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Quest Means Business
European Taxi Protests; Uber's Sign-Ups Surge; EU Commissioner Supports Ride Service Apps; Uber's Defense; Blatter Backlash, FIFA Under Fire; Global Growth Forecast Cut; Mexican Tax Hurts Growth; Reforms in Mexico
Aired June 11, 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)
MAGGIE LAKE, HOST: A sudden end to the winning streak on Wall Street. The Dow is off by triple digits. It's the 11th of June.
Gridlock in Europe's capitals. Europe's digital commissioner tells us these taxi drivers need to adapt.
One day to go. This hour, FIFA's president will hold a press conference on the eve of the World Cup.
And a $16 billion flight cancellation. Emirates drops its order for 70 Airbus planes.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
Tonight, as fans prepare for the World Cup kickoff, football's top governing body finds itself in crisis. Sepp Blatter is under fire after
telling officials he will seek another term as FIFA president. And allegations of corruption in Qatar's bid for the 2022 World Cup are
distracting from the tournament, which is due to begin Thursday in Brazil.
We are looking at live pictures from Sao Paulo, where FIFA president Sepp Blatter is expected to speak any moment now. We will bring that to
you live.
First, though, tonight, a simple mobile app to summon a taxi has led to gridlock across Europe's major cities. The taxi industry has staged its
biggest-ever protest against Uber, claiming it's an all-out assault on the profession.
In London, the home of the famous Black Cab, drivers tooted their horns within earshot of the prime minister in Downing Street, and turned
Trafalgar Square into a parking lot. In Paris, there was shouting and shoving at Orly Airport as drivers made their feelings known. And in
Berlin, with hazard lights flashing, drivers slowed the German capital to a crawl.
Well, Jim Boulden has more on how London cabbies hit the brakes to make their feelings known.
(BEGIN VIDEOTAPE)
(HORNS HONKING)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: All of this over an app. London cabbies staged a one-hour protest here in central London,
basically bringing traffic to a halt. The reason, of course, is London cabs say that anybody who uses the Uber service is taking business away
from them.
They say that this app called Uber makes your iPhone a metered taxi service, and they should be regulated. They should have to follow the same
rules as the Black Cab companies have to follow. Now, we asked some taxi drivers why they decided they had to take this step to take a protest.
UNIDENTIFIED MALE: I've spent three years learning the knowledge, my way around London to provide a good service for Londoners, where apps don't
do that. You just -- anyone can become a driver.
UNIDENTIFIED MALE: Licensing Uber, which is an illegal act, because they've given their drivers a meter. Only by law in this country, licensed
taxis, hackney cabbie drivers, we're the only ones allowed to have meters. That's what makes us a taxi.
UNIDENTIFIED MALE: Well, I just want people to realize what's going on really, because I don't think they knew before. So, yes, hopefully
that's the idea. So, hopefully, it'll bring people's attention to what's going on.
BOULDEN: Now, the protests weren't just here in London. There were also protests scheduled by taxi drivers in places like Berlin, Milan, and
Paris. Uber has already been effectively outlawed in Brussels by a court.
Here in London, the Transport for London has said because of this uprising by taxi drivers, they will ask the high court, a judge, to decide
once and for all, is Uber on your iPhone a metered taxi service or can it operate the way Uber would like to see it operate, which they say, of
course, brings down the cost of traveling.
Jim Boulden, CNN, London.
(HORN HONKS)
(END VIDEOTAPE)
LAKE: Well, the saying goes, there's no such thing as bad publicity. Well, if the protesters hope to garner public sympathy among Londoners,
they failed. Uber says its sign-up numbers were up 850 percent compared to last week, and it chose today to launch a service allowing traditional
black taxis to pick up Uber passengers.
Well, Uber and apps like it have a friend in the EU's digital commissioner. A little earlier, Neelie Kroes, who's also the European
Commission's vice president, told me that this debate is about the wider sharing economy.
(BEGIN VIDEOTAPE)
NEELIE KROES, VICE PRESIDENT, EUROPEAN COMMISSION: A change in our society is happening. It's not only talking about cabs, it's talking about
booking your flights, it's booking your hotels. So, all the devices are giving new opportunities for the customer.
And I'm absolutely aware that for the decent cab drivers, for example, in London, it is tough, for they have done a great job in doing their
education and sometimes that took a couple of years. They are investing their money. But still, we have to take into account that our society is
now a digital society, with all the opportunities for everyone.
LAKE: So, what can be done, or what does the government need to do to ease this transition?
KROES: Well, anyhow, give opportunities for those who also are willing and able to take advantage of those new technologies. And quite a
couple of cab drivers are doing so. So far, the apps, life can be much easier for the two parties. So, it can be a win-win situation.
But then you have to take into account that it can't be done like it was yesterday, but you have take your new business model.
LAKE: That's right. And you said in a blog that you wrote about it today that we can't live in a cave. These apps are here, and they're not
going to change.
You also wrote something which I thought was very interesting, saying, "We also need services that are designed around consumers. The old way of
creating services and regulations around producers doesn't work anymore." What do you mean by that?
