Fed may raise rates sooner than expected. Those fears did help boost banking shares. Those would benefit from higher
interest rates.
Well, Greece has sweetened its reform plan to unlock funding from Europe, but Brussels says the plan still isn't sweet enough. With
deadlines approaching, we'll speak to the president of the American Hellenic Chamber of Commerce next.
(COMMERCIAL BREAK)
LAKE: Greece's latest offer to Europe lasted just a few hours before being rejected by Brussels. Prime Minister Alexis Tsipras agreed to raise
his country's sales tax and promised to aim for a higher budget surplus. EU officials deemed the plan insufficient.
Mr. Tsipras met with members of his party and called for unity as officials continue talks with European creditors. With the deadline for
Greece to repay its debts drawing nearer, Finland's new finance minister admitted Europe is not looking to keep Greece in the eurozone at all costs.
[16:15:00] (BEGIN VIDEO CLIP)
ALEXANDER STUBB, FINNISH FINANCE MINISTER: Well, I think the bottom line is that the ball is in the court of the Greeks themselves, and if they
do not meet the conditions that were set on the 20th of February this year, I think we are in for a few very long nights.
So, we'll try to do everything in our power to keep Greece in the eurozone, but of course, I can't say this, because I've been finance
minister for ten days only, but I'm sure there are a few finance ministers whose patience is running out.
(END VIDEO CLIP)
LAKE: Simos Anastasopoulos is here in New York. He is the president of the American Hellenic Chamber of Commerce. Thank you so much for being
with us. You're, I'm sure, watching these negotiations very closely, as are all of we. Do you believe that Greece should stay in the eurozone?
SIMOS ANASTASOPOULOS, PRESIDENT, AMERICAN HELLENIC CHAMBER OF COMMERCE: Definitely. I believe Greece belongs in the eurozone, it
belongs on the euro. I think the mandate from the people during the elections was quite clear. In the eurozone, in the euro, no more
austerity.
LAKE: You're here talking to investors. They're very fearful. Why should people put money to work in Greece?
ANASTASOPOULOS: I won't say that they are fearful, I would say that they are concerned. Actually, the sentiment today at the investing forum
was quite good. We have record interest, more than 490 business-to- business meetings with all the companies that could grow with us. It seems that people want to invest in Greece.
LAKE: Is that predicated on the hope, still, that there will be a deal?
ANASTASOPOULOS: I am sure that this plays a major role there. However, I have to say that the private sector has proved to be very
resilient, very competitive, and worth investing in.
LAKE: But we've seen the economic figures. The economy is really struggling. And even if there is a deal, I think it's fair to say there is
a stigma that Greece has a corruption problem and a tax collection or evasion problem. How do you change that perception?
ANASTASOPOULOS: Well, I'm pleased to say that I think that the majority of the work has already been done. This is not 2012, when we
really had a deficit problem. Today, the economy is still running with a primary surplus, so this is not a problem.
Indeed, we need to reform our tax collection system, we need to reform our public administration, (inaudible) is to be expedited, the market needs
to open up. Perhaps we need to touch the social security loss and the labor.
However, the country is not in such a bad condition. And if you exclude the payments that are quite significant and have to be done to the
IMF and ECB within July and August, following that, you have, I think, quite a lesser problem. Things relax a lot.
LAKE: What type of investors are showing interest, and what do they want to invest in? Are they looking at infrastructure? What are the parts
of the economy that seem attractive to them?
ANASTASOPOULOS: Actually, we heard in the investment forum in New York, most reforms -- sorry, mostly funds are attractive, because we are
presenting companies listed in the Athens Stock Exchange.
This is a collaboration of the American Hellenic Chamber of Commerce and the Athens Stock Exchange, and so the companies are major companies
listed in the Athens Stock Exchange.
LAKE: How important is this private investment if Greece is to really heal long-term its economy? You can talk about getting a deal and
extending the bailout and all that, but you need to really tool your economy for this next century. How important is private investment?
ANASTASOPOULOS: It is absolutely necessary, because we cannot expect any more funding from the public sector in Greece. Direct foreign
investment is very extremely necessary for the country today.
LAKE: Simos Anastasopoulos, thank you so much for coming in.
ANASTASOPOULOS: Thank you very much for the invitation. A pleasure to be here.
