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Quest Means Business
Dow Closing at 12th Straight Record High; Trump Calls for Rise in Military Spending; Major Market Merger Close to Collapse; PWC Apologizes for Oscars Confusion; PSA-Opel deal puts UK Auto Workers Jobs at Risk; Nokia Revives Iconic 3310 Phone. Aired 4-5p ET
Aired February 27, 2017 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: Closing bell ringing on Wall Street and, wow, we are in record territory on all sort of records. We better do
a good job, sir or madam, because, yes, I've got a good feeling about her. Oh, well, I was wrong on that one. It was five. That's enough. Six.
Just wait -- seven, eight, nine. Just in case he'd forgotten how many there were. Look, this is really significant.
Before we have the data and everything else, we're up 16.5. It is a record on the Dow. It is now the 12th record high in a row. And that, in itself,
matches the record of 1987. All of which means today is a record-breaking day. It's Monday, the 27th of February.
Swinging the axe to upgrade the military. Donald Trump wants a major rise in military spending.
Market turmoil of a different kind. A giant merger on the verge of collapse between London and Frankfort.
And don't blame on the moonlight -- blame it on the auditors. PWC says sorry for the best picture blunder. We'll show you how it probably
happened. I'm Richard Quest live in the world's financial capital, where I mean business.
Good evening. We start unusual days for unusual times and unusual places. 12 days, 12 record closes. The Dow opened lower, went up, down, up, down.
And it finally ended not at the best of the day, but a thumping good gain, up 16 points over 20,838. The Dow has now matched a 30-year-old record
streak of records. So, now we've done this one. The next one to look out for is 120-year-old, 1897, record. The longest consecutive gains of
records was in 14 days of consecutive gains. They weren't necessarily record. Was in 1897. This is complicated stuff, but it does mean that the
market wants to rise, though there's an energy in this market. Paul La Monica, our guru is here. Guru, look, when we began the session, I was a
bit dubious, I mean it was down at the beginning.
PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: Yes.
QUEST: And it turned around and went up. And the view seems to be that this momentum is there and is going to continue.
LA MONICA: Yes, we're not up a lot today, Richard, just like Friday, but it is positive. We are going higher. And people that I talk to say that
they don't want to bet against the expected news from President Trump about fiscal stimulus, about tax cuts, about less regulation on banks and
possibly health care firms. We saw the insurer's meeting with Mr. Trump today.
QUEST: But look at this. Here we've got the actual Dow components. They, most of them, were down.
LA MONICA: Yes. I remember the Dow is price weighted, so if you look at some of the big winners there, you have Caterpillar, which does have a
pretty high price. So, that helps lift the overall average.
QUEST: Goldman's there, Exxon --
LA MONICA: Goldman is there, yes. These are companies with, in some cases, triple-digit stock prices. So, this isn't like the S&P 500, which,
poor them, they had their 60th anniversary, they're ringing the bell, no one cares about the S&P 500 today. It's all about the Dow.
QUEST: Just explain to our viewers, to the dear viewer, this concept of the price-weighted index versus just the S&P.
LA MONICA: The big difference between the Dow and the S&P is that the companies in the Dow that have the most weight aren't necessarily the most
valuable companies. They're the ones that have just the highest share price. Remember, Apple wasn't in the Dow for a long time because its share
price was so high, it would have had an exorbitant amount of weight on the average. It didn't get in until after it split and now its stocks are
around 130. Look at the S&P 500, it's Apple, it's Google, which isn't in the Dow, that has a big weight on the S&P 500. Facebook, Amazon, also
companies not in the Dow, Berkshire Hathaway, the companies with the larger market weighting have the bigger weight, as opposed to just higher stock
price.
QUEST: But we still look at the Dow as a barometer of a general, not market well-being, but a general economic well-being. Because those 30
stocks are crucially the big ones in the U.S. economy.
LA MONICA: At this point in time. I mean, the Dow obviously goes through their changes. I remember when Sears used to be in the Dow. Sears is now
a laughingstock of retail. Obviously, times change. But there is a history to the Dow.
[16:05:00] We're talking about a record from 1897, where we're 14 days up in a row. S&P 500, all due respect, they're celebrating their 60th
anniversary. That still makes them a relative newbie compared to the Dow.
QUEST: So, tomorrow night, President Trump gives his first presidential address. The tension in the sense that he -- you know, the president has
said, he keeps pointing at the market as being -- look at how good I'm doing on the economy. And if he gets this wrong, this market could deflate
like a souffle. I'm not saying it will crash. I'm not saying it's all over in Armageddon, but the air that is in this market could evaporate.
LA MONICA: I think there's a good chance that could happen if everything goes wrong. Here's the issue right now, I see, with the market. And even
Warren Buffett admitted it today, that he doesn't think it's a bubble right now. For all of the concerns about social policies, immigration, the ban
there, and the media being up in arms about being, you know, left out of White House press briefings, the market is still looking and hoping for
stimulus for tax reform and that's why stocks keep going higher. And stock probably aren't overvalued if Trump is available to deliver, even if it's
slightly watered down from what he campaigned --
QUEST: 13 for 13 tomorrow?
