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France-Italy Spat Grows, Macron Recalls Ambassador; U.K. Investigators Recover Body from Wreckage of Sala's Plane; Horse Racing in Britain Suspended Due to Equine Flu; Twitter Shares Fall After Earnings; Aid Trucks Arrive at Colombian-Venezuelan Border; Fiat-Chrysler Shares Tumble on Weak 2019 Outlook; Ford Announces New $1 Billion Investment, 500 Jobs in Chicago; Sonos Slips After Record Earnings; Stocks Fall on Trade Fears. Aired 3-4p ET
Aired February 07, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We're an hour away from the closing bell and this is the way the markets are trading. Look at this.
Fascinating. We were down just a bit in the morning, but sharp falls throughout the course of the afternoon. In this program, we're going to
analyze exactly why this happened.
We are off the lows of the day. That was down 389 points. All the major markets are down. The S&P and the NASDAQ. The NASDAQ, the biggest of them
all. Let's understand what's going on, because this is what's been moving the markets.
The U.S. officials on a deal with China say there's still sizable distance between Washington and Beijing on trade. We're going to hear from
executives at Ford and Sonos. The Governor of the Bank of England, Mark Carney says the British economy isn't ready for a no-deal Brexit. And
Twitter shares are tumbling. Now it wants to rethink its earnings and matrixes altogether.
We're live in the world's financial capital, New York City on Thursday. It is the 7th of February. I'm Richard Quest. I mean business.
Good evening. Tonight, it's growth troubles and trade uncertainties that are fraying investors' nerves. Whether in Europe, China, or the United
States, there is reason to worry. All the major indices in Europe and the U.S. suffered losses today across the board, across the park, across the
oceans and look at the Xetra DAX in Germany, off 2.6%, the worst of them all.
Now, into New York, you take a look at the big board and how that traveled, the big board has been sharply lower, as a result, that's when reports
surfaced that Donald Trump's proposed meeting with President Xi of China would not happen before the March the 1st deadline for a trade agreement.
The White House Economic Adviser, Larry Kudlow, says negotiations have a long way to go.
(BEGIN VIDEO CLIP)
LARRY KUDLOW, WHITE HOUSE ECONOMIC ADVISER: The President has indicated that he's optimistic with respect to a potential China trade deal. But,
but, but, but, but we've got a pretty sizable distance to go here, to quote a colleague of mine, "We have miles to go before we sleep." That was a
joke.
(END VIDEO CLIP)
QUEST: The losses were even worse in Europe. Stark warnings from economic policy makers that fueled new worries about the continent's growth
respects. The European Commission has slashed growth forecasts for all but one of the E.U. economies.
Germany's DAX as I outlined suffered some of the day's worst losses. Brussels has now warned a slowdown in global trade would weigh heavily on
its growth in the coming year. In London, the FTSE closed lower after the Bank of England Governor Mark Carney used his super Thursday policy speech
to warn about the Brexit fog clouding the U.K.'s economic future and warned Britain is still not prepared for a no-deal Brexit.
(BEGIN VIDEO CLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: Although many companies are stepping up their contingency planning, the economy as a whole is still not
yet prepared for a no-deal, no transition exit. Given the wide range of potential scenarios and the various paths to them, it would be remarkable
if the current levels of sterling and other U.K. financial asset prices were consistent with the outcome that finally emerges.
(END VIDEO CLIP)
QUEST: Now, amid all of this Brexit tension, the FTSE has held up remarkably well. Perhaps investors are keeping a typical stiff upper lip.
Come over here. They're adhering to the old wartime spirit, keep calm and carry on. Well, if you look at the Brexit referendum back in 2016, the
FTSE has jumped more than 13%.
Now, what a lot of this was fueled by was the falling pound. If you bear in mind, the falling bound made exports high. So it's a really unusual
conundrum in the sense that where this is concerned, the falling pound increases exports, therefore, the FTSE does better.
Now, that's the way the FTSE looks. It's still well off its lows. Now take a look at its European counterparts and the Americans and factor them
all in, and you'll see just how far, yes, how far the FTSE's performance falls short, particularly to U.S. stocks, which have jumped more than 25%.
This is our starting point, and as our starting point goes up, you see consistently the gap. There is a gap, obviously, except for one aberration
there. But overall, that gap is wide and getting wider with the other markets. The FTSE is the lowest of them all in percentage terms.
[15:05:04]
QUEST: Philip Shaw is with me, the chief economist at Investec. Good to see you, Philip, as always. Good to see you, sir. Why is the FTSE
managing to stave off what are tremendous, tremendous forces of an uncertain Brexit?
PHILIP SHAW, CHIEF ECONOMIST, INVESTECH: Indeed. Hi, Richard. Certainly, you're absolutely right that when you say, when the pound falls, it
improves the export prospect of FTSE 100 companies. The other factor, and arguably, it's an even bigger factor is that because of the globalized
international world we live in, the great majority of profits coming from FTSE 100 companies, perhaps around 65% to 70% of them, come from overseas,
not denominated in foreign currency.