LAKE: Well, the prime minister of Romania has gotten the backing of his parliament and now has voided a criminal investigation. Parliament has
voted to allow Prime Minister Ponta to keep immunity. He faces several allegations of corruption. Clare Sebastian explains.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN PRODUCER (voice-over): Romania's prime minister voting for his own immunity and heading off a corruption investigation that
threatened his political future. In a speech before the vote, he said this was not about politics.
VICTOR PONTA, PRIME MINISTER OF ROMANIA (through translator): First of all, you have to decide if political decisions can be censored by
another constitutional power. Please, don't vote politically today. Vote as citizens, as members of parliament.
SEBASTIAN: Almost two thirds of MPs backed him, meaning he avoids prosecution.
LAURA STEFAN, ANTI-CORRUPTION CONSULTANT: The parliament acts actually just in defense of its own membership or the leaders of the main
political party, and that's -- that's, I think, the more serious issue that we're faced with apart from the case itself.
SEBASTIAN: The case itself is actually multiple cases. Romania's powerful anti-corruption agency suspects the prime minister of money
laundering and being complicit in tax evasion.
[16:19:59] Between 2007 and 2009, when he was in private legal practice, Ponta is also accused of forging documents to justify benefits,
such as around $45,000 he allegedly used in part to buy two luxury apartments.
Those benefits came from a law firm run by this man, Dan Sova, who Ponta later made transport minister. That appointment led to another
charge, conflict of interest.
While Ponta denies all the charges against him, his political fight is not yet over. Protesters turned out on the streets last week with placards
reading "Ponta resign." A sentiment echoed by the country's president.
KLAUS IOHANNIS, PRESIDENT OF ROMANIA: (through translator): I can say that today is a sad day for the democracy in Romania. It is a sad day
for the millions of citizens who believe in democratic values.
SEBASTIAN: Still, Victor Ponta will return to parliament on Friday for a no confidence vote, one he says he's confident he'll survive.
Clare Sebastian, CNN.
(END VIDEOTAPE)
LAKE: Nissan's CEO says he is committed to eco-friendly cars. He'll tell me why Nissan's heading away from gas guzzlers, after the break.
(COMMERCIAL BREAK)
LAKE: NASA has released its projections of how different the world's climate will be over the course of the next century. NASA says
temperatures and rain patterns will shift because of greenhouse gases in our atmosphere.
With the G7 this week agreeing to phase out fossil fuels, Nissan's CEO says rules on emissions are only going to get tougher. Carlos Ghosn says
he is committed to more eco-friendly cars. I spoke to him here in New York.
(BEGIN VIDEOTAPE)
CARLOS GHOSN, CEO, NISSAN: Electric cars particularly, and hybrid, are not only taking care of the high price of energy, but also of the
emissions. Emissions are going to become much tougher with all the regulations that are going to be enforced, not only in the United States,
but globally.
So, in a certain way, the price of oil is more of a kind of head wind or tail wind, but it doesn't change the destination, and doesn't change the
trend.
LAKE: We're in the midst of one of the biggest recalls ever when we're talking about Takata air bags. How is that impacting Nissan's bottom
line? And do you feel confident that you can switch them out, that you can make the changes for your customers as quickly as you need to be? How are
we in terms of supply?
GHOSN: Look, we depend a lot on our suppliers for this, obviously, and because of the massive recall, it's going to take some time before the
problem has been taken care of because of the lack of supply.
What's important here is really to work in a very transparent way, not only with the regulator, but also with the supplier in order to make sure
that you don't create preoccupation at the level of the consumer that you cannot answer.
Things are now going reasonably well, taking into consideration the size of the problem. And hopefully, we're going to be able to supply
everything which is needed in order to fix the problem for all the recalls that all car makers are making.
LAKE: Should we not have so much supply concentrated in one manufacturer? Should this be a wake-up call?
GHOSN: It's going to be difficult not to do that, because the market is driving more cost-competitiveness, price-competitiveness, and this means
you need more scale in order to make it a good business for the suppliers.
[16:24:58] So, I'm afraid that the trend is going to be more and more standardization, which means more and more concentration not only at the
level of the automaker, but also at the level of the suppliers.
LAKE: Sales are down in China. A lot of people worried about that economy in general slowing down. What is Nissan doing to tweak your
strategy there? How are you going to boost sales in China?
GHOSN: The growth of -- the growth rate of China is going down, but sales are not going down in China. The passenger car sales are still up in
China. This year so far, we're practically even above double-digit growth, which is extremely healthy.
