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Stocks Remain Volatile; Russian Economy and Oil Supply; Amazon Earnings Fall Short; EU Toughens Taxes for Multinationals. Aired 5-6p ET
Aired January 28, 2016 - 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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MAX FOSTER, HOST: Another swing for the Dow as stocks closed higher on Wall Street. It is Thursday, the 28th of January.
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FOSTER: Tonight, Russia gasps for breath in a world drowning in oil, production cuts could be on the way. Google's tax deal in Britain raises
some eyebrows in Brussels. And Facebook shares soar 15%.
Now it's Amazon and Microsoft's turn to impress investors. Their earnings are due out any minute.
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FOSTER: I'm Max Foster, This is "Quest Means Business."
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FOSTER: Good evening. Tonight, oil prices are rallying on signs that there could finally be a breakthrough in the global price war.
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FOSTER: Both Brent and Light Sweet Crude are up nearly - or more than 3.5% if you can see down there. The cause, reports that Russia may be trying to
broker a deal to cut oil production.
If oil-rich nations do cut production, it would be a major turning point in the price war between OPEC nations highlighted here in yellow and the rest
of the world there. OPEC is split into two camps; those who want to keep driving the price down to force out rivals and those who don't. The lighter
shaded countries in the Gulf, Saudi Arabia, Qatar, the UAE, and Kuwait, are actually quite happy for prices to stay low. The ones in red, say enough is
enough now, it's time to cut production. They include Venezuela and Nigeria, which have both tried to get OPEC to hold an emergency meeting
without any success.
But now Russia may be taking matters into its own hands. According to state news agency, the country's energy minister says oil producing nations could
meet as early as next month to discuss cuts of up to 5%. So could this potential meeting finally see an end to divisions within OPEC? Our emerging
markets editor, John Defterios has more.
JOHN DEFTERIOS, CNN MARKETS EDITOR: Well it seems that the Russians are willing to negotiate at this stage. The Energy Minister of Russia,
Alexander Novak is suggesting that non OPEC and OPEC members are looking at a cut of 5% in the production right across the board perhaps as early as
February.
Now a Russian ministerial source told me no formal invitation has been sent to Russia, nor any formal offer is on the table. But I spoke to a senior
gulf source here in the region suggesting that all options are now on the table and they're willing to consider a cut as early as February.
Now we know that the pressure within OPEC itself is coming from the higher cost producers such as Algeria, Venezuela, and Nigeria, and you can include
Angola in that group. But so far we've seen the four major gulf producers led by Saudi Arabia resist that call.
I think this drop Max to $27 a barrel we saw last week while we were covering Davos was a global wake-up call and it now has the two largest
producers in the world, Russia and Saudi Arabia, considering cuts. Now it is early days. No formal offer but you can see the parties behind the
scenes are beginning to talk.
FOSTER: And that would be a big move. Particularly for Saudi Arabia wouldn't it? Because always been concerned about losing that market share.
DEFTERIOS: It has been a battle for market share ever since December 2014. In fact, back then, the Energy Minister of Saudi Arabia Ali al-Naimi, told
me they'll never cut again, were his words.
Now as recently as last week at the World Economic Forum, Khalid Al-Falih, who is the Chairman of Saudi Aramco suggested that Saudi could live with a
low price for a very, very long time.
But at the same time Max, it was very interesting, he left the door open for cooperation. Saying if others are willing to stabilize the market, we
may consider doing so.
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DEFTERIOS: So lo and behold, we see background discussions taking place. It appears at the very highest level perhaps with Saudi Arabia and Russia. We
know there's a group of OPEC producers reaching out to non-OPEC players. No meeting called just yet.
FOSTER: And just from the reaction of what we've heard so far, even if it doesn't go as far as 5% it would have a big impact on the market if this
did go ahead, right?
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DEFTERIOS: Well, we saw the spike up to 35, even $36 a barrel for the international benchmark today. So this is a market that's looking for a
deal. But we've seen Russia go to Vienna, to the OPEC headquarters, twice in the last couple years Max, talking about a potential deal. They sat down
for hours with ministers also from Mexico and other non OPEC players. And no deal was struck. So the markets very excited to see perhaps an agreement
trying to find a low for this market last week and perhaps moving higher from here.
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FOSTER: John Defterios there. Well, for some countries, any recovery in oil prices might be too little, too late. Take Azerbaijan; once a rising
star amongst emerging markets. Now with oversupply in the oil industry and the possibility of Iran adding to that glut, the nation has taken a very
big hit.
Azerbaijan has just received a visit from the International Monetary Fund and is considering an emergency loan of $4 billion. European Central Bank
for Reconstruction and Development has already invested more than $2.5 billion in Azerbaijan. It's chief economist told me that whilst Azerbaijan
has been severely impacted by the falling oil prices, it could still have an easier ride than its Russian neighbor.
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SERGEI GURIEV, CHIEF ECONOMIST, EBRD: Azerbaijan and some other oil countries are feeling the shock. We see protests. We see major de-
appreciation. The reason is Azerbaijan is even more dependent on oil, something like 95% of exports are oil. The sovereign wealth fund is also
built on oil revenues and in that sense, Azerbaijan does need loans now.