So when the pound falls and you translate those earnings back into sterling, they are worth more than in pound terms, and that's one reason
why FTSE actually tends to rise when sterling falls, outweighing the potentially negative effects of more uncertainty in Brexit.
QUEST: Right. Now, looking at these three again, let's ignore -- I mean, the DAX obviously has got some problems of its own at the moment, but
staying with the FTSE, essentially, it's not much higher than it was at the height of 2007. I think it's right down about 400 to 500 points, compared
to the S&P or the DAX, which are considerably higher than the heights of 2007.
SHAW: Yes, that's also true, and probably a key factor here is the composition of each index. Certainly, if you go back to the good old days,
if I can call it that, of 2007, the FTSE 100 was especially heavy with mining stocks and banking stocks and other financials, as well.
And over the last 11 or 12 years, those sectors haven't performed particularly well. Now, by contrast, of course, the S&P 500 is relatively
heavy in tech-type stocks, which on the whole, have performed well. So that's, I think, it's the composition, the makeup, which explains a lot of
the outperformance there.
QUEST: The downside risk for the German market, we may be so preoccupied looking at the FTSE and the S&P and the Dow in the States, we might
overlook the real crisis, which is, European growth and the DAX and the Italian market.
SHAW: Absolutely. If we look at the German market, for example, what we saw in terms of the economy over the summer of 2018 was a change to
emission standards in the car or the auto industry, which weighed down on industrial production, generally.
Now, the German authorities were fairly optimistic at that stage, saying, it really wouldn't last very long. Now, of course, what we've had is very
poor industrial production data, especially on the car or the auto side. But also, just generally export industries haves have suffered.
And here, you have to look at the global picture, which has to do with the trade tensions between and U.S. the China and the slowdown in world trade
and that's hitting Germany particularly badly.
QUEST: Good to see you, Philip. Thank you. Thank you for coming in this evening. European leaders are holding their line insisting they won't
reopen talks on the U.K.'s withdrawal agreement. The British Prime Minister spent the day in Brussels and British lawmaker sent her there to
try to renegotiate the terms of the so-called backstop. European leaders will only agree to wording changes on the separate Political Declaration
that deals with the future relationship between the two after Brexit.
Erin is in Brussels for us tonight. The Prime Minister wants legally binding wording, effectively removing the permanent nature or potential
permanent nature, the potential permanency of the backstop. She's not going to get it.
ERIN MCLAUGHLIN, CORRESPONDENT, CNN: It certainly does not seem that way, Richard. She once again leaves Brussels empty-handed with little to show
for her visit other than a guarantee of further talks. That was her - the outcome of her meeting with the President of the European Commission, Jean-
Claude Juncker.
They issued a joint statement out of that meeting, reiterating their red lines. Juncker for his part reiterating the E.U.'s red line, that the
withdrawal agreement is not open for renegotiation.
So where this process goes from here, pretty much, at this point, is anyone's guess. Worth reiterating that it is, today, 50 days to Brexit.
[15:10:02]
QUEST: So, on that valid point, is there a potential here for our old friend, the Euro fudge, something that nobody really understands what it
means, nobody wants it to take it to the bank to cash it, but will allow them to get it through Parliament.
MCLAUGHLIN: Well, you know, at this point, Richard, the demands are pretty specific from the standpoint of what the U.K. is asking for. Legally
binding changes to the withdrawal agreement.
Now, we understand that there was no concrete proposal, according to media reports, put on the table by Theresa May today. But that's pretty
specific. It's either legally binding within the withdrawal agreement or it's not. And what senior E.U. officials have been telling me is that
they're potentially open to at this point is some sort of side arrangement alongside the withdrawal agreement, that could be potentially legally
binding, but they're not going to commit to anything here in Brussels without assurances, a path to getting this deal across the line at
Westminster, which at this point, is not on offer in the U.K.
QUEST: Erin, thank you. Good to have you with us tonight. The E.U. and Theresa May are deadlocked on the question of the backstop. We're going to
spend a bit more time tonight talking about this, because it is the crucial key for Brexit.
European leaders say, only one thing is clear, whatever happens, there needs to be and there will be a Northern Ireland backstop.
(BEGIN VIDEO CLIP)
GUY VERHOFSTADT, EUROPEAN PARLIAMENT BREXIT STEERING GROUP It's important that Mrs. May today in the meeting assured us that there will be a
backstop. That what she said already in Belfast, there is no question to remove the backstop.
(END VIDEO CLIP)
QUEST: To understand the backstop, you have to understand the current position and where it's going forward. This is the current position. The
United Kingdom, Northern Ireland, the Irish Republic, one single market with goods and services flowing between them freely.
The issue is after the U.K. leaves the E.U., well, then, it will be two countries in two different regulatory regimes, and by rights, there should
be a hard border between Northern Ireland and the Republic. But they are against that. It's not in the Good Friday Agreement, and the fear is that
if you go back to a hard border, on the Island of Ireland, well, when, there's a real risk of going back to violence.