KROES: Well, the consumer is the main party in our economy, and the consumer wants a choice and wants a diversity. So, sometimes he or she is
preferring to have an easy one, and sometimes a more difficult challenge but with more aspects. So, the consumer is and should be the king at the
end of the day.
But we also should take into account that we want decent partners in our economy, and just giving opportunities to them, too.
(END VIDEOTAPE)
LAKE: Well, CNN Money's Laurie Segall has been speaking to Uber's CEO, and she joins me now. Laurie, this is a really interesting time for
them, isn't it? Because they've set out to be a disruptor. But it's not clear that they fully comprehended the sort of strength of these
traditional forces that are lining up against them.
LAURIE SEGAL, CNN MONEY TECH CORRESPONDENT: Well, I certainly think they're learning now, right? And you get the idea that they are, actually.
I sat down with Travis Kalanick, he's the CEO of Uber, and I asked him about some of these challenges, both here in New York City and also abroad.
Listen to what he said.
(BEGIN VIDEOTAPE)
TRAVIS KALANICK, CEO, UBER: Well, it's really common when we go into a city or when we really succeed in a city that the incumbents, the taxi
industry, are often trying to protect a monopoly that has been granted them by local officials. So, they're trying to slow down competition, or at
least they're getting pressure from the taxi industry to do that.
SEGALL: You have said that you guys are almost launching a political campaign.
KALANICK: Well, look. We really started out as -- you see with a lot of start-ups who are a bunch of techie kids sort of trying to make
something really interesting happen. But as it starts to succeed, we see pressure from the incumbent industries trying to get government to do
things they otherwise wouldn't do.
We have to tell our story and persuade politicians and city officials about why our story's important, why drivers are making better incomes and
we're creating a whole bunch of jobs.
(END VIDEOTAPE)
SEGALL: What Travis will tell you is that they're adding 20,000 jobs a month, they're doubling revenue every six months. And what he said that
was interesting was, he said, hey, we don't look at taxi cabs as competition -- which I think you'll look around right now and it doesn't
exactly seem to be the case.
But this is what happens in these disruptive industries. When the technology's there and things are going to change, and then you have all
this controversy.
LAKE: And it's interesting, because they do have some powerful allies. We heard the digital commissioner sort of siding and saying,
listen, the consumer is king. They were in town announcing a deal with AmEx, so they've got big corporate partners lining up.
Do you feel that they are mature enough as a company, as leadership -- because I know you met them very early on in the day -- to be able to
navigate this very sort of tricky environment?
SEGALL: This is the question when start-ups go from scrappy little start-ups to these massive companies. This company has a valuation that it
makes it worth more than Hertz and Mattel. But when you look at it, you think, but hey, these have been industries that are well established, and
this one is four years old.
So, a lot of times, these guys learn the hard way. A lot of times, they have to grow up very quickly. I met Travis years ago, he was wearing
cowboy boots and a cowboy hat. He's got a suit on now, and he's got more white hair than ever.
LAKE: Right.
SEGALL: But you get the idea that they've got to bring in the grown- ups a bit.
LAKE: They do. And I know that -- and sometimes deal with some tough questions. And I know during your interview he got a little frustrated it
because you were asking him some pointed, tough questions, and this is sort of part of the growing pains of a company as they progress.
Interestingly -- let's go back to that stack, because it is sort of astounding -- they raised all this money, I don't know if they talked about
explicitly with you what they plan to do with it, but they seem like they are exploding internationally --
SEGALL: Yes.
LAKE: Really growing the cities they're available in. And today in London, they saw 80 -- 850 percent increase in sign-ups, even with all this
controversy.
SEGALL: I'm sure this is probably an opportunity for them, if you look at it. And what Travis has said to me is, really, the people are
going to win, because the people that are using Uber, they're very social, they use the -- they're using their smartphones.
And I would say that Travis thinks that this is probably -- and he hasn't addressed this specifically -- but this is a roadblock for him, but
this isn't the end.
LAKE: Right.
SEGALL: They're going to go after Europe, they're going to go after many different markets. They've got all this new funding now. And what I
said -- and I was trying to ask him, tell me a little bit more about this valuation, defend this valuation.
And he said, "I don't have to defend this. With the growth and numbers, we are exploding. The people like us. It's going to be going to
the politicians and the local officials and these entrenched businesses and making change.
LAKE: And Neelie Kroes is right, the consumer is king, and they're voting with their money, and they're making this a choice --
SEGALL: Yes.
LAKE: -- that's very viable, even with all the controversy and even if they're sympathetic to taxis. We should note, not only taxis in danger,
they're also delivering goods, so we're going to have to watch that space.
SEGALL: Absolutely.
LAKE: All right, Laurie, thank you so much for bringing that to us.
SEGALL: Thank you.
LAKE: Well, some news just into CNN. FIFA president Sepp Blatter has just told the FIFA congress he wants to stand for another term as
president. We'll have more on the story after the break.
