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Quest Means Business
Apple Promises Massive Investment in U.S.; Dow Roars Past 26,000; Bitcoin Price Sinks Below $10,000; Ford Shares Suffer Sharp Sell-Off; YouTube Takes Action on Controversial Videos. Aired 4-5p ET
Aired January 17, 2018 - 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 HOST: Quite a remarkable day as the closing bell is ringing on Wall Street, all of the three major indices are at
record highs, a day that was down to begin with or at least not very positive, suddenly roared up and that is a pathetic gavel to bring trading
to an end on a rambunctious day, Wednesday, it's January the 17th.
And the day tonight, the United States of Apple. Tim Cook unveils a massive investment on the company's home turf on the back of the tax cuts.
The bulls are charging on Wall Street, records all around with the U.S. market. We'll give you chapter and verse. And when bitcoin goes bad the
price sinks below $10,000.
I'm Richard Quest live in the world's financial capital, New York City, where I mean business. Look at the numbers.
Good evening. We begin tonight with the U.S. economy getting a blockbuster announcement from Silicon Valley, as Wall Street sets another record. A
remarkable claim from Apple. The tech giant says it will contribute $350 billion to the U.S. economy over the next five years. And it will do so by
investing in manufacturing, repatriating this vast cash pile and creating 20,000 jobs. This came late in the afternoon.
At the same time, we are just getting to grips with the Dow Jones which roared back to finish above 26,000 for the first time. We went through
that yesterday, but it fell back, and it was down. All three indices at record levels and you just got a look at this. I need to point this out in
great detail to you because Boeing, the tear on Boeing just does not stop, up 5 percent after it was up 3 percent earlier, and it's about 14 percent
up so far for the year.
Apple up 1.5, 1.6 percent on its announcement. IBM up nearly 3 percent. The only laggard in all of this which I'll get to in more detail, down
here, Goldman Sachs on banking numbers off 2 percent and look at this, having lost 3 percent yesterday and earlier losses, GE is down 5 percent.
This is the story of the day and if the story of the day, at the heart of it is the Apple. Let's begin with Apple and Clare Sebastian who is with us
surrounded by -- I don't know what the collective noun of Apple products, probably a wealth of Apple products.
CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: A bushel of apples.
QUEST: Thank you, right. What did Apple announce?
SEBASTIAN: So, they are saying that they are going to indirectly contribute $350 billion to the U.S. economy over the next five years. But
for this, you know, Richard, they say they want to give back. That this is the right thing to do. But this is the right thing to do for Apple, make
no mistake. They revealed --
QUEST: Let's just go. They've got a cash pile overseas of how much?
SEBASTIAN: 250-odd billion.
QUEST: There's 250 billion which they can now bring back to the United States at the lower tax rate having paid the levy.
SEBASTIAN: Exactly. And that is the crux of this. They revealed today that it's 38 billion with the amount of tax that they're paying on that 250
billion overseas. Now that is around 15 percent which is at the higher end of what the Trump administration said that would be for that repatriation
tax. But under the previous tax rate of, say, 35 percent, they would have been paying in the region of 80 to 90 billion on that tax pile. So, in a
sense they're saving 50-odd billion and they're only reinvesting directly 30 billion in capital investments.
[16:05:00] QUEST: Well, arguably the rest might go into other areas or --
SEBASTIAN: Or back to shareholders.
QUEST: Or back to shareholders. OK, so they're going to do that. Their future tax bill will be lower.
SEBASTIAN: Right.
QUEST: But on a systemic basis, Clare, does it make more sense competitively to be doing more manufacturing and to be doing more business
here. Where are they doing business?
SEBASTIAN: The Americans is their biggest market. That is where they sell the bulk of these products. Even though, Richard, including this one from
2004, and they all say assembled in China or various other countries. Most of the stuff is still assembled overseas. And I want to point out that
they announced a new campus today. We don't know where that will be yet. Another potential HQ2 fight like we saw with Amazon. But that at the
primary function of that initially at least, will be a technical customer support, so that makes real sense for Apple. Customers in the Americas
want their technical support in the Americas.
QUEST: Let me get to the heart of this -- and we'll be talking to Stephen Moore about this in a moment or two. Is this a commercial decision they
are making? I mean, the White House has welcomed it. The White House has said how please pleased they are and this is a justification, and this
reinforces the president's message. Is this being done on commercial grounds do you think?
SEBASTIAN: Yes. Because they're saving so much money on tax. Tim Cook said several years ago he would love to bring this cash pile back, but he
would have to pay 40 percent on it. Today he's paying 15 percent on it, plus it's a good PR move and that's what Sarah Sanders said today.
QUEST: Good news keeps coming for American workers just like POTUS from the United States promised it would when tax cuts and reform passed. There
is the statement from the White House.
SEBASTIAN: And 20,000 jobs is good news. That's a 25 percent bump or so on Apple's workforce in the United States, but I think it's crucial in
these instances to look at the small print, Richard.