LA MONICA: Not making any bets whatsoever. It's been a nail biter the past two days. So, who knows what's going to happen.
QUEST: Paul, good to see you.
LA MONICA: Thank you.
QUEST: In Washington, President Trump's campaign promises met the federal budget. The president has given the public his first look at his spending
priorities. They include major increases for public safety, national security, and infrastructure. Proposals from the White House now go to the
departments and the agencies affected. Some like the pentagon are going to get a lot more cash, others will need to tighten their belts.
(BEGIN VIDEO CLIP)
DONALD TRUMP, U.S. PRESIDENT: This defense spending increase will be offset and paid for by finding greater savings and efficiencies across the
federal government. We're going to do more with less.
(END VIDEO CLIP)
QUEST: The message, do more with less. The government must balance a $54 billion increase for defense with equivalent cuts elsewhere. The White
House is saying that the savings will come from consolidation and cuts to where the administration has called lower priority programs. Foreign aid
and environmental protection are both facing significant cuts. CNN's Michelle Kosinski is at the State Department for us tonight. Michelle,
look, the State Department's budget is $10 billion or $50 billion -- sorry, $50 billion or whatever, compared to the Pentagon's $500 billion. The
thought that they are going to take cuts must have sent a shudder through that building, through foggy bottom.
MICHELLE KOSINSKI, CNN SENIOR DIPLOMATIC CORRESPONDENT: It did. I can't say that the writing wasn't on the wall before. Remember, even before the
inauguration, back in December, the Trump team was reaching out to agencies, including the State Department, and asking, what are the programs
and who are the people who are working on things like gender equality programs? And so, they were looking for that information. That was a
pretty good indicator that they might want to make some changes in programs like that.
They also reached out to the energy department. Tell us, if you will, who is working on climate change and what are the climate change programs? So,
that, too, you know, kind of tells you where they're going with this. But I think the shock today was to see that number increase for defense, $54
million -- or billion and then to think, where is that going to come from within, say, the State Department.
So, Yes, people don't know. This is just coming out now. The discussions haven't been had. And the numbers haven't been presented to the agencies,
precisely, to know where the cuts are coming. But they know that it's happening and we're hearing words like, big cuts and devastating cuts to
programs that many people feel are very important, including more than 120 former generals, who have now written a letter to Congress saying, look, we
need to keep the State Department at full funding. In fact, the current Defense Secretary, a few years ago, he wrote that when the State Department
isn't funded, I need to buy more ammunition.
QUEST: OK, now, on this point, because the State Department, as you're discussing, it's not only the ambassadors, is it, and the embassies and the
bricks and mortar. And a lot of that, of course, would come under fixed, anyway. It's not discretionary. It's very difficult for somebody to say,
well, we're no longer -- unless you make people redundant. But these are the programs, the soft power of the United States.
KOSINSKI: Yes, that's a great question. Because not everybody knows that there are all of these programs within the State Department.
[16:10:00] Things to combat human trafficking, for example, or to help women in developing countries. I mentioned gender equality before. Also,
aiding education and agriculture and people to people. You know, you name it. Also, to combat diseases. That also falls under the State Department.
So, it's not to say that everything's going to be cut across the board, but when you hear things like, from the director of the Office of Management
and Budget saying, well, these are going to be, you know, big cuts and people are going to have to deal with them, it raises a lot of questions --
QUEST: In a sentence, in a sentence, Michelle, do you think Rex Tillerson would have signed on if he knew this was coming?
KOSINSKI: I think he had to have known that some of it was. In fact, on his first day, he said, I'm going to need to make some changes here. It's
not necessarily going to be comfortable, but the way they see it is to make the government more efficient. Some of that surely is good, but when you
look at the other side, all of these former generals saying, now is not the time to retreat, on things that, you know, prevent disease and keep peace,
you can see the split there.
QUEST: Good to see you, Michelle. Thank you, as always, for bringing us up to date on the State Department side of it.
The U.S. national debt is at nearly $20 trillion. But fair due, remember, the U.S. economy is sizably larger. And the Trump administration is
warning that the government must tighten its belt. Maya MacGuineas, heads the committee for a Federal Responsible Budget -- or Responsible Federal
Budget and she told me the president is looking in the wrong places to make cuts.
(BEGIN VIDEOTAPE)
MAYA MACGUINEAS, PRESIDENT, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: It's good he's paying for his spending increases. This country has record
levels of debt. One of the first rules of that is, pay for all your new policies. If you're going to have tax cuts or spending increases, you need
to pay for those. But at the same time, I would say that the part of the budget where he's going to pay for his increases is a very small sliver of
our overall budget. It's domestic discretionary. It's only 15 percent of the budget. It's only 5 percent of the spending growth. And I think he's
looking in the wrong areas of the budget, if not only does he want to pay for his new policies, he wants to deal with this huge, massive debt that
he's talked about before. And that faces the country.
QUEST: But he can't go to the places where the bigger part of the budget are. Because the election promises said he wasn't going to touch
entitlements, social security, Medicare, Medicaid, and all of those. So, he's left with the discretionary part, which is the oldest conundrum in the
U.S. federal budget. It's relatively small!