The difference between Azerbaijan and Russia is that Russia is under sanctions, Azerbaijan is not. Azerbaijan can talk to international
financial organizations and we already see the IMF and the World Bank dispatch a mission to Azerbaijan.
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FOSTER: At the moment, there's a worrying amount of inflation in Russia, isn't there, because there's so much pressure on the economy. But that is
also directly linked to the oil price.
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GURIEV: Russia has several economic issues that are result in negative GDP growth, in recession. First, is the poor investment climate and lack of
structural reforms. Second, sanctions and third, which is very important, low oil prices.
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GURIEV: But it is definitely true that oil prices are the primary cause for concern regarding the budget deficit, regarding the lack of fiscal
revenues. Which already resulted in tightening belts for the budget and will probably result in further austerity already during this year. So it
is a huge concern. Oil prices are very important. Of course sanctions reinforce the impact of the lower oil prices and lack of structural reform
is also important. Yet if oil price recovers, then budgetary problems, fiscal problems, will be less painful.
FOSTER: And they can avoid some capital controls which some economists suggesting should be on the agenda there in Moscow.
GURIEV: Yes, we think everything is now on the table. Because currently Russian government is facing a very difficult situation regarding budget
deficit. If oil prices at $15 per barrel on average during 2016, there is enough reserve in that money, the reserve fund, to pay for this year, but
probably not for next two years.
But if there is a drop to $35 or $30, then the reserve fund will probably be completely exhausted before the end of this year and further cuts or tax
increases might have to be undertaken.
FOSTER: Well adding to Russia's challenges is growing public anger over the state of the economy. Some people have even stormed banks saying mortgages
they took out based on the dollar are now too expensive to pay back. Matthew Chance has more.
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MATTHEW CHANCE, CNN INTERNATIONAL REPORTER: They're victims of Russia's economic crisis, determined to be heard. Protests like this one against
crippling dollar denominated mortgages have been erupting nationally. Indebted homeowners storming banks demanding the harsh terms of their homes
be reviewed.
Across Russia, there are tens of thousands of people that took out dollar mortgages thinking they would be cheaper. But because of the plunging oil
price and the devaluing ruble, they've all been left in desperate straits now with repayments that they're quite simply unable to afford and they're
furious about it.
Furious but (inaudible) helpless too in the face of ever rising repayments.
UNIDENTIFIED MALE: My payment was about 32,000 rubles per month. And the highest payment per month, which was during this crisis, was 120.
CHANCE: 120,000? From 32,000
UNIDENTIFIED MALE: Yes. Nearly four times. Yes, exactly.
CHANCE: Incredible.
So far, the kremlin appears unmoved. President Putin's popularity remains sky high and his official spokesman has dismissed the problems that those
stung by dollar mortgages.
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CHANCE: But as Russia's economic crisis continues, there are growing signs patience is running out. Matthew Chance, CNN, Moscow.
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FOSTER: Well, the U.S. stocks ended the day with solid gains fueled by a rise in oil prices. The Dow climbed around 125 points, 0.8%. As crude oil
prices jumped 4%. Facebook shares gained 15% on Thursday as the company reported earnings that smashed Wall Street expectations.
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FOSTER: Now the backlash over Google's tax deal is growing. And now other companies are being called into the fray. We'll have some details on that
coming up.
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FOSTER: New numbers coming in to CNN. Amazingly Amazon earnings have fallen well short of expectations.
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FOSTER: Net sales increased 22% over the year in the fourth quarter but shares are down sharply in afterhours trading. Microsoft faring slightly
better, its profits and earnings topped expectations. Analysts will be paying particular attention there to the health of Microsoft's cloud
business.
Let's go to Paul La Monica to break this down.
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FOSTER: And a really bad response to those amazon results.
PAUL LA MONICA, CNN DIGITAL MONIES CORRESPONDENT: Yes, definitely Max. It really is stunning.
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LA MONICA: I think everyone was really expecting Amazon to blow away forecasts. It's the holidays after all. Even though Facebook and Amazon
aren't really in the same market at all, they often get lumped in together. And Facebook had really great results last night. Amazon stocks surged
today for no real good reason. You would think people would be a little nervous heading into these results. So to miss on sales and, you know,
during the holidays, I think that's inexcusable for a momentum stock like this so it is tumbling hard after hours.
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FOSTER: It's doing business it just isn't making money, is that right?
LA MONICA: No, they are actually making money now. That used to be the main knock on Amazon, that they weren't profitable. But they've got a cloud
business that is very lucrative, that is helping to lift profits.
I think the problem with Amazon wasn't that they lost money, they just didn't make as much as the expectations were. And this is a very, very
hyped stock with an extremely high valuation.
FOSTER: And it's the one company that's meant to be doing well in this environment when a lot of the big retailers aren't.