QUEST: Thank you very much, Clare Sebastian.
Now, to the trading post. The QUEST MEANS BUSINESS trading post. And Green across the world or at least across the United States markets.
Absolutely record highs. This Dow went up like a rocket in the afternoon, having been down in the morning and it went up to by a 1.25 percent. The
S&P 500, the Nasdaq, the tech-heavy stocks, it's the Dow's biggest gain since November, the first time it's closed above 26,000 and Boeing led the
way.
We look at the percentage -- not necessarily going to be a numerical number. Because at these elevated levels, obviously, you know, it's more
concerning about what that number is. But I do now need to do my duty and that means -- so the Dow goes to seven. The S&P and the Nasdaq, they both
go to nine. Maybe I should take some handwriting lessons at some point. They both go to record highs. No records in London. In fact, all of the
Euro bosses were actually lower because they'd seen the early part of the New York day. Guru La Monica, Paul La Monica is with me. Paul, what do we
make of this?
PAUL LA MONICA, CNNMONEY CORRESPONDENT: It's a stunning day. The enthusiasm about tax reform, obviously continues. But solid earnings, as
well. I think that's another reason why people are excited. The banks were a little bit of a disappointment. Goldman Sachs was a loser today and
I know you want to talk about GE, as well. But I think there are rising hopes that a lot of companies are going to be posting solid numbers for the
fourth quarter. IBM got upgraded today. Microsoft had a solid day. This was even before the Apple news which then lifted the market to the heights
that we wound up closing at.
QUEST: Quick-fire questions. Does this rally make sense?
LA MONICA: Not to this extreme.
QUEST: GE down 5 percent today. Overdone?
LA MONICA: No.
QUEST: Why not?
LA MONICA: I just don't know what the plan is to break it up into pieces - -
QUEST: The break value normally sends your stock higher.
LA MONICA: It does, but that's if you assume that the parts have any value to begin with, and I think there's just a lot of skepticism about GE's core
businesses and they just don't look all of that promising right now.
QUEST: Boeing is a brilliant company, but the rally in Boeing overdone.
LA MONICA: Overdone. I've got a story about this tomorrow. Boeing's PE ratio is now higher than Facebook's 2018 earnings estimates. That's just a
little ridiculous.
QUEST: So, it does one of two things. It had to solidifies at a higher level or it starts to -- it falls back.
LA MONICA: Yes, if the earnings are good, that will justify this growth, but the expectations are obviously so high now. This was a stock that was
up nearly 90 percent last year and its up almost 20 percent already and it was in the first few weeks of 2018.
QUEST: And the market today, Peter Tuchman said there's real money coming into this market.
LA MONICA: I don't believe that. I believe that once you have the market rallying at this level you will have people afraid of missing out. So,
more money is obviously, coming in and you know, hey, it looks like it's leaving cryptocurrencies right now so why not put it in stocks?
[16:10:05] QUEST: Good to see you, sir.
LA MONICA: Thank you.
QUEST: Thank you, as always.
Donald Trump was never a major player on Wall Street, that is until he became president. And much of what we are seeing now is overseeing in the
markets because of this historic rally in financial stocks and the overhauling of deregulation. Specifically, in the first year of his
administration, he's overhauled the consumer financial protection bureau.
Now this is a banking regulator, one which Donald Trump called a disaster. He then picked this gentleman who is actually, arguably a high-profile
critic of the Consumer Financial Protection Bureau -- maybe an enemy. It's Mick Mulvaney and he is running the very organization that he criticized
and the first thing he did was block all new rules.
(BEGIN VIDEO CLIP)
MICK MULVANEY, ACTING DIRECTOR, CFPB: Effective today, we've put something similar in place here to what we did across the entire executive branch at
the outset of the administration. At the outset of the administration we did a 90-day hiring freeze. We put a 30-day hiring freeze here at CFPB.
Probably more importantly, we put a 30-day immediate freeze on any new rules, regulation and guidance. Anything that's in the pipeline stops for
at least 30 days while I get a chance to see exactly what's going on and kick the tires here at the bureau.
(END VIDEO CLIP)
QUEST: We're looking at this very closely. The one-year anniversary people like Elizabeth Warren who helped create the bureau -- the CFPB.
They are furious at what Mulvaney is doing. They say the right regulation can help stop another crisis and it's not like banks were having any
problems giving out loans anyway.
But the cuts keep coming, relaxing things, for example, the fiduciary duty rule which makes it easier for banks to sell products and some would say
including risky products. Now, arguably, when you look at what's been happening here, for now, Wall Street remains very happy. The banking index
is up more than 20 percent since the inauguration, and one year on, one year on we are seeing this deregulation on a wide scale. Stephen Moore
joins me. We need you, sir. Good to see you. Stephen, stay with me.
STEPHEN MOORE, CNN SENIOR ECONOMIC ANALYST: Hi, Richard. Good to see you.