MACGUINEAS: Well, that is exactly right. And this is so far, a president who we've seen on one hand talks about the importance of dealing with the
national debt and criticizes past presidents for having a big run-up in the debt. And on the other hand, doesn't want to put forth any of the tough
choices that we know are part of dealing with the debt. If you want to deal with our debt, there's three things you have to do. You have to
control government spending. You have to raise revenues, and you have to grow the economy.
He's been focusing on growing the economy in a way that's not, frankly, realistic. The growth numbers that we've been hearing about, 4, 5, 6
percent, not even close to realistic. But what he hasn't been willing to do is say, we have to make some hard choices, some budgetary trade-offs,
and the most important one is going to be leveling with the voters that entitlements, Social Security and Medicare, cannot continue as promised.
QUEST: He has an even more tricky problem in that he's also promising tax cuts, or at least reorganization. Now, if you accept under traditional
economics, that the tax cut loss of revenue will pretty much happen immediately, because that's the way it happens, but the future revenue
growth, if such it arrives, doesn't happen until you're two, three, or four after the tax cuts, is it?
MACGUINEAS: Yes. And let me put a finer point on that. Because there are many people who mistakenly argue tax cuts pay for themselves. And even if
they recognized your accurate point that it hurts the deficit in the short run and it can grow the economy in the long run, it does not grow the
economy, to the point where you generate more revenues than you lost. In fact, you only get back a certain, a small fraction of the amount of
dollars that you lost in tax cuts.
So, if you want to cut taxes, and I would suggest now is not the time for us to be considering that, but if you want to, you have to raise revenues
somewhere else or cut more spending and so far, he's barely finding the office to pay for his new initiatives on the spending side. It would be
very difficult to find cuts of the trillions of dollars these tax cuts would potentially lose. He really should be focusing on reforming the tax
code. Cuts should not come until we get our budget into better shape, which right now we're not on course to do.
(END VIDEOTAPE)
QUEST: And we'll hear more from the President of the United States on his budgetary priorities when he does his presidential address tomorrow.
[16:15:00] When we come back after the break, two suitcases, two sets of envelopes. One horrible, horrible mistake.
(COMMERCIAL BREAK)
QUEST: Strike up the orchestra. PricewaterhouseCoopers is apologizing tonight after its epic mistake, which spurred panic and chaos at the 2017
Academy Awards. In the biggest moment of the most important award show in the world, the wrong film was crowned best picture. The presenters Warren
Beatty and Faye Dunaway called "La La Land" to the stage, when as you are now aware, "Moonlight" was the winner.
(END VIDEO CLIP)
JORDAN HOROWITZ, "LA LA LAND" PRODUCER: I'm sorry, no. There's a mistake. "Moonlight," you guys won best picture.
UNIDENTIFIED MALE: This is not a joke.
HOROWITZ: This is not a joke. I'm afraid they read the wrong thing.
(END VIDEO CLIP)
QUEST: For 83 years, PricewaterhouseCoopers has overseen the ballot process at the Oscars. Amid the panic on the stage, you can see these two
people. That's Brian Cunningham and that's Martha Lewis. They're partners at PWC. And their year-round job is to handle the Oscar ballots. And they
are very proud of the way they've done it so far. There are two suitcases involved. Two briefcases. One on one side of the stage, ready, just in
case anybody decides to come on from that side, and the other, on the other side of the stage. Each has a full set of envelopes with the winners.
Now, the idea is, they hand the presenters the envelopes and last night, Warren Beatty and Faye Dunaway, they simply read the card that they were
given.
(END VIDEO CLIP)
WARREN BEATTY, WRITER, DIRECTOR, ACTOR: And the Academy Award for best picture.
FAYE DUNAWAY, ACTOR: You're awful. "La La Land".
(END VIDEO CLIP)
QUEST: So, what happened? Well, here's probably, probably, we don't know, but this is a good guess, of how the mistake happened. Emma Stone won the
award for the best actress, for "La La Land." Emma Stone came in, she was given her card, she then read it, gave her speech, and she left, with her
card. Warren Beatty, on the other side, must have been handed the second- best actress card, because he came in from the other side. When you look at both briefcases, you see the envelope for best picture was still in both
briefcases.
(BEGIN VIDEO CLIP)
[16:20:00] BEATTY: I opened the envelope and it said Emma Stone, "La La Land." That's why I took such a long look at Faye and at you. I wasn't
trying to be funny.
(END VIDEO CLIP)
QUEST: Joining me now, Bruce Weinstein, is the chief executive for the Institute for High-Character Leadership. Good to see you, sir.
BRUCE WEINSTEIN, CEO, INSTITUTE FOR HIGH-CHARACTER LEADERSHIP: Good to see you, buddy.
QUEST: Tell us all about this. What happened? About how Pricewaterhouse handled this situation.
WEINSTEIN: What PricewaterhouseCoopers did was an example of high character. What they did was honorable and it's disgusting they're being
vilified in the international press. Disgusting.
QUEST: Hang on a second. Hang on a second.
WEINSTEIN: OK.
QUEST: Not sure I agree with you here.
