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Quest Means Business
Threat to Global Economy; Banks Drive Market Rally; Investors Cheery on Wall Street; European Markets Up; Tale of Two Europes; Tesla Shares Motor Ahead; Apple's Parental Permission Payout; US House Approves Funding Bill
Aired January 15, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Well, everyone else is clapping. Come on. Are the penguins going to give a quick clap as we come to the end of the trading day? It's been a rally on the markets. Hit it! It is Wednesday, it is January the 15th. What a way to begin.
We're talking tonight about deflation danger. The IMF's warning of an ogre that must be beaten.
Also tonight, behind the wheels at last. GM's new chief exec has taken over.
And -- you ready for this? If the apple of your eye is running up bills on Apple's apps, Apple must give it back. We'll explain.
I'm Richard Quest, I mean business.
Good evening. We are about economics tonight, where you will hear from the chief execs of Delta Airlines, Tesla, Volkswagen Global, and more. We begin, though, with a warning from the head of the IMF about what they call -- or Christine Lagarde calls "a monstrous threat to the global recovery."
The chief exec, Christine Lagarde, says the recovery is strengthening, but it's fragile and could be derailed entirely but what she's describing as "dreaded deflation."
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: With inflation running way below central bank targets in most corners, clearly we are seeing rising risk of deflation, which could prove disastrous for the recovery. If inflation is the genie, then certainly deflation is the ogre that must be fought decisively.
(END VIDEO CLIP)
QUEST: A serious warning on the question and issue of deflation. The priority needs to be, she said, creating sustainable economic growth in all the major markets. So, what's the IMF suggesting and prescribing? Join me at the super screens and I'll show you exactly what she says.
Let's start with the United States, and what they want from the United States, to the Fed, don't taper too fast. A slow tapering process to keep the monetary stimulus. They also said the debt ceiling threat from February must be lifted.
On the question of Europe, and it was a question of the high debt burden, and the IMF says quite clearly, the ECB -- the European Central Bank -- could do more, maybe some sort of funding for lending program, which would be appropriate.
As for emerging markets and out in towards in Japan, out in Japan and in the Far East, when we finally get there, reforms needed, they said. In the case of Japan, it's a question of the deflation threat. Abenomics is working, but perhaps not working far or fast enough. Finally getting the hang of swiping this away.
The emerging markets, Lagarde says they must stay strong and get rid of infrastructure bottlenecks and regulatory bottlenecks and obstacles.
So, that's the way the IMF sees the world. The US, Europe, Japan, emerging markets. The World Bank has brought out its own numbers and says the global economy is at a "turning point," is the phrase. The bank's raised its forecast for global growth for this year to 3.2 percent, up from 3 percent in June. So, a revision that's up, the first such in some three years.
Advanced economies are driving the growth, and that's easing the austerity policies. There's also some private sector gains, and that's giving a firmer footing. But it's in the advanced countries where they are seeing this.
The World Bank is warning developing economies are still vulnerable, as central banks are starting that tapering and withdrawal process, and the pace is crucial. A fast Fed exit could shake the markets. The lead author of the report on economics spoke to Nina Dos Santos about the forecast.
(BEGIN VIDEO CLIP)
ANDREW BURNS, GLOBAL ECONOMIC TRENDS MANAGER, WORLD BANK: The euro area is, I think, in a situation that we saw the United States in a couple of years ago. It's starting to come out of recession. We get a mix of good news one day, bad news the next day, and it's a little bit frustrating because we want that recovery to get on a solid footing more quickly.
We're forecasting growth to go from minus 0.4 percent last year to 1.1 percent this year. That acceleration in growth is pretty much visible in every economy, it's just that some of them are starting with much more negative numbers and therefore not getting quite as positive a number. But generally speaking, a significant shift in the euro area overall.
(END VIDEO CLIP)
QUEST: Now, I'll be speaking to the head of the World Bank, the president Jim Yong Kim next week. President Kim will be with us as QUEST MEANS BUSINESS, we come live, as we always do every year, from the World Economic Forum in Davos. On Thursday, I sit down with Christine Lagarde, so a bevy of guests that we will have on the program next week.
So, that's the macro-economic perspective, but I want to look and show you what's been happening in the banking world, because big banks, backed by strong quarterly earnings, are driving a rally, the rally that we saw on Wall Street. And today was better than expected results from Bank of America, which helped push the Dow to its first solid rally of the year.
Let's open the vault. Let's start, of course, with JPMorgan Chase. You saw the number from JPMorgan Chase. We have $5.3 billion of quarterly profits reported so far. Wells Fargo came in with $5.6 billion. That's the biggest on Wall Street. That's the biggest number we've seen so far, it's a jump of 10 percent year-on-year.
And today, we have Bank of America, slightly less, $3.4 billion, but it is a significant improvement from last year. The chief exec of Bank of America says the bank's core business is performing well. So, three banks that we've heard from so far, and we've still got tomorrow Goldman, Citi, and Morgan Stanley on Friday.
