Return to Transcripts main page
Quest Means Business
Outrage in France Over BNP Paribas Fine; European Markets Slip; US Markets Pull Back From Records; Obama Calls for $1 Billion to Boost Military Presence in Europe; Doing Business in Russia; Seattle Minimum Wage Hike; Minimum Wage Fight
Aired June 03, 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)
MAX FOSTER, HOST: It's the closing bell on Wall Street, and the Dow and S&P 500 have pulled back from Monday's all-time highs. It is Tuesday, the 3rd of June.
A huge outcry over a huge fine. Jean-Claude Trichet tells me the US treatment of BNP Paribas is neither fair, just, nor proportional.
Have to have it all. Air France's chief executive says the airline can combine low costs with high quality.
And minimum wage, maximum fuss. Seattle upsets business.
I'm Max Foster. This is QUEST MEANS BUSINESS.
Hello to you. There is fury in France tonight. Banking officials there are lashing out at their US counterparts, and it's threatening to spark a diplomatic row. There's anger over a proposed fine by American authorities against the French banking giant BNP Paribas. Tonight, the former president of the European Central Bank tells me the punishment would be extraordinarily dangerous.
The United States is investigating BNP Paribas for violating sanctions by doing business with Sudan, Iran, and Syria. The bank is facing a $10 billion fine, the largest criminal penalty ever given by the US -- United States.
Now, BNP Paribas could be prevented from moving millions -- or millions of dollars, or dollars, whatever it's got, in and out of the United States. Now, French officials say the fallout could hurt the French economy and could impact trade talks between the US and the European Union.
French foreign minister Laurent Fabius is calling the punishment "unreasonable, unfair, and extremely serious problem."
(BEGIN VIDEO CLIP)
LAURENT FABIUS, FRENCH FOREIGN MINISTER (through translator): It poses a very big problem. Why? Because if there's an error or a violation, then it's normal that there is a fine, but the fine has to be proportionate and reasonable. These figures are not reasonable.
(END VIDEO CLIP)
FOSTER: Francois Hollande is under pressure to defend his nation's largest bank. When he meets with US president Barack Obama on Thursday, he'll ask Mr. Obama to intervene and push for a smaller penalty, one that won't impact BNP Paribas' bottom line.
I spoke with former president of the European Central Bank and governor of the Bank of France, Jean-Claude Trichet, earlier, and asked him if he thinks the French government should be getting involved in the matter.
(BEGIN VIDEOTAPE)
JEAN-CLAUDE TRICHET, FORMER PRESIDENT, EUROPEAN CENTRAL BANK: Well, first of all I would say, my own sentiment is that it is a global issue, obviously. It's not only a European issue or a French issue, but really a global issue.
Second, I think also that there is something which is illustrating the fact that we do not have the same rules as regards sanctions on both sides of the Atlantic, because it's been checked, if I understand well, by Banque de France, and the fact is that what they did was in line with the regulations here. So, I would certainly call, myself, for appropriate harmonization on both sides of the Atlantic, because it's very important.
Third, I think that there is a problem of equity, a problem of fair and just and proportionate, I would say, sanctions. And it doesn't seem to be the case, and I understand that's the reason why there is great emotion here.
And the last point, which is my personal view, when speaking of suspending the clearing in dollars in New York, it seems to me that we have there something which is of an absolutely dramatic, systemic nature. So, I would say this should not be even mentioned. It is a global, systemic issue, which could be extraordinarily dangerous.
FOSTER: But if the deals are being done in dollars, and if someone is to be in control of that, surely it should be the country the currency belongs to?
TRICHET: No, I don't dispute that. I don't. I say only the real -- the rules are not the same on both sides of the Atlantic, and that's a pity, because if you want to be effective, of course, the rules have to be the same.
I was only mentioning the extraordinary measures that has been envisaged, looks like, when you read the papers, that the clearing in dollars could be suspended for one major international bank. I say this is of a systemic nature, and that is something which appeared to me, from a global systemic standpoint, extraordinarily dangerous. That's my point.
FOSTER: And there are --
TRICHET: I don't dispute the fact that dollar is dollar, and that the US regulation is the US regulation.
FOSTER: There are those in the US that think it's extraordinary that a government would step in and get involved in what should be an issue just for the bank, in their view. So, the French government are turning it into a diplomatic issue when it shouldn't necessarily be so.
TRICHET: Well, I'm sorry, I'm not the French government. And I know I can tell you only that there is, obviously, great emotion in Europe, and probably also great emotion in the global banking community.
Because again, what is envisaged seems to be of a systemic nature. That's my point. I don't comment on the French government at all. And as far as the bank is concerned, to my knowledge, it is fully cooperating with the investigation.
FOSTER: What would you like to see as the next step in this, the best resolution?