WEINSTEIN: I'll explain why I'm right. Here's the thing, when you make an honest mistake, as they did, and take responsibility for it, that will
encourage more people at the company from doing that sort of thing. If you castrate people or vilify people as CEO Joe Block told me -- CEO of another
company told me a few minutes ago -- you'll discourage honest people from coming forward. So, what they did is to be emulated --
QUEST: Hang on a second. They admitted they were wrong, because their fingers were caught in the till.
WEINSTEIN: But look at what you -- you see, you showed a red envelope with very clearly demarcated letters here. But if you look at the envelope that
Warren Beatty and Faye Dunaway had, it is very difficult to read this. And it is not their fault. They're being vilified --
QUEST: No, it is their fault. The question is of course, how they handled it --
WEINSTEIN: No, it is not their fault. They were given --
QUEST: Not Warren Beatty, I mean. I'm talking about PricewaterhouseCoopers.
WEINSTEIN: Yes, they made a mistake, but the thing is, they took responsibility for it. And you know what .
QUEST: They had no choice to.
WEINSTEIN: No, no, no. Several years ago, on this network, Tony Hayward, the head of BP, blamed the Deepwater Horizon and failed to take
responsibility for his company's mistakes. And there was this international cry, as you'll recall, on your show, when it was made clear
that he should take responsibility for it. He did the wrong thing at the time. He owned it later.
QUEST: All right, so, your argument is basically, give them credit, because they've admitted they screwed up?
WEINSTEIN: That is a big thing in corporate America and international corporations to take responsibility at the highest level.
QUEST: Isn't that the starting point? When you do something wrong -- isn't that the starting point? When you do something wrong, you admit it?
WEINSTEIN: But how often does that happen? And again, on this network, a major CEO pushed the blame on to other people. They should be exalted for
a what they did.
QUEST: Now, you're an ethics expert in this sense.
WEINSTEIN: Yes.
QUEST: One of the issues I've got is that Warren Beatty, when he saw -- he clearly knew something was wrong.
WEINSTEIN: Yes.
QUEST: But we are so conditioned not to ask for help anymore.
WEINSTEIN: Well, this is a leadership lesson here. In the future, I'm sure that if there's any mistake, like what happened with Sammy Davis Jr.
Many years ago, somebody will say, hey, wait a minute, this is wrong. But in the heat of the moment, 83 years PricewaterhouseCoopers has been
identified with the Oscars, this had never happened before. It's kind of hard to know when there's no history of this, what to do.
QUEST: What should he have done?
WEINSTEIN: Ideally, it would have been great to say, um, excuse me, I think this -- it seems to be best actress, I'm not sure? Can somebody
please come up and help me? But the thing is, Warren Beatty is an international treasure. We should be honoring this man, not castigating
him. And another thing is absolutely appalling, his age is being made an issue, Faye Dunaway and Warren Beatty. In fact, someone on the way into
CNN told me, while you know, they're older people they should be -- no, it had nothing to do with them. They did the right thing and the honorable
thing.
QUEST: Is this your book?
WEINSTEIN: It is. The good ones.
QUEST: "Ten Crucial Characters of Higher Quality Employees."
WEINSTEIN: You're one of the good ones, Richard.
QUEST: You're too kind. Thank you very much, indeed.
WEINSTEIN: Thanks.
QUEST: As we continue, the "La La Land" producer who announced and corrected the mistake was Jordon Horowitz. He told CNN, just one of those
things.
(BEGIN VIDEO CLIP)
HORWITZ: I'm a little bit in a daze, but, you know, it's what happened. And I'm glad that I -- I'm glad I got to stand up there. I'm glad I got to
invite my friends from "Moonlight" up there. I was just saying that, you know, it's become an incredible community of people. And I've become
particularly close with a lot of the people in that cast and on that crew. And it was, you know -- hey, things happen.
(END VIDEO CLIP)
QUEST: They're all taking it with a certain equanimity. Brian Stelter is with me and have been speaking to Horwitz. He joins me now.
BRIAN STELTER, CNNMONEY SENIOR MEDIA CORRESPONDENT: Things happen, that's all? Things happen.
QUEST: We're all human, as our last guess said.
STELTER: But as the cover of the "New York Daily News" said this morning, you had one job. Yes, there is some easy sort of ribbing happening at
PricewaterhouseCoopers, but we're seeing how seriously they're taking this, by doing an investigation, saying they're going to get to the bottom of it.
I interviewed Jordon Horwitz, right before he went to bed after staying up all night celebrating, because "La La Land" did win six awards. He said
he's not angry. He's not expecting an apology from the Academy or from the accounting firm. He said, this is just one of life's curveballs, but he
does admit, he knows he's in rare form. He went up and accepted the award. He gave an acceptance speech, and then he got to present the award to the
real winners. Who else has done that before?
[16:25:00] QUEST: It was the second chap after him that continued with an acceptance speech. I can't remember who that was. But one of the other
producers, continued with his acceptance speech, even though he knew -- because he said, oh, by the way, we lost.
STELTER: We lost. There was this commotion behind him and that's why Jordan Horowitz is getting so much praise today. Talk about leadership
skills. Horowitz stepped up, took responsibility, and was so gracious, handing the statue over to "Moonlight". He said to me today, I don't want
this to distract from the success of "Moonlight," this beautiful film and these beautiful people deserve the award.