(COMMERCIAL BREAK)
LAKE: FIFA president Sepp Blatter just finished speaking in Sao Paulo. He says he will stand for another term as FIFA president, reversing
what he said in 2011. European football officials are calling on Blatter to leave when his term expires.
Unlike a public company, FIFA doesn't have any shareholders. FIFA's presidents are elected by representatives from 209 member associations.
Those associations are overseen by six regional confederations. Most are in Blatter's corner.
However, officials from the European confederation UEFA say FIFA has gained an ugly reputation since Blatter took over 16 years ago.
Stefan Szymanski is a professor of sports management at the University of Michigan, and he joins me now from Ann Arbor. Thank you so much for
being with us. Can you give me your reaction to news that he'll stand as a fifth term. Is this a wise idea for the sport of football?
STEFAN SZYMANSKI, AUTHOR, "SOCCERNOMICS": Well, I don't think it's any big surprise. I think like may aging politicians, he's finding it hard
to stand down because he knows that as soon as he does so, his legacy will unravel.
FIFA is mired in controversy now about the 2022 Qatar World Cup, and if he were to resign, it's quite possible that the whole process would
reopen and there'd be new bidding for the competition.
LAKE: Right. What did -- how damaging is this to the sport? Or should be making that leap? Clearly it's good news headlines, but is this
a blow to football?
SZYMANSKI: Well, I think one thing we have to remember is, Blatter has an awful lot of support within football, as you mentioned, and partly
this is really a north-south divide. The wealthy nations from Europe and North America tend to be opposed to Blatter, and the poorer nations in
Africa and Asia tend to support him.
And that's partly because the traditional powers in Europe and North America have seen resources redistributed towards Africa and Asia. This is
associated with accusations of corruption, but it's also something that in Africa in Asia is seen as being progressive.
LAKE: Yes. Here's the bottom line: he has another constituency, and that are sponsors, and they've already -- some of them came out and said
they're incredibly uncomfortable with this corruption scandal that's swirling. The fact that we're talking about this on the eve of the World
Cup when our attention should be on the matches also speaks volumes.
So surely, no matter whether you're a supporter or you believe in the redistribution of power, this has got to be concerning.
SZYMANSKI: Oh, I think this is possibly the game-changer. If the sponsors start to pull out, then they are the source of the revenue which
Blatter redistributes to the associations who support him, and so, there's a danger that the whole house of cards starts to fall down.
(AUDIO GAP)
SZYMANSKI: -- does really want to put out. But bear in mind, for these sponsors, there's no other event like the World Cup for reaching a
global audience.
LAKE: Yes, that's absolutely true. Is there a way, if he is going to stay in power, is there a way that FIFA can somehow get in front of this
issue now and address the problem? What do they need to do?
SZYMANSKI: I don't think so. I think this is going to drag on and on. The core of this problem is 2022 and Qatar, which is deeply unpopular
with the powerful northern federations, who want a rebidding process.
We haven't even got yet to a discussion of Russia in 2018, which is also -- once people start to think that that's where the next World Cup is
going to be held, that's going to be a political hot potato. I think the problems are only going to deepen, and I think that's true regardless of
whether Blatter stays or goes.
LAKE: Stefan Szymanski from the University of Michigan, thank you so much for joining us tonight.
Well, Amanda Davies is live in Rio, and she has been watching events unfold. Amanda, prior -- pretty dire prediction there, saying this mess is
not going to go away anytime soon. What's the perspective from where you are?
AMANDA DAVIES, CNN SPORTS CORRESPONDENT: Well, Maggie, Sepp Blatter, that is his stage, the FIFA congress, and he held that stage for every
possible second today, he kept us all holding on right to his closing words of what had been a very long day and a very long agenda in Sao Paulo.
We suspected he was going to announce he was standing for another term. He mentioned it to UEFA, the European football federation,
yesterday. And then, when it was voted that there was going to be no imposing of age limits or term limits for FIFA executives, really that left
us to draw our own conclusions.
And Blatter confirmed right in the closing time he is ready to stand again. As he put it, "My mission is not finished. Congress, it is your
decision." That, I think, a very veiled statement to UEFA, who basically yesterday said we will not support you, you have done too much damage to
our football game, our federation.
And as your guest there was alluding to, this is a business, a business for all the independent federations around the world. They are
fighting for their own deals and their own brands to sign up and invest in their game.
And the feeling in Europe is that Sepp Blatter has done too much to damage that. But he does have a lot of other supporters around the world,
and he doesn't seem to be going anywhere anytime soon.
The question now is who, if anybody, will stand against him. There was a French diplomat, Jerome Champagne, who actually served under Blatter
at FIFA as the head of international relations for a number of years. He said earlier this year that he was going to stand, but not against Sepp
Blatter, so it'll be interesting to see what he has to say.
There's also been talk that the UEFA president, the head of European football, Michel Platini, is thinking about it. He's been thinking about
it for a very long time, and I have to say, when I put it to him in March, will you stand, have you made your decision? He genuinely said, "I haven't
decided yet."