TRICHET: I trust that what is necessary, of course, in the investigation goes. As I said, the bank is cooperating fully with the investigation, according to my understanding and what they say. And I expect that there will be an accord which would be proportionate, which would be fair and equitable and just. And I expect that there would not be the suspension of the clearing in dollars, which again, is of a global, systemic nature.
(END VIDEOTAPE)
FOSTER: Jean-Claude Trichet in Paris. Now, European markets slipped on Tuesday on data showing that the eurozone inflation fell unexpectedly in May. This adds to expectations that the European Central Bank will cut interest rates when it meets on Thursday. Eurozone unemployment also dipped marginally in April.
Meanwhile, the winning streak's over on Wall Street. Alison Kosik is at the New York Stock Exchange to explain. Hi, Alison.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Max. Only modest losses today, but yes, say good-bye to those records, at least for now. Not much was really moving the market, and not many investors were in the game, either. We saw volume very low today.
Could say that investors are showing some caution ahead of the European Central Bank meeting coming later this week. Many investors are wanting to hear the ECB statement before making any big moves, and the expectation is that the ECB may be aggressive. So, everybody's waiting on that.
Same with the jobs number here in the US, jobs report coming out on Friday. Although the jobs number is expected to be good, on one really placing any big bets out there just yet. So, we saw a lot of sideways trading, despite some good manufacturing reports, not just out of China, but out of the US as well. Max?
FOSTER: Alison, thank you very much, indeed. Now, plans for a $1 billion boost. President Obama wants to expand America's military presence in Europe. We'll tell you why after this short break.
(COMMERCIAL BREAK)
FOSTER: US president Barack Obama wants a billion dollars to boost the American military presence in Europe. The move marks a shift from his pivot towards Asia. The announcement came during his visit to the Polish capital Warsaw, and Congress must approve the proposal.
President Obama also reaffirmed the United States' commitment to NATO allies and praised Poland's decision to increase its own military spending.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Poland's resolve and the initiative I'm proposing today is a reminder that every ally needs to carry their share and truly invest in the capabilities of the alliance that are needed for the future.
(END VIDEO CLIP)
FOSTER: White House correspondent Michelle Kosinski is in Warsaw for us. What did you make of this? Was it a surprise?
MICHELLE KOSINSKI, CNN WHITE HOUSE CORRESPONDENT: Hey, Max. Not so much. I think that the president did want to make an announcement to kind of step things up in terms of the cooperation, not only between the US and Poland, but also other allies in this region.
And the reason for all of this, yes, Russia, and the situation in Ukraine. And we were thinking maybe there would be more talk about sanctions, but that really didn't figure in so heavily this time, even though the president did mention it.
So, what he wants to do is this $1 billion fund that, of course, has to be approved by US Congress, to step up these patrols, the training exercises that have already been increased. But obviously, the White House wants to expand those even more, and they spelled it out, saying that a persistent air, land, and sea presence in this region is necessary.
I think it's been really interesting to see how much Russia's behavior has affected the US's stance on these issues that would normally be kind of -- I don't know, I don't want to say run of the mill, but kind of the usual topics or topics moving forward.
And we're talking not just NATO defenses, but also things like energy security. Even the economy. It's all now colored by what Russia has done, and these topics are seen kind of more as national security issues, like energy security, for example, and energy independence, than they would be, say, a year ago.
FOSTER: And the Russians have been accused of being provocative. This could be seen as provocative as well from the US point of view. Is there a sense of that there?
KOSINSKI: Yes, that's a good point. I really haven't seen a Russian response to this as of yet today. So many topics coming out of this. But the Russians lately have expressed their desire for dialogue, their hope that the new Ukrainian government will establish peace. Again, kind of shoving it off a bit, putting the onus on Ukraine.
President Obama and also President Komorowski in Poland did spell out today that continued provocation would lead to further costs. That's kind of the line that they've been saying over and over again. So, alluding to stronger sanctions.
But the US has said even today, again, stating that Russia has not really taken any significant measures to reduce sanctions -- to reduce tensions in Ukraine. And the president calling on Russian president Vladimir Putin to do more to stop the militias in southern and eastern Ukraine from stirring up more violence.
I thought one thing that was very interesting, though, was that the president today said that he saw there being a possibility to reestablish trust between the US and Russia, and he doesn't have any plans to meet with Putin, even though they're going to be in the same place at the same time this week, if only for a day.
But he said that it could come up, that they would greet each other. And he sees there being a possibility, at least, in the future of the reestablishing of that trust. How exactly that would happen, it seems like there's going to be -- have to be significant movement on the part of Russia, Max.
FOSTER: As you say, you're implying to this event on Friday, where you have this incredible setting where heads of state from all around the world are meeting in France, aren't they?
It's obviously to commemorate D-Day, but are you expecting bilaterals or something extraordinary to come out of that? Because there is a real opportunity, isn't it, to have some bilateral meetings at a sort of an independent location, let's say?