So, in this scenario, Alison Kosik at the New York Stock Exchange. Economics, banking stocks, a market that's rallied quite sharply. There's a feeling that things are cheery.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes. And the way the financials have been reporting these past couple days really setting the tone for fourth quarter earnings season. Also helping to push the Dow up to the triple digits today, you can thank an upbeat manufacturing reading, once again along with those Bank of America earnings.
You look at these bank earnings, these bank profits, they wind up being cyclical, Richard, and their performance often paints a really good picture of how the economy's doing, since individuals and businesses often take out loans if they're feeling more confident about how things are going in the economy.
There were a lot of worries when that lackluster jobs report came out on Friday. The earnings that are coming out stronger than expected, they're helping to allay some of those fears, Richard.
QUEST: I'm just looking at the Dow. We were up 108 points so far. The Fed has now basically made it clear this tapering continues at about $10 billion a month after each meeting. Any deviation from that would be considerable and would be worrying.
KOSIK: It would be. Well, it would be for the market, because they don't like surprises. But I really don't see the Fed doing anything fast or shocking to the market. That will only make things go haywire for the markets. I think slow and easy is really the mantra for the Fed these days.
QUEST: Alison Kosik at the New York Stock Exchange. To the European stocks, which advance for the fourth straight day after the World Bank raised its global growth forecast. It was poorer than expected GDP numbers.
They were better -- they weren't as good as last year's, but they were better than, perhaps, had been thought about. The DAX rallied some 2 percent. Just look at that, that's a very strong rally for that market.
Paris CAC 40 was up one and a third on the day. The London market up just three quarters of a percent. British brand Burberry scored some strong results during the course of the session.
So, what we end up with in Europe at the moment, again, continuing this thought on economics, the economic future is looking very different depending on who you're speaking to.
First of all, the Greek prime minister Antonis Samaras claims Europe is being transformed. He praises the European Union and unity, saying it's developing a common identity and a conscience. Remember, Greece currently has the presidency of the union.
The British finance minister, the chancellor George Osborne, on the other hand, in a landmark speech, says Europe's facing a choice between reform and decline, and he's warning that the UK could leave the euro -- European Union if it fails to modernize.
(BEGIN VIDEO CLIP)
GEORGE OSBORNE, BRITISH CHANCELLOR OF THE EXCHEQUER: The European treaties are not fit for purpose. They didn't anticipate a European Union where some countries would pursue dramatically deeper integration than others.
Rather than face up to the truth, those in Brussels are being forced into legal gymnastics as they try to stretch the existing treaties to fit a situation they were not designed for.
(END VIDEO CLIP)
QUEST: Stephanie Flanders is the chief market strategist for Europe and the UK at JPMorgan Asset Management, joins me now from CNN London. Good to see you, Stephanie. Thank you for joining us this evening.
STEPHANIE FLANDERS, CHIEF MARKET STRATEGIST FOR EUROPE AND UK, JPMORGAN: Good to see you.
QUEST: So much economics out here tonight, from the World Bank --
(LAUGHTER)
QUEST: -- raising its forecast to the IMF warning about deflation to George Osborne saying get your act together or we're off. What do you make, first of all, on the deflation question?
FLANDERS: Well, I think it is something that's been lurking in the background of all this optimism that we've seen around the global economy the last few weeks and months.
I don't know about you, Richard, but I feel like we've come into this year with a slightly different feeling that finally the recovery was reaching some kind of momentum in terms of the global recovery. We're seeing the US doing so well, and we've seen financial markets reflect that.
Of course, financial markets have been doing really well the last few years without so much recovery from the economy.
I think the problem, though, is everyone has been writing up -- strategists like me have been writing up their forecasts for this year and thinking about the way forward, is you have this kind of nagging doubt that around the world, and particularly in the US and in the eurozone, these inflation numbers just keep coming in below expectations
We've got -- there's just a feeling that there's that deflation reek of danger lurking out there, and I think at the moment, the epicenter of that is in the crisis economies of Europe --
QUEST: Right.
FLANDERS: -- but also in the eurozone generally.
QUEST: Because it is interesting -- isn't it? -- that to have this much monetary stimulus -- let's face it, they are shoveling it with a large bulldozer, there's so much of it going out there. And still, to have these low inflation numbers. The UK hit its target for the first time in several years. That's a worry.
FLANDERS: Yes, although as you point out, though, inflation has been above target in the UK. We've been the sole beacon of inflation, if you like.
(LAUGHTER)
FLANDERS: We've been pretty good at keeping inflation up. We're always quite good at that in the UK. But that's been -- it's been above target for four or five years.
I think the key thing, though, is that you've got in the eurozone a bank that's actually not done as much in the last few years as the Fed or the Bank of England, under a bit of pressure to make sure that the continent actually does get this recovery that we've been talking about.
And that particularly in the periphery, those crisis countries, Spain and Portugal, they don't get pulled down by falling prices.
QUEST: Right.