There's talk about another number of European candidates, but will anybody else from any of the other federations stand around the world? We
shall wait and see. The election, of course, not until next year, 2015.
LAKE: Amanda, if -- you told me a few weeks ago that you'd be standing in Brazil tonight and we would be talking. I would have thought
for sure it would have been about the World Cup. What's the feeling there on the ground that all this controversy continues surrounding Sepp Blatter
and FIFA and the corruption, continues to make the headlines when we're about to start the World Cup?
DAVIES: There's a lot of sadness, Maggie, but it seems to be a growing trend with these big sporting events. You can see what they're
trying to do, taking these sporting events to different parts of the world, but they seem to be getting engulfed in more and more controversy.
We had Sochi all the way up to the run-up, we weren't talking about the sporting events, the same here. There's then Russia for the next World
Cup, then Qatar 2022.
But you have to say here in Brazil, actually, the Brazilian people aren't that fussed about Sepp Blatter and what's going on with FIFA.
They're more concerned about the World Cup and the impact it's having on their lives.
The protests are still going on, the strikes, there's a subway strike meeting in Sao Paulo going on in the next hour or so to decide whether or
not they will strike again on Thursday on the first day of this competition.
There's a lot of ill feeling towards the government here and the football authorities that the money isn't being spent in the right
direction. There's lots of fans from around the world here to enjoy the part, the party that you would expect at the Brazilian World Cup, the home
of football Samba Stars and Canarinhos. But the locals as yet haven't bought into that.
LAKE: Absolutely. Controversy no matter where you turn. We'll see if at some point the game overtakes all that. Amanda, thank you so much.
Well, the World Bank says Mexico has already scored an own goal against its economy. The Mexican finance minister joins me to discuss a
controversial sales tax, among other reforms, after the break.
(COMMERCIAL BREAK)
LAKE: The World Bank has cut its forecast for global growth. It now expects the global economy to expand 2.8 percent year, down on its
prediction at the start of the year. It says activity is weak in Africa and Latin America, and so far this year, overall growth has been stymied by
tough weather in the United States and the crisis in Ukraine.
In Mexico, the bank says that a sharp rise in sales tax in some states along the US border is hurting growth. The policy seems to be driving
consumers out of Mexico and over to the US to make their purchases.
Last week, Mexico's typically conservative central bank unexpectedly cut interest rates to record lows in an effort to boost growth. The move
sent the Mexican stock market to its highest level of the year.
Well, Luiz Videgaray is the Mexican finance minister. He's overseen a series of energy, tax, and education reforms in his country and joins me
here on set to tell us what is next for Mexico. Thank you so much for being with us tonight.
LUIZ VIDEGARAY, MEXICAN FINANCE MINISTER: Thank you, Maggie.
LAKE: This has been sort of a tough economy in the beginning of the year. A lot of disappointment on many fronts. Talk to me about where the
Mexican economy is, and specifically the impact this sales tax has had.
VIDEGARAY: Well, first of all, Mexico exports 80 percent of our exports to the US, so whatever happens here has a strong effect on the
Mexican economy. And certainly the winter didn't help for growth in the early part of the year.
Mexico's undergoing a series of very important structural reforms. As you said, energy, telecommunications, anti-trust, financial markets reform,
and also a tax reform.
The purpose of the tax reform is to reduce our dependence on oil revenues. Thirty-four percent of government revenues are related to oil
and we need to improve our revenues from other sources, and that's where the tax reform happens.
In particular, the taxes are imposed on consumption. Our taxes that are imposed on sugary drinks, high-calorie foods, and carbon -- and a
carbon tax. So these are things that from a policy perspective, other than taxes, we want people to consume less.
Certainly we have a basic obesity problem in Mexico. The death rate out of diabetes is six times higher in Mexico than the OECD average. So,
we want to use all our policy tools in order to have less consumption of sugary drinks and high-calorie foods.
LAKE: Sometimes when you do the right thing, it can be tough medicine, when you make these very difficult structural reforms, and
investors give you a lot of credit for that. Has the government done enough, though, to offset that?
So, if you're trying to shift where your revenue comes from, but you're getting more in, what about infrastructure projects? Some of the
spending that investors did expect to seep back into the economy hasn't really had an impact yet. Why not?
VIDEGARAY: Our overall expenditure has grown. In infrastructure projects, 47 percent in the first four months of the year, compared to last
year. So, infrastructure spending is happening. Of course, you cannot build a road or a bridge in two weeks or in two months. It takes time.
LAKE: Even shovel-ready is not immediate, right?
VIDEGARAY: Exactly.
LAKE: We've learned that here in the US.
VIDEGARAY: So, it's going to take some time. But the good news is that the infrastructure is already happening, and the expenditure is
happening as a way to give support to the economy in the times that it's obviously needed. So, the effects of higher spending, which is already
happening, will be clearly seen in the rest of the year and for the years to come.
But the key to increased growth in Mexico are really structural reforms, to remove the things that are holding Mexico back. Our growth
rate over the last 30 years has only been 2.3 percent. That's very low for emerging economies.