We need to go to Donald Trump first who is speaking before the Senate.
(PRESIDENT SPEAKING BEFORE THE SENATE)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Thank you very much. And I must say that it is my great honor to join you today, and to witness this
incredible moment in history: the presentation of Congress' highest civilian honor to our friend, a true American hero, Bob Dole. And, Bob,
it's an honor to be here. Thank you very much. Great job. Great job.
Bob earned his place in the chronicle of American legends by the time he was 21. And in the decades since, he has never stopped earning his place
in the pages of American history.
I also want to recognize Senator Elizabeth Dole. Elizabeth, that was beautiful. Your words were beautiful. Thank you very much. You've been
my friend for a long time. Thank you very much. And you've meant so much to our country, and done so much for so many. And I know that very well.
Thank you.
Everything we've heard today reminds us of the thoughts of Second Lieutenant Dole when he was more than 4,000 miles away from where are
today, many years ago. As his body lay paralyzed against a cold, jagged Italian hill, his thoughts went back home -- back to that small town in
Russell, Kansas. On Hill 913 in those darkest moments, Bob Dole had home in his heart. He wanted to go home.
And in the end, it was home that saved him. Home was his grandma, who believed that he would walk when the doctors doubted that he would even
live. It was his mother, whose love and cooking fueled the fight to move his legs just a half-inch higher each and every day -- half-an-inch each
day, Bob. Half-an-inch, she would say, each day.
It was Dawson's Drug Store on Main Street where a cigar box sat on the counter to solicit donations for his so many surgeries. Home was where Bob
Dole learned that classic American grit. He knows about grit. That got him through 39 months in hospice. It was where he learned the values of
loyalty and integrity, hard work, faith, and family that have defined him ever since.
"To the stars through difficulties" is the state motto. "To the stars through difficulties."
[16:15:00] A beautiful motto of the truly great state of Kansas, and the perfect description for Senator Dole's extraordinary life.
From his first year as a young representative from Kansas, to his tenure as Majority Leader of the United States Senate, all the way to today, Bob Dole
has never stopped fighting for those values. He fights for Kansas, for veterans, for the disabled, and for all of his fellow Americans -- and he
always has.
Tens of thousands of veterans have bordered Honor Flights to visit the World War II Memorial thanks to, in great measure, Bob Dole. Nearly every
day, at the memorial, you can see tough war heroes in their eighties and nineties moved to tears. And many recount the unforgettable experience of
being greeted at their memorial, and much to their surprise, by Senator Dole -- somebody they have great respect for.
One World War II veteran from Ohio wrote him after a visit.
QUEST: President is talking about Senator Dole. One of the great grand politicians in the United States. Stephen Moore is a former economic
adviser to the Trump campaign, and you also see the CNN senior economic analyst. Right, today, what do we make of it. The market up 300 points,
1.25 percent, the Apple announcement.
MOORE: Just every time you think the news couldn't get better and it gets better in the economy. I think the Apple announcement is a big, big deal.
You're talking about tens of billions of additional dollars being invested in the United States. You know, I was thinking when I first started
talking to Donald Trump about this tax plan that eventually became law, one of the big features of that was this repatriation of letting companies
bring money back at a 10 percent tax rate and this couldn't have worked better if we'd put it on the chalkboard. We have $38 billion of tax
revenues that will come into the treasury. You've got potentially 20,000 new jobs that Apple will create in the United States. This is exactly what
we'd hoped would happen and I hope to see a lot more of it.
QUEST: You've got that, and I have no doubt other companies will do more, but -- I don't suggest it should be dollar for dollar, but they're not
putting as much in as they're getting bac in the longer run over a lower tax bracket.
MOORE: What exactly do you mean by that if they're not putting --?
QUEST: What I mean is either employees or most of the benefits.
MOORE: Right.
QUEST: Are going to go to shareholders.
MOORE: That's probably true. By the way, I don't have a -- look, my first preference would be for these companies to build more factories, pay
workers more and give them more benefits. And that will happen in some cases. But in other cases, you're right, companies will do stock buybacks
and in other cases they will pay out dividends, but look, what's wrong with that? That makes the companies more valuable. Companies that have a
rising stock are more likely to expand their operations. And by the way, we've got 100 million Americans who own stock. Yes, a lot of it is owned
by the people at the very top, but pension funds and all of these benefit from that.
QUEST: So, I guess the core question is how do you -- how does the economy take these benefits? These legitimate benefits and I'll fully grant you
that, but at a time of income inequality and the growing divide, how does this administration ensure the full benefits are enjoyed by more.
MOORE: There's no way to ensure it, right? But so far so good, right? Apple is not the first company. We've seen dozens of companies now that
have announced either pay raises for their workers as with Walmart or bonuses for their workers. Now Nancy Pelosi, the leader of the Democrats
and the House says that this is crumbs for workers. But you give a worker an extra $1500 a year and that's not crumbs.
