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First Move with Julia Chatterley
Populist Parties Across Europe Failed To Make Significant Gains, But The Centrists Struggled, Too; President Trump Says The U.S. Isn't Ready For A Deal With China; Renault Set To Tie Up With Fiat-Chrysler. Aired: 9-10a ET
Aired May 27, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's your need to
know.
A far-right fizzle. Populist parties across Europe failed to make significant gains, but the centrists struggled, too. "We'll call you,"
President Trump says the U.S. isn't ready for a deal with China. And a whole new alliance. Renault set to tie up with Fiat-Chrysler.
It's Monday. Let's make a move.
Welcome to FIRST MOVE once again. I hope you had a great weekend. And if you're still on holiday today, then enjoy it while we bring you up to speed
with what's been happening around the world.
I'm calling it a populist polls in the European elections with many parties underperforming expectations, but that didn't stop a few fireworks and
we've got all the details; and of course, no pause in the war of words between the U.S. and China over trade.
Right now U.S. and U.K. stock markets are closed, so global volumes are expected to be a bit muted, but as you can see Europe is making gains,
green across the board here. Greek stocks. Look at Athens over there, up by more than 6 percent.
Prime Minister Alexis Tsipras called a snap general election following his party's defeat in both E.U. and local elections. Greek bond yields are
also significantly lower, too. Is that a measure of perceived riskiness here? We'll take that I think as a positive sign as well on that general
election call.
Meanwhile, over in Asia, stocks had a mix session. President Trump said in Japan today that he's not yet ready to make a trade deal with China and the
tariffs could rise further on Chinese goods. China responded though blasting the U.S. negotiators for not being on the same page as them on
trade.
Didn't a third of those pages get red lines scribbled all over them? Just saying. The Chinese also saying higher U.S. tariffs will have quote, "very
limited impact on their economy."
Well, new numbers out today tell a different story. Chinese industrial profits tumbling in April and we've got manufacturing business survey data.
Later this week, too, we'll be bringing you that. Some analysts watching for a contraction in activity.
Now, we say in FIRST MOVE all the time, that the stock market is not the economy. But I do think this chart speaks volumes and I'll continue to
show it to you. At the beginning of this year, if you remember, Chinese stocks with a big winners with the MSCI China index, outperforming the S&P
500.
Since President Trump's pivot away from that trade deal, the S&P has outperformed. It slipped 13 percent so far this year with a mere 4 percent
higher for the MSCI. So that relative performance, they're important. That said, the U.S. won't escape scot free.
Last week's report on U.S. manufacturing was a shocker. It showed factory activity falling to an almost 10-year low this month. JPMorgan thinks that
we could see us growth boil to just 1 percent this quarter.
The political center, of course took a hit in Europe this weekend. I question whether the economic center can hold on any better during the
trade war.
All right, let's go to the drivers. People from 28 nations have picked their representatives for the E.U. Parliament and it was a fragmented
picture. Centrist groups did poorly, but populist parties didn't perform as well as some polls had suggested. Erin McLaughlin is in Brussels to
give us all the details.
Political fragmentation, I think that's the phrase following these results. Erin, talk us through it.
ERIN MCLAUGHLIN, CNN CORRESPONDENT: Yes, that's absolutely the phrase, Julia. I think it's interesting to look at these results in a context of
three camps that exists here inside the European Union.
On one camp, you have the status quo, then you have those who want more Europe and then you have those Eurosceptics who want less Europe.
What we saw last night evolve is a picture in which the status quo lost ground and the other two camps essentially gain ground. We saw strong
gains for the ALDE and martialist, the liberals as well as strong gains for the greens, but we also saw the Eurosceptic camp make gains as well,
although not as much as some had originally feared.
We saw strong gains for the Eurosceptics in Italy particularly strong performance from the Deputy Prime Minister there, Matteo Salvini. We also
saw Marine Le Pen in France have a strong showing come out victorious, though a narrow victory over French President Emmanuel Macron.
Although, in total, those who are pro-Europe within this Parliament vastly outnumber those Eurosceptic groups. So we don't expect the Eurosceptics to
have too much of an impact on the internal workings that's more seen as a warning shot to the European project in general.
[09:05:08] MCLAUGHLIN: The other big figure that everyone here is talking about in Brussels is voter turnout. It was particularly strong at almost
51 percent, the strongest it's been since 1994. The first time since the elections were introduced in 1979, voter turnout has actually gone up seen
as a very healthy sign here for the E.U. in Brussels -- Julia.
CHATTERLEY: Yes, one could argue that Brexit and the difficulties of that challenge have certainly sent a message to voters in regional Parliament's.
But to your point, if we break it down in terms of the Eurosceptics and those that are more pro-E.U., how coordinated are the parties on the
Eurosceptic side if they want to create tensions and get in the way of voting and decisions in Brussels, how coordinated are they? Because the
challenge has always been for me that actually even if they are Eurosceptic, the differences between them are vast.
MCLAUGHLIN: Yes, absolutely. The differences are vast by definition, they're nationalists who want to exercise their own national interest. So
traditionally, in the past, these nationalist parties, these Eurosceptic parties have not managed to coalesce.