Now, if your expectations are that China should continue to grow at double-digit or 15 percent, yes, you're going to be disappointed. But if
you look at China compared to the other large markets in the world, it's still a very healthy market.
And I'm predicting it will continue to be very healthy. Certainly not at 10 percent growth, but eventually, if you were still in the zone of 6 to
8 percent growth, it's still very good. And that's what I predict for the Chinese market is going to be going.
For us, we have invested a lot in capacity. We are now using this capacity to supply the Chinese market. I don't think you're going to have
a problem of over capacity in China.
What you're going to have is probably a slowing down of investments waiting to see at what level of growth the Chinese market is going to
stabilize. I bet it's going to be around 6 or 7 percent. But still, more factors will have to be taken into consideration.
LAKE: As other markets matured, other auto sales markets, you saw price war. That's how everyone grabbed market share. Is that going to be
the same in China?
GHOSN: Yes, without any doubt. With the Chinese market maturing, you're going to have much more price competition taking place, but nothing
more or less what we're seeing today in Europe or in the United States. So, this is part of the normalization of the Chinese market.
(END VIDEOTAPE)
LAKE: Aviation workers with links to terrorism. A scary finding in a new report on the US Transportation Security Administration, coming next.
(COMMERCIAL BREAK)
LAKE: Hello, I'm Maggie Lake. Coming up on the next half hour of QUEST MEANS BUSINESS, the US Senate hears that airport security guards are
suffering from low morale.
And from the White House to the Golden Arches, why McDonald's is hiring one of Barack Obama's oldest advisors.
Before that, these are the top news headlines we are following for you this hour.
In Washington, the Secret Service is investigating a series of bomb threats that caused parts of the White House and Capitol Hill to be
evacuated. Officials say a bomb threat was called into police targeting the White House briefing room. Earlier, part of the Capitol building was
also evacuated after another bomb threat. There is no sign of whether the two events were connected.
[16:30:08] Iraqi officials say they are still encountering pockets of resistance in Baiji after declaring the city liberated from ISIS. They
tell CNN the city is not completely under government control. A US official agrees that the fight is far from over, saying ISIS still appears
to hold about half the city.
A Lufthansa flight carrying the remains of 30 passengers killed in the Germanwings crash in France in March is due to land Tuesday evening in
Germany. More repatriations are scheduled to follow in the coming weeks until the end of June.
An Argentine business man has been arrested by Italian police after being implicated in the FIFA corruption scandal. Alejandro Burzaco has
been subject to a red notice from Interpol. He handed himself in to police in Northern Italy earlier on Tuesday.
South Korea says a seventh person has died of Middle East Respiratory Syndrome. Eight more MERS cases have been confirmed, bringing the total in
this outbreak to 95. Almost 3,000 people who may have been exposed to the virus are under quarantine. Kathy Novak has more from Seoul.
(BEGIN VIDEOCLIP)
KATHY NOVAK, CNN FREELANCE REPORTER OUT OF SEOUL, KOREA: Many of the recently-confirmed cases of Middle East Respiratory Syndrome can be traced
to one emergency room at a hospital here in Seoul. Authorities are making more than 200 preliminary testing centers available and asking anyone who
is experiencing symptoms that may be associated with MERS to report to these first.
The government has also announced it will bear the costs of all testing and treatment for MERS. A team from the World Health Organization
is in town working with South Korean experts as they try to prevent any further spread through hospitals and, crucially, into the public.
On Tuesday, more than 2,000 schools were closed. A governor from a province that was affected by MERS says South Korea is now fighting two
battles - the virus itself and fear. Kathy Novak, CNN Seoul.
(END VIDEOCLIP)
Low morale in the U.S. Transportation and Security Administration is stopping workers from doing their jobs properly. That was the message at a
senate hearing Tuesday. A report has revealed the TSA failed to identify 73 aviation workers with links to terrorism.
It also shows a lack of effective controls to prevent people with criminal records from working at airports. Earlier this month, tests of 95
percent of all airport screeners failed to detect explosives and weapons. As a result, the acting director of the TSA was reassigned.
The head of the Transport Security at the U.S. Government Accountability Office said low was a major problem.
(BEGIN VIDEOCLIP)
JENNIFER GROVER, DIRECTOR OF TRANSPORTATION SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE: I do think there is a concern about morale at TSA.