So, this year, we're providing support through increase public spending. The Bank of Mexico has just cut the rates. But the key for
Mexican growth is structural reforms, and that's very good news, because Mexico is one of the few countries in the world that is undertaking true
reforms.
LAKE: And one of the keys to this, which has been very difficult, is pushing through reform of the energy sector. When is that law that's going
to finally enable that going to pass?
VIDEGARAY: Well, the Senate started yesterday the process -- the formal process of discussing the law, and we expect that to happen,
according what the leadership in the Senate has said, we expect that to happen within the next few weeks.
We are very close. I think that the two parties that create the coalition for the energy reform are very much in agreement with the
substance. Some differences still remain, but I'm very optimistic that we'll have secondary laws in energy very soon.
And we need to have the laws soon in order to attract capital, to attract investment, create jobs, and lower the cost of energy. In Mexico,
say the city of Monterrey, which is very close to the US, electricity is 50 percent more costly than in Texas. We need to correct that, and the way to
do it is through energy reform.
LAKE: Well, it sounds like, according to your projections, it's going to be a much better second half to 2014, and we would love for you to come
back and let us know how that's going. Thank you very much for joining us tonight.
VIDEGARAY: Thank you, Maggie, such a pleasure.
LAKE: Wonderful to see you here in person.
VIDEGARAY: Thank you, such a pleasure.
LAKE: Well, this time tomorrow on QUEST MEANS BUSINESS, Richard will be sitting down with the World Bank president Jim Yong Kim. You'll hear
about his outlook for the economy and how he hopes to tackle global poverty. Join us at the usual time on Thursday for that.
Apple, Starbucks, and Fiat might be in very different industries, but they're all under scrutiny by the European Commission. It's all about
paying the right amount of tax. We'll hear from all sides next.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. These are the top news headlines we are following this hour. Sunni militants in Iraq have gained
almost complete control of the Northern city of Tikrit as they pressed ahead with a lightning offensive. Police officials and witnesses reported
heavy fighting in the city. It comes a day after militants captured Mosul, the country's second largest city.
FIFA president Sepp Blatter has announced he will stand for a fifth term as president of football's governing body. The announcement comes on
the eve of the World's Cup in Brazil. Blatter told FIFA's congress his mission is not finished.
Metro workers in Sao Paulo, Brazil will vote later on Wednesday whether they want to resume their strike on Thursday. Brazil and Croatia
play the first match of the World Cup in the city on Thursday. British foreign secretary William Hague and U.N. special envoy Angelina Jolie have
joined forces to help fight sexual violence in combat. They are taking part in a global summit now underway in London. Angelina Jolie told CNN it
is quote, "pitiful that more is not being done to convict those who commit these crimes."
The second most powerful Republican in the U.S. House Eric Cantor is expected to step down as majority leader at the end of July. You are
looking at live pictures of an event that is about to take place. A press conference is expected to start shortly on Tuesday. Cantor lost in
Virginia's - in the Virginia -- state primary to a little-known Tea Party challenger, David Brat. The election has been described as a political
earthquake.
Three household brands are tonight at the center of a tax avoidance probe by the European Commission. Officials are concerned that Apple,
Starbucks and Fiat are getting special deals from some E.U. countries. For example, Apple paid as little as 2 percent on profits attributed to its
Irish subsidiaries even though Ireland's corporate tax rate is 12 and 1/2 percent. CEO Tim Cook was hauled before the U.S. Senate in a separate
inquiry on the matter last year. Starbucks' executives face similar questions from the U.K. Parliament. The Irish Finance Ministry denies it
has given Apple any favorable treatment, and all the companies told CNN they pay all the tax they owe to the last euros. Starbucks says it
complied with all the revelant (ph) - relevant - tax rules and guidelines. Apple says, "Since the iPhone launched in 2007, our taxes in Ireland have
increased ten-fold. Success and growth come from the hard work of our Irish employees, not from any special tax deal with the Irish government.
And Fiat declined to comment further.
Well, CNNMoney's assistant managing editor Paul La Monica joins me now. Paul, there has been such a brouhaha over corporate taxes basically
because all of these governments want more money in their coffers. Is it clear that these companies are doing anything wrong?
PAUL LA MONICA: CNNMONEY ASSISTANT MANAGING EDITOR: It isn't really clear. I think what does seem pretty evident is that even if these
companies are complying with the letter of the law and the spirit of the law, the laws may not necessarily be all that fair and you can understand
why there is this populous backlash and outrage against many of these companies which are really successful, potentially avoiding taxes.
LAKE: And I think part of this, the backdrop, is very important. This happening at a time when corporate profits are at record levels, and
some of these companies are sitting on billions in cash while at the same time the average person is still struggling. That's got to be playing into
this as well.
LA MONICA: Yes, without question. And you know Fiat is a company that has had a really amazing turnaround. Apple has nearly $160 billion in
cash so it's not exactly hurting financially. And Starbucks - I think what irks a lot of people with Starbucks is Howard Schultz is known to be a very
progressive leader, it's a very socially responsible company. So I think the argument for many people would be, well, if you want to really do that,
then pay what you owe in terms of your taxes.