So there is a backstop that's designed to stop it and the backstop says as follows, if they don't reach agreement in the next two years, if, then
Northern Ireland becomes closely allied to the south in a Customs Union that includes the whole lot. But that, because these two will be more
closely aligned, would create an artificial border between the Great Britain and Northern Ireland. And that, according to British politicians,
is absolutely unacceptable. They will not go for it.
And so the Northern Ireland question has become the intractable issue. The backstop says, if it's enforced, the north and the south will be aligned in
a massive Customs Union. Can they renegotiate? European leaders say there's no going back to the negotiating table. Jean-Claude Juncker and
Donald Tusk have been remarkably consistent over the past couple of months, not open to negotiation. The only deal possible. The only way to ensure
an orderly withdraw and no room whatsoever for another deal.
Malachi O'Doherty is an author and journalist in Northern Ireland. He joins me from Straffan near the border. I sort of outlined there the
potentials, but there is no obvious solution to it, because if you end up with a Customs Union of the north and the south, you've got a border down
the Irish Sea, and if you have a hard border, you go back to violence.
MALACHI O'DOHERTY, AUTHOR AND JOURNALIST: You're stuck with the reality of a divided society in Northern Ireland. About half of the population
identifying as Irish and half identifying as British, so the half that identifies as British don't want any separation from Great Britain and the
half that identify as Irish feel that they're entitled to the closest association with the Irish Republic as guaranteed by the Good Friday
Agreement.
So, no, you're right, there is no - there's no conceivable compromise here. That's part of what comes from the nature of Northern Ireland itself for
the way it's structured, and the way the topography is changing, but it's also quite ironic, if you like that people who have campaigned for Brexit,
on the understanding and on the slogan that they wanted control of their borders, have only one land border with the European Union, and they're now
desperately trying to find a way of not having a border there at all.
[15:15:03]
QUEST: What's the fear - if you do - let's just say there's no border there and there's no Customs Union. I mean, what is the fear here, that
goods and services, Europeans would flow through Ireland up into Northern Ireland to try and get to the U.K.?
O'DOHERTY: Well, I suppose that's part of it, but the public expressed fears by the Chief Constable and his predecessor, former Chief Constable
are simply that if you put structures on the border, they will be attacked by paramilitaries, by Republican paramilitaries. We do have active armed
groups in Northern Ireland. We had a bomb in Derry just last week at the courthouse. So there is a realistic prospect of an increase in violence,
if you provide a target like a border.
Now, other people will say, of course, you can't actually determine the constitutional future of Ireland or the European Union under threat from a
paramilitary group and there's logic to that. But then again, the logic of the entire peace process was that you did adapt politics to make some
accommodation with that kind of anger.
QUEST: Is there - I'll ask you the same question asked my colleague in Brussels, is there a Euro fudge that you can think of, that you can cobble
together that just gets you over the March the 29th deadline so you're into the traditional period?
O'DOHERTY: What might get you over the March 29 deadline is that the backstop might not be needed on the day. I mean, Britain has not made its
new trade agreements with the rest of the world. When Britain makes a trade deal with the United States, the fear is that we will get chlorinated
chicken coming in and the European Union will want to seal the Irish border to stop American chicken getting into the European Union and contaminating
the food market there.
But there will be no fudge. The key to this decision in many ways is a Northern Ireland political party and a confidence in supply arrangement
with the Tories, t hat's the Democratic Unionist Party and they don't do fudges. They don't do fudges. You also talked to your correspondent over
the idea of a side deal. You know, there is a side deal in the Good Friday Agreement signed by Tony Blair and that was one of the things that made the
final resolution so difficult, so they don't do side deals, either.
QUEST: Good to see you, sir. We'll come back to you, if we may, in the future to understand what finally happens. I appreciate it.
O'DOHERTY: You're very welcome.
QUEST: When we continue, it's a resolution recognizing the duty of the Federal government to create a Green New Deal. What does it mean?
(COMMERCIAL BREAK)
[15:20:00]
QUEST: The world's top scientists are giving the global economy just 12 years to complete a green revolution and avert climate disaster. Democrats
in the United States have unveiled a detailed plan to get it done, it's called the Green New Deal.
Now, the idea is it phases out fossil fuels over ten years, it moves to 100% renewable energy. There will be big investment in infrastructure and
millions of new jobs. No mention of the costs. Estimates are it will be $1 trillion.
The U.S. Congresswoman Alexandria Ocasio-Cortez is one of the masterminds and says the private sector failed on climate change, now massive
government intervention is the only solution.
(BEGIN VIDEO CLIP)
ALEXANDRIA OCASIO-CORTEZ, U.S. REPRESENTATIVE, NEW YORK, DEMOCRAT: For 40 years, we tried to let the private sector take care of it. They said, "We
got this, we can do this. The forces of the market are going to force us to innovate." Except for the fact that there's a little thing in economics
called externalities.