LA MONICA: Definitely. I mean Amazon has really put the squeeze on companies ranging from Walmart to Target, Best Buy, Staples. There are so
many American retailers that have been hurt by the emergence of Amazon. And make no mistake, Amazon still reported very solid growth in the fourth
quarter, more than 20%. But Wall Street was expecting around 25% or so. And you know like I said before, when you're a stock with this much momentum on
your side, you know, you really have to not just meet earnings estimates and sales, you have to beat them. And that's what Facebook did yesterday.
That's why Facebook surged today.
FOSTER: It's all about expectations isn't it. And that's where Microsoft seemed to have done well as well after the bell.
LA MONICA: Definitely. Microsoft is a fascinating company in transition.
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LA MONICA: After Steve Bolmer left the company, and Satya Nadella became the CEO, Nadella quickly move to really make Microsoft into a more cloud
first type company, and it seems to be working. So Microsoft obviously not relying as much on the old software model of selling Windows and office
updates in a store to consumers buying new pcs. They're doing a lot of it online and that has helped them.
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LA MONICA: The Xbox business is something that has been you know, a nice win for them. And their internet services division, MSN and Bing that had
long been a money losing proposition for Microsoft and that's been profitable for them lately as well. So Nadella is doing a really good job
at Microsoft.
FOSTER: So what do we learn at the end of this week of tech results? Apple at the beginning of course.
LA MONICA: Yes, I think we've learned that the worst case fears regarding Apple, you know, have come true. Apple is slowing down. They're going to
need something beyond the latest iPhone to get people excited again.
Mark Zuckerberg I think he rules the world. Facebook just dominant right now in social media particularly on mobile. Amazon good but not as good as
hoped. And hey, don't count out old tech at all, we see that with Microsoft.
Next week will be even more interesting as we get Google and Yahoo, talk about two different stories there. Google doing extremely well, Yahoo,
Meyer, fighting for her job and whether or not that company stays independent.
FOSTER: We know you'll be watching closely. Paul La Monica, thank you very much.
LA MONICA: Thank you.
FOSTER: Indeed. Now the backlash over Google's so-called sweetheart tax deal is growing. The internet giant agreed to pay $185 million to cover
unpaid taxes after an audit by British authorities. That left a sour taste though in the mouths of very many.
The Chancellor of the Exchequer, George Osborne has held firm though, he has said getting Google to pay any tax is a victory. His boss David Cameron
distanced himself from the deal. The Prime Minister also tried to pin some of the blame on the labor government that preceded him.
News Corp. chairman Rupert Murdoch slammed the deal on Twitter, and called for new laws to prevent tax avoidance. Google's troubles may not end at the
English Channel either. The European Competition Commissioner has said she may examine the deal as well.
Now officials of the E.U. have come down hard on multinationals. And as Nina Dos Santos now reports they are preparing new measures now to end the
tax avoidance issue altogether.
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NINA DOS SANTOS, CNN CORRESPONDENT: The European Union is getting tough on taxes for big multinationals.
PIERRE MOSCOVICI, EU ECONOMIC AFFAIRS COMMISSIONER: (As translated) we will be coming forward with concrete proposals to stop companies from
transferring their profits to tax havens. And we will be working to make sure they can't exploit the differences in national tax systems,
differences which allow them to reduce their taxes.
DOS SANTOS: So far, $1.36 billion has been clawed back in taxes from across the union in the last few months. In October, the block ordered Starbucks
and Fiat to fork out $65 million of unpaid dues. Starbucks has said that the ruling has errors and Fiat denies any wrongdoing.
Then in January of this year, Belgium was told to recover $763 million from 35 different multinationals. At the same time, individual governments have
also been taking action.
In December, Apple settled a $346 million tax bill with Italy. And just this week, Google agreed to pay almost $186 million to the U.K. government.
A deal that has been deemed inadequate by trade unions and tycoons like Rupert Murdoch. But, Britain's Prime Minister is promising he won't let the
industry off the hook.
DAVID CAMERON, BRITISH PRIME MINISTER: We have put in place the diverted profit tax that means that this company and other companies will pay more
tax in future.
DOS SANTOS: As the E.U. pushes for further action on taxes that creates a real dilemma for governments at a time when their economies are just
getting back on their feet. If the rules are too strong, well they could deter firms like these from investing and hiring. If they're too weak
though, they risk alienating votes.
But before more firms pay up, all 28 member states need to sign up. And since some of the worst offenders are from outside of Europe, the success
of this scheme hinges on getting the rest of the world on board too.
Nina Dos Santos, CNN, London.
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FOSTER: Now as the Zika virus spreads, world health officials plan to take action.
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FOSTER: We are live in Switzerland for you and Brazil with the very latest on the outbreak including the economic concern.
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FOSTER: The World Health Organization will hold an emergency meeting on Monday over the Zika virus which it says is spreading explosively.
The agency is facing a backlash for not mobilizing funding quickly enough to tackle the mosquito borne disease.
International diplomatic editor, Nic Robertson joins us from Geneva. A huge amount of concern about the pace of change and spread.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Oh, absolutely. They're saying it's moving at an alarming rate, that it's -- that it is, you know,
their consideration now when they call an emergency meeting on Monday is to see whether this is of a public health emergency of a global scale. 24
countries affected, this in a relatively short space of time.