QUEST: Excellent. Good to see you, sir. Were you there?
STELTER: Oh, no, I was watching on the couch. I had almost turned off the TV when Horwitz came up and said something had gone wrong.
QUEST: You stayed up that late?
STELTER: Oh, of course. Must-see TV. Ratings down a little bit this year, but still a big, big show.
QUEST: It's the second lowest I've just seen.
STELTER: The numbers have been trending downward, but only down 5 percent from last year. Still, the Oscars, still almost bigger than anything else
on TV.
QUEST: Big changes, as well. Thank you, Brian.
STELTER: Thank you.
QUEST: One of the big changes, Netflix and Amazon, of course, won Oscars. The Netflix, chief exec, Reed Hastings, claims, it has lots of Oscar-worthy
stories as the streaming company is delighted now to be celebrating its first academy award. "The White Helmets" which follows volunteer rescue
workers in Syria won best documentary short. Kristie Lu Stout spoke to Hastings at Mobile World Congress in Barcelona. Obviously, the pride of
winning your first, your maiden Oscar.
(BEGIN VIDEOTAPE)
REED HASTINGS, CEO, NETFLIX: You know, it's great for the filmmakers and for the Syrian people to have their story be told and it's such an
incredible story. They're such amazing volunteers. It's really satisfying for us.
KRISTIE LU STOUT, CNN ANCHOR, NEW STREAM: now, Netflix documentaries have been nominated before, but is this your first Oscar?
HASTINGS: First Oscar ever. So, we're so excited about it. But we've had many nominations and of course, we've got so many stories that are Oscar
worthy.
LU STOUT: And do you feel that your investment in original content and documentaries is paying off, especially in terms of subscriber growth?
HASTINGS: I don't know if it's paying off. We don't look at it that way. We look at it, is it a great story? Are we proud to be associated with it,
whether it's the "13th" or "Audrie & Daisy", or "The Square", many documentaries and many features and TV series. So, we're just trying to
make people enjoy Netflix.
(END VIDEOTAPE)
QUEST: And a full interview with Reed Hastings on "NEW STREAM", which is on Tuesday, 1:00 p.m. London, 9:00 in Hong Kong.
Soccer changes play matchmaker to buyers and sellers. Now, getting two exchanges together requires a regulator, and the European regulators are
demanding more than the stock exchanges are prepared to give. We continue QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
[16:30:16] QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. I'll be speaking to the British lawmaker trying
to save more than a thousand Vauxhall jobs in his constituency. And Nokia brings the indestructible 3310 back from the dead. But before that, this
is CNN and on this network, the news always come first.
In the last few moments, the deputy leader of Al Qaeda has been killed in Syria by a missile strike directed by U.S. intelligence. Abu al-Khair al-
Masri was in a car when the strike took place on Sunday.
U.S. President Donald Trump, is making defense spending a main focus of his budget. He's expected call for a 10 percent increase military spending and
what he's described as a public safety, national security budget. Officials said, most federal agencies and lower priority programs will see
cuts.
Meanwhile, the Pentagon has sent Mr. Trump some early options for ramping up the fight against ISIS, one of his campaign vows. Administration
officials have been meeting today to hash out a way forward, it's believed, for the first time they're considering sending U.S. ground forces into
Northern Syria.
The European mega exchange merger is unraveling and doing so fast. The tie-up between the London Stock Exchange and the Deutsche Borse would have
created an exchange big enough to take on the American rival New York stock exchange and its various parents.
Now, this is what had happened so far. The LSE has agreed to sell off part of its clearing business, the London Clearing House, to Euronext. It had
already exceeded two regulators' requirements or requests or demands, I should say, to sell off LCH. Then late in the day, there was a new demand
to sell the bond trading platform, in Italy. MTS, of which the LSE has a 60 percent share, MTS is the largest player in the Italian bond market.
And the London Stock Exchange says that it is a strategic investment for the London Stock Exchange, and is describing the request to sell it as
disproportionate.
The problem is, if, if they do not sell it, then the tie-up between these two becomes untenable, unless the European regulators decide to change
their mind. Alastair McCaig is the director of investment management at Fern Wealth and joins me now. Is it likely, do you think that now the LSC
has said, we ain't selling MTS for these valid reasons, that the commission and the regulators will say, OK, we'll find something else for you to do?
ALASTAIR MCCAIG, DIRECTOR OF INVESTMENT MANAGEMENT, FERN WEALTH: Evening, Richard, I think that's very much the case, this is a well-trodden path, as
far as the LSC is concerned. There's been a number of speculative mergers over the course of time and this is actually the third attempt that the
Deutsche Borse has had at trying to merge with the London Stock Exchange. In reality, the MTS system is a part of an integral part of their overall
exposure to the Italian markets and stripping that out in itself is complicated for the London Stock Exchange. Added to which they would also
need to get approvals from Brussels, from Germany, from France, and Italy, as well, making this almost impossible to achieve by that 11:00 deadline.
QUEST: So, the regulators must have known all of. Therefore, either, they are expecting this deal to fail, the Borse and the LSC, or they are
prepared to compromise. Which do you think it's going to be?