And what that means is that a corporation can dump pollution in the river and they don't have to pay for it and taxpayers have to pay for cleaning up
our air, cleaning up our water, and saving the planet. And so we've already been paying the costs, except we have not been getting any of the
benefit.
And so what we're here to say is that government is not just for cleaning up other people's mess, but it's also for building solutions in places
where the private sector will not.
(END VIDEO CLIP)
QUEST: Get out your phones, cnn.com/join. This is one that affects us all deeply, long-term. Should the government spend big to stop climate change?
Private sector has an involvement, but fundamentally, is this really what the government should be doing? Yes or no. Straightforward, yes or no,
cnn.com/join on that particular issue.
The Green New Deal follows a wave of activism by a group of millennials who call themselves Sunrise Movement. Bill Weir met the group's leader in
Washington.
(BEGIN VIDEO TAPE)
BILL WEIR, CORRESPONDENT, CNN (voice over): The problem is so big, it's hard to imagine, but America and the world's top scientists widely agree
that we are running out of time. That mankind has as little as a dozen years to stop burning so much carbon and save life on Earth as we know it.
But you'd never know it listening to the State of the Union.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The United States is now the number one producer of oil and natural gas anywhere in the world.
STACEY ABRAMS, FORMER GUBERNATORIAL CANDIDATE OF GEORGIA: We can do so much more. Take action on climate change.
(END VIDEO CLIP)
WEIR (voice over): And while Stacey Abrams' rebuttal only mentioned the end of the world in passing --
(BEGIN VIDEO CLIP)
CROWD: Green new deal. Green new deal.
(END VIDEO CLIP)
WEIR (voice over): A new generation of activists are now forcing the issue in the halls of Congress.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: We brought 200 young people to tell Nancy Pelosi and Democratic leadership, we need you to step up, we need you to back
something like a green new deal.
(END VIDEO CLIP)
WEIR (voice over): They call themselves the Sunrise Movement, and after dozens were arrested for occupying the offices of top Democrats, dozens of
top Democrats are now singing their song.
(BEGIN VIDEO CLIP)
KAMALA HARRIS, U.S. SENATOR, CALIFORNIA, DEMOCRAT: I support a Green New Deal.
(END VIDEO CLIP)
WEIR (voice over): And when one of the Sunrise founders came back to Capitol Hill, instead of calling police, Senator Ed Markey gave her a
ticket to the State of the Union, and he is drafting a Green New Deal resolution with Representative Alexandria Ocasio-Cortez.
(BEGIN VIDEO CLIP)
FRANKLIN D. ROOSEVELT, FORMER PRESIDENT OF THE UNITED STATES: This nation is asking for action and action now.
(END VIDEO CLIP)
WEIR (voice over): The original new deal helped pull America out of the great depression, with massive public works projects, dams and grids and a
civilian conservation core over two million strong. But it also set up the modern welfare state and so the Sunrisers are demanding not just clean
power, but Medicare for All, resettlement funds and climate-related jobs for the neediest population.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: And so more than anything, I'm actually feeling heartened in this moment.
WEIR (on camera): Yes, you do?
UNIDENTIFIED FEMALE: Yes.
WEIR: You're going to look out on the floor of lawmakers and think, oh, no? If we have to wade through them to agree on something, we're doomed.
UNIDENTIFIED FEMALE: Probably, but we're not waiting on them and we are actually building a movement that is going to be powerful enough to make
something like a green new deal a political inevitability in this country.
(END VIDEO CLIP)
WEIR (voice over): But in an age of bitter division, they are calling for trillions in new spending and the kind of national unity not seen since the
Apollo Project. Ironic, since Cape Canaveral's moon shot launch pads are currently being fortified against sea level rise caused by climate change.
(END VIDEO TAPE)
QUEST: Jeffrey Sachs, our good friend, always good to have him with us, economist and professor and directs the Center for Sustainable Development
at Columbia University. He is in Brussels tonight and joins us.
[15:25:10]
QUEST: Jeffrey, good to see you, sir. Thank you. The resolution recognizing the duty of the Federal government to create a green new deal.
It's highfalutin, it's high sounding, it's got good intentions, but it's going nowhere.
JEFFREY SACHS, DIRECTOR,THE CENTER FOR SUSTAINABLE DEVELOPMENT AT COLUMBIA UNIVERSITY: Well, it is going to be put into reality, actually.
Yesterday, I was in Washington. Today, in Brussels. In both places here in the capital of the European Union, same discussion. We have to move to
a renewable energy based economy and we have to do it quickly.
We have to do it because we're facing disasters of mega force fires and rising sea levels and unprecedented droughts and floods and hurricanes and
so we actually have to do this and it is going to get done.
The interesting thing, Richard, is the American people have been saying for years, we don't want more fossil fuels, we want renewable energy. And now,
finally, some politicians who aren't in the pocket of the oil companies are saying, yes, that's what we're going to do.