FLANDERS: They need to have low inflation, because they're trying to get more competitive. They're trying to squeeze their labor costs. They can't afford to have prices fall for very long. Because as you know, that makes their debt harder to repay. It increases the real burden of their debt.
QUEST: I just want to finally turn to George Osborne and his comments in his speech today. He's -- they're setting out their markers for the negotiation or the renegotiation for EU membership. Is it a realistic possibility that A, the other countries will negotiate, and B, anything meaningful comes of it?
FLANDERS: I think the conservatives, and George Osborne particularly, are in a difficult position in the UK, because they've promised this referendum, and yet they've also said we want Britain to stay in the EU.
And the way they're trying to square the circle and still keep nice with the people who'd like -- in their own party that would like to get out of the EU is by saying, well, we'll only ask the British people to stay in if it's a reformed European Union.
QUEST: Right.
FLANDERS: And people have sort of wondered, what are the reforms you actually want? They've asked this question since the referendum was -- the idea was suggested. There hasn't been, really, an answer. We got one from George Osborne today.
I think the problem is, it was kind of too ambitious for most Europeans. They don't want to start fiddling around with the treaties and changing the way the budget's written.
And probably not ambitious enough for the people in his own party and in the UK who just want to have done with the EU, and they're not going to be satisfied with a few treaty changes or a slightly smaller budget. So, I think this is a really difficult one for the ruling conservatives.
QUEST: Stephanie, good to see you. Thank you for joining us. Looking forward to having you more on QUEST MEANS BUSINESS from New York.
FLANDERS: Any time.
QUEST: Thank you very much. Stephanie Flanders joining me from London.
The fortunes of Tesla are again on the rise. The chief exec of the electric automaker says an affordable model is not far away. Elon Musk next.
(COMMERCIAL BREAK)
QUEST: My word. Fast. Sexy. And expensive. Well, that's the Tesla motorcar, seriously expensive. Tesla shares have closed the day higher after soaring on Tuesday.
The chief exec of the carmaker, Elon Musk, has been talking to Poppy Harlow and said that Tesla was on track to produce a more affordable, mass market car in just about three years. It came on the day the firm announced strong sales growth.
Come have a look and see just how these cars -- just to give you a last peek at the car -- and just look at the share price, and you'll see exactly -- my word! -- in the past year. Now, we will -- a good, strong, rollicking up from May to September.
We'll explain what this nasty hiccup was all about in just a moment. But whatever that hiccup was about, the share price has started to come back up again and is once again on the rise. It's up more than 11 percent year-to-date.
Tesla's rapid rise comes despite a recall by regulators of nearly 30,000 charge adapters in the model of its cars, model S. Poppy Harlow is with us this evening. Good evening.
POPPY HARLOW, CNN CORRESPONDENT: Good evening, Richard. Good to be with you. The rise is 385 percent over the past year is how much Tesla stock has risen. And you've pointed out the viewers the decline in September. That was over those fires.
There were a handful of fires in Tesla vehicles after crashes. A lot of people were concerned, many headlines made, and now this recall of about 30,000 charges. But we talked yesterday to Elon Musk.
QUEST: It's worth pointing out, though, as I understand it, before you get to Elon Musk --
HARLOW: Sure.
QUEST: The regulators and those that look into this found nothing wrong in terms of the general safety of the vehicle. Far from it. It got -- it still maintained --
HARLOW: Top safety ratings.
QUEST: Top -- whatever it's called, five star or S --
HARLOW: Top safety ratings.
QUEST: Yes, yes.
HARLOW: But the US is still investigating.
QUEST: Right, right.
HARLOW: And Tesla welcomes that investigation. But Elon Musk sat down with us yesterday, and it's rare to sit down and talk to him, because he wanted to, quote, "set the record straight." He tweeted out, "The word 'recall' needs to be recalled." He said, "They're all of these headlines, they say our cars are being recalled. It is the charger, not the cars."
And of course, they got a lot of headlines in the fall around those fires. So, we wanted to ask him what he thinks of the media attention and, of course, what is ahead for the company. Listen.
(BEGIN VIDEOTAPE)
HARLOW: But Elon, can you understand that although electric cars aren't a new technology, this is a new market for a lot of people. So of course there's going to be more attention to it.
ELON MUSK, CEO, TESLA MOTOR COMPANY: Any new technology is going to get added scrutiny, and that's certainly understandable. There should be a spotlight on new technology, but it shouldn't be a laser beam. So, I think, in often as the coverage probably is, but is too high.
Now, at the same time, I think we'd accept some responsibility for that, because at Tesla, we've built somewhat of a viral brand, and that's a two-edged sword. So, the good news gets heavily reported and the bad news gets heavily reported.
HARLOW: A lot of people want to know when a less-expensive version of the Model S, which is now about $70,000, when that and a less-expensive Model X, the crossover SUV, when those are going to come out, be ready for production. When are you estimating right now?