KOSINSKI: Yes, it seems that President Hollande of France is actually going to be meeting with Putin bilaterally and Obama bilaterally on the same day, maybe one right after the other.
So it's interesting, we know that during this cluster of meetings, Putin is going to meet with Hollande, he's also going to meet with David Cameron of the UK. And President Obama separately is going to meet with both of them, too, so there might be some movement there, or some discussion that comes out of that.
But I think what we have seen over the last two months again and again is that these discussions have gone on in person, with other ranking members of the governments, over the phone, even when there seems to be a little bit of movement or agreement, it turns out that there really is none.
So, I think everyone's looking at this with some skepticism, but again, officially, we've been seeing mostly on Twitter, people like Russian foreign minister Lavrov, they're kind of making -- setting a tone, at least, for some peaceful movement going forward, now that the new Ukrainian government has been elected. But what that means for events on the ground, it seems like that has not changed very much, Max.
FOSTER: Michelle in Warsaw, thank you very much, indeed. An interesting week for you.
Jim Boulden spoke with the Russian deputy prime minister, Arkady Dvorkovich, and the Russian leader was at a hub for tech start-ups on the outskirts of Moscow. Skolkovo Village, as it's called, has attracted corporate partnerships with companies like Cisco, Siemens, and Panasonic, and Jim asked the deputy PM if US and European sanctions have hurt business.
(BEGIN VIDEOTAPE)
ARKADY DVORKOVICH, DEPUTY PRIME MINISTER OF RUSSIA: We do not have any difficulties at this point with our partners, despite the fact that sanctions have been applied by some of our international partner states in recent weeks.
But all businesses that we are doing now are successful, are on track. And our partners, our foreign partners are saying that for them, it's about business, it's not about politics. And they do want to do business with Russia. They don't want to be under the pressure of political circumstances.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: But there could come a time where there are sanctions which would not allow them to work in an initiative like that. Or do you not think that's going to be the case?
DVORKOVICH: Well, if working with us were prohibited by law, they will stop working, like they stopped doing this in Cuba, Sudan, North Korea, and Syria. But I think that would be stupid to apply such a law for Russia. And we hope that our partners are not stupid. We hope that they're smart and they will not apply any sanctions like this against business we are doing together.
BOULDEN: And do you expect these companies -- more companies to sign up as well? Or are you worried that maybe that those that have signed up will stick to it, but you might not be able to get other companies to follow the likes of SAP, Intel, Cisco, Siemens, IBM, and Microsoft?
DVORKOVICH: I think that American companies will be a little bit cautious now, but we do see more interest from some Asian, Latin American companies, now, especially from Japan, Korea, China, and other countries.
So, even if we will not have new companies from the United States in the upcoming months, we will have good substitutes. But we do hope that we will have more and more partners, both from Europe and the United States, in the future.
BOULDEN: What are these companies saying to you about Ukraine, or are they not even talking to you about it? Are they not expressing any concerns, even if it has to do with the negotiations on the gas price, for instance, with Gazprom and Ukraine?
DVORKOVICH: They just want stability. They want stability for their own businesses, and they would like to feel safe about doing business in Russia. And they don't want new sanctions, frankly speaking.
BOULDEN: As deputy prime minister of Russia, what do you think the likelihood is with the talks with Ukraine and Gazprom, do you feel that this will be settled this week? In fact, could it be settled today, Tuesday?
DVORKOVICH: We do have constructive discussions with our EU partners about gas issues, Ukrainian gas issues. And the reason is very simple: Europe wants stability in those affairs. Europe wants their deliveries to be stable over the future from Russia and from other regions.
And we do hope that we will reach a solution based on full payments from Ukraine for Russian gas, both postponed debts and current payments.
(END VIDEOTAPE)
FOSTER: Well, still to come on QUEST MEANS BUSINESS, Seattle's lowest-paid workers are getting a raise. Hear from the business leaders who are so furious, they're suing to stop the move.
(COMMERCIAL BREAK)
FOSTER: Well, it's a big win for Seattle's minimum wage workers. The city council unanimously agreed to raise the minimum wage to $15 an hour over the next seven years. Seattle's minimum wage will be the highest by far in the US, and one of the highest, actually, in the world.
By comparison, the US federal minimum wage is less than half of Seattle's at $7.25 an hour. Seattle's mayor told CNN the wage hike is necessary to combat income inequality. Speaking to Carol Costello, the mayor defended the unprecedented move.
(BEGIN VIDEOTAPE)
ED MURRAY, MAYOR OF SEATTLE: We went to $15, but we're going to $15 smart. We're phasing it in over seven years. We're very sensitive to the fact that Seattle has some of the most innovative small and large businesses. It gives us a chance, it gives them a chance to adjust their business model.
So, I think we've been able to do something that helps business and helps employees. And I think the studies show again and again, where you have a higher minimum wage, you actually see a fairly vibrant economy.