QUEST: It doesn't help when the President and the administration don't believe in climate change.
SACHS: No, this President is a disaster for the world. I've called it climate crimes against humanity, because in the face of people losing their
lives in huge numbers, not only no response, but as we heard in the State of the Union, as your story just retold, the President is cheering on going
in exactly the wrong direction.
But the public knows this all over the world and that's why I'm finding in every capital that I visit now, not only a similar effort but the resonance
of what is happening in U.S. politics giving hope around the world, not obviously from Trump, but from Alexandria Ocasio-Cortez.
QUEST: Before we let you go, it's late in Brussels, David Malpass for the presidency of the World Bank, several organizations have come out and said,
you know, he may not be the most perfect choice, but he does know what he's doing and he is a worthy choice to run the World Bank. You're shaking your
head already. I haven't even been asked the question, do you agree?
SACHS: I just think it's hilarious. Here's the chief economist of Bear Stearns, which was one of the major triggers of the financial disaster of
the world a decade ago, he knows what he's doing? Well, I'm not quite so convinced.
QUEST: Good to see you, Jeffrey. Next time - when you're back home, please, there's a seat here waiting for you. Instead of talking to you
that way.
SACHS: Looking forward to it.
QUEST: Good. Jeffrey Sachs. When we return, it may still be a favorite - actually, before we go to the break, just look at those numbers. Let's go
back. Sorry, I just realized, we don't often see that sort of numbers. Should governments spend big to stop climate change - 94% of you say yes,
we should. cnn.com/join. Don't often see that number. That's overwhelming. It's almost unanimous, but almost.
It may still be a favorite of President Trump's, Twitter is losing users by the millions. After the break.
[15:30:00]
(COMMERCIAL BREAK)
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. Twitter shares
are down almost 10 percent on a tough day for tech stocks. And you're going to hear tonight from Ford's executive Vice President, who tells me
we're in unprecedented times.
He's navigating Brexit, China, and the Trump administration. For that, this is Cnn, and on this network, the facts and the news always come first.
France is recalling its ambassador to Italy to protest against the Italian deputy Prime Minister, Luigi Di Maio's meeting with the French Yellow Vest
protesters.
France and Italy have been in a slowly escalating squabble for almost a year, after the rise of populism in European politics. One body has been
recovered from the wreckage of a plane that was carrying the Argentinean soccer star Emiliano Sala and his pilot. The plane went down in the
English Channel more than two weeks ago. He was on a flight from France to Wales. Investigators have not said if the body is Sala or the pilot David
Ibbotson.
All horse racing in Britain has been suspended after an outbreak of Equine flu. The British horse-racing authority says it takes three days for the
animals to show symptoms. They'll decide on Monday whether to resume racing on February the 13th.
To the QUEST MEANS BUSINESS trading post, where you're down on the Dow, we're off the lows of the day, but still heavily down. The Nasdaq, again,
off the lows, but still sharply lower, three red arrows. Josh, the lighting boss, where -- yes, that was so easy, even I could have got that
one.
It's reds all around, but we're still up almost 10 percent year to date from the February -- sorry, from the December, the 28th lows, and investors
are growing anxious. The U.S. won't reach a trade deal with China before the March tariff deadline.
At the bottom of the Nasdaq, it's Twitter shares, almost down 10 percent. The Q4 earnings revealed it's losing millions of dollars. Samuel Burke is
in London and joins me now. Samuel, so, Twitter down sharply. They want to change the metrics upon which people value what they are doing. Are
they justified in so?
SAMUEL BURKE, CNN BUSINESS & TECHNOLOGY CORRESPONDENT: Absolutely. This was a necessary move, but a real shock to the system, people didn't see it
coming. Basically, in social media, for years we measured things by monthly active users.
But eventually, Facebook reset all of that and decided to go with daily active users. So Twitter was the only one that hadn't caught up to this.
And so they decided to do just that today. They let us know how many daily users they have.
But on top of that, they created something called MDAU, Monetized Daily Active Users, because they have a problem that nobody else has. They have
a lot of people who use Twitter on other apps, but they can't see the ads actually. So the numbers that we just put up on the screen, I wouldn't
mind if we put them back up again just for a second.
All of a sudden, it was a shock to the system because a few weeks ago, it would have said, Twitter has 300 million followers, probably a little less
than that, and when you see just how small Twitter is there, 126 million --
[15:35:00] QUEST: OK, Samuel --
BURKE: Compared to Facebook's --
QUEST: One-point-five billion --
BURKE: Samuel --
QUEST: It's a real shock. So why would they knowingly, willingly, and with intent reduce the visible numbers if it makes them look bad?
BURKE: Because they have to tell the advertisers, these are the amount of people who are going to see your ads. And if they're telling the
advertisers one number, but the public, aka, the stockholder is a different number, they could run afoul of the SEC. So this was an absolutely
necessary move on all fronts.