We see the likes of Matteo Salvini trying to change that with his new alliance with Marine Le Pen of the National Rally in France. We're going
to have to watch that space very carefully to see how successful he is. So far, he has been unable to bring others on board like Viktor Orban's Fidesz
Party, have been unable to bring on board the Eurosceptics out of Poland. They all have very different economic as well as foreign policies.
So it'll be very interesting to see if they'll be able to come together to make any sort of impact. But regardless, they do not have the majority.
In fact, far from it in terms of this Parliament. The pro-European parties still have a majority of the seats in the upcoming European Parliament.
CHATTERLEY: Yes, we were just showing the smiling face of Matteo Salvini, one of the other big winners of the E.U. elections as well. Erin
McLaughlin, thank you so much for breaking that down.
Brexit one word and the one issue that dominated voting for the U.K. Nigel Farage's Brexit Party storming to victory with nearly 32 percent of the
vote. There were also small but strong gains for parties to back remain, including the Liberal Democrats and the Green Party.
Phil Black is at Downing Street for us and have been following these results. Phil, for me, the key takeaway for the U.K.'s voting was here.
If you have a firm view on Brexit, whether you're a Brexiteer, or you're a remainer, you actually won votes. If you're an established party here, you
got crushed.
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Yes, that's precisely right, Julia. Parties that took a clear unequivocal view on Brexit one way or the
other, were rewarded by the electorate.
The clearest example of that, as you touched on is the Brexit Party, this new Nigel Farage single issue vehicle that was only formed a month ago last
month, and yet now has emerged to capture a third of the vote and come in at first place, which really is an extraordinary result.
But what it's been very good at doing is sweeping up the discontent that exists across pro-Brexit areas around the country. People who voted for
Brexit, three years ago and who to this day simply cannot understand that what they voted for has not yet been delivered.
On the other side, the Liberal Democrats, as you mentioned, up until pretty recently, something very akin to a political courts in this country, they
have been incredibly effective at capturing the remain vote by say definitively unequivocally that they want to stop Brexit, they want a
second or a third referendum in order to do that.
And then there were the main parties which were punished. Labour lost a lot of its votes to the Lib-Dems, punished for that consistently murky
policy of theirs saying, "We respect Brexit but at the same time, maybe we might back a further referendum," and that Conservatives, they knew they
were going to take a hit on all this. They could see this coming.
For many conservatives, it was one of the reasons why they push to force out Theresa May last week, but even still, they came in at fifth place,
historically terrible. It will be a shock to the party, and it will very much likely inflame passions during the coming conservative leadership
contest -- Julia.
CHATTERLEY: Yes, it's such a huge illustration, I think of the polarization of public opinion is, as you quite rightly point out. But
let's move this forward then, what does this ultimately mean in the win for the Brexit Party here? Does it mean that the conservatives have no choice
but to go for a hard Brexiteer, when you've got Nigel Farage saying, "Look, I want to be party to the next talks and the next Brexit negotiations."
The challenge remains and it's still a huge challenge to get something that works for all here.
BLACK: Indeed, but it's difficult to see how this will not frame the coming discussion within the Conservative Party.
[09:10:07] BLACK: Really, they are already feeling the pressure, the need to elevate someone to the leadership who is a dedicated Brexiteer, someone
who promises to take a tough line with Brussels, someone who if necessary, is willing to accept and perhaps enthusiastically embrace the idea of a no
deal Brexit scenario.
Even before this result, much of the conversation about who the leader should be was through that paradigm, if you like, and it is very difficult
to see how with this result in, the clear threat that many feel from the rise of the Brexit Party, how that will not further influence the
discussion that is taking place in the Conservative Party over the coming six to eight weeks or so as they go about the process of not just choosing
their new leader, but of course, choosing Britain's next Prime Minister as well.
CHATTERLEY: Absolutely. And we will continue this discussion later on in the show, but for now, Phil Black, thank you so much for that.
All right, let's move on to our next driver and we go over to Tokyo now where President Trump had some choice words for China.
During a Summit with Prime Minister Shinzo Abe, President Trump says the U.S. is quote, "not ready to strike a deal with Beijing."
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: So as far as China is concerned, they want to make a deal. I think they probably wish they made
the deal that they had on the table before they tried to renegotiate it. They would like to make a deal. We're not ready to make a deal and we're
taking in tens of billions of dollars of tariffs. And that number could go up very, very substantially very easily.
But I think sometime in the future, China and the United States will absolutely have a great trade deal.
(END VIDEO CLIP)
CHATTERLEY: U.S. companies are paying those tariffs just to be clear, but White House correspondent Boris Sanchez is in Tokyo for us to give us the
latest. Lots of pomp and ceremony here and a few Sumo wrestlers as well Boris, but it was the President's comments about North Korea and China, too
that I think perhaps garnered most attention. Talk us through it.
BORIS SANCHEZ, CNN WHITE HOUSE CORRESPONDENT: Yes, well, specifically on China. It's a big part of the reason that the President is here and
bringing up key talking points with Japanese Prime Minister Shinzo Abe.