LAKE: Right.
LA MONICA: Again, it's not clear whether or not they really owe more or not if they're dodging taxes so to speak. I think people are upset
about the way the laws are constructed.
LAKE: That's true. And, you know, these companies - I mean they have a fiduciary responsibility to investors if they're wasting money when they
can - I mean, if any of us found out that we could get a better tax deal some place, we would all take it too. I mean, that is just the fact of
taxes. None of want -
LA MONICA: Definitely.
LAKE: -- to pay a higher rate just out of the goodness of our heart. And there is also an issue about sort of competitiveness within the E.U. I
suppose. I mean, we are no stranger here the way the states work. If you want to attract business to your state, you offer companies deals and they
come there and presumably the economic benefit overrides that discount you've given them. It's common practice, presumably as this is happening
in Europe. But they seem very uncomfortable with it.
LA MONICA: Definitely. I mean, you look at the, you know, the kerfuffle regarding the Phizer-proposed acquisition, you know, that didn't
go through with, you know, how that is a company that wanted to maybe move into the U.K. for, you know, just for tax purposes, didn't happen. You
have AstraZeneca obviously fighting against that, and you know, people in you know Walgreen is another company that people speculate may want to
acquire the remainder of a European subsidiary. It already owns Alliance Boots, you know. Whether that's a deal that would just set it up for
Walgreen to be able to pay lower taxes even though it's an Illinois-based company to move to U.K. So, clearly, there is this element of countries
trying to attract big well, known brand-name companies with the lure of lower taxes.
LAKE: Do investors care about this, Paul - politicians clearly do? It's a good campaign issue. Do investors care about this discussion at
all?
LA MONICA: Not really. I don't get the sense that it moves the needle that much. I mean, if you look at a company like Apple, its shares
have really roared back to life because of dividends, stock buy-backs (inaudible) new products. You know, Starbucks is a phenomenally successful
company. If companies are found to have actually broken laws then investors will care, but absent that, this is just political theater.
LAKE: Absolutely right, Paul, great. Thank you so much for laying it out for us.
LA MONICA: Thank you.
LAKE: We appreciate it. Well, U.S. markets ended the day lower. The Dow ended down more than 100 points. The World Bank cut its global growth
forecast for the year to 2.8 percent, blaming the crisis in Ukraine and the harsh winter in the U.S. Bank of America shares fell following reports the
Department of Justice is seeking a $17 billion penalty from the bank. The proposed fine stems from the bank's role in the mortgage crisis.
European markets also fell off their multi-year highs on Wednesday. In Paris, shares of the French steel pipe maker Vallourec tumbled 11
percent. The company warned of a fall in profits after some major customers announced they would delay orders. And in the U.K., unemployment
fell to the lowest rate in five years. However, wage growth slowed sharply.
Well, shares in the German airline Lufthansa experienced their biggest drop since September 2001, falling 14 percent. The airline issued a
surprise profit warning saying earnings for the next two years will likely come in lower than expected. Lufthansa blamed pilot strikes and stiff
competition from Gulf airlines.
In Greece, the former finance minister is set to take over the country's central bank. The general council of the Bank of Greece
unanimously confirmed Yannis Stournaras to the post. German - Germany's finance minister says he's confident the transition will be a smooth one.
(BEGIN VIDEOCLIP)
Male, VIA TRANSLATOR: The change in the position of the finance minister does not mean a change in politics. I do not yet know the new
colleague, but will certainly do so in the near future. And I'm looking forward to it. And I am confident that I will continue the great
cooperation I had with Yannis Stournaras. But I am convinced there won't be any change in politics.
(END VIDEOCLIP)
LAKE: Three months after Malaysian Airlines flight 370 was lost, officials are trying to make sure an aircraft will never disappear again.
Richard speaks to the most powerful players in aviation next.
(COMMERCIAL BREAK)
LAKE: Time for today's "Business Traveller" update. The aviation world is united in its mission to stop a plane from ever going missing
again. Officials are now looking to private companies and high-tech underwater equipment to find MH 370. IATA, the trade organization for
airlines, is making recommendations for the future of aircraft tracking. Richard went to its annual meeting in Doha to find out more.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Three months after Malaysian Airlines flight 370
vanished, and no one can still quite believe what's happened. As the days and weeks passed without any trace of the wreckage, the question
everyone feared to voice has now begun to surface. In a day when an iPhone can be tracked in an instant, how could a triple 7 simply disappear without
trace?
TONY TYLER, CEO, IATA: I think everybody is first, extremely surprised and secondly, extremely worried that a large commercial airline
can disappear completely. And what are we now? Nearly three months later, we still don't know where it is, we haven't found it. I promise you the
industry wants to fix this.