MUSK: Well, the $70,000 version of the Model S, which is actually $63,000 after the federal tax rebate, that's on sale right now. The Model X we expect to deliver in volume production in about a year. And then our mass market affordable car is about three years away.
HARLOW: That's going to be about half the price?
MUSK: That's a sort of -- yes. About a $35,000 car.
HARLOW: What about a pickup truck? I believe that you said recently that you'd like to make the equivalent of a Ford F150. Is that going to happen?
MUSK: Yes, we'd like to produce an electric pickup truck. That's -- we're not really thinking much about that, but that is part of our long- term plans. I would imagine that's probably something like four to five years.
HARLOW: You've warned back in October that the stock's overvalued. You said it's, quote, "more than we have any right to deserve." Do you still feel that way about the stock price?
MUSK: I think it's about right relative to the rest of the market. I do think it's probably fair to say that equities overall are at a relatively high point.
HARLOW: Do you think the market's overblown right now?
MUSK: The equity markets move in cycles, and I think it's fair to say that we're either at or approaching the top of an up cycle.
(END VIDEOTAPE)
HARLOW: So there's your US equity market prediction from Elon Musk, if you want to listen to him for stock tips. He says we're near the top of an up cycle. But the big question here, Richard, is can they scale? And I don't think --
QUEST: Can they?
HARLOW: I don't think they can until they get the more affordable car on the market. $35,000 versus $70,000, now three years away. If that is a hit, they absolutely can.
QUEST: You're a petrol-head, aren't you?
(LAUGHTER)
QUEST: I'm sitting her watching you sort of drool over --
HARLOW: They're enticing cars. I've driven in one of the sports cars.
QUEST: You're a fast car sort of woman.
HARLOW: I am, although I just take the subway here in New York City.
(LAUGHTER)
HARLOW: I don't even own a car. I don't even own a car. But it's intriguing, and this is a company founded and led by the man who is trying to send humans to space. His visions are grand. There are hiccups, but it's a fascinating story to watch.
QUEST: Thank you, Poppy.
HARLOW: Good to be with you.
QUEST: Go and get the subway.
(LAUGHTER)
QUEST: Twenty past 4:00 in New York. They'll be starting to --
(LAUGHTER)
QUEST: You want to buy a ticket as well --
HARLOW: I do.
QUEST: Yes, I thought you would.
HARLOW: I do, I do.
QUEST: All right. Coming up, your little darlings have run up an enormous bill on your iPad buying those apps, and now, Apple is going to pick up the tab. We're going to explain in just a moment. This is QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Now we're having a debate here in the studio whether -- what a petrol-head is in different lingos. Some say it's a gear-head, some say it's a motor-head. Whatever sort it is, @RichardQuest, what you think on these issues, @RichardQuest is our Twitter name where we can have a discussion elsewhere.
Now, here's something you will want to get involved with. Apple is having to refund at least $32.5 million for allowing children to spend their parents' money without permission. The problems relate to in-app purchases, virtual items for games, which require parents to enter their passwords.
Apple didn't tell the parents that there's a 15-minute window after the password has been entered where it's possible to make additional, unlimited purchases without any checks. The Federal Trade Commissioner, Edith Ramirez says the bills come very quickly become extremely large.
(BEGIN VIDEO CLIP)
EDITH RAMIREZ, CHAIRWOMAN, FEDERAL TRADE COMMISSION: In our complaint, we described stories from individual parents whose children racked up hundreds and even thousands of dollars of in-app charges.
For example, one consumer reported that her daughter had spent $2600 in the app "Tap Pet Hotel." Others reported unauthorized purchases by children totaling more than $500 in the apps "Dragon Story" and "Tiny Zoo Friends." In aggregate, we alleged that there have been millions of dollars in unauthorized charges.
(END VIDEO CLIP)
QUEST: Apple's agreed to modify it's business practices as part of its settlement with the FTC. Joining me now from Washington, Jessica Rich, the director of Bureau of Consumer Protection at the FTC. Jessica, good to see you. Thank you for taking time to come in.
I'm betwixt and between on this. Part of me says parents should have been more careful, and the other part of me says, well, Apple shouldn't have left this loophole open. But this is an example, isn't it, of the new world and the difficulties we're all facing in it?
JESSICA RICH, DIRECTOR OF BUREAU OF CONSUMER PROTECTION, FTC: This case stands for the proposition that you need to get consumers' consent before placing charges on their bill. And in this case, parents didn't have the information they needed to make an assessment about whether to permit charges.
They weren't told that there would be these charges, and they certainly weren't told that by putting in their password, it would open up a 15-minute window during which consumers could -- children could incur unlimited charges.
QUEST: Is this, though, a case where no one really thought about it until the problem arose? Because I don't see anybody here suggesting that it was done mendaciously, deliberately, this 15-minute window exists for the purposes of entrapment. It's one of those things that happens.
RICH: Well, starting in late 2010 and early 2011, there was a lot of outcry, there were a lot of complaints, there were articles in the press, and at that point, Apple did not undertake the kind of changes that were needed to prevent the problem from happening.