CAROL COSTELLO, CNN ANCHOR: Some might argue that Seattle's economy is much better than in other cities across the nation, and that at some point, because of the particular business in Seattle, there will be a bust, and you'll be sorry for doing this.
MURRAY: I don't believe that is going to be the case. I think what is hurting the economy, what is hurting Seattle, what's hurting cities and states around this nation is the issue of income inequality.
When you have a large middle class that can go out and buy TVs, can buy the next house, a car, those are things that stimulate an economy. And when you have just a small number of people at the very top who buy a yacht, that's not how you stimulate an economy. So, we're putting money into people's pockets, money that will go right back into the economy.
COSTELLO: Well, there are other people who'll say, including business owners in Seattle, who'll say this will really hurt them. They're going to have to lay off workers because of this.
MURRAY: Well, again, we have to look at studies around the nation where the minimum wage has been higher in Seattle, and the indications is that is not what happens.
The other thing, though, that we have to realize is even at $15 an hour -- and most people who are making lower wages or lowest wages don't work a 40-hour week -- even at $15 an hour in a city as expensive as Seattle, it is very, very hard for that worker to actually live in this city. Again, that is a huge problem for small businesses and large businesses.
(END VIDEOTAPE)
FOSTER: Well, a push by Democrats in Congress to raise the national minimum wage have largely fallen flat. They want it pushed from $7.25 to $10.10 an hour. Howard Schultz is the CEO of Starbucks, which is based in Seattle and has more than 100,000 employees in the US. CNN's Poppy Harlow asked him whether the minimum wage should be raised across the country.
(BEGIN VIDEO CLIP)
HOWARD SCHULTZ, CEO, STARBUCKS: I do think that there are fundamental issues in a larger gap between the haves and have-nots in America, and I applaud the president for taking a stance on raising minimum wage. I'm not sure that the rhetoric around $10 at the federal level or $15 at the state level in Washington is the right number.
(END VIDEO CLIP)
FOSTER: Steve Caldeira opposes Seattle's minimum wage hike. He's the president and CEO of the International Franchise Association. He's filing a lawsuit, actually, to overturn the plan, or at least the association is. He joins me now, live. Thank you so much for joining us.
It's an argument about fairness, isn't it, rather than economics? From an economic point of view, of course it makes sense not to have a minimum wage.
STGEVE CALDEIRA, PRESIDENT AND CEO, INTERNATIONAL FRANCHISE ASSOCIATION: Well, look, the ordinance that was passed in Seattle yesterday by the city council and mayor signing this afternoon clearly is unfair. It's irrational, and it blatantly discriminates against the 600 franchisees that own 1700 establishments and employ 19,000 people. It picks winners and losers, and it flies in the face of common sense.
It's the small business independent owners, the franchisees, that own the stores, not the chains. So, it really creates an uneven, unlevel playing field, if you will. And we're not looking for special treatment, we're looking for equal treatment. So, it's really less about the minimum wage from our perspective and more about preserving the time-tested, proven model of franchising.
FOSTER: What about people who haven't got enough money to afford to live? They work hard, but they really struggle? Isn't the debate about that, rather than about the business side?
CALDEIRA: I think it's important to understand that the minimum wage was never intended to be a living wage. It was meant to be a floor. It was meant for entry-level workers, for lesser-skilled positions.
And because of this still-fragile, uneven economic recovery, there's been downward pressure on the economy, and folks that maybe got re-orged out of their jobs or are coming out of college and can't seem to find the jobs at the pay level they want have been forced into some of these other jobs, and that's putting downward pressure on the franchise industry, on quick service restaurants.
And we feel that we do our part to create jobs and opportunities for young people and all people that want to rise and live the American dream. We like to say franchising is a way to be in business for yourself, but not by yourself. Formula entrepreneurism, if you will.
But to arbitrarily, with no sound rationale, raise the minimum wage to $15 an hour and then tell franchisees that are small business owners that are not part of the corporate brand that you have to get to that $15 per hour threshold in three years and non-franchise businesses have seven years that could have up to 500 employees as defined by the small business administration is flat-out wrong.
And it's really offensive to these small business franchise owners that create -- help to create two thirds of all net new jobs in America from a small business perspective standpoint.
FOSTER: But you're saying it should be a floor, as in a floor to wages, but actually it's not, is it? It effectively acts as a benchmark. So, many of your members, it's argued, would use that as the amount that they should pay their staff, not about the floor. As in they don't go that much above it.
CALDEIRA: Look. Our members are working through a still very fragile, tepid, uneven economic recovery. They're dealing with Obamacare implementation. They work on thin profit margins, high energy costs, high beef and commodity costs, a more regulatory environment under the Obama administration.
And now, you tack on the unfairness of this as it relates specifically to Seattle, which is why we're putting a stake in the ground, here, where they may have five or eight or ten employees as a franchisee on one side of the street.