QUEST: So far, we've not seen it on that sort of level. We've seen one- off payments and we've seen, for example, in the Walmart where you've given extra --
MOORE: It's only three weeks old. Come on, give it a chance and let's see how this evolves and I would say it couldn't be going better so far.
And I'm doing my best not to sound like a sort of a moaning mini on --
MOORE: No, no look, it's right to be skeptical. Let's see how this turns out. The tax cut is not even a-month-old, but there's so much juice in the
economy right now. You see it with respect to the numbers on -- we're going to get a GDP report in the next couple of weeks and I'm predicting a
3 percent to 3.5 percent growth. We've seen, you know, record business, optimism, all of the signs are pointing north for the economy right now
which is great for the American worker.
[16:20:00] QUEST: Do you worry that the Fed might negate some of the benefits, doing their duty under the June mandate by saying this 3.5
percent -- or whatever it might be -- growth would have inflationary expectations and therefore the two or three raises should become four or
five.
MOORE: It is kind of fun they people says, well gee, inflation may rear its ugly head and we have a 2 percent inflation right now. I mean, I'm old
enough to know, remember as you do, when we had 15 percent inflation. So, if we went from 2 percent to 2.5 percent or maybe even 3 percent inflation,
would that be a disaster for the economy? No, but look, I do worry about that. I want to make sure that the increase in pay and the increase l
benefits don't just lead to higher prices, but you know, you study this every day. You know, the big development in the world economy is trade and
technology. And tell me one industry that has pricing power right now. Because it is so ferociously competitive out there, companies can't raise
their prices.
QUEST: Right, so into this, the big unknown is the administration's trade policy.
MOORE: That's true. I am worried about that.
QUEST: Right.
MOORE: I am worried about NAFTA. NAFTA, next week is the Montreal negotiations --
QUEST: Absolutely, and everything we've heard says it's not going well.
MOORE: That's right. It's not going well.
QUEST: And you know, you've got Asia coalescing around their own version of TPP. And you know as well as I do, TPP had most of the benefits that
the NAFTA -- that the U.S. wants.
MOORE: Well we make this really about the benefits of TPP, but I am a big fan of NAFTA, and I think it would be a major mistake of the United States
to pull out. I think Canada and Mexico are not, I think, I worry that they're going to call Donald Trump's bluff here and this could lead to a
potentially -- I don't think -- look, it's been good for Canada. It's good for Mexico. It was good for the United States and it was Ronald Reagan's
and Bill Clinton's vision that we should have a North America trade zone that becomes a counter to the power of Asia and Europe. I think it's
worked wonderfully and I share your worry bad Donald Trump --
QUEST: Have you made your views known?
MOORE: Pardon.
QUEST: Have you made your views known?
MOORE: You know, Donald Trump knows that. And look, I don't think Trump wants to pull out of NAFTA, but if Canada and Mexico are intransigent and
they don't provide some, you know, some changes and modernization, I think there is a chance that Trump would pull out of NAFTA and that would be bad.
QUEST: Wonderful having you here, thank you.
MOORE: You too, good to see you,
QUEST: You don't own bitcoin, do you?
MOORE: You know, what's wrong with owning the dollar? It's unstable.
QUEST: The reason I ask, of course, because after the break we'll be talking about bitcoin.
MOORE: I'll be listening it because I don't understand it one bit. I don't understand the attraction.
QUEST: Good to see you, sir.
We will be talking about bitcoin which has effectively lost half its value in the last month after the break.
(COMMERCIAL BREAK)
[16:25:02] QUEST: It really is a classic case of what goes up must come down or at least it would appear to be that way. Bitcoin is tumbling fast
and it has spent most of the day below 10,000. Look at how we've gone. These are the prices, 14,000, 13, 13, and now it did close tonight just
about 10,000 -- I say close, it continually trades at 10,812. So, you're looking at a loss of 30 percent this week. Now bear in mind it was
flirting with $20,000 back in December. Earlier at the New York Stock Exchange I spoke to Bauerle, the director of research at Coindesk.
Remembered he helped us by a fraction of the bitcoin to show you how it's done. Now he says the volatility, this volatility is nothing new.
(BEGIN VIDEOTAPE)
NOLAN BAUERLE, DIRECTOR OF RESEARCH, COINDESK: So, since 2016 bitcoin has lost 25 to 40 percent of its value six times. And it would go further than
that it would indicate some type of bear market has set in. But what we're seeing is that usually it does these drops and then rebounds much higher.
Bitcoin also lost a lot of its overall market share compared to other cryptocurrencies in the past month. So, we'll see if it consolidates.
We'll see if it starts taking over more of the total value of the entire cryptocurrency marketplace.
QUEST: How much is bitcoin off the total cryptocurrency orbit?