QUEST: All right, so, if you then look at their new daily numbers, and you look at their engagement numbers, because it's not just enough to have
people, it's how they're enjoying it and are they engaging with it, what do you learn then?
BURKE: Well, I think the engagement actually looks pretty good, the same way the financial picture actually looks pretty good. But investors have
long proven that they really only care about daily active users. They'll let you --
QUEST: Right --
BURKE: Go a long time, as long as you've got those users and you're growing and they're really just not doing that.
QUEST: We talk about Snap, there are people who say, it's got no long-term future, rightly or wrongly, I don't know, but that's what people will say.
If we talk about Twitter, do they say the same?
BURKE: Listen, I don't think that they think it doesn't have a long-term future. Twitter is definitely going to be there. But Twitter, Snap, are
in a completely different category from Facebook and the apps that Facebook owns. And I think that's why you're seeing the number that you're seeing
on the screen right now.
There is a realization about that with Twitter, over and over again. Even though we lumped them all together because they're social media, the gap
between them is really unbridgeable.
QUEST: All right, Samuel, thank you. Twitter, now that, you know, Twitter down only 10 percent, and by the way, Twitter is of course traded on the
NYSE, not at the Nasdaq. Aid trucks from Bogota are just now arriving on the border with Venezuela carrying food, medicine and supplies for the
desperate people on the other side. We're live at the scene.
(COMMERCIAL BREAK)
QUEST: To Venezuela now and the self-declared President Juan Guaido says he's confident he can get humanitarian aid into the country. Isa Soares,
having done spectacular reporting there yesterday is now at the border at Cucuta in Colombia, the trucks are arriving.
[15:40:00] Now, if I remember correctly, is that the place where the trucks arrive, but the road is blocked by containers and -- well, you tell
me.
ISA SOARES, CNN CORRESPONDENT: It is spot on. You remembered it correctly, Richard. This is Tienditas Bridge, this is a bridge that was
built about three years ago, it's never been inaugurated, it's never been opened, it's not pedestrian bridge, never been used.
The trucks came in about an hour or so ago, and we saw two big white trucks carrying U.S. aid. I spoke to a U.S. official about an hour or so ago in
terms of giving a sense of what's in their trucks, I'm going to tell you what they told me.
They said it includes food and nutritional supplements, hygiene kits --
QUEST: Right --
SOARES: Medical supplies, it said, for those most in need in Venezuela as soon as possible. And to give you a sense, Richard, of how far the
difference is -- the distance is from here to that blockade. You were talking about the two blue containers and that orange tanker, it's about a
kilometer distance.
So a kilometer from here to that blockade, that will then mean Venezuelan territory, Richard --
QUEST: Right, so what's going to happen here? Because there's a blockade, there's a fence just behind you, which I'm not sure what --
SOARES: Yes --
QUEST: Purpose or who put that there. Is that the Colombian side, is that the Venezuelans who put there -- that there -- so what's going to happen
when the trucks arrive?
SOARES: The trucks have gone in, the trucks have been told -- two trucks are in the storage house just over my left shoulder --
QUEST: Right --
SOARES: This full warehouses. OK, so they're in there, Richard, we don't know at what point that aid is going to go into Venezuela. Government U.S.
officials have told us as soon as possible, the Colombian government have told me on the phone that it's not staying here.
It is going into Venezuela where the -- that is just after those tanks where that blockade is, we do not know, but they do not want that aid to
stay here. This is, Richard, in many ways, it's the last -- it's one of the first, I should say, chess moves of what is a political crisis, a
humanitarian crisis as well.
And it is a high-stakes game for Maduro and as well for Guaido, as you were mentioning there. Because if Maduro -- if this goes in, Maduro looks
weakened and his supporters, in terms of high-ranking officials, will then switch sides and he loses the control.
If it doesn't go well, if the aid doesn't go well, doesn't go any and it doesn't go well for Guaido, then he looks weakened. He's put so much
emphasis on this aid, and he's got a lot of support because of this aid. So high-stakes game for both men, the question now remains, how long until
that aid actually goes in?
QUEST: All right, but there is still the physical barrier. I don't want to harp on about it, who's going to -- who is going to remove it?
SOARES: Absolutely --
QUEST: Who is going to remove it?
SOARES: Well, this barrier just behind me has been put in place -- it is the Colombian side by the Colombians. Because this has been here for some
time --
QUEST: Right --
SOARES: Because this bridge has never been opened. So it's -- that's it. On the other side, it's always close because there is a political standoff
between Colombia and Venezuela and has been for some time.
But people have been telling me that the Venezuelans who were only at the bridge, if you remember, you and I were talking yesterday, who were making
that journey every single day, they said --
QUEST: Right --
SOARES: If that aid doesn't go into Venezuela, Richard, they themselves are going to come over the bridge somehow and move that --
QUEST: All right --
SOARES: Blockade. Just to give you a sense of the people's --
QUEST: Good --
SOARES: Frustrations here.