On the other side of the street, you've got a small business as defined by the SBA under 500 employees, and yet, they have a seven-year phase-in. So, this is really all about fairness and equity for our franchisees. That's what it comes down to from our perspective.
We will be filing a lawsuit very soon. We believe we have grounds under the equal protection clause, the common -- the commerce clause, and other federal and state precedent. So, that will be coming out shortly.
But we are going to throw a stake here in the ground in Seattle, we're going to be aggressive, because we believe this is a blatant unfairness by the city council and the mayor, which has had tremendous pressure, by the way, on them from the Service Employees International Union, the SEIU. So, we're here --
FOSTER: OK.
CALDEIRA: We're going to file that lawsuit.
FOSTER: OK, Steve --
(CROSSTALK)
CALDEIRA: And we appreciate the opportunity --
FOSTER: Steve Caldeira, thank you very much, indeed --
CALDEIRA: -- to come and air our views.
FOSTER: -- for joining us from Seattle.
CALDEIRA: Thank you.
FOSTER: We'll be watching closely. Thank you very much, indeed.
Coming up, high quality at a lower cost. The CEO of Air France/KLM speaks to Richard about competition from budget carriers.
(COMMERCIAL BREAK)
FOSTER: Welcome back, I'm Max Foster. These are the top news headlines we're following here this hour.
While Western nations are calling Syria's presidential election a farce and a parody, a democracy, President Bashar al-Assad is almost certain to declare victory over two little-known challengers. He's seen here voting with his wife Asma in Damascus. The U.S. President is promising America will stand by its European allies. Speaking in Poland today, Barack Obama said he'll ask Congress for a billion dollars to boost U.S. military presence in the region. Meanwhile, Mr. Obama says the U.S. and Russia can rebuild trust if the Kremlin gets separatists in Ukraine to back down.
There's been a violent protest in Karachi over the arrest of an exiled Pakistani politician at his home in London. The MQM Party leader, Altaf Hussain, is suspected of money-laundering according to reports. The party has joined the Pakistani Prime Minister's office in condemning the violent demonstrations.
The U.S. party - the U.S. army rather - says it will review the case of Sergeant Bowe Bergdahl who was freed from captivity as part of a prisoner swap with the Taliban. The army secretary said the review would include speaking to Bergdahl to better understand the circumstances behind his disappearance and capture.
A plan for Spain's royal succession is now on its way to Parliament. The prime minister's cabinet wrapped up a succession meeting earlier on Tuesday. The country is scrambling after King Juan Carlos announced he's handing the throne to his son.
The CEO of Air France KLM said his airline is ready to compete with Europe's low-cost carriers. Alexandre de Juniac sat down with Richard at IATA's global aviation summit in Doha and he said the airline is well- positioned to keep growing.
(BEGIN VIDEOCLIP)
ALEXANDRE DE JUNIAC, CEO, AIR FRANCE KLM: KLM is as you know the biggest carrier in term of intercontinental network. We are bringing a - the most numerous people inbound Europe and outbound Europe, so we are one of the major airline in Europe bringing people from Asia and from America to Europe, first. Secondly, in continental Europe, Schiphol and Washishalogo (ph) are very big and very good entry point and we have additional capacities in these two airports, in these two hubs. It means that in the future we will remain probably the two major entry points in Europe with our German friends of course, but the additional capacity we have in these two airports is absolutely key.
QUEST: But it is against the EasyJets, the RyanAirs -
DE JUNIAC: That's another point. Inside Europe -
QUEST: -- Yes.
DE JUNIAC: -- we will compete and we compete already with low-cost. The strategy for France KLM is to develop its own low-cost Transavia. We already operate -- in the summer season - we'll operate 50 aircraft. So it's not a small operator anymore, and we target to be a pan-European low- cost in the future in the coming five years.
QUEST: There's almost -
DE JUNIAC: So we'll have someone will be able to compete against the two giants you have mentioned.
QUEST: Right, so - fascinating, this, because there's a different strategy starting to emerge between the three big carriers in Europe.
DE JUNIAC: Yes.
QUEST: Lufthansa has Germanwings point-to-point but still under the umbrella. Willie Walsh has Vueling which is pushing further and forward.
DE JUNIAC: Yes.
QUEST: Where do you fit in to that strategy in terms of - ?
DE JUNIAC: Transavia will be the low-cost operating point-to-point from everywhere in Europe, but basically from France and from Holland. But we will have probably other bases in Europe first. And we are a quality low-cost under the umbrella of Air France KLM. Quality meaning that we - you can bury your mies (ph) on Transavia, your flying glomiers (ph), secondly we provide all our recovery service to the Transavia passengers. It means that if there's something happening, a cancellation -- and it happens, -- our passengers will not be left in the middle of the desert alone.