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ROBERTSON: They say that this is because of the spread of the mosquitoes already. And their concern now is the gaps in data that they don't have.
There's a lack of information at the moment about how it has - how it has spread so much so fast.
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ROBERTSON: About how to stop it in the future and right now, the WHO says the priority is to get a vaccine in place, Max.
FOSTER: That's going to take a while to do though obviously so what's the short-term solution here? What sort of ideas are they discussing?
ROBERTSON: Well, they say that they're working with governments in the affected countries and part of that process is to gather more information
so they're better informed.
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ROBERTSON: To better understand how the virus is connected is widely expected and believed connected to the childbirth deformities and to
various neurological diseases. So that's a priority as well.
It's the gathering of information which is made harder by the fact that people can have the virus without showing symptoms, that makes it very hard
for them to effectively track it.
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ROBERTSON: What they want to do is to track - is to track where this disease spreads to, how quickly it spreads there, why it's spreading there
and they hope through having better information that the governments involved that are affected by this can make and take better decisions about
should they close borders, should they stop travel.
The concerns are they want the affected governments to make decisions that don't have a negative impact that would allow this to expand further,
faster and quicker. So it's really the WHO in its emergency meeting hopes to be able to sort of initiate an assessment of how big and how bad it is
but prioritize taking action to better understand it Max.
FOSTER: OK, Nic, thank you very much indeed.
Well Brazil is considered the epicenter for this virus. For an already struggling economy, Zika is only making things worse.
Shasta Darlington has been following the story from the city that has seen the deepest impact really Shasta. And just describe what it's like in the
worst place in the world, as many people view it.
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Yes, that's right Max. I think it's interesting, you know the world is sort of waking up to Zika
right now as the WHO investigates what the link is between Zika and these birth defects.
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DARLINGTON: But here in Brazil they're really - they're really living it. Right here in (inaudible) in particular, where the (inaudible) of course.
It's night now but this is where babies are coming in every day who have been born with microcephaly. Since the Zika virus was discovered last year,
more than 4,000 babies have been reported born with microcephaly. And there have been more in this hospital than any other place in Brazil.
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DARLINGTON: So we've talked to the doctors who are encouraging and urging women to put off getting pregnant if they can. We've talked to the mothers,
many of them teenagers, coming from really very poor backgrounds.
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DARLINGTON: So we've seen a lot of the emotional burden that this is putting on people but also the financial burden.
Of course Brazil is scrambling to put together programs that would involve early stimulation for the babies born with microcephaly, physical therapy,
psychologists for the families. But in reality, it's not clear how these families again from such poor backgrounds are going to be able to have the
time to take a baby every day to get this kind of treatment when they have to basically have jobs to feed the rest of their family.
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DARLINGTON: So we've got a long slog ahead. And remember, in 80% of the cases, Zika is asymptomatic. So we may have more pregnant women, more
expectant mothers who don't even know they may already be infected and they may too have -- we may see more babies with microcephaly, Max.
FOSTER: In an area which is more used to this illness. As you say, they don't have symptoms, so what are people doing to try to work out if they've
been affected or those around them?
DARLINGTON: I think the major - the major effort right now Max, is on prevention.
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DARLINGTON: So the government has announced that 200,000 troops are going to be going door to door, really searching for that standing water under
plants in water tanks where the mosquitoes breed.
They're also going to be educating families about using repellent, about wearing clothes that cover their bodies, especially pregnant women. And
then in the case of pregnant women, they're going to be - they're going to be coming in for more checks.
They can't rely on just the idea well I never had any symptoms for Zika so I never had Zika. No, they have to come in, they have to get the
sonograms. They have to really have the head of their baby monitored has to be constantly monitored. That's the main symptom of microcephaly.
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DARLINGTON: But you're going to -- what we've already seen is increased prenatal care and really stepping up the fight against the mosquito in the
hopes they can contain it there, Max.
FOSTER: What about the impact on the economy? Obviously people are starting to get concerned about traveling to Brazil, that's a reality isn't it?
There's no advice against travelling to Brazil at the moment, but what sort of impact is being felt there?
DARLINGTON: Well, I think that's interesting. Obviously, looking ahead, there could very well be a long-term impact. The CDC has warned that
pregnant women should put off travel to countries that are affected. The Olympics are expecting half a million visitors.
But right now the impact really isn't being felt for a curious reason. The dollar is so expensive for Brazilians that all those tourists that we saw
going to - Brazilian tourists who are going to Miami, going to the Bahamas, going to Europe, well they're staying home. So any lack of -- or loss of
foreign tourists is really being more than made up for by domestic tourism.
In fact right here in Recife, really the epicenter of this epidemic, they're saying it's their best carnival season in years because Brazilians
are traveling inside Brazil, Max.
FOSTER: Okay, Shasta, thank you very much indeed.
Now, the Iranian President has channeled his inner businessman in Rome.