As was mentioned earlier, morale at DHS as a department is very low and morale at TSA is even lower. And that does affect people's engagement to
their work.
(END VIDEOCLIP)
LAKE: Renee Marsh is live in Washington for us this evening, Renee, first of all let's start with the fact that while serious discussions
happening about security, at the hearing we had security scares taking place across the capital.
RENEE MARSH, CNN AVIATION AND GOVERNMENT REGULATION CORRESPONDENT: Absolutely. I was watching live as this hearing was going on and then
suddenly the chairman of the Senate Homeland Security Committee stopped and told everyone in the room they were going to have to take a mandatory
recess and that everyone should exit as fast as they could. And then seconds later, I saw a Capitol Hill police come into that room.
They checked under the tables, they checked under chairs, they moved the curtains and then eventually the all-clear that everything was OK.
In the end we found out that there was a threat phoned in to the U.S. Capitol. Said a device had been planted in this specific room that you're
looking for video of. So out of an abundance of caution, Capitol Hill police responded and they did not find anything.
And then just a short time after that, we saw at the White House another threat phoned in. This time it was phoned in to Washington, D.C.
police. At that point we know that they had to evacuate the White House briefing room in response to that.
In the end they did not find any device there, but two scares happening within minutes of each other here in Washington, D.C.
LAKE: Absolutely. And underscoring I think that the very always- present threat of terrorism of course - these hearings related to how to prevent a terrorism attack and how to keep air travel safe in the U.S. We
just heard that sound saying low morale is part of the problem.
[16:35:10] That doesn't seem like a good enough excuse for the very serious lapses we are seeing brought up in recent days.
MARSH: I mean, we had the Department Homeland Security inspector general who has been behind the recent report that came out just yesterday
that you highlighted there, that the TSA missed some 73 airport workers - they did not realize they had links to terrorism.
I think beyond the morale issue, what was also highlighted in this hearing is that there's basic human error. Standard operating procedures
are not always being followed coupled with issues with the screening equipment that billions of dollars have been spent on, and some of that
equipment is not working the way it should.
So there are multiple layers of issues that they really started to dissect here at this hearing and I heard one lawmaker said - many lawmakers
said the same thing in that they believe this agency really needs an overhaul. In the couple of months, Maggie, we had a couple of situations
here (AUDIO GAP) along with airport workers who had links to terrorism. You also have that test that they failed miserably - 95 percent failure
rate in detecting a weapon or fake explosives passing through airport security. That is startling.
Those tests are designed to be difficult but not at a 95 percent failure rate. So everyone there in that group is trying to figure out how
can we improve things at TSA.
LAKE: And, Renee, I would think speed is of the essence here. I mean, we're talking about keeping the public safe. If they're going to be
changes, how quickly can they be made?
MARSH: Well, you know, it doesn't seem like this is going to be something that's going to happen with the snap of a finger here as far as
completely overhauling this agency. However, after the OIG report, many recommendations were made and the TSA in speaking with them yesterday said
that they are in the process of making changes.
For example, one of the reasons why they missed those some 70 plus individuals who had terror links is because they didn't ask Department of
Homeland Security for enough information as it relates to their terror watch list.
So what TSA will do now is ask for more access than they had been in the past.
LAKE: Yes, getting those secure - different departments - to work together and share intelligence -
MARSH: Yes.
LAKE: -- have been a challenge ever since 9/11, frankly. It's one we continue to work on. Renee Marsh with the very latest from Washington.
Thank you, Renee.
MARSH: Sure.
LAKE: Well we return now to the IATA conference in Miami. Airbus is facing a big problem with its biggest plane - the A380 is the world's
largest aircraft. It's designed to move huge numbers of people between hubs like Dubai and London. That was its key selling point when it first
entered service in 2007.
Today, though, sales are flagging, and with airlines looking to sell used A380s, Airbus may not find takers for its new aircraft.
The company is having more success with the smaller A350 which entered service this year. It is designed to compete with Boeing's Dreamliner.
And like the Dreamliner, it uses composite materials to save weight and, importantly, improve fuel economy.
Finally the smallest - the A320 over the last 27 years it has become a workhorse for airlines around the world. Airbus is updating the A320 with
new engines designed to increase range and reduce fuel consumption. The company has more than 3,600 orders for the so-called A320 Neo. Speaking to
Richard Quest, the Airbus CEO said his key challenge is building and delivering all of those orders.