BAUERLE: When it hit those highs that you bought we were seeing it around 60 percent of the entire market. It fell down to the low 30s recently
because a lot of the other coins took quite a bit of the shine and luster and got a lot of attention. Bitcoin actually faced a lot of network
issues. The scaling of bitcoin, actually buying and using bitcoin because it became so popular in December became difficult. People move down the
list and bought other coins.
QUEST: Is it possible to sell a bitcoin? Now, the reason I ask is -- I know you're looking puzzled. But the number of stories, people out of the
U.K. that suggest that bitcoin, you have to have super users that will buy them from you and then you have to wait long. And even when we went online
today, there are delays in the system. So how easy is it to sell the bitcoin that you've got?
BAUERLE: To get a cash position on an exchange is really easy. You can convert on any one of these large exchanges to a cash position
instantaneously, basically. Well, other than the delays on the actual transactions on the block chain which are slower because of the traffic on
the network. So, you can get your cash position, cashing out is another story. If you're a large institutional investor and you use someone like
Gemini or Cumberland or Circle, you can get the cash really quickly. But to go to other coins. So, you have a lot of traffic on crypto, to crypto
exchanges. Some people going from crypto to crypto is very popular too. I mean, it's that quickly.
QUEST: Is it you're feeling that this race to bitcoin -- I mean, a lot of people -- for a lot of people it was get-rich-quick. But how much of
bitcoin is fundamentally being used for substantive transactions versus purely speculative endeavors?
BAUERLE: So, I would say, I wouldn't go so far as to say speculative. I think 2017 really saw a moment were people accepted that something that was
natively digital could be private property, could actually be property. So, that part of it was there. People were saying I want exposure to
digital assets. So, they bought digital assets and they didn't really care which ones. Bitcoin had trouble getting on boarded. Buying it and people
went down the list bought other coins. 2018 is really where were going to see these cryptographic innovations come in in the use cases really take
flight. Useful bitcoin is coming in 2018.
(END VIDEOTAPE)
QUEST: YouTube is putting the brakes on automation, turning to real people to make high-profile videos to make sure that they're shown, and they're
fit for purpose.
(COMMERCIAL BREAK)
[16:31:04] Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment when Ford is in need of its own "pickup" a day after its
worst day on the market in more than a year. YouTube has a novel idea to fix its controversial videos. Get human beings involved to watch them
first as we continue tonight, this is CNN, and on this network, the facts always come first.
Athletes from North and South Korea will march side by side in the Winter Olympics under a united flag. According to the south, after a day of talks
between the two governments and also there will be a joint Korean women's hockey team at the games. Officials in Nigeria believe four female suicide
bombers detonated explosives which is killed ten people and injured 65. The blast happened in the outskirts of Muna Garage in the capital of Borno
state. It is not clear who was behind it.
Myanmar and Bangladesh have finalized a two-year plan to repatriate Rohingya Muslims. Right now, 650,000 are in refugee camps in Bangladesh
after fleeing from deadly violence in Myanmar which the Rohingya blame on the army. Repatriation is set to start next Tuesday, and many say it's not
safe to return.
Saudi Arabia is depositing $2 billion in the Yemeni Central Bank to prevent economic collapse and help stop a deepening humanitarian crisis. After
three years of civil war. the United Nations has estimated that more than 8 million people in Yemen are just a step away from famine.
The Pope is in Santiago in Chile where he's focused on issues affecting children, the elderly and poverty. He also met and prayed privately with
victims of the church sex abuse scandal and said he felt pain and shame because of the irreparable damage children had suffered at the hands of
some priests.
YouTube says it's stepping up vetting to reassure advertisers alarmed by shocking videos, and it is promising real people will review videos
earmarked for premium advertising and Logan Paul, one of the top bloggers from the preferred category. A furor over a dead body of someone who had
apparently committed suicide in Japan.
Brian Stelter is here. Well, there is a novel thought. Human beings.
BRIAN STELTER, CNN MONEY SENIOR MEDIA CORRESPONDENT: it's about time. The sites, YouTube, Facebook and others have built themselves up over the past
decade with the entire premise, you can post whatever you want, however you want and they're coming up against these sorts of problems. Criminal
content and illegal content, unethical content and the immoral content. Logan Paul just being the most recent example. And so, we do see YouTube
stepping up, perhaps belatedly, saying they are going to employ human reviewers.
QUEST: Can they do that? They can do it, but have they got enough people even with 10,000 that they said they were going to employ. I don't know,
I'm not a huge aficionado of Google preferred, or YouTube preferred, and so l don't know how bigger it is? How many videos people are going to be
looking at? Are they going to screen the first 20 seconds and move on?
STELTER: I'm imagining a giant wall each employee has with nine videos going at once so they're kind of scrolling through this infinite universe
of videos. We are talking about hundreds of thousands of videos that these employees will be reviewing. In fact, are going to start by going through
the archives right now, the going through the archives all of these creators right now.
[16:35:00] They say by mid-February they'll be done doing that and it will take a month just to review the archives and going forward any new videos
posted by onesies really prominent creators will be vetted before.