The main reason the President wants to open up agricultural markets to American businesses is because a lot of American farmers are suffering
because of the trade war with China and the impact that tariffs have had on them.
So that was news there. The President saying that the United States is not ready to get back to the negotiating table. But you're right. Some of the
most surprising comments from President Trump were about North Korea.
The President apparently taking the side of Kim Jong-un when it comes to the short range ballistic missile tests that North Korea launched last
month that going against the outlook of his own National Security adviser, Ambassador John Bolton and even Japanese Prime Minister Shinzo Abe who was
standing just a few feet away from him when the President basically said that he wasn't working worried about these missile test.
Abe, however, said that he believes that these tests are regrettable. The Japanese Prime Minister has to walk a fine line here. He needs to sort of
charm the President, engender his support for a bilateral meeting between Shinzo Abe and Chairman Kim, something that Abe is still seeking. And yet
he also wants to condemn Kim and confront him with, in his words, some harsh truths.
We should point out the President and Abe just departed from a banquet held in the President's honor by the new Japanese Emperor, Emperor Naruhito.
The President and the First Lady are turning in for the evening. A big day ahead tomorrow. They're scheduled to tour joint Japanese and American
Naval facility before the President ultimately has back to Washington tomorrow afternoon -- Julia.
CHATTERLEY: Yes, I mean, you raise some really important points, strategic partners in many respects, whether it's trade, whether it's security,
whether it's tackling things like North Korea and China. Can we call this a successful few days between the two nations?
SANCHEZ: Well, it depends what the expectations were. White House officials before we even got to Japan had told us that this was largely
going to be a symbolic visit. That it was meant to strengthen ties between the two nations and show the strength of the Alliance as well.
But there really hasn't been a tremendous amount of progress to tout on a trade deal, or on some sort of joint coordination regarding North Korea.
Perhaps, the biggest thing that came from that press conference in terms of any deal or coordination between the two countries was this announcement
that Japan and the U.S. would work closer together on an effort to explore space. President Trump talking about soon going to Mars.
But again, this is more about diplomacy. This is more about showing a united front than it is about actually getting something on paper and
accomplish. President Trump telling the press and the world on Twitter that we could expect some kind of deal after elections are held here in
Japan in July -- Julia.
CHATTERLEY: Yes, it's such an important point. The symbolism here perhaps front and center and Melania Trump wins, her face at that sumo wrestling
match was just a picture and that was all over social media at the weekend, it did make me laugh. Boris Sanchez. Thank you so much for that over in
Tokyo for us.
[09:15:18] CHATTERLEY: All right, two big carmakers are on the road to a potential merger and investors are loving it.
Renault's Board says it will study a quote, "friendly proposal" for a 50/50 merger it received from Fiat-Chrysler. Shares of both companies are
rallying in Europe and Peter Valdes-Dapena joins us now and has been looking into the details. Talk us through what this combined entity would
look like? The world's third largest carmaker here, what will that mean? And also what will it mean for the Renault-Nissan Alliance as well going
forward?
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Well, that's something that's really going to be a lot of discussion. By the way, if
you include the Alliance partners in this, this would be the total package, the largest automaker in the world, including Nissan and Mitsubishi with
Fiat-Chrysler and Renault. Obviously a very, very big deal for the industry.
So far, Nissan is not commenting publicly on this arrangement. It hasn't said anything about it. There are reasons Nissan might be happy about
this, because, of course, Renault has been pressuring Nissan looking to do a full merger and Nissan has been resistant to that.
And now Nissan could say, "Well, there. You have your merger. You're happy, and we can maintain our independence in this."
CHATTERLEY: You know, it's interesting, I was looking at some of the synergies that come from the Nissan-Renault-Mitsubishi partnership here.
It was 5.7 billion euros in 2017. So we're talking if this alliance only generated half of the synergies that that Alliance does, we're talking some
two and a half billion euros a year, which would be lovely.
The challenge that I see here is Europe, Italy, where there is greatest crossover between these two things, try telling France or Italy that we're
going to be cost cutting and closing factories and things. Huge challenge.
DAPENA: Of course, now officially speaking in this announcement, Fiat Chrysler said it would not have to close any plants. That this would all
be through other sorts of synergies. But in the long term, who knows? It can be tough in this industry to cut costs without closing factories, but
so far, they say they're not going to.
But clearly Europe is the biggest challenger. It's a very -- it's a very challenging market to begin with and one where both these companies do have
a lot of overlap. The benefits -- the big benefit -- for them is going to be in the U.S. where of course Fiat Chrysler has deep dive big pickup
trucks and lots of profits.
CHATTERLEY: Yes. And the future is technology, of course. I have an eyebrow raised. We shall see. Peter Valdes-Dapena, thank you so much for
that.
All right. Let me bring you up to speed now with some of the other stories making headlines around the world. The Austrian Parliament looks set to
sack Chancellor Sebastian Kurz's caretaker government in a vote of no confidence.
In a few hours' time, the crisis began after a video sting scandal which took down the Vice Chancellor and dissolved the coalition between the
Chancellor's Conservatives and the far-right Freedom Party.