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FOSTER: Now Hassan Rouhani is in Paris and the deals just keep on coming. We'll have the latest details on that next.
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[16:30:40] MAX FOSTER, CNN ANCHOR AND LONDON CORRESPONDENT: Hello, I'm Max Foster in London.
Coming up in the next half hour here on "Quest Means Business," all revved up is the world's biggest car companies. Get ready to enter Iran.
We visit one of the country's biggest car parts suppliers, excited about the new business opportunities.
And we join a DJ school in New York where aspiring musicians are learning how to scratch out a career.
Before that, though, these are the top stories this hour at CNN. In France police have arrested an armed man who was trying to enter hotels at Disneyland Paris. They say 28-year-old - the 28-year-old man - was
carrying two guns and a box of ammunition inside his luggage as well as a copy of the Quran.
Police are still looking for a woman who had been with the man that they arrested.
The World Health Organization will hold an emergency meeting on the Zika virus on Monday. The group says the virus is, quote, "spreading
explosively through the Americas." Zika is linked to dangerous and sometimes deadly birth defects. The W.H.O.
thinks millions of people could become infected.
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SYLVAIN ALDIGHIERI, W.H.O. OFFICIAL: If you start with the total number in the Americas of 2 - more than 2 million - cases transmitted reported of
dengue per year, with a virus which is already circulating for/four (ph) years, you can come up with a figure between 3 and 4 million cases of Zika
in the Americas.
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FOSTER: Donald Trump is standing firm on his decision to skip Thursday's Republican presidential debate in Iowa. Fox News which is hosting the
debate says no advertisers have backed out and its ad breaks have completely sold out.
Trump had claimed that ad rates would plummet if he skipped the debate. The "The Washington Post" reporter who was held prisoner in Iran for 18
months said his jailers insisted the U.S. government wouldn't help him. Jason Rezaian has spoken publically for the first time since his release
which was part of the prisoner swap between Iran and the U.S.
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JASON REZAIAN, JOURNALIST HELD IN IRAN - "THE WASHINGTON TIMES": -- the 18th months I was in prison, my Iranian interrogators told me that "The
Washington Post" did not exist, that no one knew of my plight and the United States government would not lift a finger for my release.
Today I'm here in this room with the very people who helped prove the Iranians wrong in so many ways.
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FOSTER: U.S. President Barack Obama has paid tribute to the astronauts who died in the Challenger shuttle disaster which was 30 years ago today.
Millions of Americans watched on live television as the shuttle exploded shortly after takeoff, killing all seven onboard.
Mr. Obama urged the country to honor their legacy and sacrifice and heroism.
With the strokes of two pens, Iran and France agreed to $16 billion worth of deals. You're looking at the signing ceremony in Paris. The Iranian
president arrived in the city after a deal-making tour in Rome. Hassan Rouhani made it clear Iran's doors are open for French companies.
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HASSAN ROUHANI, IRANIAN PRESIDENT, VIA INTERPRETER: We have gathered here to say that France is once again ready to get involved in economic and
developmental activities in Iran with new energy and greater motivation within the framework of the policies pursued by today's Iranian government.
And we have come here to welcome all investors and business leaders to get involved in Iran.
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FOSTER: Well President Rouhani has already secured deals with some of the giants of French industry. Iran plans to buy 118 jets from Airbus,
including a dozen A380 super jumbos. Total will buy Iranian crude oil and study the Iranian oil industry. And Persia was teaming up with an Iranian automaker. The French automaker
plans to invest up to $436 million and says new cars could roll off Iranian production lines in 2017.
The return of European auto giants to Iran could be a boon to the nation's car industry. It's basically been dormant for years.
[16:35:01] Senior international correspondent Fred Pleitgen went to Tehran- based Radiator Company which hopes to see big profits.
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FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Radiator Iran is one of the largest car suppliers in the Islamic Republic.
They're proud that sanctions never stopped their production and say they believe their products can compete with any radiators in the world.
Nassar Norsada (ph) has been working here for 2 years and says he's never been more optimistic.
NASSAR NORSADA, (ph) RADIATOR IRAN WORKER, TRANSLATED BY PLEITGEN: "We're so happy about the nuclear agreement," he says, and I think it will not
only be good for us, it will be good for them as well.
PLEITGEN: The sanctions forced Iran Radiator to source most of its raw material like aluminum from inside the country.
The boss believes the company will be able to buy such goods from all over the world, making production must cheaper, and more importantly, they'll
also be able to sell their radiators globally.
UNIDENTIFIED MALE, TRANSLATED BY PLEITGEN: "Foreign companies are interested in us for two reasons," he says. "Quality-wise we can compete
with them but our prices are also much lower. So, yes, there is a lot of interest from abroad."
PLEITGEN: But in total, Iran's auto industry suffered under international sanctions. Old manufacturing machines led to quality problems that Tehran
hopes foreign investment will fix. French auto giant Peugeot has announced a $435 million contract to return production to Iran. Only one of many big business deals inked during
President Hassan Rouhani's visit to Europe. Iran will also purchase more than 100 Airbus jets. Tehran's message is clear - Tehran is open for business.