QUEST: And the YouTube preferred goes to the contributor and not the video in that sense. So, they've got to look at all of the videos and someone
who is YouTube preferred.
STELTER: And let's face it. They're trying to reassure advertisers and there are a bunch of Fortune 500 advertisers that are skittish about
YouTube and Facebook and other tech giants right now and because of all of the problems of brand safety and that's been the buzz word of the past
year, brand safety.
Advertisers do not want to be next to a video of a person in a suicide forest. This was embarrassing for YouTube, Now the company is playing
catch-up, but I have a feeling we'll be back talking about this again because it' a huge problem for these companies.
QUEST: something else that we will probably be talking about again. Jeff Flake, Senator Flake, talked about Stalin's words in relation to the press.
The enemy of the people, and exactly the words that were used but President Trump last month, and tonight, supposedly, the president is going to reveal
what?
STELTER: I can't believe I'm saying this because it sounds so absurd and he's been teasing on Twitter the idea of having corrupt media awards, that
the president or his aides are going to give out, so-called awards to news outlets that they deem unfair and fake. This is the culmination of a year
of attacks by Trump and his aides and it's obviously on its face un- presidential to imagine someone giving out awards to news outlets they don't like, but this has been the Trump M.O. for a year and what Flake was
trying to do on the senate floor it was get his GOP colleagues to denounce this kind of behavior.
QUEST: You are too young to remember Dan Quayle saying of Murphy Brown to TV comedy, I wear your scorn as a badge of pride. I'm guessing there will
be media outlets that might get one of these awards.
STELTER: Might even celebrate --
QUEST: Saying I wear your scorn as a badge of pride.
STELTER: I don't think we're in the business to make the White House or any other foreign -- any government love and appreciate our work. We are
in the business of getting it right though. Anybody who gets it wrong, maybe they deserve to be criticized, but the bottom line here is it is so
strange to see the president every day calling things fake when he knows they are real. It is doing damage to the population and no matter what he
does with fake news awards, the problem is that.
QUEST: Go on. You get one for this. There you go. Brian Stelter.
Thank you. When we return, Ford and GM deliver a gloomy outlook, and both are hoping the traditional pickup of trucks in pickup trucks, with drag
earnings out of the doldrums. Quest means motors after the break.
(COMMERCIAL BREAK)
[16:40:00] QUEST: Welcome to QUEST motors, have I got a nice little runner for you. Low mileage and one elderly lady and we have a larger range
available. In fact, we've got lots particularly from Ford and General Motors at Quest motors and today these two, Ford and GM shared some gloomy
news, and there was a very different reaction in the market, and come over here and I'll write you up good deal.
There were big reductions on Ford, the share price was down 7 percent in Ford's stock and it's the worst day in the company's history for a year and
a half, and it's because of the disappointing forecast even with the new CEO. Ford is promising to cut costs as part of its response and cut costs
within the company and not cuts the cost of cars. High commodity prices, volatile currency, it's all taken its affect and it isn't really predicting
a full recovery until 2020.
Look at this and compare it with General Motors. The stock was flat on the same day the earnings would always be flat. Whatever way you look at it,
GM is predicting higher profits in the next year with revamped models, and when we talk about new models, both companies are very much relying on the
pickup trucks as it gets harder to turn profits on smaller cars. Pickup trucks versus smaller cars, Ford versus GM. Rebecca Lindland is the
executive analyst at Kelly Blue Book and she's in Connecticut, and I have a nice little runner for you and low mileage, and I promise you I'll give you
a good deal, but you tell me, of the two biggies, Ford and General Motors, why has Ford suddenly lost its oomph when the stock price showed it was
clearly making progress?
REBECCA LINDLAND, EXECUTIVE ANALYST, KELLY BLUE BOOK: Well, they're definitely making progress, but the problem is that Ford really is so
dependent upon only two brands. Ford and Lincoln. Lincoln is continuing to struggle in the marketplace. So, they've got to make sure that that
Ford F-150 pickup truck does incredibly well. It's really supporting the entire company which, of course, is less than ideal.
General Motors, on the other hand, has a number of brands and they trimmed a lot of their brands when they went through bankruptcy, but now they've
got powerful brands in the marketplace and they're able to appeal to a variety of people and they're also able to leverage those brands across the
world.
QUEST: How did Ford, it lost its way, arguably in the post-Mulally world through its last CEO. It had huge problems in Europe where General Motors
was faster to get rid of it and GM is doing arguably better in China. You can't build the company on the back of its pickup truck.
LINDLAND: Unfortunately, Wall Street never had confidence in Mark Fields, even though he was very much an Allen Mulally protege, you just could
really never gain the confidence, so we are still recovering from that and Jim Hackett has done a great job, but you're absolutely right. They do not
have the backing of China like General Motors does because, of course, Buick is huge in China, because the emperor first owned a Buick back in
1915 or '20, I think it was.