(BEGIN VIDEOCLIP)
FABRICE BREGIER, CEO, AIRBUS: The priorities are around ramping of the production because we have a huge order book. We have just delivered three
A350s - our new long range aircraft - and we want to deliver 15 this year and achieve more than 100 in 2018.
So a big challenge. On the A320, the single line, the same. Forty- two aircraft a month right now, 15 2017 and higher potential.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: How can you get to 50 A320s a month? I mean, I
know it's a factory, but that's extraordinary.
BREGIER: Because the A320 is the best singular in the world and we have a big order book, so the challenge is not commercial, the challenge is
clearly to push the supply chain to make it work. Because at a vast (ph) level regarding final assembly lines, with the opening of Mobile in Alabama
in a few months, we'll have enough capacity.
QUEST: When will you make a decision on re-engining the 380?
[16:40:05] BREGIER: I don't we'll do it soon because with 380s just break even this year, we are innovating on the cabin to have a highland
(ph) city (ph), we've the best comforts for the best interests (ph). This is what the 380 brings.
But we need also to resend (ph) to our consumers and clearly our biggest customer, our best customer in the (rates) is looking for success
of the 380 after 2020. And probably it will be A380s re-engined and perhaps modified. But this is not for today.
QUEST: It's not for today but it's disappointing for you when one of the 380 customers, Malaysia, one of the first things they do as they're
restructuring is to put two of their 380s into the secondary market. Which speaks volumes for the difficult economics of the plane.
BREGIER: Yes, but we need to accept that when you have difficult economic time, when you have ailing companies, you cannot just block them
the 380s. And so they will find another place. There were discussions with one European airline some months ago. They didn't grasp the
(inaudible) 380. There will be other 380s, but globally the market is doubling every 15 years. And the passengers love the 380. When I'm
traveling as a passenger (ph) they say you do the 380, what a model this aircraft. They don't talk about the rest of my fleet.
QUEST: Straight question for a straight answer - the rumors that United is going to take 380s because you're basically going to encourage
them commercially to take a 380 - true or false?
BREGIER: I think we need some more time to convince them.
QUEST: But you were -
BREGIER: They should do it.
QUEST: But you are talking to them?
BREGIER: Yes, we are talking to them as we are talking to other customers. The U.S. airlines have nine competitors flying the 380 to the
United States and we need to react to it. And I think one good solution for them is clearly also to adopt some 380s.
QUEST: Do you expect United to take them?
BREGIER: I don't know. I don't know. I think they are intrigued because for some of the airlines, this is a cash machine so
United will be able to make a lot of money out of it. But it takes time to convince customers overall to shift to the A380 - because it's the bigger
aircraft and so you need to adapt your (inaudible) flight which is plenty (ph). You need to look for work.
QUEST: One area where you are having to struggle with business as usual is as the euro continues to remain relatively weak. It
may have progressed a bit -
BREGIER: We just had the right currency exchange rate. You know, we procure so more than half of our costs in U.S. dollars. And I
think our competitor has also goods procured in euros.
But it's clear that we enjoy now an exchange rate of about 110 dollars per euro which reflects much more the economics between
dollar and euro. When it was at $130 and, what $135, was difficult for us to compete. So, yes, we'll progressively be in a better situation if this
exchange rate is maintained.
(END VIDEOCLIP)
LAKE: McDonald's has taken another step in its global rebranding effort. You'll never guess who their latest hire is. He used
to be a top advisor in the White House.
(COMMERCIAL BREAK)
[16:45:51] LAKE: McDonald's has a new "employee of the month." It's former Whitehouse press secretary Robert Gibbs who will now
be leading McDonald's PR efforts as the global chief communications officer. Gibbs had the ear of President Obama when he worked for him
during the President's first term and throughout the 2012 reelection campaign.
McDonald's for its part is attempting a major brand overhaul. CEO Steve Easterbrook says hiring Gibbs is part of building a
quote "more modern, progressive burger company."
Paul La Monica is here now to discuss this. What does - what is - the modern, more progressive burger company anyway, Paul?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: The sarcastic person like me would -
LAKE: (LAUGHTER).
LA MONICA: -- say Shake Shack is a modern, progressive burger company. But we're talking burgers. This isn't Indie rock music.