(END VIDEOCLIP)
FOSTER: Well from planes to automobiles, and despite a string of high-profile recalls, General Motors is selling more cars than it has in years. The company reported U.S. sales in May jumped 13 percent compared to a year ago, making it the best month since 2008. Zain Asher has been following the story and an extraordinary one it is.
ZAIN ASHER, CNN CORRESPONDENT: Hi, Max, absolutely. So GM sold more than 284,000 cars in May, as you mentioned a record-setting month. The best we've seen - monthly sales we've seen since August 2008. A lot of that has been due to fleet build. But I do want to mention, you know, -- listen - despite this nightmarish recall from GM, you are seeing car sales just basically get stronger. Part of the reason is because when a company like GM announces a recall, essentially what they're doing is basically luring customers into the dealership to get their cars repaired, and sales teams often take advantage of that to get those customers to buy new cars using discounts and other incentives as well. Also, there is this idea that when people go shopping for GM cars here in the U.S., they might not necessarily realize right away that the car they're buying is a GM car. Let me just explain why. GM dealerships here in the U.S. will label themselves in terms of the model and not necessarily the car company. So a GM dealership will label itself as a Buick dealership or a Cadillac dealership or a Chevy dealership. So people might not necessarily make that connection right away. But also, Max, you know, recalls here have happened so frequently, they are so common, that people tend to grow numb to them. And especially when you consider that two of the models that were implicated in this ignition switch recall don't exist anymore.
But, yes, you know, sales are not necessarily impacted that much. The share price of GM not necessarily impacted either - only down 3 percent since February but where GM is hurting is in its profit. Profit net income for GM in the first quarter actually fell 85 percent. This recall is actually costing them $1.7 billion, so they are certainly hurting in terms of profit.
FOSTER: Yes, and as you intimated, it's happened at a fortunate time because the whole industry is picking up and that's seen as a reflection of the U.S. economy.
ASHER: Yes, absolutely, so all three U.S. car companies certainly doing well. I'm just going to break down the numbers for you - Chrysler sales up 17 percent, GM as we just talked about their sales up 13 percent, Ford which was actually expected to go down this month actually rose 3 percent as well. So a few reasons for this - pent-up demand. During the winter months people weren't necessarily buying cars. Now that summer is actually coming back, we're seeing more people go to the dealerships as well. Also we are in a low interest rate environment right now. The average interest rate for a new car is between 3 and 4 percent, so obviously the easy credit, obviously there's some incentive as well.
But when you look at lastly the overall economy, we're seeing housing obviously signs of health. And then jobs, you know, April jobs numbers - they came out 288,000 jobs added in April. We have gained back all the jobs that we lost since the recession so obviously when peoples - people - get a job, they are certainly more likely to buy a car, so it all works together. Max.
FOSTER: Zain, thank you very much indeed. Now, in a world where cash is king, there's a new pretender to the throne. After the break, why hard currency faces harder times.
(COMMERCIAL BREAK)
FOSTER: Well, bucks, bills to old moola - whatever you call it - money is changing - new ways of paying and spending emerge and each one threatens to replace the notes and coins we're so used to. In our new series, "Future Finance" we explore whether we could live without it.
(BEGIN VIDEOCLIP)
FOSTER: Money, money, money. It makes the world go `round. We use it of course to buy goods and services and to measure wealth. Historically, we traded in beans, cows, camels or even beads and jewelry. Then the Chinese invented the first paper bank notes in the seventh century. Today, cold, hard cash comes in the form of bills and coins. But are they on their way out?
TIM GREEN, EDITOR, MOBILE MONEY REVOLUTION: Now that there are mobile technologies and quick tow (ph) currencies and things like that, there's a - we're on the brink of some new ideas around a cashless society.
FOSTER: The shift is being embraced on the streets of London. For a copy of the "Big Issue," a magazine sold by the homeless or jobless will cost you 2 pounds, 15. A few coins for now a quick swipe of your bankcard in Simon Mott's mobile money machine.
SIMON MOTT, MAGAZINE SELLER: Last year I'd taken to sell 500 pounds through the card machine on the card payments alone, so this is money that would otherwise pass me by. Nowadays with contactless payments, you can just pay and (inaudible) all items below 25 pounds. Some people don't really bother carrying cash.
FOSTER: Larger-scale cash alternatives include Kenya's virtual's M- Pesa currency. SumUp, an app that turns your phone into a card terminal, Paym, the cross bank where you're sending money without a need for account details and Bitcoin, a peer-to-peer payment system. Futuristic finance solutions being mooted include Bluetooth payments and the great multi- currency mobile wallet. Fashion too may have a role.
GREEN: One area of the market we haven't really talked about is wearables. So it's perfectly possible that we can actually use some kind of ring, bracelet, watch that's actually tapped to make a payment.
FOSTER: Technology will arguably revolutionize our financial future, but Crawford Hollingworth reminds us of the power of cash.