QUEST: Isa, thank you, take care, do not fall off the van upon which you are standing that we caught a glimpse of in advance.
SOARES: You know, you know --
QUEST: Yes, precariously standing on, take care over there, we need you to continue reporting this story in the days and weeks ahead.
SOARES: We'll do.
QUEST: As we continue tonight, Sonos Q1 is the most profitable in its history. The chief executive tells me about the next move.
[15:45:00] (COMMERCIAL BREAK)
QUEST: Quality everywhere when you look at the carmakers. The major automakers suffering. Take a look at Fiat Chrysler, major stock down 12
percent, and that's just because of disappointing 2019 guidance. Now, as with the rest of them, a weak performance in China with very small margins
in the United States because of stiff competition.
And this has been, in terms of the stock price alone, the worst day for the stock since the death of Sergio Marchionne. Ford shares are down more than
4 percent as we look towards the end of trade on Wall Street. The company has a new investment in Chicago -- well, in the factories around Chicago
that Ford has, $200 billion, and 500 high-paying jobs come with it.
Ford, as a company, as an automobile maker is grappling with political disputes all around the world. So let's have a look and see exactly where
Ford's issues are. In the United States -- between the United States, Canada, and Mexico, you have the USMCA. You've got trade tensions over in
China.
And if all that wasn't bad enough, you've got Ford's operations in Brexit in the U.K. and in the EU and Brexit. So the man responsible for
operations globally is the Ford's Executive Vice President, who told me it was investments like the ones in Chicago that would help navigate these
sort of problems.
(BEGIN VIDEO CLIP)
JOE HINRICHS, EXECUTIVE VICE PRESIDENT, FORD: Well, certainly, a lot of attention given to the auto industry in the United States these days by our
governing partners, and we understand why, because manufacturing is so important to the economy and to employment and to the communities that we
support.
But we've been investing here in America for a long time, that we have the volume here for a reason. And we believe we can compete here, which is why
we're working with our government partners to make sure that the new USMCA, the new NAFTA agreement is passed in Congress so we can have a North
American Trade Agreement that works for everybody and keeps our automotive business in North America competitive around the world.
QUEST: Now, with the new USMCA, what is the benefit in that sense? Obviously, Mexico's labor costs will become higher, there are new rules
about rules of origin and the amount of origin. But for a company like Ford, how will the USMCA affect you?
HINRICHS: Well, the USMCA as an agreement gives us certainty to plan the business going forward. It also allows the course for the free and flowing
trade happening between Mexico and Canada and the United States, which is so important because of the integrated nature of the automotive industry in
North America.
It also allows us to be able to plan for the future with certainty around what are the requirements for what should be produced where and what
minimum requirements are needed to be part of the USMCA in the U.S. and Canada as well as Mexico.
But importantly, it's also about making sure that North America as a total auto industry is competitive versus other parts of the world, like the EU,
like China or Asia Pacific for example. So all those -- for all those reasons, we think it's really important that we have that certainty, we
have a good agreement and we move forward together.
QUEST: You talk about China, of course, you're an expert having run the operation in China and in Asia Pacific. Well, as you look at it now, in
terms of your operations, there are too distinct problems. Firstly, a slowdown in growth, which is taking its tolls on sales, and secondly, the
possibility of a trade war or the reality of a trade war. How are you managing both of those issues?
[15:50:00] HINRICHS: Well, there are a number of issues in China. First of all, with Ford in China, we had a disappointing year last year, and
we're working very hard with new leadership and new plans in place for 2019, including some very exciting new products that we just launched in
China.
We're working very closely with our joint venture partners and our dealers to bring that business back to where it was just a few years ago.
Regarding change, we're encouraging China and the United States to work together, to listen to each other, and find agreements that can work for
both parties to make sure that the global economy benefits from the world's two economies -- two largest economies working together.
We understand autos are a big part of that and because of the global nature of trade, we ship a number of vehicles from the United States to China. We
actually have a trade surplus with China because of that. So we're watching very carefully to make sure that the both parties are talking,
listening to each other and working towards an agreement that works for both countries.
QUEST: You know, talking to you, Tim, it is very good to talk to you. But I am immediately reminded of how politically sensitive, industrially-
sensitive, how significant automobile making is. We've just talked about the U.S., USMCA, we've talked about China and the trade war.
Now let's finish off Europe and Brexit. Now, you have to make some key decisions about what manufacturing you're going to do in the EU and the
U.K. that makes it worthwhile. What's your plan?
HINRICHS: Well, you're right, Brexit's a big deal. As a leading U.S. -- I'm sorry, as a leading automotive sales in the U.K., it's a very big deal
to us with our brands and with our plans. We're encouraging the government in the U.K. as well as in the EU to work together to find a resolution.
We think it's very important for both the EU and the U.K., they work together. We need certainty to plan our business. We need freedom of
movement of goods and people across the countries to do that. And it can impact a lot of people if we don't do this right.