QUEST: Right.
LINDLAND: So, we have this long history that General Motors has really been able to parlay into success.
QUEST: And if we then add in Fiat Chrysler, which if you look at the stock price, not that that' the ultimate barometer, but Fiat Chrysler has really
zoomed ahead in many ways.
LINDLAND: Yes. The issue and the challenge that Fiat Chrysler has is here in the states getting the Chrysler brand right. Right now, it only has the
Chrysler Pacifica and the 300 sedan. It needs to figure out its product lineup. However, Jeep did make the KBB hot list because it's got the new
Wrangler coming out and the new Jeep Cherokee, so they've got some strong products coming out for 2018 and we expect good things.
QUEST: So, Ford needs more restructuring from the plan you've heard are you reasonably optimistic?
LINDLAND: I think that what Ford needs is solutions for today. They have a lot of long-range plans that are very valid and that need to happen, but
they need to sell cars and trucks and more of them today and get Wall Street more comfortable with their plan.
QUEST: what about the new Ranger? What do you think of that?
LINDLAND: Yes. I think the Ranger was fantastic. I was at the reveal on Sunday, and I think it looks great. That mid-sized market which General
Motors has really been dominating along with the Toyota Tacoma.
[16:45:00] They have to play in that market and these are places where Ford has been powerful overseas with the Ranger and it was a long time coming
been are before they came to the states and they should have brought it last year.
QUEST: I'll give you a good deal. Come and see me later, I will give you a good deal low interest, good trade, something tells me you have
absolutely no intention of buying anything like a used car for me, we are grateful that you are joining us tonight.
LINDLAND: Thank you so much for having me on.
QUEST: Back in 2011, Ford sent the Ranger compact truck to the scrap yard here in the U.S. saying customers weren't interested. It remained a hit
overseas and from next year, we were talking about it just there, a new version will be on sale and Rebecca clearly likes and we took it for a test
and Peter Valdes-Dapena reports on the Ranger.
(BEGIN VIDEOTAPE)
PETER VALDES-DAPENA, CNN CORRESPONDENT: Here at the Detroit Auto Show, Ford showed off the 2019 Ford Ranger. It's coming back to the U.S. and
it's going to be built here at the Michigan assembly plant outside Detroit and I spoke to Ford's global head of operations, Joe Hendricks about why
the Ranger is important and what it will do for Ford and for the workers at this factory.
Right now, there is a lot going on. We are getting ready to build the Ford ranger. When will that start?
JOE HINRICHS, GLOBAL HEAD OF OPERATIONS, FORD: The production will start in the end of 2018. Right now, we're doing some of the pull ahead work on
the conveyors and the overhead system to get ready for the production that will start in the second half of the year. It will balance out the focused
production in the second quarter and start to turn the plant over completely during the summer time frame.
DAPENA: As small car interest in the United States, has it fallen that much that it just doesn't make sense to make them here anymore?
HINRICHS: It's been fascinating. About a ten-year run we've had SUV growth and cars declining and cars are still a substantial part of the
industry here, but we've identified an opportunity to build Ranger and Bronco here.
DAPENA: Are you employing the same number of people here that you employed before?
HINRICHS: That's right. We're not going to lose any jobs and we anticipate growing jobs as the Ranger and the Bronco volume kicks in.
DAPENA: Why does it make sense to bring it back now?
HINRICHS: We sold 7 million Rangers between early 80s and 2011. What happened is full size pickup trucks have got larger over time and gotten
more expensive and more capable, but what's happened with the size getting bigger and price going up, there's room for a mid-sized truck, smaller,
less pricey than the full size, pickup truck, but with the adventurous spirit that an SUV or a truck can give you.
(END VIDEOTAPE)
QUEST: And that's the Ranger. QUEST MEANS BUSINESS. More in a moment.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: This is a story of how one woman in her bedroom in England built a $33 million business exporting dresses around the world.
Meet Alice Hall who five years ago had a novel idea.
ALICE HALL, FOUNDER, PINK BOUTIQUE: As I was really struggling to pay my bills, and I thought what about if I tried selling clothing online. And
so, I bought one pack of dresses, it sold, I bought two, and then I bought four. And I continued reinvesting my profits. We started with an initial
investment of 90 pounds, and we are forecasting sales of 25 million this year.
UNIDENTIFIED MALE: Pink Boutique is an online retailer of so-called glam fashion. Play suits and dresses drenched in sparkles, for 18 to 35-year-
old women heading out on the town.
HALL: We are a niche brand, so our target customer loves the night out, she loves her hair extensions, her makeup, people love it, or they hate it.
But that is absolutely fine by us. We are not trying to market to the masses.
UNIDENTIFIED MALE: The entrepreneur says half of the websites 2,000 lines or source for manufacturers you need U.K. The rest comes from China. 75
new designs are introduced every week.