CRAWFORD HOLLINGWORTH, BEHAVIOURAL ARCHITECT: You can feel it because it's real, you know, it's not in a bank where you money may turn out of the bank. You can smell it, and if you can smell it, you can feel it -
FOSTER: You can completely (ph) hear it.
HOLLINGWORTH: You know that's kind of the great hand (ph) as well as it trains you to behave in a salient different way and to value it slightly more. I put this little box here. This is my son Harry - it's Harry's inheritance. This is about trying to make savings and things more salient. And basically this is full of cash. And the picture of my son on it, then this whole kind of concept of saving becomes much more real. And you're much less likely to open it and steal Harry's inheritance.
FOSTER: Do you think we should all still have some cash in our wallets?
HOLLINGWORTH: I think if you've got cash in your wallets, particularly in bigger denominations, you're likely to be more cautious of how you spend. Whereas with these, you discount the future, you're subject to the power of now and you'll spend a lot more.
FOSTER: Non-cash payments exceed $300 billion a year globally and are set to grow. When the history of the 21st century is written, it's likely to include some old-fashioned loot. But these may very well have become extinct.
(END VIDEOCLIP)
FOSTER: How to spend less, Jenny Harrison, we could all use a few tips.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Say that to me as if I spend a lot of money? You're the second person to say that to me today.
(LAUGHTER)
FOSTER: It's those outfits that kind of gives it away.
HARRISON: Oh, yes. It's the other things. But anyway, Max, I need to talk about - luckily you're not going to (inaudible) this sort of weather in Europe, but if you're out there and perhaps heading towards Mexico, well, be prepared because this is now the second tropical storm of the East Pacific season and this is it -- Tropical storm Boris. Winds are certainly about 65 kilometers an hour is very, very close to shore and of course close to shore when it developed when it developed into a tropical storm. So, I'm hoping it won't gain much more strength. If anything of course, once it makes landfall, it should weaken very, very rapidly. But obviously you've got some very heavy rain particularly coming down with the storm system, and because it's been raining for the last couple of days, the ground is already quite saturated. So you can see some areas that will see more rain than others. And in fact some areas could - just on the coastal areas here - maybe pick up about 25 centimeters of rain. So we are expecting to see some flooding but also there's always that danger of landslides and mudslides.
So this is the East Pacific season for 2014, and already we've have Amanda, we're on Boris now, and you can see of course how the list continues throughout the year or the coming few months. Now, meanwhile, up in mainland U.S. up here, you'll see these two red boxes. So right now Iowa and Nebraska - there's actually some very strong thunderstorms expected particularly as we head into the early hours of Wednesday morning. This is where the warnings are and it's just been elevated to this pink which is high risk. So very probable they will have very strong, severe winds, heavy rain but also large, damaging hail and of course tornadoes - never without that threat.
The storm system work its way eastwards as we continue over the next couple of days. And in fact, the storms really haven't reached the Northeast just yet. But we've already, as you can see here in Newark and also LaGuardia, we've actually got ground stops in place, and JFK not much better really - one hour and ten minute and then you can see also in Teterboro one hour and 15 minutes. So not looking good there, but those storms are fairly swift-moving. We'll keep an eye on that.
Meanwhile in Europe, the Southeast - yet more rain in the forecast here. We've got sort of front after front coming in to the Northwest, so passing showers and things are feeling a little bit cooler. But in the Central and Eastern Med, some pretty strong winds around that area of low pressure. And we've got some warnings here to across Eastern Europe. Again, we could have heavy rain and possibly some large, damaging hail.
But it's not all doom and gloom. Look at this - something from an I- reporter in Amsterdam. Beautiful of course. Not exactly hot and sunny, it has to be said, but, hey, it's not raining for once and it all looks lovely on the canals. But there is some heat in place. Look at this in fact - that's of the United States you'll notice. Well, that isn't the United States, well what if it's actually Europe. But these are the temperatures that were recorded this Tuesday - 29 in Moscow, 9 above average, the same in Saint Petersburg, and of course we batched that theme (ph) that we were in about a week ago. So the temperatures once again expected to be way above the average. Friday 31 in Moscow, 30 in Kiev and 28 in Saint Petersburg over the next couple of days.
FOSTER: Jenny, thank you very much indeed. Now, if you're still hoping to go to the World Cup in Brazil, you do have one final chance. The last of the tickets go on sale through FIFA's website in around six hours from now. Just one problem, though - the preparations aren't quite complete. Shasta Darlington has more.
(BEGIN VIDEOCLIP)
SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: Now they held their final test match on Sunday and unfortunately it looks like there's still a lot of work left to be done. There are construction sites all around the stadium, especially along the western plank, the VIP boxes aren't ready, the press area isn't ready, but most concerning of all are the stands themselves.