MCCAIG: I think it's more likely that they'll let it fail, rather than the compromise. You've got to remember that it's highly likely we're going to
see Theresa May, the U.K. Prime Minister, trigger Article 50 at the end of March, or certainly, at some point in time in March, and there are a huge
amount of question marks over what sort of passporting rights the City of London will have. And this is an intricate part of their business arena in
Europe. And to muddy the waters, before such an important occasion does seem rather precarious.
QUEST: Of course, that shouldn't, shouldn't, I say, have weighed on the regulators' mind, should it?
[16:35:00] Look -- we're all grown men and women watching this program on a Monday evening. But the reality is, what you're telling me, perish the
thought, is that politics may have got involved here.
MCCAIG: Richard, you will excuse me if I'm a touch more cynical, having spent the best part of 20 plus years working in the City of London to
believe that the regulators aren't completely ofay with what's going on in the background here. It is a complexity. There's already been rumors
doing the rounds in London that the New York Stock Exchange is looking on with a real attraction towards the London Stock Exchange. Difficult to
believe that they would want to act, again, with such big question marks over how exactly the European landscape is going to look in 12 months'
time, let alone two years.
QUEST: Final question, completely off the subject, just give me the view from London, please, sir, the view from London, on what we are seeing with
12 successive record rises in the Dow? Is the view from London that this is sustainable?
MCCAIG: I must submit, I heard on your show earlier, 12 in a row is quite an impressive run, and these runs tend to not last too much longer than 9
in a row for anything. There is maybe a city saying that we would use, which is, buy the rumor, sell the news. I think there's a lot of blue sky
already being factored in as to what Donald Trump's speech is going to contain tomorrow. And unless it really has the full package, I think the
city might be a little bit disappointed, certainly here in Europe, and in London, and we may well see markets just deflate, I believe was the word
you used earlier on in the show.
QUEST: Like a souffle. Like a souffle, sir. Thank you. Good to see you. Come back again please.
MCCAIG: Good to talk to you, Richard.
QUEST: We need your guidance on these issues. Thank you.
The former British Prime Minister, Sir John Major, has hit out at the U.K. government on what he's calling overoptimistic and unreal expectations
about Brexit. The government's vowed to protect jobs at the carmaker Vauxhall, which is the British division of General Motors and is the target
of a potential takeover by the French rival PSA. Justin Madders is a member of parliament for Ellesmere Port in northwest England, where more
than 1000 people were at the very famous Vauxhall plant there. Good to see you, sir. Thank you for taking time to talk to us this evening. Have you
received the sort of assurances from either the Prime Minister or, indeed, from PSA, that if this deal goes ahead, your constituents, it may not be
safe, at least we won't be harmed?
JUSTIN MADDERS, UK MEMBER OF PARLIAMENT, LABOUR PARTY: I think we've had those kind of assurances, yes, and the statements from PSA are that the
existing production runs will be guaranteed not until 2021 or thereabouts. And that's really the position that we're in pre, these takeover talks.
QUEST: The reality of course, Mr. Madders, is that whatever promises are made in the heat of a takeover battle, unless it's enshrined in law and
signed in blood, six months down the road, circumstances change and things can -- you know, they're just basically promises made, promises broken.
MADDERS: Well, that's the sort of thing that's normally leveled against politicians, rather than businessmen. But certainly, if there is trouble
down the track, we will be calling on the government to use all the tools at their disposal to guarantee jobs in the plant and also the plant at
Luton. And I think with our track record, we've shown that the union's management and government can actually get together and put a pretty
compelling package together.
QUEST: Are you sad that GM is wanting to sell? GM has been around in Europe for 50, 60 odd years, if not longer. And, I mean, Opel is often
seen as being the more problematic part of the company in Europe than say, Vauxhall.
MADDERS It's actually about 90 years --
QUEST: Thank you.
MADDERS: Yes, I think the important thing from our perspective is that we're sort of protecting the jobs. And who the owner is, as long as it's
someone we can talk to, someone who recognizes the importance of workforce and management working together. And also, recognizes the importance of
the brand and the British market. You know, those are things that we ask whoever the owner is.
QUEST: Finally, I want to just go to -- you may have heard my introduction, Sir John Majors comments about the unrealistic expectations
that people have now got about Brexit. Do you think your constituents, in Ellesmere Port -- do you think that they have an unrealistic expectation of
now the referendum has been held, of what it will mean as it unfolds?
MADDERS: Well, I think it's fair to say no one knows, exactly, what it will mean.
[16:40:00] We have had all sorts of different ideas put forward and it's certainly true to say that some people voted on the basis, for example,
that the NHS would get 350 million pounds extra a day, which was never a serious proposition. There's also all sorts of conditions being put
forward about controlling immigration. Now, some of these things may be possible to deal with. Some of them may prove more problematic. I think
it's a job of people like myself to make sure that we get the best possible deal that protects jobs and protects investment in the country. And really
holds to account those people who made some of these promises.
QUEST: Good to see you, sir. Thank you for taking time to talk to us. Appreciate it.