So we're hopeful that parties will work together to find a resolution that works for both sides and we encourage both governments to do that.
QUEST: Right, is Ford planning to move production if they don't?
HINRICHS: Well, it's too early to tell, we're obviously very important that we know where all this plays out from --
QUEST: Right --
HINRICHS: A trade and tariffs and customs and duties, but we're working together to hopefully make sure we can avoid some of those things.
QUEST: Jim, final question, let's get back to cars. You wondering -- I mean, it's nice to talk about the big shiny things sitting behind you, that
is the actual thing that you make. But you sometimes just despair, you end up having to be more of a diplomat. You end up having to be more of a
politician. The geopolitics of this world affects Fords and automobiles like pretty much none others.
HINRICHS: Well, we are kind of in unprecedented times, when we talk about the global trade environment, and all the different things going on from
Brexit to USMCA to China in the U.S., so it's very important that we stay actively engaged in the conversation.
Ford wants to be part of the solution, whether it's on fuel economy and emissions or whether it's on trade.
QUEST: Right --
HINRICHS: So we work very closely with governments to find solutions so we can work together to have a global auto industry that works for everybody.
(END VIDEO CLIP)
QUEST: The head of Ford production worldwide. Sonos shares have taken a very sharp dive, down 11 percent. The CFO announced he will leave the
company later this year. That's a flip-flop for the speaker maker, who reported his most profitable quarter in the industry this week.
Sonos has had its ups and downs since it went public. It started with a solid IPO, but has since tumbled. And others have followed similar fate.
Tencent is the only music -- the only IPO that's gone up and considerable, and that's arguably because it is Chinese one.
Spotify down, Dropbox down, Sonos down, Snap will draw a veil over. I spoke to the Sonos CEO Patrick Spence, he shut down reports that Sonos will
shift manufacturing from China because of tariffs and says he's confident of the company's future.
(BEGIN VIDEO CLIP)
PATRICK SPENCE, CHIEF EXECUTIVE OFFICER, SONOS: We're not pulling out of China, we're happy with our manufacturing in China. We've been expanding
our global footprint, we'll continue to do that, but we continue to manufacturer in China and will for the long-term.
QUEST: And what about the difficulties of tariffs and managing a company that's creating products or buying products that are tariff that does eat
into margins.
SPENCE: Well, the good news is so far that we've been able to avoid the tariffs that are there. And you know, we have a plan over the long-term to
make sure that we have a global footprint that addresses any of those needs. I think the real story for us has been the ability to deliver the
most profitable quarter in our history and doing it on the back of record sales and increasing efficiency in our business.
And so like you said, that is difficult in this kind of environment, but I'm very proud of the team's work to actually make that a reality.
QUEST: All right, so you had a good IPO, and then sort of the price went down. But you're not alone, because if you look at all of the digital IPOs
lately or the IPOs in the tech sector lately, three of four of you are lower, Spotify is down, Dropbox is down and you're down.
[15:55:00] Only Tencent has managed to gain on its IPO price. Why do you think this is?
SPENCE: You know, there's probably some macro factors. I can't begin to guess at what, you know, investors are looking at on that front. I really
focus on what we can control, which is how we're doing in terms of building our new products, introducing new products, executing on the quarter.
And you know, we've just been focused on how we deliver on sustainable, profitable growth. And so this quarter was a big step for us because some
of the questions around the IPO were, can you be profitable? And we just put that to bed, in my opinion, based on what we've been able to deliver --
QUEST: Right --
SPENCE: And we set ourselves up for a great year ahead.
QUEST: Do you get a bit irritated with the market? You've got good results, you've got good numbers, your sales are up, and the market still
doesn't seem to want to give you the credit for that.
SPENCE: Right, I think ultimately, you know, we're in this for the long- term. I think stock prices over the long-term gravitate to reflect the companies that are building value over that long-term. So I don't really
worry about these short-term gyrations. I know it will gravitate to the right spot over the long-term.
(END VIDEO CLIP)
QUEST: And finally, we're in the last few minutes of trade on Wall Street. Dow is off the lows of the session, we're down around 1 percent, most of
the Dow 30 are lower, just a few spots of green. Boeing and Caterpillar are down roughly 1 percent. We will have our profitable moment after
break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. Fickle betwixt and in-between -- look at the markets, Spotify is down 12 percent, Dropbox is off 13 percent,
Sonos down 48 percent. Let's put Snap to one side, and Tencent down 18 percent. These are companies making real things in the case of, say, for
example, Sonos.
They've got millions of customers in the case of Spotify and Dropbox. But they have been overvalued by the market and in an era of tech, it has
simply been unable, in some cases, to monetize, in other cases, to truly value the potential.
There's a lot of froth in the market, a lot of fluff, and you see that with many of these IPOs. Instead, over time, the market values them properly,
which does beg the question why Tencent is so well, but that's obviously China, vast population, still got to get to grips with the internet and
online.
And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
The Dow is down, the bell is ringing, the day is done!
END