At the test match there some 40,000 fans there to see the game, but on June 12th, 68,000 fans will be piling into the stadium, a stadium that has never been tested at full capacity. In particular, provisional stands that were built just in the last couple of weeks - never tested. Now, according to Brazilian experts, this hasn't happened for over two decades. The first time that a World Cup started in a stadium that hadn't had a full-capacity test, is reportedly Italy in 1990.
And Sao Paulo isn't the only problem. The World Cup is of course going to be played in 12 cities across the country, another two stadiums are also under some sort of construction - Cuiaba and Curitiba and then there's the question of infrastructure. Even in the cities where the stadiums are done and looking good - Manaus for example - there's the question of urban transportation. How to get the fans from airports to the stadiums. In many cases the metros, the monorails never even got started. And in other cases, the airports are still undergoing renovations. All we can say is this is still very much a work in progress. Shasta Darlington, CNN Sao Paulo.
(END VIDEOCLIP)
FOSTER: Still to come on "Quest Means Business," the plane that made commercial travel a reality 80 years ago is still in the skies today. We'll take a closer look right after this.
(COMMERCIAL BREAK)
FOSTER: All this week in "Across the Skies" we are celebrating 100 years of commercial flights. In the 1930s the iconic Douglas DC-3 revolutionized commercial air travel. It helped the allies win World War II and some are still flying commercially today. Jonathan Mann takes a closer look.
(BEGIN VIDEOCLIP)
JONATHAN MANN, ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: It was the workhorse that helped win World War II. It was the marvel that made passenger airlines profitable. An enduring icon of the era, it carried Indian Jones to Cairo as a raider of the lost ark.
ROBERT VAN DER LINDEN, SMITHSONIAN AIR AND SPACE MUSEUM: The DC-3 was a major turning point.
MANN: Robert Van Der Linden runs the aeronautics department of the Smithsonian Institution's National Air And Space Museum, America's pantheon of planes that made history.
VAN DER LINDEN: The DC-3 is a monarch (ph) because it was such a hugely important aircraft. It revolutionized the airline industry.
MANN: The DC-3 was born in 1935. At first, a few hundred of them were sold to commercial airlines but more than 10,000 were built for the Allies in World War II. From Burma to the Berlin Airlift, the DC-3, known as the C-47, the Skytrain, the Dakota and even the `Gooney Bird moved soldiers and supplies across the globe. But Gooney? As Gooney as gold or greenbacks. The DC-3 carried 21 paying passengers, more than ever before, and enough to make commercial air travel profitable for the first time. Thousands were suddenly available as inexpensive war surplus. There were lots of trained pilots and lots of spare part and the planes were sturdy. Originally designed eight decades ago, there are DC-3s still in the sky today.
The reason is in the sky. Today's jetliners fly so high the cabins have to be pressurized for the people inside. The DC-3 flies relatively low - it isn't pressurized. So the aircraft doesn't have to endure the stresses of being squeezed and stretched every time it goes up and down. The metal doesn't fatigue as fast. So, replace the worn parts as they wear, and the plane itself can keep flying and flying and flying.
VAN DER LINDEN: It's almost unbreakable.
MANN: Almost unbreakable.
VAN DER LINDEN: If you crash one you'll break it, but quite a few of them took some very, very hard landings and were fine.
MANN: And it can land just about anywhere. Have a look at those big, bouncy tires. They don't really need a runway. So it can stop pretty darn fast - you don't need a particularly long patch of land. High tech is terrific but this tough old bird can take you just about anywhere you want to go. At the Smithsonian, the DC-3 isn't really the star exhibit. Not just a short walk from the Wright Brothers plane that gave birth to manned flight or the spacecraft that pushed flight beyond the confines of the planet. But it does represent is the innovation that defined an era, when passenger flight, the aviation most of us know best, really took off.
(END VIDEOCLIP)
FOSTER: Well, coming up, the Europeans' take their right to be forgotten on the internet. But I will tell you how many requests Google has received to remove links after the break.
(COMMERCIAL BREAK)
FOSTER: Now Europeans are trying to edit out their pasts on Google - by the thousands. Google says it's received more than 40,000 requests from people who want links taken down since it released an application on Friday. It follows a ruling by Europe top court that citizens do have the right to be forgotten.
Meanwhile in Asia, China is hoping its citizens will forget the bloody Tiananmen Square crackdown. The watchdogs say Google access has been restricted in China ahead of the 25th anniversary of Tiananmen. The Chinese foreign ministry spokesman denies foul play.
(BEGIN VIDEOCLIP)
HONG LEI SAYING, CHINESE FOREIGN MINISTRY, VIA TRANSLATOR: I don't understand the details of the situation but I want to point that the Chinese government manages the internet in accordance with the law.
(END VIDEOCLIP)
FOSTER: Millions of users have not been able to access the search engine or features like Gmail and Calendar. The Tiananmen anniversary itself is on Wednesday. That is "Quest Means Business," thank you very much indeed for joining us. I'm Max Foster in London.
END