A climber who died on Mount Everest over the weekend had warned of overcrowding at the summit in his last post on social media. Robin Haynes
Fisher one of nine people killed on Everest this year. Experts say conditions this season have become increasingly dangerous and some
mountaineers lacked experience.
All right, we're going to take a quick break. But still ahead, what the E.U.'s fractured Parliamentary elections mean for global business and the
centrists; and don't wave goodbye to the populist wave just yet. Plenty more to come on the show. Stay with us. You're watching FIRST MOVE.
(COMMERCIAL BREAK)
[09:21:49] CHATTERLEY: Welcome back to FIRST MOVE live from New York, not the New York Stock Exchange, of course because U.S. markets and the U.K.
are closed today. An extra day to recover might be a good thing.
U.S. stocks lost ground again last week, the S&P 500 falling over 1 percent. The NASDAQ falling some 2.3 percent. The most significant losses
of course coming from the tech sector and those most sensitive to China generating the largest revenues. The likes of Apple, Qualcomm, of course,
as we've been discussing for many sessions now. The Dow fell for a fifth straight week in a row.
Let me give you a look at what is moving right now. European stocks are higher in the aftermath of the European elections. Greek stocks are the
biggest gainers, up more than 6 percent as you can see the defeat of the ruling Syriza Party in this weekend's E.U. elections and local elections
playing a part here with the Syriza leader, of course, Alexis Tsipras calling for fresh general elections.
What about in currency land? Both the euro and the pound losing a bit of ground against the U.S. dollar, but again, we mentioned as always, when the
U.K. and the U.S. are out, liquidity tends to be lower. So joining me now with insights into E.U. parliamentary elections, Carsten Nickel, Managing
Director of advisory firm, Teneo. Great to have you with us, Carsten, as always. Your assessment of what we got from the E.U. elections here.
Fragmentation and polarization, I think the key.
CARSTEN NICKEL, MANAGING DIRECTOR, TENEO: Yes, absolutely and a massive realignment of the party political space. So I think we're seeing a
continuation of that trend both on the European level, you know, where now the alt-center left and center right have to bring on these new forces.
The liberals, the greens clearly the big winner last night and then also in national politics that plays out, you know, very differently between places
like France or Germany or Italy.
But overall that story of the of the realignment of the party political space, these old voter coalitions breaking down, and, you know, coming
together in new formations, I think we're far from the end of that process. It is very much under way.
CHATTERLEY: Talk to me about what you make of the fact that turnout was higher this time around than it was in 2014? So whether it's four or
against, more people are saying, "Look, I want a voice here and I want to make a statement."
NICKEL: Yes, absolutely. I mean, it's -- you know, increased politicization that is also a trend that we've been seeing over the last
couple of years, you know, these topics that have been driving voters to the polls. If you remember, a couple of years ago, of course, the whole
question of the migration crisis in Europe, that was one of those wake up moments I think, for many people who had been abstaining in previous years
that brought them back to the polls.
Then we saw the surge of this new far right movement, and then probably something like a reaction on the center left and among younger voters,
urban voters who have been turning to the liberals and the greens ever since.
So it's very clear that interest among voters in European politics, but also in the politics of their member states, is rising again.
CHATTERLEY: You see, that's a fascinating point for me, the greens here, all across Europe, you can sort of poo-poo them or at least have until now,
but to your point, these are going to be the key makers going forward. It's young people. It's liberal, female, urban, wherever they are drawing
votes from. These are going to be key and pivotal decision makers of the future. And we should watch this.
[09:25:10] NICKEL: Yes, absolutely. And I think we should prepare ourselves for these forces leaving a mark on the policy agenda, again, in
member states and on the European level, just pick one of those key topics that we've been watching in Brussels over the last couple of years -- the
trade agenda, the international trade agenda, of course, a very complicated backdrop here for the E.U. against the backdrop of tensions with the U.S.,
with China and so on.
The Greens care very much about trade. Overall, a very pro-European force certainly, but with a greater focus on topics such as climate change,
consumer protection, and so on and so forth.
So what will the alt-center left and alt-center right do in order to onboard the greens to get their support for the continuation of their pro-
trade agenda on the on the international stage? I think that's a topic that we will be watching for, for the next years to come really.
CHATTERLEY: Yes, it's interesting. And obviously, on the right side, it drags people back to the center ground, which is an interesting thing, too.
Talk to me about France. How important is the wind for Marine La Pen here? And how important is it for Macron going forward?
NICKEL: Yes, I wouldn't -- to be honest, I wouldn't overestimate this because these two blocs in the end, you know, attract between 20 percent to
25 percent of the electorate, let's keep in mind that we were dealing with a different electoral system here proportional representation in the
European Parliament, as we've seen two years ago in the presidential election, the system works very differently. And that, of course, favors
Macron.
I think what we're going to see is a continuation -- a completion of his domestic reform agenda. Next, he is going to move to the question of
pension reform. But then let's make no mistake. I mean, obviously, the backlash from Le Pen is one thing that he needs to keep an eye on.
But I think the bigger problem that he really encounters is that this gradually crumbling coalition in Berlin and Germany that this is basically
too paralyzed to really get into a conversation with him about the future of governance in the Eurozone. That's where he would need to see some
movement. He's not seeing that. And the problems with Germany are certainly bigger than the problems that he has at home.