ROUHANI, VIA INTERPRETER: We have gathered here to say that France is once again ready to get involved in economic and developmental activities in
Iran with new energy and greater motivation within the framework of the policies pursued by today's Iranian government.
And we have come here to welcome all investors and business leaders to get involved in Iran.
PLEITGEN: The folks at Radiator Iran feel they are ready to compete on the international markets and are hoping the many new business deals between
Iran and the West will soon also lead to more demand for their products. Fred Pleitgen, CNN Tehran.
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FOSTER: It's a record profit for Ford and shares are falling. Ford's stock ended the day down, off more than 1 percent.
The automaker posted a pre-tax profit of nearly $11 billion and that was thanks to a rise in U.S. sales and improvements in Europe.
The problem is the investors don't think Ford can pull that off again. Ford's chief financial officer Bob Shanks spoke with Maggie Lake and he
insisted the skeptics are wrong.
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BOB SHANKS, CFO, FORD MOTOR COMPANY: Well our guidance says in fact that we will repeat that success. Our guidance says that we'll have a 2016 that
is at least as good as if not better 2015's record results. I think the concern they have is around, you know, has the industry in the U.S. peaked. And we do admit and agree that industry volume won't go up as
much in 2016 versus 2015, but it's at a very high level. We expect it stay there this year.
And in fact, when we look at the leading indicators, we think it looks pretty good for 2017 as well.
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS ANCHOR AND CORRESPONDENT: So I guess what investors are looking for the rapid growth, then it turns the
attention overseas and there's a lot of concern. We had Tim Cook from Apple this week warning of extreme conditions unlike anything they have seen. What's your view of the global economy?
SHANKS: Well it's very bumpy and volatile, I agree with that. And it's different everywhere in the world. But when you look at our particular
sector and our industry in China specifically, we do expect industry volume to be at least as strong as it was last year if not a bit stronger.
We're off to a good start in January. The showroom traffic appears to be pretty good. So we're off to a good start and we think that it looks
pretty positive for us. We expect Europe to grow modestly. And the only area where we're really
expecting even increasingly tough conditions is in South America where the recession in Brazil is expected to get worse and in Argentina the new
government's starting to restructure the government and the economy and that's clearly going to have some pain in the short-term.
Bu overall we see the overall industry globally growing modestly in 2016.
LAKE: Are you concerned about the strong dollar?
SHANKS: Well, it's having different effects around the world, but I would say on Ford at a macro level, you know, if you look at last year, it only
had a $250 million impact on the downside. But on the positive side - because it's all related - we had a $930 million improvement from lower commodity costs.
As we look at 2016, we think we'll have less positive tailwinds from commodities but they'll still be - they'll still be there.
And maybe a bit more headwinds on exchange, but that is still positive for us.
LAKE: Yes, that's a great point. There is always a flip side to that people can benefit from.
I want to finish by talking about Europe a little bit more. You mentioned that -
SHANKS: Yes.
LAKE: -- as a bright spot. First profit in quite a few years there. Is it just that the bleeding has stopped or are we seeing real recovery?
[16:40:10] SHANKS: Well we're seeing real recovery just as we saw in the U.S. You know, the U.S. industry came back faster than the overall
economic growth was. We're seeing a similar story played out, particularly in the Euro area of
Europe. So if you look at 2015, the results were driven by quite a strong growth in
the overall industry, excluding Russia. And then we had, you know, great performance from out new products, we had favorable pricing, we had favorable mix and we had favorable cost
performance. So, it's a combination of, you know, good news in the external environment but also, you know, things that we did and that we brought to the business
as well. But overall, first profit since '11 as you mentioned.
(END VIDEOCLIP)
FOSTER: I want to bring you some breaking news that's just come in to CNN. The U.S. believes North Korea may have tested the components of a hydrogen
bomb earlier this month. It follows a review and analysis of latest intelligence after a reported test by Pyongyang on January the 6th (ph).
The U.S. still doesn't accept North Korea's claim it tested a fully- functioning H-bomb, but an official says there may have been a partial failed test.
We're returning to the auto world though. While Ford's profits surged, America's biggest car retailer saw profits fall 16 percent.
AutoNation resorted to offering deep discounts to keep cars moving off its lot, which in turn cut into profits.
So joining me now is Mike Jackson, he's the chairman and CEO and president of AutoNation. Thank you so much for joining us.
You're also having to reduce the number of new cars you buy in.
MIKE JACKSON, CHAIRMAN, CEO AND PRESIDENT, AUTONATION: Max, good evening, how are you?
Yes, the fourth quarter was challenging. We went into it expecting the growth streak to continue. We had the inventory, we spent the marketing
dollars. But it was clear the American consumer was not willing to do that and the numbers which achieved which are relatively flat on a unit-buying basis,
were only achieved with significantly higher discounts from us and from the manufacturers.
So that leads me conclusion to say, you know, vehicle volume in the U.S. has plateaued at a very high level - near record levels.
But this streak of six years of dramatic growth has probably ended and now the industry has to manage for quality and not just rely on overall growth
for its results.