QUEST: What are the problems -- people in the rest of the world watching us tonight will be very grateful, I'm sure, because of what the FTC has done in that respect, but there is a danger, isn't there, with all these consumer protections that boilerplate language, template language becomes so ubiquitous that you ignore it anyway?
Because it's just so -- I was buying something online and I listened to a message, on the phone the other day, I was buying something, and it just rambles on and on and on.
RICH: We don't think it needs to ramble on and on. Basically, this is such a fundamental idea that before you're charged for something, you need to be told whether it's 99 cents or $99 or whether it's one charge or it's multiple charges, and that can be done fairly simply on the same interface where they're asking for the password. So, it really doesn't have to be rambling on and on at all.
QUEST: Right.
RICH: And it is such a fundamental principle.
QUEST: Ultimately, are you pleased with the way Apple has dealt with this? I'm sure you'd have preferred they came to the table sooner, but if there is a moral in this, what is it?
RICH: Well, the moral is that all companies, Apple and any other company, needs to get consent from consumers before placing charges on their bills.
QUEST: We thank you for joining us, Jessica. Good to see you from Washington. Thank you for coming in and talking about it, much appreciated. Now, some news just in.
(RINGS BELL)
QUEST: US House of Representatives has overwhelmingly approved a $1.1 trillion compromise spending bill. It will fund the government through September. The Senate is expected to vote on the measure later this week. This is a funding bill that now takes the US government through to September.
When we come back, Mary Barra is in the driving seat of General Motors. She stepped into the chief exec's role today and immediately announced major plans. What were they? After the break.
(COMMERCIAL BREAK)
QUEST: Hello, welcome back. I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN and on this network, the news always comes first.
At least 61 people have been killed and many more injured in a series of attacks in Iraq. Seven car bombs exploded in the capital of Baghdad, another car bomb went off at a funeral in the northern town of Bakuva. Witnesses along the Tarshish/Syria border say al Qaeda-linked militants are winning battles against free Syrian army rebels. This video report shows the aftermath of a bomb attack by the fighters of the Islamic state of Iraq and Syria known as I-S-I-S, ISIS. Some of the wounded are getting medical help in Turkey.
Egypt state news agency says 125 people were arrested during the country's second day of voting on a new constitution. They are accused of trying to obstruct the electoral process. The referendum is seen as being a test of legitimacy of the country's military-backed government. Critics fear the new constitution will simply give more power to the military.
The hearing will continue on Thursday for four suspects in last year's mall attack in Nairobi to determine if there's enough evidence to take them to trial. At least 67 people were killed in the attack at the Westgate Mall. Al-Shabaab, an affiliate of al Qaeda claim responsibility for the siege and massacre that took place over the course of four days.
And police say two people have been arrested in connection with the latest report of a gang rape in India. A Danish woman says she was robbed and gang raped in New Delhi. The woman was allegedly assaulted when she asked a group of men for directions.
A new era is beginning at General Motors. The carmaker is making money, it is paying a dividend for the first time since the Great Recession, it won car of the year in North America and (RINGS BELL) Mary Barra has stepped into the chief executive's role, the first woman to lead a major U.S. car company. She's already announced restructuring plans for some of GM's underperforming regions. Marina Von Neumann Whitman is the former senior vice president - SVP - in her own right at GM. She told me how significant Barra's appointment is for the iconic American brand.
(BEGIN VIDEOCLIP)
MARINA VON NEUMANN WHITMAN, PROFESSOR OF PUBLIC POLICY, UNIVERSITY OF MICHIGAN: The auto industry has long been known as sort of the quintessential macho industry. Thirty-five years ago when the then- chairman of GM hired me as a vice president and then a senior - I became a senior vice president. That was big news. And now, of course, Mary Barra has been appointed to the top job, and again, that's big news.
MARY BARRA, CEO, GENERAL MILLS: In this business, everything starts and ends with great product.
WHITMAN: She is an engineer's engineer, and GM had a tendency to appoint financial people to the top of the company. And now they've got somebody who knows the product inside out, who knows where the industry is going who looks forward instead of backward, which was bad tendency of the industry in my day, and where she is from the point of view of GM and its employees, one of us, not one of them.
Mary Barra has been with GM since she finished high school. And before that her father was a blue collar worker at GM. So, for all those reasons, I think she's a spectacular appointment. I just read today in the paper that there was concern on GM's part a bit because the biggest attraction at the GM exhibit was not the GM cars, although they won both the car of the year and the truck of the year, but Mary Barra.
(END VIDEOCLIP)
QUEST: What does that say about the rest of us? And what we're concerned about is a woman at the top of a car company. German car company, Volkswagen, is to make a billion dollar bet in Mexico. The automaker has confirmed it will invest up to $7 billion in North America over the next five years and much of it will go towards a New Mexican car plant for the Audi brand. VW is now selling GM in key market of China. Nick Parker spoke to its global chief executive.