CHATTERLEY: Yes, he's not going to get back anytime soon. Talk to me about the U.K. because we've already discussed on the show the likelihood
that the win here for Nigel Farage and the Brexit Party likely means that the conservatives now will go for a hard Brexiteer to lead the party and
the country going forward.
But if we bring it back to the negotiations that are now going to happen over Brexit, are we still looking at the fact that it's got to be some
version of Theresa May's Brexit deal that's the only thing that's going to see the U.K. leave the E.U.?
NICKEL: Yes, I think we're going to return to that realization, but a little bit later in the year because we all know what's underway right now
is the contest within the Conservative Party. And we know what the party membership wants, as you say, indeed, they want somebody who's playing very
strongly with the idea of no deal.
That's what we're going to hear over the coming weeks. That is certainly the ticket upon which one of those contenders will ultimately be elected as
the next Prime Minister, and then that realization will kick in that, "Hey, here in Westminster, you don't we have a majority for a no-deal." And from
the Brussels side, there's really no interest in renegotiating the withdrawal agreement.
So I think towards the end of the current extension, 31st October, that's going to get very interesting again in Brussels.
CHATTERLEY: Yes, lots of sound of fury, but we're still searching for the impossible dreams in unicorns. Thank you to Carsten Nickel of Teneo.
Always great to have you on the show.
All right, a bitter pill to swallow for one of the biggest makers of generic drugs. Teva Pharmaceutical settles a lawsuit for $85 million, but
it's way bigger than that one settlement. The details are coming up. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:31:48] CHATTERLEY: Welcome back to the show. Donald Trump says he may announce a trade deal with Japan as early as August. The U.S. President is
in the country on a state visit. He made the comments in Tokyo just a short while ago.
He also talked about the chances of reaching a trade agreement with China saying he expect that the two countries to strike a great deal at some
point in the future. Anna Stewart joins me now.
Anna, I do get the sense that he is picking his battles here. He is trying to reach a trade deal with Japan, ending those steel and aluminum tariffs
on the likes of Canada and Mexico. But China, of course, remains a key battleground and it still looks as elusive as ever here.
ANNA STEWART, CNN REPORTER: It looks elusive, but that was the idea that he believes there will be a deal. That was some positive music really.
But yes, as you said, there's not going to be a deal yet.
He is going to keep that one spinning and comments we read in media reports from analysts suggest that perhaps there's no real incentive to get there
to a deal, to later in the year to nearer the U.S. election or if their economies are really sort of damaged by the trade relations of course, it's
not great. But so far, perhaps it isn't enough incentive to reach a deal.
As with Japan, very interesting, because he said that there will be an announcement soon on a trade deal. But again, we didn't actually get
anything real, nothing substantial. In many ways, this trip felt quite ceremonial didn't it rather than substantive, you know, ideas that they
will collaborate on things like space, that there will be a redressing of the trade imbalance, but nothing quite as far as a trade deal there.
CHATTERLEY: Yes, work in progress, but to your point, perhaps symbolic more than anything else. I want to bring it back to China though, because
we got some interesting headlines from Huawei of course, at the core of this battle over technology and intellectual property theft.
The chief there giving an interview and saying, "We don't want Apple to become a pawn here. China shouldn't punish Apple as a result of the
broader tensions and the United States pressure that they're putting on Huawei." Those were interesting comments to me, because we've seen Apple's
share price come under pressure, yet again.
STEWART: Apple share price and also if look at the sales numbers for both Huawei and Apple in China from the last year. I think, Huawei sold 41
percent more phones in China in that quarter, Apple sold 30 percent less.
Unlike here, we have Huawei coming out and saying actually they defend Apple, they do not want to see Apple's phones boycotted as a result of this
trade war. And while this stance may not change anything in terms of U.S. trade policy, it does kind of soften the image for Western consumers.
They're making sure that consumers realize that they do think they are part of this trade war, whether or not they are of course, there's been an
inconsistent message frankly, from the U.S. on this whether they've been blacklisted for being a national security threat or whether they are a
bargaining chip in the U.S. China trade war.
Huawei is just holding up their hands here and saying, "Listen, we'll try and operate as a company. We certainly don't support this kind of action
on us or our rivals," Julia.
CHATTERLEY: Both security risk, I think, and a potential pawn in this trade war. We're going to watch for the carve-out. Anna Stewart, thank
you so much for that.
All right. Let's move on and talk about today's "Boardroom Brief." One, the biggest makers of generic drugs has agreed to settle a lawsuit for $85
million.
Israel's Teva Pharmaceutical has been accused by the Oklahoma Attorney General of contributing to the U.S. states opioid painkiller epidemic.
[09:35:13] CHATTERLEY: Clare Sebastian has the details. Clare, Teva saying, "Look, this does not establish any wrongdoing on the part of the
firm here," but it leaves Johnson & Johnson also part of this lawsuit firmly in the hot seat here.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Absolutely, Julia. The question, I think now, what comes next? The trial is set to start
tomorrow. Very little time left for Johnson & Johnson to settle if they're going to do that, but don't make a mistake, they have very much wanted to
avoid this trial. It will be live. It will be televised.