As we continue tonight on QUEST MEANS BUSINESS, the old is new again. One of the best-selling mobile phones of all time makes a welcome return. And
indeed, there's a new Blackberry on the market coming soon.
(COMMERCIAL BREAK)
QUEST: Doesn't that tingle and send a shiver up your spine? The Nokia 3310 is back, more than 15 years after it first launched. Let's have a
listen again. New phone features talk time, 22 hours and battery, one month on standby. And that's just about all it does. I mean, don't try to
make a cup of tea. I think it's even got the weird texting, where you actually have to push it a number of times. Nokia isn't the only brand
coming back. All of my Christmases at once. Blackberry's has unveiled the KeyOne. A new secure Android phone with a smart keyboard. It's produced
under license by the Chinese company TCL.
And Samsung is focusing on tablet. The presentation is interrupted by a Greenpeace protester. Apparently, the actual presentation went truly,
dreadfully wrong in terms of the technology. China's Huawei has a new flagship smart phone the P10. It's aiming to become the number one
smartphone maker within five years. Lance Ulanoff, is Mashable's, Editor- at-Large. Spinning with all these, head spinning, what do you make of it all?
LANCE ULANOFF, EDITOR-AT-LARGE, MASHABLE: The field is wide open, because you don't have Samsung with the S8 out there. They're just doing tablets.
Obviously, it's months before we see Apple's iPhone 8 or iPhone X. So, this is a real playground for all the other guys who may even struggling a
little bit. LG went after modular phones and fell flat on its face.
QUEST: But none of the phones -- let's be blunt about this. There's the Samsung Galaxy and Note which have a certain cache and people love them.
There's the iPhone, we all know, people love or hate. But once you move away from them, nobody gets too excited about the others.
ULANOFF: It's true. And they also sometimes feel like they're fighting for table scraps. The market share for Samsung and Apple are so much
greater -- particularly Samsung, so much greater on the Android side, they really own Android.
[16:45:07] It's funny, because there was a time when we thought LG was really surging and the G series, the G6 is a return to form for them. But
they've got to climb back into it.
QUEST: Who's going to buy the Nokia 3310, the new one, who's going to buy it?
ULANOFF: You know, people love -- they've got that sort of -- the romance of it. You know, it's an indestructible phone. It's got that classic
Nokia design that we all miss. And everybody always wonders, how do you take today's technology and squeeze it something that small, that elegant,
that fun to use? But there is a harsh reality --
QUEST: What will it do?
ULANOFF: I mean, it will make calls. It will play some simple games. It has a 2-megapixel -- let me say it again, 2 megapixels. That's just like -
- it's like a phone that's also a time machine. But I think some people buy it because some people really just want to make calls and have 22 hours
of call time is rather incredible. And of course, you've got, if you really miss your keyboard, you've got blackberry back in the game --
QUEST: Yeah.
ULANOFF: I knew you'd --
QUEST: Here's my classic, classic, you can go the place of everywhere.
ULANOFF: The only way they can survive is by having somebody else build it. You know, they've got TCL doing it.
QUEST: You're not impressed with this keyboard?
ULANOFF: I think we've learned that we don't need it. We really don't need it. We've survived without it.
QUEST: You may have. You may have.
ULANOFF: Blackberry's market share is below 1 percent.
QUEST: But this is on an android phone.
ULANOFF: Yes, it's all android now.
QUEST: You -- you -- if the 3310 can come back, so can Blackberry. I'll be the last one standing.
All right, news just in to CNN. SpaceX and its head Elon Musk have announced a plan to send two people around the moon. Seriously, I'm not
making this up. They're private customers, they're not astronauts. Elon Musk says, the two passengers have put down significant deposits. The
mission is due to launch next year. Our space analyst, Miles O'Brien, is on the phone. Miles, hang on. They're not -- tell me what this is about.
Musk is sending two people to orbit the moon. In what vehicle? And what time scale?
MILES O'BRIEN, CNN AVIATION AND SPACE ANALYST (via phone): Richard, the plan is to use the Falcon Heavy. This is an upgraded larger version of the
Falcon Nine, which Elon Musk has had recent success and recent failures with. And it will fly the first time, sometime this summer, it is hoped.
The idea is that at the end of 2018, two paying passengers will strap in to a Falcon Heavy, which has about two-thirds of the thrust of the old Saturn
5, and go off on their way to the move on an Apollo 8 style mission, meaning just around the moon they go, no landing.
And presumably have paid a significant amount of money to do so, with deposits already in the bank. So, it's quite possible, as a matter of
fact, you can almost take this to the bank, that Elon Musk, Falcon, and these two individuals will beat NASA back to the moon.
QUEST: Now, hang on a second. Will it be an astronaut onboard? Obviously, you don't need an astronaut onboard. The whole thing can be
controlled from the ground. Is that the idea? Will there be anybody steering the thing and pulling the levers and pushing the buttons?
O'BRIEN: All these things can be done from the ground, of course, and these people who are flying along for the ride I'm sure will be put through
a significant amount of training for all kinds of contingencies, but it doesn't require Chuck Yeager or Neil Armstrong, necessarily, to make this
happen. So, this is, with the sophistication that we have and automated flight control, something where somebody can just go along for the ride.