FOSTER: And some interesting dynamics within the market because trucks and SUVs actually doing quite well which are traditionally expensive to run.
But not at the moment of course because gas prices are low.
JACKSON: Well, you know imagine we have gasoline prices in the United States at $2 a gallon.
It's unbelievable, and the American people have observed for the past couple of decades that whenever there's unrest in the Middle East, gasoline
prices spike up. Well this past year, the Middle East is a bigger mess than ever and gasoline prices are going down.
So the American consumer has concluded that gasoline is going to be cheap for a long time and they just love trucks in America.
They love the high seating position, they love the space and the size. So the American consumer is stampeding to trucks. In December, fully 60
percent of all vehicles sold were trucks. Now, this is very good for Ford, General Motors and Chrysler - that's their strength, for the Asians which have strength in fuel economy.
The American consumer is not as interested and we also had challenges in premium luxury - most likely related to the volatility in the stock market
that we've seen as of late.
FOSTER: But in terms of the broad market, you say it's peaking to a certain extent. But do you think it's also playing into the idea that
people are holding on their cars because they're uncertain about the future. So that market might come back in a few years, once confidence
comes back.
JACKSON: Well, I don't like the word peak because that implies you're at a pinnacle and you're going to then go down the other side.
I prefer the word plateau. You know, this industry can sell over 17 million vehicles for years. We still have tremendous replacement need that
has still not caught up from the great auto depression of '08, 09, and '10. The average age of vehicles on America is an astounding 11.5 years. So
they still - we still - have significant replacement need. So we've plateaued at a high level, and if the industry manages it well, it can do
that quite profitably.
FOSTER: OK, Mike Jackson. Appreciate your time. Thank you very much, indeed for joining us.
[16:45:02] JACKSON: Thank you.
FOSTER: Now, while Nigeria is Africa's top oil producer which meant big problems when crude prices fell there, the finance minister though reveals
lessons learned about the nation's oil dependence.
(COMMERCIAL BREAK)
FOSTER: Now Nigeria's president Muhammadu Buhari says he will not devalue the nation's currency. The naira is suffering after oil prices plummeted,
eroding Nigeria's finances. The country is Africa's top oil producer. Speaking to us at Davos, the finance minister told Richard the fall in crude prices has revealed heaps of problems within the Nigerian economy.
(BEGIN VIDEOCLIP)
KEMI ADEOSUN, NIGERIAN FINANCE MINISTER: The oil price decline has exposed some vulnerabilities in the growth that we had actually seen over other
years. And really that growth wasn't sufficiently inclusive and it didn't build enough resilience in the economy to protect us against what we all knew was
a big risk, which was that the oil price would move against us. And it now has and I think it's exposed those vulnerabilities, and as you said correctly, we're facing challenges.
What we've chosen to do is sort of reverse engineer and look at where do we want Nigeria's economy to be? And I think one of the first things we've
identified is we never again want to be so vulnerable to the oil price. We actually want to be far more resilient, we want to be far more diversified so that we're not as vulnerable to these market changes.
We're a big economy outside of oil, and that's what we really want to focus on.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: You're a big economy outside of oil except when it comes
to government revenues.
ADEOSUN: Absolutely - that's the big challenge. So oil is 13 percent maximum of our GDP, but it's 70 percent of government revenue.
So my challenge is looking at that other 87 percent of GDP and explaining and understanding why is it such a small contributor to government revenue.
And so we're improving our revenue coverage, we're improving our revenue collection strategies, we're improving our efficiencies around non-oil
revenue and bringing that into the government coffers.
QUEST: So whilst you're dealing with the high finance level of actually understanding the macroeconomic and macroprudential - mechanisms, if you
like, or structures of your economy - you have to deal with some very real poverty issues and some very real issues.
For example, subsidies -
ADEOSUN: Yes.
QUEST: -- which I realize you're saving on hugely -
ADEOSUN: Yes.
QUEST: -- as a result now and you have not having -- of having lower oil prices.
ADEOSUN: Yes. I mean, as I said, it's all about having a vision for the economy and where we see it. And we need more inclusive growth as you've
said. We grew - the GDP grew - but inequalities grew. And what we've seen with the troubles that we've had, social troubles in the Northeast, and so that
produces its own vulnerabilities which actually will come back to destabilize the economic system.
So we need to fix that. So there's a range of measures in this budget that are around building infrastructure, which we think helps to grow the
economy - the wider economy - sorting out power, sorting out transport -
QUEST: Ultimately, everything you've said I can hear the IMF going, 'Yes, excellent, absolutely!'
ADEOSUN: (LAUGHTER).
QUEST: 'We thoroughly agree with all of this.'
ADEOSUN: Oh, dear.
QUEST: But how do you stay on track with it, particularly in an economy like Nigeria where - I shall be blunt in this sense - where corruption is
endemic?
ADEOSUN: Well it's not just a change of party, it was a change of philosophy. We have a leader now that is absolutely committed to anti-
corruption. He's absolutely, resolutely committed to cleaning up corruption in Nigeria.