They tried to get a summary judgment two weeks ago. That was thrown out by the judge. They tried to get a delay. That failed. They definitely did
want to avoid the potential reputational cost, not to mention the legal cost of going to trial here. But they have remained defiant throughout.
They have denied that they mis-marketed their product, that they made out that it was safe for extended use, and that contributed to the opioid
crisis. And they may feel that this case is hard for Oklahoma to win. It's being tried under a public nuisance law.
They're trying to link this allegedly wrongful marketing of the company to the opioid crisis in the States and they may feel that that is just a
difficult link to make.
But this will be a huge precedent nationwide, Julia. Oklahoma has gone it alone here, it has come out first. And if they do win, it will set a huge
precedent for more cases coming down the pipeline.
CHATTERLEY: Clare, that's the key, isn't it? Because this is just the thin end of the wedge. Forty other states have also filed lawsuits against
various pharmaceutical companies also battling the challenge here. I mean, it could be huge.
SEBASTIAN: I think this will really define how much and if Big Pharma is set to pay for the opioid crisis that has ravaged the United States today.
The next big one is this big Federal case, which groups more than 1,500 claims by states and municipalities. That is set to be tried in Ohio in
October.
The lawyers for that will be very closely watching what happens here. That will also be tried under a public nuisance law where the money that
companies may have to pay won't be damages, but will be to abate this public nuisance that they are alleged to have caused.
Of course, the companies are saying they have nothing to do with it, that their marketing was correct. But I think there's another issue here, it is
do they want to be seen to be fighting this? Or do they want to just settle and you know, use those funds that they might have used for legal
defense to actually help with the solution?
That's what happened with Purdue Pharmaceutical, the third defendant in the case in Oklahoma, that's what happened with them in March. They settled
for $270 million and that is being used to fund addiction treatment in the States.
CHATTERLEY: Yes, don't take any culpability for the problem, but try and tackle some of the spillover effects. Yes, it's an interesting point.
Clare Sebastian, thank you so much for that.
All right. We're going to take a quick break here on FIRST MOVE, but up next, the Brexit Party storms to victory, with what leader Nigel Farage
calls the most important message we've discussed in the country in 300 years. Wow. Really? We discuss with one of the Brexit Party's newly
elected-MEP. Stay with us.
(COMMERCIAL BREAK)
[09:41:22] CHATTERLEY: Welcome back to FIRST MOVE and into the "Chatt Room." Farmgirl Flowers began in one woman's dining room and grew into a
multimillion dollar online flower company.
CEO Christina Stembel launched the firm almost 10 years ago using her own savings of $49,000.00. Today, business is blossoming posting revenues of
more than $23 million last year. I sat down with the CEO and asked her what makes her product stand out.
(BEGIN VIDEOTAPE)
CHRISTINA STEMBEL, CEO, FARMGIRL FLOWERS: We're doing something different. So we actually make every bouquet in-house as opposed to making them at
bouquet makers, the same ones that make grocery store bouquets.
We don't have the buying power as 1800flowers.com or many of the other companies. So our shipping rates are still really high. We subsidize our
shipping by $1.2 million last year. So that's what we're paying our shipping provider more than what we're charging consumers. And we still
have a $25.00 shipping rate, because we have to.
So I'm just amazed and really grateful that people still choose to buy our flowers, even though they're higher priced and shipping costs so much more.
CHATTERLEY: You could bring that down, though, arguably, if you change the way that you're producing these, is there a compromise to be found there to
perhaps reduce costs and not be so hands-on with what you're creating? And I don't want to knock it because it is something really beautiful.
STEMBEL: Yes, I mean, we could make them at bouquet makers, but we've tested seven of them. And they did not -- some of the biggest ones that
make our competitors bouquets -- and they did not hold up to our like our standard for what we want them to be.
So how we're going to scale, we are definitely going to scale I want this to be a billion dollar business. But it's through opening distribution
centers, get closer to the end consumer so we can reduce our shipping rates.
CHATTERLEY: Yes.
STEMBEL: Not by taking the bouquet making out of house because we want to keep -- like what we do really, really well is make a beautiful bouquet
that it stands alone in the whole industry in my opinion.
So I think bar none. Like I think if you want a great design bouquet, you come to Farmgirl Flowers. It's not the cheapest, it'll probably never be
the cheapest. But when we opened seven distribution centers across the United States, it does get our shipping rates to a much more palatable
price.
CHATTERLEY: And that's the key. You do all the production, you control it, but you just opened places around the United States and perhaps beyond.
Talk to me about the kind of revenues that you're generating. What are you expecting to generate this year?
STEMBEL: This year, I'm probably up $32 million to $34 million. We did $23 million last year. We're growing as quickly as we can. We're
completely bootstrapped.
So I started this with $49,000.00 of my own personal savings. And now, you know, doing over $30 million is really great. We still have a long way to
go to get to the billion dollars. I might be a hundred when I get there, but I think we will.
CHATTERLEY: Wishing is good.