QUEST: We look forward to finding the price. Miles O'Brien, good to hear from you, sir. Thank you for coming on so quickly and talking about that.
When we come back, Saudi Arabia is trying to build a future beyond oil. You'll know about that. We'll hear from the chief executive of the King
Abdullah economic city after the break. It's QUEST MEANS BUSINESS.
[16:50:00] (COMMERCIAL BREAK)
QUEST: Talk about building big, Saudi Arabia is building one of the most ambitious construction projects in the world. It's the King Abdullah
Economic City. It's $100 billion -- Yes, I said $100 billion development. So, the idea is simple. To create a metropolis of the future and end the
country's reliance on oil. It's the business-friendly infrastructure that's being put in place. Lower taxes, lower regulation. So where is
this place? It's 120 kilometers north of Jedda. You've got Riyadh over there. You've got Jedda over here and it's 120 kilometers north over, on
the coast.
The economic city is about one hour from Mecca Medina. The state -- it will have a state of the art deep water port, road rail links, and possibly
a possible population of 2 million people. It's also going to be targeting families and schools and major international companies, as well. Fahd Al-
Rasheed is the chief executive of the King Abdullah Economic City. Good to see you, sir. How much is built so far?
FAHD AL-RASHEED, CEO, KING ABDULLAH ECONOMIC CITY: 15 percent.
QUEST: 15 percent?
AL-RASHEED: Yes.
QUEST: Why is there the need for this?
AL-RASHEED: You've got a young population, 65 percent of the population of Saudi Arabia is below 30, so we need housing. But we really need economic
development. So, we have huge potential for logistics. That's why we're building one of the biggest ports in the world. We're already at 3 million
container capacity, going to 4 million. But ultimately ambition is 20 million containers.
QUEST: Right. Now the important thing here, of course, is that this is part of the deputy Crown Prince strategy of 2030, isn't it, and into the
future?
AL-RASHEED: The kingdom has a huge ambition for diversifying away from oil. We are a non-oil company, because we don't have oil equity investment
from the government or oil revenue. So, we are already showing --
QUEST: Who's paying for it?
AL-RASHEED: The private sector. We are actually the first public listed city in the world.
QUEST: It's a publicly listed -- but in reality, where is the money coming from. It is -- obviously, it's a prestige project, the Saudi government
isn't going to watch it fail. Therefore, you are effectively sovereign.
AL-RASHEED: Well, you can't have a project of this scale and size without public/private partnership. That's the way we say, this is one of the
biggest innovations of the private/public partnerships in the world. Where you have the private sector really leading the development. But there is
no public equity investment, in terms of government ownership in the project.
QUEST: But at some point, the government going to have to get involved in the sense of roads or infrastructure, or were you hoping to do the entire
thing from private --
AL-RASHEED: Right now, we have done everything privately. However, we have to be connected by roads from outside. We have high-speed rail that
connects us with Mecca, Medina and Jedda, so we have this public investment. We are connected to the national grid.
QUEST: Give me an idea of how Saudi and the Saudi people are adapting to this idea that, you know, I mean, 98 percent of the economy is oil-based at
the moment. It's well up in the 90s at the moment. So, to shift away from that, even if it's 85 percent, even getting down to 70 percent, is going to
require such a dramatic change.
AL-RASHEED: Well, it is difficult. You have a country that's been dependent on oil revenue for so long, but it is also easy. What we've seen
is that we built a port, within three years, we got to become a 3 million container port. Which is massive. This year will be the largest port on
the red sea. We have an industrial zone of roughly 120 companies from around the world, Pfizer, MARS, and the like first time investing in the
region.
Why are they coming? What are you offering? What's the hook here?
AL-RASHEED: The hook is that this is a global economy right now, for MARS, we are fifth largest market for them in the world.
[16:55:03] But there's a huge potential in the Red Sea region. The Red Sea region or the 24 countries around the Red Sea have 650 million people now.
So, they want to address this market. The address it through Saudi Arabia and then they can distribute in the region. We are going to be a billion
people by 2030.
QUEST: So, what's your day for completion?
AL-RASHEED: 2035, but effectively, we're operational and we're having lot of fun doing it.
QUEST: Can I come and have a look?
AL-RASHEED: Yes, you should, please.
QUEST: There you go, ready at first. I'll come and have a look. Thank you very much, sir. Good to see you. Thank you very much, indeed. We
will have a Profitable Moment after the break. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment, one envelope, the other envelope, best picture, best actress, what we saw, of course, was a classic case,
probably, of human error. But why, perhaps, this is so different or so interesting is that PricewaterhouseCoopers makes such a fuss in the weeks
before the Oscars about integrity, planning, and the steps they take. Some, arguably, would say, in a hubristic attempt to say they've been doing
it for more than 80 years and they've never got it wrong.
Well, guess what, somebody just handed over the wrong envelope and the rest is history. There's a moral here, of course. Don't beat up on
Pricewaterhouse's search. Everybody makes mistake and at the end of the day, all you do is you have to apologize and try to make sure it doesn't
happen again. And maybe don't boast about how good you are in the first place. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in
New York. Whatever you're up to in the hours ahead, hope it's profitable. Good night.
END