Modern, progressive burger company. I don't know what that means and I don't think Wall Street or consumers do either and that's a big concern.
So Gibbs, he -
LAKE: He's got his work cut out for him, right -
LA MONICA: -- he's a spin doctor obviously, --
LAKE: Right.
LA MONICA: -- a political spin doctor, now he's got to take that skill and try and convince people that McDonald's makes great,
healthy food.
LAKE: But they are in the middle of a campaign though honestly -
LA MONICA: Definitely.
LAKE: -- they are in a campaign to try to convince consumers to come back to McDonalds.
LA MONICA: Yes.
LAKE: They have - he had - the new CEO has not really gained any traction so far, has he?
LA MONICA: I think the biggest program is even though Easterbrook has taken some steps to address the fact that McDonald's was
really weighed down by this negative image, he hasn't given enough specifics yet about what the turnaround plan is going to look like.
So there've been some menu changes, you've got sirloin burger, you `ve got these artisanal chicken sandwiches, but it isn't enough
to really get millennial consumers to stop going to Chipotle which - wait a minute - McDonald's used to have a big stake in, and people I think are
just scratching their heads on Wall Street about what McDonald's actually stands for now.
LAKE: Right. Well and it's interesting because one of the - one of the -- I guess you could make this connection - is that the
Obama campaign had a lot of success with millennials - especially the first time around. They lost them certainly with voter fatigue in the
reelection, but they did connect with that younger generation.
But this isn't a candidate, this is food. So what do they have to convince millennials they're going to do? And I guess really
the question is what do investors want to see?
LA MONICA: Yes investors, simply put, they don't care if it's millennials, if it's gen X, if it's boomers, they want sales
growth. That's something McDonald's is not delivering right now.
But what Gibbs and other executives McDonald's have to do is really convince their consumers that the food tastes good, the
quality of the ingredients is top notch and you don't need to go spend a lot more money on a burger at Five Guys or Shake Shack when you can come to
McDonald's and they still have that value component.
Interestingly, the Gibbs hire is getting all the attention but McDonald's also hired a new marketing guru today. She used
to be at Bacardi and before then was at Dove so that's something that I think people may be - they might be falling under the radar because Gibbs
is the big get, but they are probably going to really make a bigger marketing push as well. It's not going to be just the corporate PR spin.
LAKE: Right, they've got to have the material to spin though and get it right in the store. Otherwise, it doesn't matter who
they hire. They're going to have a hard time convincing both I think their customers and their investors.
LA MONICA: Without question.
LAKE: All right, Paul, we shall see. The jury's out. Paul La Monica for us tonight.
Well the FIFA corruption scandal is still reverberating through the football world. Some are calling for Sepp Blatter to go now
and we'll show you what happened when our reporter in South Africa tried to get a word with the man behind the country's 2010 World Cup bid.
(COMMERCIAL BREAK)
[16:55:58] LAKE: The head of Australia's football federation says Sepp Blatter should quit as FIFA president now. Frank Lowy
says the current leadership is not capable of making the necessary changes to its culture.
Australia was one of the countries to lose out to Qatar in the bid for the 2022 World Cup. Frank Lowy told CNN affiliate Sky News
Australia that he now believes Australia never stood a chance.
Lowy has also acknowledged paying half a million dollars for football development in Trinidad and Tobago but he denies it was a
bribe to Jack Warner, saying he didn't even speak about it to the disgraced former FIFA executive
(BEGIN VIDEOCLIP)
FRANK LOWY, CHAIRMAN, FOOTBALL FEDERATION AUSTRALIA: I have never spoken to Warner about the subject. It was always done at a
level of the executives of both areas.
REPORTER, CNN AFFILIATE, SKY NEWS AUSTRALIA: So there was no conversation with Jack Warner about this?
LOWY: No conversation with Jack Warner about it.
REPORTER: So when he talks about having an avalanche of secrets that he's now sitting on, this isn't one of them?
LOWY: I haven't - I have no concern about that. And I made no offer to him, I had not negotiated with him, it was people from
Australia from the executives of Hever Fait (ph) and they hired an expert to advise us on what needs to be done and we provided the funds for the
planning.
(END VIDEOCLIP)
LAKE: Meanwhile, South Africa has consistently denied all bribery allegations over its World Cup in 2010. Now there is growing
pressure on the tournament's organizer to break his silence about the country's bid. Diana Magnay tried to get a word with him at his new job.