STEMBEL: Yes. I have the best team ever, and so I know we'll get there. It just takes a while.
(END VIDEOTAPE)
CHATTERLEY: Christina says that when it comes to growing the business ultimately, she and her team aren't afraid to get their hands dirty, both
literally, as well as figuratively. Take a listen.
(BEGIN VIDEO CLIP)
STEMBEL: Our hands are dirty all the time. Because we're the only company that makes the bouquets in-house, the show behind the scenes. You know, I
still -- you know two people in my team and myself that do all of the digital media, like our marketing, all of our posts every day. We have
stories that we rely heavily on and we just show, you know, who we are to - - we really kind of like wear our heart on our sleeve with our community, and it helps.
CHATTERLEY: It's the equivalent of farm to table in food terms from farm to bars basically in your terms.
STEMBEL: Absolutely.
CHATTERLEY: What about supply of flowers here? Because I know as a company, you've evolved, 80 percent originally, flowers were in the United
States and then cannabis changed the game. Talk me through this, because this is fascinating.
STEMBEL: Yes, so actually 100 percent when I first started were all domestically grown flowers. It wasn't a schtick. It was really near and
dear to my heart. I wanted -- I grew up on a corn and soybean farm in Indiana. So I really wanted to help support local agriculture.
And I was really naive though. I had done a lot of research on Google. But there's a lot of things that you can't learn from Google. And so I
quickly learned that I was running out of supplies.
[09:45:10] STEMBEL: And then when cannabis was legalized in California, it changed the entire landscape of floral agriculture. Overnight, like
overnight, all of our kind of growers had ripped out their plants and we're starting to repair the space for cannabis.
CHATTERLEY: I mean, what was the difference in terms of what you know, each acre was worth in your terms versus cannabis versus flowers.
STEMBEL: Yes, some of our growers have told us that they could get like normally, they're growing like snap dragons for us, five to ten cents per
square foot of greenhouse space is what they make in flowers versus cannabis. They can just land lease it out. They don't even have to do it
themselves and they can make $1.50 to $2.00 a square foot.
CHATTERLEY: Wow.
STEMBEL: Yes. So the difference is huge. And I get it. I mean, I totally understand. I mean, supply and demand and they are business
owners. They need to maximize their profits as well. And flower farming is hard. It's really, really hard.
So I mean, I understand it, but it definitely changed how we source you know, we're very values driven as a company and so you know, making sure
that we were buying ethically grown flowers that didn't have like 12 year olds cutting them in the fields is really important. So there's a lot of
trips to South America, going to Europe, all the places where we're purchasing flowers to make sure that we're buying from farms that align
with our values.
CHATTERLEY: Who is buying? Who is buying your bouquets?
STEMBEL: Women 25 to 44 predominantly, it's the hardest to get demographic for any, you know, consumer goods company, which is another reason why I'm
so lucky. We're all so lucky at my company that it is resonating with so many women.
CHATTERLEY: So it's by far the greater proportion of women to men that ultimately buy flowers.
STEMBEL: Yes.
CHATTERLEY: It's women who buy flowers for other women.
STEMBEL: You're one of the first people that I've met that knows that.
CHATTERLEY: You remember that.
STEMBEL: Yes. When I started Farmgirl, I just assumed it was mainly male consumers and it's not, 81 percent are females buying for other women. And
you know, if you take Valentine's Day out, it's more like 90 percent, I think.
Yes, and I think it probably really helps that you know, I'm the only female-founded, getting to be large scale e-commerce flower company out
there. The rest are all hundred percent owned by men and I understand what women want because I wanted to send something to my mom in Indiana, that I
wasn't ashamed of.
(END VIDEO CLIP)
CHATTERLEY: A comparison between flowers and cannabis. Fascinating. Anyway, you heard Christina say before that she plans to turn Farmgirl
Flowers into a billion dollar company. I asked her how she plans to do it.
(BEGIN VIDEO CLIP)
STEMBEL: We're going to have to slow down to speed up, which is what we're doing. You know there are certain products right now that we're losing
money on, shipping them to faraway zone. So we're going to need to stop doing that if -- for a while I thought we'd be able to raise outside
capital, so I wasn't. I was in hyper growth mode doing you know, 60 percent, 70 percent, 80 percent even up to 100 percent year-over-year.
And now, it doesn't look like that's in the cards for us probably, so I need to do slow us down a little bit. So we can self-fund our next
distribution center next year and then keep doing that every year in a different area.
And you know, by the time we get seven open, we'll be able to get 84 percent of our orders shipped ground overnight instead of air overnight.
This is much more economically priced for the average consumer in the U.S. which would be amazing.
(END VIDEO CLIP)
CHATTERLEY: The CEO of Farmgirl Flowers there. All right, We're going to take a break. Up next, enter the exiteers. Britain's anti-Europe Panty
storms to victory in the E.U. elections but what next? Stay with us on FIRST MOVE.
(COMMERCIAL BREAK)
[09:50:29] CHATTERLEY: Welcome back to the show. In the U.K., voters in the E.U. elections punished parties without a firm view on Brexit, the
result? A victory for the man with the clearest message, Nigel Farage, leader of the Brexit party.