(BEGIN VIDEOCLIP)
NICK PARKER, CONTRIBUTOR, CNN.COM INTERNATIONAL: The new Golf 7 now in production here in Pueblo. As VW marks its 50th anniversary in Mexico, the country has become a staging post into the vital U.S. market because of NAFTA. The company just announced a $7 billion investment in North America, most of which will be spent right here in Mexico.
Let's talk about the North American market. You have a goal of selling one million vehicles per year by 2018. But last year, your core brand VW dropped in sales by 7 percent. What do you think went wrong there and what is your strategy to try and put that back on the right track again?
MARTIN WINTERKORN, VOLKSWAGEN CEO (through translator): First of all, I must say VW as a group sold nearly 600,000 in the United States. The drop in the last year was about 4 to 5 percent. But with this new strategy of the Golf and the Variant (ph) and a new SUV midsize, we are certain of the success of our overall brand for Audi, for Porsche, and we're going to conquer that market with these models.
PARKER: You recently announced investment of $7 billion in the North American market. Recently, the U.S. posted some very disappointing jobs data. I wonder (inaudible) that's fairly invested in the economy what your outlook is for the U.S. economy.
WINTERKORN (through translator): We do think the United States is going to continue growing, not as fast as 2013 but continuous growth is to be expected. We are very glad industrial jobs are important again, not just employment relating to banks and software. And we appreciate President Obama knows he has to offer jobs in the industry. We at VW have created 2,500 jobs in Tennessee.
PARKER: Heading to China for second, Professor Winterkorn. Volkswagen overtook GM in sales for the first time in nine years. What are you seeing in the Chinese consumer at the moment?
WINTERKORN (through translator): Regarding China, I am convinced we are going to observe slower growth, but a bigger growth in the automotive sector. We have some need to balance growth in the western part of China, and that is why we as Volkswagen Group are investing in western China. I am convinced that even though we are just seeing single-digit growth, not double figures, the single figure growth will be very high.
PARKER: And my final question - looking at the Eurozone for a second, it seems like it's entering a fairly fragile recovery. Do you think the Eurozone debt crisis is now finally behind the continent as Jose Manuel Barroso has suggested?
WINTERKORN (through translator): We think we have reached the bottom line of the crisis in Europe. That means in 2014, we're going to be growing still very far away from figures we had in 2007. But Europe will be growing steadily and we are most certain that we are still going to be successful in Europe.
(END VIDEOCLIP)
QUEST: Coming up after the break, we move from automobiles to aircraft when we fly to Atlanta for our "Business Traveler" report. You'll hear of course from the CEO of Delta Airlines.
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QUEST: We start our update on business travel issues with news of the Dreamliner, the 787. Regulators in the U.S. now say they're ready to help Japanese authorities to work out why smoke was seen venting from a 787 nearly nine months after the plane's batteries were declared safe. It was a year ago this month that the battery owner, (JAL), the Dreamliner similar to this one, caught fire in Boston. Now on Tuesday, smoke was reported to a venting out from the aircraft of a 787 at Tokyo's Narita Airport. The battery unit was also smoldering and molten -- or at least a liquid had been coming from it. Investigations are underway.
It is almost 90 years since Delta Airlines was born in 1924. Then, the airline was a crop-dusting operation. Delta flourished and went out to set its headquarters of what was to become the world's busiest passenger airport -- ATL Atlanta. To give it its full title -- are you ready for this? -- it's Atlanta Hartsfield Jackson International Airport -- a mouthful. Now, for business travelers, I've been to Atlanta to speak chief executive Richard Anderson about his plans for the year ahead, and he told me thousands of employees have made the city more than their headquarters - - Atlanta is now Delta's home.
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QUEST: Atlanta is fortress Delta when it comes to aviation, isn't it? You are a vast presence here. So I ask you, how important is Atlanta to you?
RICHARD ANDERSON, CEO, DELTA AIR LINES: Oh, Atlanta is incredibly important. It is the largest hub in the world, we have a takeoff or landing every 45 seconds and if you look at the DOT statistics, it's one of the most reliable hubs in the world.
QUEST: So, when you look at a place like Atlanta, how did Delta -- and how did Atlanta the airport -- grow so big?
ANDERSON: A great long-term partnership between Mayor Hartsfield and Mr. Woolman, the founder of Delta that started in 1940 and has been carried on until today with the mayor, the leadership of the city of Atlanta and the leadership of Delta decade after decade after decade.
QUEST: And yet at the same time, you have great temptations and you have other hubs that you build out -- the west coast, the northeast. So as the chief exec, how do you prioritize when you've still got this big hub here in Atlanta?
ANDERSON: Well, the world is a big place and we now have six hubs in the U.S., and we have three hubs outside the U.S., and the key prioritization is where do our customers originate and where do our customers want to go and to build the most convenient network to service the customer.
QUEST: But Delta sends many more people to a central hub like Atlanta than the other airlines do, don't you? You've perfected or maximized the use of the Atlanta Hub.