QUEST: As tens of thousands of aircraft take to the skies every day, the Malaysian tragedy's raised the question when are planes visible to air
traffic control and when are we out alone in the skies? Planes are currently tracked using two radar systems. There's primary radar which
reflects radio signals and measures the approximate position of the plane. Then there's a secondary radar, relying on an aircraft transponder. It
feeds back additional information such as identity and altitude. Once an aircraft is 250 nautical miles from landfall, radar coverage fades. And
crews maintain contact using high-frequency radio. Under current regulations, planes only have to communicate once an hour or so. The rest
of the time, they fly over the earth's vast and remote oceans alone.
The Malaysian Airlines disaster was not the first time the industry's been made aware of this potential problem. In 2009, Air France, a 447,
crashed off the coast of Brazil. It took two years for the wreckage to be located. Air France made immediate changes through a satellite-based
system called ACOS.
ALEXANDRE DE JUNIAC, CEO, AIR FRANCE: We have an automatic tracking system which send messages with some datas of the flight that has -- of the
aircraft every ten minutes. If the aircraft deviates from its initial flight plan, we send messages every minute and on our dispatch control
center in Paris, there is a red light for this aircraft saying that there's something which is wrong. So the tracking is much more accurate and we
know minute-by-minute where the aircraft is. Many (ph) lined up the equipment - the ACOS equipment - the satellite connection on board/both
(ph). So then it's a decision plus some investment - but not huge, not huge investment - to increase the frequency of the messages.
QUEST: It all raises the question, if the satellite technology's available, what's prevent more airlines from employing it?
JOHN LEAHY, COO, AIRBUS: To some degree, it's cost, but it's a little bit like seatbelts in a car. If you said a seatbelt is an option, you can
pay an extra $100 to have seatbelts, maybe today would do it. But 20, 30 years ago, nobody would've put seatbelts in cars. You almost have to
legislate something like this. But if everybody did it, especially for over-water flights, once it's legislated, it'll be fine.
QUEST: IATA's put together a task force which will draw up a list of recommendations for the industry by September.
KEVEN HIATT, TASK FORCE LEADER, IATA: There are some carriers that are very sophisticated right now that have the equipment that may only need
a software change. There are others that will have to start from ground zero. It's not going to be an easy task, but we've put together some of
the best experts in the world. All of the vendors - and there's 30 of them by the way that we have vetted - will get their chance to tell us exactly
what they're product can do and how they can make that happen.
QUEST: Inmarsat is one of those companies. It's offering free tracking every 15 minutes via its satellite system. Then there's Iridium
which is set to launch next year that uses satellites in low earth orbit - meaning lower-powered radios can be used. Installing the systems can cost
up to $10,000 a plane, and then there's the cost of sending the data to the satellite which could be prohibitively expensive to airlines already
operating on razor-thin margins. The changes will bring long-term economic benefits. There'd be more aircraft in the skies.
LEAHY: The technology is there and we as manufacturers - I'm sure Boeing would have the same feeling - are frustrated that the airplane was
capable of transmitting all sorts of information about itself but it didn't have that capability installed. Why don't just install them?
QUEST: The challenge remains getting everyone on the same page. There is no one thing upon which all that IATA can agree. This is
something that has to be done. The tragedy of MH370 is still that it still remains a mystery. The future hope is it never happens again.
(END VIDEOCLIP)
LAKE: Time now for a check of our global weather. Jenny Harrison is at the CNN International Weather Center for us. And, oh, I can tell from
the picture behind you, Jenny, it is all about the World Cup now. What's the forecast looking like?
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: It is indeed, dear (ph). I should - it's this graphic -- I feel as if I should move away
every time I set it in motion. I'm going to step back because it's like he's out to kick me in the face. Let me just step out of the way. Look as
he kicks that ball and gets the start. You're right, of course, it's all about the countdown just hours from now - for, what, this time tomorrow
it'll be underway. So, Sao Paulo - what have the weather conditions got in store? Because of course we've been talking about the varying conditions
in Brazil for all of these matches over the next month and the fact that we've got some very humid conditions and also some - at some of the
locations - we've got some very high daytime temperatures.
Well, in actual fact, it should be a pretty good weather day when it comes to the first match to kick off the tournament. Brazil, of course,
the host nation against Croatia - 21 degrees Celsius - that taking place 20 hundred hours GMT which is 5 p.m. local time. So, it should be light wind,
not bad humidity and as I say a pretty good temperature. So, a nice way to start the tournament off. Having said that, do be prepared for quite a few
showers from time to time even in the next couple of days you can see here, particularly these coastal areas. So, some locations again see quite a bit
of rain this time of year, so we will have to see how that actually pans out over the next few days.
Now, talking about the heat in Brazil and the fact that for the first match it shouldn't be too bad at all, it's certainly a lot better than what
people have been dealing with in Europe. My goodness, if we were to have some of these matches of the tournament having been held in Europe this
time of year, we could potentially have temperatures well over 30 degrees Celsius. People in France, people in Italy - all the way throughout the
Med really and across central eastern areas really trying to keep themselves cool. These are the high temperatures reported on Wednesday -
34 Celsius in Vienna, look, against a high - an average high - of 23 degrees. So, much warmer than average, but already beginning to cool down
across northern mainland Europe as a front sweeps through, ushering in some cooler air. But what you can see on the satellite - again, for the last
several days - is these little areas that pop up here perhaps in the afternoon and evening hours.