CNN's Nina dos Santos spoke to him ahead of the election results on Sunday, and asked him about that message.
(BEGIN VIDEO CLIP)
NINA DOS SANTOS, CNN CORRESPONDENT: How confident are you that you can translate this into a national party?
NIGEL FARAGE, EUROPEAN PARLIAMENT MEMBER-ELECT, BRITISH BREXIT PARTY: That all depends to a large -- I mean, the answer is yes, we can. How
successful it will be will depend to a large extent on whether we leave on October 31st, just as March the 29th became seared in people's minds as
this big important date, October 31, is the same.
DOS SANTOS: To those who say you are a one-message-man, what's your answer?
FARAGE: The important message we have discussed in this country for over 300 years.
(END VIDEO CLIP)
CHATTERLEY: Joining us now, John Longworth, newly elected Brexit Party Member of the European Parliament. John, fantastic to have you with us and
congratulations on your win.
You've said this is a clear message to the establishment parties here. What next, though?
JOHN LONGWORTH, EUROPEAN PARLIAMENT MEMBER-ELECT, BRITISH BREXIT PARTY: Well, clearly, we've got to continue to put pressure on the government and
the political class in the U.K. to leave the European Union no later than October 31st, with a deal or without a deal.
CHATTERLEY: So the assumption now is that the Conservative Party have to decide on a Brexiteer, a tough Brexiteer to lead the party. Do you believe
that they can come up with a plan here to get the U.K. out of the E.U. on October 31st?
LONGWORTH: Well, getting out is as simple as you want to make it. If it's the U.K. law that we leave on the 31st of October, whatever happens, then
we leave.
The whole idea that there's some sort of crashing out or a cliff edge involved in leaving without a deal is complete nonsense. Most of the U.K.
trade, most of the trade that the E.U. undertakes, in fact most of the trade the U.S. undertakes is actually on World Trade Organization terms
Trade that we have with United States with China, Brazil, Australia, it's all on WTO terms. It's the normal way of doing things around the world.
And actually, this whole myth of crashing out has been created by remainers to frighten people.
CHATTERLEY: John, you and I have debated this many times, in fact, and the challenges of the messaging surrounding Brexit right now. But when it
comes down to it, the only thing that Parliament could agree on for a majority was ruling out a no deal exit here.
So do you think the Conservative Party with a fresh leader can change anything that we've seen and get the U.K. out of the E.U.? Or do you think
actually we're going to end up postponing again or going to fresh elections?
LONGWORTH: Well, first of all, it's not correct to say that the only thing Parliament agreed on was not to have no deal. In fact, Parliament voted
for the Malthouse compromise, which was a way of creating a free trade arrangement prior to leaving with a no deal exit.
The truth of matter is that a strong leader and it requires leadership is perfectly able to get the U.K. out of the E.U. without Parliament's
agreement, it won't be easy, but it is entirely possible. And if we don't leave on the 31st of October, I can't imagine what will happen, because
that will be an indication to the electorate who overwhelmingly voted to leave both in the referendum and the general election and now in the
European Parliament election, it will be an indication to those people, the vast majority of the population in fact, that democracy in the U.K. has
broken down.
CHATTERLEY: If it went to fresh elections, John, can the Brexit Party win here do you think and would Nigel Farage make a good Prime Minister?
LONGWORTH: Well, for sure, if we repeat even a proportion of the success we had, where we've won in every region of England and Wales apart from
London in a general election, the Brexit Party could make real headway.
And actually, if the government do not deliver an exit on the 31st of October, I think that it is highly likely that's what will happen.
CHATTERLEY: You think, if we struggle after October 31st, the Brexit Party could win the next election.
LONGWORTH: I think that the Brexit party could win a loss of seats in Parliament. It may well hold the balance of power and we'll have a very
significant influence on the future direction of the U.K.
CHATTERLEY: Is it a one-policy party though, John? Can it be bigger than that? Or is Nigel Farage right? This is the defining decision to be made
over the last 300 years for the U.K. and actually being a one-policy party is enough.
[09:55:08] LONGWORTH: Well, it's more than just Brexit now. It's about democracy and the way the political systems run. And actually, that's one
of the reasons why so many people came out and voted for us last night.
The party itself, of course now has to look to a general election or formulate policies to deliver Brexit in the way that it should be to
develop the economy boost the U.K. economy as a consequence of Brexit and other policies that people will be interested in as well. And that process
has already started.
CHATTERLEY: And the Malthouse compromise that would be good for the Brexit Party too, if necessary?
LONGWORTH: Well, I think the Malthouse compromise is probably too late now. The real objective for us ought to be to have a World Trade
Organization exit with no deal. But of course, we could offer the European Union an Article 24 arrangement under the GATT which means it is at
standstill while free trade arrangement is actually negotiated.
But then that gives the U.K. freedom to make trade deals elsewhere. The leave may not want that.
CHATTERLEY: We'll see, John. It's going to be messy. Something tells me it's going to be tough. John Longworth, sir, thank you so much, and
congratulations on your win again.
And that's it for the show. I'm Julie Chatterley. You've been watching the FIRST MOVE. Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