ANDERSON: We do. I mean, pretty much everything in the United States -- large population centers -- are within 750 miles of Atlanta, and there aren't any real airports in the vicinity of Atlanta. So, we collect an enormous amount of traffic here.
QUEST: What do you do next with Atlanta, because clearly you're not going to be attacked by any of the other major airlines on your home base here?
ANDERSON: Well, we're going through a massive transformation right now at Delta, and we're turning Delta back into a mainline airline. What that means is we're up-gaging (ph) the fleet and we're growing the mainline airline which is airplanes flown and operated by Delta employees and reducing the connection operation rather than what has happened in this industry over the last 25 years, which is we put too many people on 50-seat jets for 1,000 miles. We're stopping that at Delta.
QUEST: Why?
ANDERSON: Because one, the economics of the airplane, number two, I don't believe that customers expect to take a 50-seat jet more than about 250 to 500 miles at the most. And number three, what it allows us to do in Atlanta is take a market we would've served with ten 50-seat regional jets, ten flights a day, and replace it with six a day on a big airplane.
QUEST: So what's your priority as the chief exec in 2014?
ANDERSON: Well, we want to continue to successfully up-gage the airline, second, we're doing to continue to improve incredible performance from a reliability perspective at Delta. So this year to date our completion factor is 99-7, and our on our on-time performance 86 percent. Those numbers are unheard of in terms of reliability, but we're going to raise the bar next year.
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QUEST: Richard Anderson who always gives as good as he gets on the plans for Delta, which, according to some, is eating just about everybody else's lunch in the industry at the moment.
The weather in Atlanta -- Jenny Harrison is at the World Weather Center. Jenny, you've been -- you've actually done -- reported -- on how they check the weather at that particular airport which of course is so crucial to the smooth running. But I know you've got a lot of other things to talk about for today.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: I do indeed, and of course the thing with the weather in the Southeast, Richard, it's so changeable as well. So, yes, it plays a major factor of course into the success of those planes coming in and taking off, and it's like every 45 seconds -
QUEST: Every 45 seconds.
HARRISON: I know.
QUEST: And look at Australia. This is extraordinary because I -- when was it we were talking about the weather -- the fires, the forest fires? OF course that was hot weather as well. And now we've got these -- this dangerously hot weather.
HARRISON: Yes, I mean this is just some -- well this is record- breaking heat actually, Richard. We've broken more records again in the last 24 hours. But the good news in all this is that it is about to change. Of course the heat really now is across the southeast, but you'll see this line of cloud -- that front, well it's going (eventually) work its way across the great (Inaudible), and that will usher in the much cooler air. But again, just look at these temperatures that were recorded on Wednesday -- 44 in Adelaide, 43 in Melbourne, and 40 Celsius in Canberra, and again, so temperatures well above the average. But not just there because also down in Tasmania we saw in Strahan a temperature of 38 Celsius. The average is 21 this time of year, and in fact that of course (translates) to 100 degrees Fahrenheit.
But the good news is there is a change in place, and I'm sure nobody more pleased with this news than all those tennis players and spectators in Melbourne right now for the Australian Open. This flight is sliding through and I think there's -- it'll change the direction of the winds. So instead of coming from the very hot and dry interior, they are instead going to usher in this cooler ocean air -- a bit of humidity in there as well. But in fact if anything, I have to say people are probably going to say they're feeling rather cold, certainly when it comes Saturday, because that is when the change will take place Friday into Saturday. So, hopefully you'll see now more of this, but you cans see the huge long bag filled with ice to keep Maria Sharapova cool -- as cool as she can be anyway in the circumstances. But look at this in Melbourne -- 42 again Thursday and Friday, but by Saturday 20 degrees Celsius which is actually below the average of 26. So I promise you people will indeed feel rather cold.
Now, we've seen a change in Europe as well in the last few days -- the cold air finally beginning to usher in across northern and eastern regions. Of course what that's doing as well is bringing in a little bit more in the way of snowfall, even a little bit of sleet and snow out across the west, certainly across parts of Germany. Nothing particularly widespread. At most the snow is going to be across the east, and unfortunately in the west it is more of the same -- breezy and of course rather mild with that rain. The snow accumulating across the line of the Alps but also continuing to work its way across into western (inaudible) with 10 centimeters her in Moscow.
But despite the cold weather, I've managed to find a couple of good locations for your weekend retreat. Now, first of all, I'm not sure you'll this is necessarily warm enough to get on the beach, but Crete of course the island just off the coast of Greece -- we've got 18 Celsius Saturday, maybe a degree warmer on Sunday. Mostly sunny skies, a little bit of cloud up there but not bad, and then staying in that general area because this is really where the warmest and best weather is going to be throughout the weekend.