(BEGIN VIDEOCLIP)
DIANA MAGNAY, INTERNATIONAL CORRESPONDENT FOR CNN: For a man just weeks in the job, the new mayor of Port Elizabeth is keeping a
very low profile.
MALE SECURITY: No, you can't do this. What do you call - of course you can.
MAGNAY: This is a public space, we can ask the mayor.
DANNY JORDAAN, (PH) MAYOR, PORT ELIZABETH, SOUTH AFRICA: Office. Yes, I'm a new officer, I'm in a public space.
MAGNAY: That's because the new mayor of Port Elizabeth is Danny Jordaan, president of South Africa's Football Association and the
man who ran South Africa's bid to host the 2010 World Cup. Now drawn into the FIFA scandal himself after a letter emerged dated December 2007 where
he acknowledges the $10 million sum at the heart of the FBI investigation and suggests that it be deducted by FIFA from funds earmarked to go to
South Africa's local organizing committee.
South Africa's minister of sports has consistently denied any form of bribery as alleged by the U.S. attorney general in its
recent indictment.
FIKILE MBALULA, SOUTH AFRICAN MINISTER OF SPORT: The fact that a payment of $10 million was made to an approved program above
board does not equate to bribery.
MAGNAY: But the man who suggested how that payment should be made hasn't shown up to answer questions.
In the run up to the World Cup, Danny Jordaan loved the limelight. He was, if you will, the face of South Africa's bid but it's a
very different story now.
SAFA says that it will be the ministry of sports dealing with all issues pertaining to the FIFA affair because some of the media
they say are distorting this issue for their own expediency.
South Africans have had to listen to their fair share of alleged corruption scandals lately, scandals which reach right to the very
top.
Female: The scandals from the president to everybody - everybody - they have just got their hands dirty.
MAGNAY: But there's also national pride at stake and the pride of Port Elizabeth locals about their mayor.
Male: Nothing has been proven yet.
MAGNAY: You mean the FBI will come knocking on his door?
Male: They're not allowed to come here.
MALE REPORTER: Mr. Uran Front (ph) from CNN.
MAGNAY: Knocking on the door of City Hall or just standing outside it proved problematic for us -- pushback by security as we
tried to ask questions.
MALE REPORTER: Mr. Jordaan, do you have any comment?
MAGNAY: Begging the question why Port Elizabeth's new mayor is being quite so cagey.
MALE REPORTER: What do you have to say about the letter that you wrote?
[16:55:00] MAGNAY: Diana Magnay, CNN Port Elizabeth, South Africa.
(END VIDEOCLIP)
LAKE: From one global sporting event to another, it appears to be a competition of David versus Goliath proportions.
Kazakhstan is going up against China to host the 2022 Winter Olympics. We'll hear the bidding committees make their cases to the IOC.
(COMMERCIAL BREAK)
LAKE: The two cities hoping to host the 2022 Winter Olympics have arrived in Switzerland to make their presentations to the
IOC.
The competition is between Beijing and Almaty in Kazakhstan. Beijing held the summer games back in 2008, spending billions
on stadiums and infrastructure. Leaders from the Chinese bid committee told the IOC a winter games in the Chinese capital would be sustainable.
(BEGIN VIDEOCLIP)
ZHANG LI, DEPUTY DIRECTOR, BEIJING 2022 BID COMMITTEE, VIA INTERPRETER: We have a very comprehensive plan. It's a combination of
appropriate temperatures, sufficient order supply and reliable snow-making facilities - and also initiatives because of 2022 to make the whole area
more sustainable and long-term sustainability is one of our priorities planning before the games.
(END VIDEOCLIP)
LAKE: Kazakhstan would be the first country in Central Asia to host the Winter Olympics, on top of never hosting an Olympic game
before. Its economy is also five times smaller than China. The bidding team for Almaty told the committee there should be no question - they can
afford to host the games.
(BEGIN VIDEOCLIP)
AWNDREY KRYUKOV, VICE CHAIRMAN, ALMATY 2022 BID COMMITTEE: It's easy, we have money. We have money. We would like to
spend it for sport. We'd like to bring it to the world society.
(END VIDEOCLIP)
LAKE: Blunt and to the point. The IOC will announce the winning bid next month. Our best of luck to both cities.
And that is "Quest Means Business." I'm Maggie Lake. Stay with CNN.
END