[16:50:01] And we're doing on the economic side is supplementing that with improved efficiency. So those are the two biggest problems we've had in
our economy. They're the reason why we don't have a lot to show for our oil.
What wasn't stolen was wasted or not invested the way it should have been. So if we put those two forces together, we think we can reposition
Nigeria's economy and come out much stronger.
(END VIDEOCLIP)
FOSTER: Nigeria's finance minister speaking to Richard last week. Now, life as a DJ is proving to be a lucrative career for some. Next, a
look inside the multi-billion dollar industry booming, more by the day as well.
(COMMERCIAL BREAK)
FOSTER: House, ser (ph), garage, jungle, grime - it's the music that's got clubbers breaking a sweat and some DJs dancing all the way to the bank as
well. The electronic music industry is now worth more than $6 billion worldwide
would you believe. And tonight we're featuring the current crop of superstar DJs.
Supposably Calvin Harris came in 17th in last year's "Forbes" celebrity rich list, just behind tennis ace Roger Federer.
Our Claire Sebastian goes to DJ school to find out how it's quickly spinning into a lucrative industry, part of our special look at music
trends in the digital age.
(BEGIN VIDEOCLIP)
CLAIRE SEBASTIAN, CNN PRODUCER: Watching in advance DJ class at New York Scratch Academy is a bit like learning a new language.
DAN CHAVEZ, "DJ DIRTY DIGITS": I can break/bring (ph) it down to like any sort of small loop. Loop like 1D, this for him is the loop button right
here.
SEBASTIAN: And all of that looping, spinning and scratching is not just for fun. At just 17, Dante) hasn't yet finished high school and is already
making $150 an hour as a DJ.
DANTE PERALLA, ASPIRING DJ: I do block parties, Sweet 16s, birthday parties, baby showers. From all my gigs I saved up to come here.
You'll see this same encoder is going to move these right here
CHAVEZ: You'll see this same encoder is going to move these right here too.
SEBASTIAN: Scratch Academy teaches around 180 students per semester, many of them like Dante hoping to turn this into a career.
The rise of DJing has gone hand-in-hand with the rise of electronic dance music - EDM.
In 2014 the industry was estimated to be worth almost $7 billion - up 12 percent from the previous year. More than half of that total came from
people paying to see a DJ at a festival or club. Gone are the days where DJs were mere record collectors confined to a dark
corner of a nightclub. Nowadays these are the rock stars of their age and their success is enough to make your head spin
Last year Calvin Harris was the top-earning DJ according to "Forbes Magazine," earning $66 million. High-profile endorsements and
collaborations with A-list musicians helping propel him to the top spot. In second place, David Guetta brought in $37 million and in third place DJ Tristo scratched together a mere $36 million.
So as more and more people are trying to crack this market, it's time to find out how it's done.
CHAVEZ: So this is going to be called the baby scratch. This is the first thing anybody learns here. Whenever you feel like you're ready, let her
go. We could play it for our audience.
SEBASTIAN: All right.
CHAVEZ: That was great.
SEBASTIAN: While at Scratch Academy, students learn on traditional turntables, with technology nowadays there are many other ways to teach
yourself.
CHAVEZ: There are CD turntables, there's controllers. You know, I even have people who come in here and they have a little app on their tablet.
[16:55:06] SEBASTIAN: After the baby scratch -
CHAVEZ: -- and three and four.
SEBASTIAN: -- there's the scribble scratch and the drag scratch.
CHAVEZ: Here we go.
SEBASTIAN: And then the real test.
CHAVEZ: So as we go now, --
SEBASTIAN: Yes.
CHAVEZ: I'm going to - we'll try to get this one in time with that one.
SEBASTIAN: Oh, God. OK. While clearly none of this is easy, the appeal is plain to see. A rock
star profession where anyone can start from scratch. -- and one --
CHAVEZ: Very nice drop.
SEBASTIAN: Claire Sebastian, CNN New York.
CHAVEZ: There we go. That was a successful transition (inaudible).
SEBASTIAN: Yes?
(END VIDEOCLIP)
FOSTER: Now that's Claire Sebastian learning a little bit more about the music industry. We'll be back with a final check on the markets in just a
moment for you.
(COMMERCIAL BREAK)
FOSTER: A final check of the markets for you before we go. Rising oil prices pushed U.S. stocks to their solid gains that you can see there.
Dow ended up 125 points. Amazon shares though fell as much as 14 percent after trading stopped before bouncing back a little bit. They're now off
around 3 percent. The onsite online retailer reported a major miss in earnings for the fourth
quarter. Microsoft shares those surged after the company reported results that were
actually better than expected. In a statement, Microsoft's CEO touts the success of the company's cloud business.
In Europe, stocks closed in the red. All the major indices ended lower as investors reacted to some poor results from the Eurozone.
Deutsche Bank shares fell after the bank reported its first full-year loss since the financial crisis.
The Dax down nearly 2.5 percent. That is "Quest Means Business." Thank you for watching. I'm Max Foster in
London.
END