You can see Athens at south, you can visit the acropolis by night -- not bad at 12 Celsius, most (inaudible) on Saturday, and by Sunday, again, a degree warmer at 17 degrees Celsius. But as I say, that cold air is across the east, and look at what it's doing to temperatures in Moscow -- by Saturday -12 -- the average is -6. But remember, it's been much above the average the last few weeks. Not much snow -- that is also set to change. Stockholm, about average for the next few days. But unfortunately in the southeast of Europe -- look at this -- Belgrade, 14 and 15 on Saturday with an average which of course is much lower than that. So there's the snow working its way eastward. Unfortunately, there's still more rain across the west, but those temperatures are a little bit lower than they were, so 9 in London and Paris and 15 Celsius in Rome. Richard.
QUEST: I'm going to look forward to you before the end of the weekend giving me a forecast, Jenny, for Davos next week.
HARRISON: Oh, yes, that is all in hand, Mr. Quest. We're well aware of your plan beginning next week.
QUEST: Again, Jenny Harrison at the World Weather Center. When we come back, we're going to turn our attention to a very different subject -- the drive to help victims of the conflict in Syria. In Kuwait, nations have come together and they planned more humanitarian aid.
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QUEST: United States is donating another $380 million in aid to help those affected by the war in Syria. That brings the total U.S. commitment to $1.7 billion. U.S. Secretary of State John Kerry says the humanitarian situation in Syria is in his words "an outrage." He was speaking at a donors' conference taking place in Kuwait, part of an effort by the United Nations to raise $6 and 1/2 billion. Together the nations taking part pledged more than $1.3 billion towards what's the largest-ever humanitarian appeal in history. Kuwait was the largest donor, giving $500 million.
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SHEIKH SALMAN SABAH AL-SABAH, KUWAITI MINISTER FOR INFORMATION AND YOUTH AFFAIRS: I'd like to (inaudible) that His Highness the Emir of Kuwait Sabah Al-Ahmad Al-Jaber Al-Sabah announced that Kuwait will donate for the Syrian humanitarian needs half billion U.S. dollar -- $500 million U.S. dollars.
QUEST: In Syria's neighbor Turkey, a group of craftsmen are giving a very different kind of aid to some refugees, but by no means of course just as welcome. They're making artificial limbs for people wounded in the fighting. Our senior international correspondent Ivan Watson has the story.
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IVAN WATSON, CNN'S SENIOR INTERNATIONAL CORRESPONDENT BASED IN ISTANBUL, TURKEY: On the fringes of Syria's awful civil war, there's a small factory where craftsmen are hard at work. They're not manufacturing bombs or guns, these Syrians are building artificial limbs -- prosthetic legs -- that are giving some victims of the conflict a second chance at life.
Throughout the day, patients limp in to the two-story building that houses the National Syrian Project for Prosthetic Limbs. Among them, Ahmed Muhammed. A year ago, he says a bomb blew off his left leg in the battleground city of Aleppo as he was trying to rescue wounded children from a previous blast. Today, he takes his first steps on a brand new prosthetic leg.
AHMED MOHAMMED, SYRIAN WAR VICTIM, VIA TRANSLATOR: Bore I got this leg, my life was tragedy. I was depressed. Thank God. This has now brought back hope, brought back self-esteem, it brought back life.
WATSON: Thanks to his prosthesis, Mohammed says he can now hold his own child on his lap. He's even been able to go back to his old job as a metal worker. Funded by Syrian expatriates, this charity is part factory, part physical therapy clinic. It can take months to learn how to walk on these artificial limbs, and most patients had to make a difficult, dangerous journey from neighboring Syria for treatment in this Turkish border town. Among the Syrians working here is 18-year-old Abdullah El Mawlah. Mawlah is not just an employee, he's also a victim of the war with his own prosthetic leg.
ABDULLAH EL MAWLAH, SYRIAN WAR VICTIM, VIA TRANSLATOR: Sometimes when you see patients who are completely destroyed emotionally, I'm here to tell them that you can go on and continue life like any normal person. Yes, you may not get back to exactly how you were before the injury, but you will be able to walk again.
WATSON: Despite these brave words, this teenager confesses to having doubts. The boy who once loved playing soccer now worries that no woman will ever want to marry a man mutilated by war. This charity has quite literally helped hundreds of wounded Syrians get back on their feet and all for free, providing a vital first step on the long road towards recovery for victims whose bodies and minds have been shattered by this devastating conflict. Ivan Watson, CNN Reyhanli, Turkey.
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QUEST: Extraordinary story that we're pleased to bring you tonight. When we come back, I'll have a profitable moment.
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QUEST: Tonight's "Profitable Moment." I'll be honest, I'm treading on very thin ice -- a man who's about to give a commentary on the first woman CEO at a major U.S. automaker. This is dangerous territory, be assured. But it was fascinating to hear our guest tonight talk about how times have changed. When she joined General Motors decades ago, people were more concerned about how she dressed, what she wore, what Marina Whitman's hair looked like. I'm sorry to say today we seem to be just as concerned about what female CEOs look like. And maybe I'm just as guilty as anybody else because I'm talking about it this evening. I put my hand up and plead guilty.
And that's "Quest Means Business" for tonight. I warned you it was (inaudible). I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you later in the week.
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