HALL: It is really important for us that we always have that stream of newness, our customers on social media, so she doesn't really like being
seen in the same thing twice. So that is why we have to constantly bring in new styles.
UNIDENTIFIED MALE: Today they ship to 59 countries around the world with Estonia and Lithuania among the most popular destinations.
HALL: I think countries where nightlife is important to have a real party lifestyle, that is where we see synergies.
UNIDENTIFIED MALE: On average 2000 parcels a day leave the company's warehouse in the northern city of New Castle, the company is part of the
wave low-cost fast fashion online retailers. The fast fashion industry developed in America during the 1990s providing affordable clause for trend
conscious buyers.
[16:50:00] Fast fashion brands like Zara can take you design from concept to consumer in two weeks. 12 times as fast as traditional brands. The
creator of 10,000 new designs every year.
Alice plans to build on her markets in the United States and Australia. The majority of advertising is done on social media. Leveraging the
company is 1.4 million Facebook followers.
HALL: There is a glam girl in a lot of different countries across the world, we just have to find her, or she has to find us.
(END OF VIDEOTAPE)
(COMMERCIAL BREAK)
QUEST: Let's take it, first of all, let's first of all go to here. The Dow Jones Industrials up 322 points. Started and popped down a little bit
and went under 26,000 even though it did remain positive throughout the whole of the session, but it did go under 26,000 and then later in the
afternoon, particularly and it speeded up as the Apple announcement it just got stronger and stronger to finish out over 322 points and if you look,
because we've really got to get underneath the bonnet of this story. Boeing up 5 percent. It's just another day of Boeing gains.
Three one day and two another and now 5 percent and at the opposite end of the spectrum, GE, one of the laggards, it was a dog of the Dow last year
and it put on a bit of weight earlier in the year, but it just lost 5 percent on two grounds, firstly, the prospect of it being broken up and
secondly on those insurance claims it's going to cost it 35 billion over the next few years.
Now, amongst all of this, there an old friend in a new hat or new scarf, Avaya was a company that started with AT&T and then to Lucent and it got
sold, it went to chapter 11 and now it's back on the market ringing the opening bell, I beg your pardon. The chief executive joined me and told me
the company's in the middle of a massive transition.
(BEGIN VIDEO CLIP)
JIM CHIRICO, CEO, AVAYA: The company is much different. In fact, we just went through a recent transformation moving from a hardware to software
centric company and we are yielding roughly about 80 percent of our revenues with the software and services today, of that 60 percent of our
services are very sticky and we expanded our global presence and we have 130,000 customers and we're very profitable and it's an exciting time to be
on the New York Stock Exchange.
QUEST: So, as I look at the statement, today Avaya is at the strategic nexus of the connectivity for the enterprise. What on earth does that
mean? We're at the core of what everyone -- all of the mission-critical applications that companies run.
[16:55:00] CHIRICO: We are actually in more than 90 percent of the Fortune 100 companies running all of the mission critical applications and we're
also leading the charge as we move to digital transformation. When you think of that, you should think of cloud.
QUEST: What went wrong and what have you put right?
CHIRICO: We've worked long and hard with the operations of the company and improved the best in class levels and we built our brand investment and
continuing to lead the innovation that the company's been known for, for frankly, more than 100 years.
QUEST: But that begs the question, what went wrong, and we don't want to go back to 1995 and AT&T and all of that, but one has to some extent take
the lineage of work out where things went wrong if you're not to sort of make the same mistakes and now you're back on the market.
CHIRICO: When we entered chapter 11 it didn't have anything to do with solvency. The company has always been profitable. In fact, we generate
cash in excess of 10 percent of our revenues. The fact is we were overleveraged and what we needed to do was find a new capital structure,
revise our balance sheet and that's why I exited chapter 11, but again, it was simply something associated with the fact that we were a bit over
levered and now we have a new financial structure and that adds 300 million in free cash flow for the company, and we'll take those additional assets
and continue to drive additional R&D investment and improve in the overall efficiencies of the company.
QUEST: Good to see you, sir. Thank you very much. It's one of the great names in corporate America or at least the pedigree is. Welcome back to
the exchange.
CHIRICO: Well, thank you. I'm glad to be here. It's a great platform and we have a great story.
QUEST: And we'll have a Profitable Moment after, the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment, Apple's announcement that it would spend $350 billion in the U.S. and set up a second campus and start talk
taking auditions for where that should be.
Is a classic example of how Donald Trump's tax cuts when it comes to corporations has worked, to bring back money that has been locked off
overseas and put it to work in the U.S. whether you agree with it in the grander scheme of thing, you cannot deny that what was intended is starting
to happen.
Now, there may be unintended consequences along the any, but Apple which can hardly be described as in Donald Trump's camp overall has proved the
validity of the policy once and for all. And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York and whatever you're up to in
the hours ahead, I hope it's profitable and we will do it again tomorrow to see if there are more records on the Dow.
END