And we see those thunderstorms really kicking off because of the heat of the day. And, again, there's been some pretty good reports in the last
24 hours - 5 centimeter hail across into Germany, 46 millimeters of rain as well further to the west in Germany And this is what we've got - this
ridge of high pressure, but it's beginning to give way already. And so as it slips southwards, the systems out across the West - they're actually
able to make some headway across Northern and Central Europe. So, really cooling things back down, but not cold at all. Just back down to the
average of what we should have for this time of year.
And right now let's have a look for the time - it's 19 degrees in Berlin, it's still 25 in Vienna, the same in Rome. And feeling pretty good
in Paris and London - 19 Celsius in London right now as well. This showing you the temperatures, the trend, over the next 48 hours. You can see the
warm colors to the south. So that just showing you where the above-average temperatures will be, whereas elsewhere things really are back down to the
average. So, staying hot in the South, you can see Budapest still in the high 20s - the average is about the mid-20s this time of year but cooling
of in the North, so Berlin finally back down to a average of 22 or 21 degrees. There is, as I say, plenty of rain in the forecast, but really in
the form of those scattered afternoon and evening sort of thundery showers. And you can see all the way along the line here these coastal areas
particularly along the Mediterranean. Mostly dry across Northern Europe. Once that front goes through, it'll be cooler, fresher, we shouldn't have
any more in the way of rain and then when it comes to temperatures on Thursday, 25 in Paris and a warm 31 in Rome. A bit warmer in Madrid at 33.
Maggie.
LAKE: Fantastic. Thank you so much, Jenny. Well, we have some out- of-the world video to show you. This is the first Vine from space. The six second looping video was shop by Astronaut Reid Wiseman aboard the
International Space Station. The time-lapse video shows the space station's 92-minute orbit around the earth. Because the station flew
parallel to the terminator line, separating day from night on the planet's surface, the sun never appears to set. Pretty cool stuff. Well, it seems
Japan is becoming obsessed with mascots. After the break, why these furry friends are fast becoming businesses worth mega bucks.
(COMMERCIAL BREAK)
LAKE: Celebrity status is taking on a whole new meaning in Japan. Its fastest-rising star is not an actor or a singer, but a giant talking
pear. Funashi is the first of his kind to make it big in the world of Japanese mascots. He shot to fame on YouTube, and according to some
estimates, now makes millions of dollars a year. Will Ripley got to meet him.
(BEGIN VIDEOCLIP)
WILL RIPLEY, TOKYO-BASED CNN CORRESPONDENT: Like they're ready for a rock concert, this crowd is pumped. One of Japan's biggest stars is about
to take the stage.
(CHEERS)
RIPLEY: Funashi is electrifying the most- adult crowds at a Tokyo festival featuring famous Japanese mascots.
Female, TRANSLATED BY RIPLEY: "I love him," says this woman. While many mascots are calm and quiet, this juicy pear is wacky and wild, one of
the only mascots who actually talks. His success is self-made. Funashi tried out and was rejected as the official mascot of his home town. So
unlike other famous mascots, like the iconic Kumamon, Funashi did it alone at his own expense. No corporate or government sponsor.
Female, TRANSLATED BY RIPLEY: "I see him working hard to promote his home town. I want to help him," says this woman who estimates she spent $1,000
U.S. dollars on Funashi merchandise - handbags, hats, huggable toys, hefty sales. Mascots are money-making machines credited with bringing in
billions of U.S. dollars in Japan alone. The most popular are being tested internationally. Today's mascot sensation could be tomorrow's global
brand. Think Godzilla, Pokemon, Hello Kitty and just maybe this dancing pear.
RIPLEY: Funashi, Funashi, I'm with CNN - can we talk to you? A star so big, his people protect him from the press. We were told we might, and
I emphasize might, be able to get an interview with Funashi. We've been trying all day, don't know if it's going to work out. After hours of
waiting -
RIPLEY: Ow! Ow!
RIPLEY: -- and some fun with other mascots --
RIPLEY: Thank you so much. (SPEAKS IN JAPANESE).
RIPLEY: -- Funashi finally grants our request. Thank you for talking to us (SPEAKS IN JAPANESE).
FUNASHI, JAPANESE MASCOT: What!?
RIPLEY: And like a true pro, he always stays in character. Do you do it for the fame, for the money, why do you do this?
FUNASHI, TRANSLATED BY RIPLEY: "I do this because it makes everyone happy," he says.
RIPLEY: Funashi is winning hearts and opening wallets all over Japan and perhaps someday the world. Will Ripley, CNN, Tokyo.
(END VIDEOCLIP)
LAKE: Strangely irresistible. Still to come on "Quest Means Business," this heart is no symbol of love. I'll tell you how it shut down
a Twitter app. Next.
(COMMERCIAL BREAK)
LAKE: All right, we want to take you live to Sao Paulo where the FIFA conference is and Sepp Blatter is attending and about to speak. Let's
listen in.
END
