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Quest Means Business
Reforms Needed for Greece; Red Lines in Greek Debt Negotiations; Moscovici Says Spirit of Talks Changed; Greek Worries Slam European Markets; US Markets Close Lower; Tech Industry Mourns David Goldberg; Decision on HSBC HQ Later This Year; Prolonged Uncertainty Danger; UK Elections; Cisco CEO to Step Down; HP Suit Charges Autonomy With Fraud; Strong Profit, Revenue for Disney
Aired May 05, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Considering they make beer, they're looking extremely serious at the New York Stock Exchange. Maybe the fact that the
market is down more than 140 points that's causing it. But let's see if there's a laugh. Come on! He's had a couple before he rang the bell.
It's a close of business, it's Tuesday, it's the 5th of May.
Tonight, the spirit has changed. The EU's economic chief says there's progress in talks with Greece.
Twenty years at the top. Tonight, the chief exec of Cisco tells me it's the right time to step down. John Chambers on this program.
And it's a case of a heartbreaking loss. Sheryl Sandberg thanks the US president for his tribute to her late husband.
I'm Richard Quest. I mean business.
Good evening. Tonight, the EU's economics commissioner tells me Greece must implement reforms to bring back growth and create jobs. It's
all about change, reform, and moving forward.
Pierre Moscovici met with the Greek finance minister, Yanis Varoufakis in Brussels earlier. Greece is coming closer still to a funding crunch as
debt repayments to the IMF draw near. Mr. Varoufakis said progress has been made.
(BEGIN VIDEO CLIP)
YANIS VAROUFAKIS, GREEK FINANCE MINISTER: It is important that good progress has been made. It's solidified, and it yields very quick
successive moves in a direction of bridging the remaining part of the gap.
(END VIDEO CLIP)
QUEST: The European Commission slashed forecasts for Greek economy, citing political turmoil. It predicts meager growth of 0.5 percent for
Greece. The European Commission raised forecasts for the EU overall.
This is all about how to bridge the gap. How to get from one side to the other. How to make progress. In the case of the debt negotiations,
you have Greece the borrower on one side, and on the other side, you have the lenders, the EU, the ECB, and the IMF. How to get the two to make
progress.
Well, there has been some signs that they're trying to meet in the middle. Talks in February, the two promised to find common ground. Now,
to find common ground, red lines are emerging.
Greece does not want to compromise and cut back on its welfare spending. Syriza has promised to look after the Greek people. Pensions
and the like, all are red lines for the Greeks.
The IMF says that Greece must give way on pensions, the very thing they don't want to. EU negotiators are more interested in talking about
the overall deficit targets, the budget deficits. Germany's finance minister made it clear, when you're talking about red lines, he's not
willing to redraw the framework agreed earlier this year after the February election.
(BEGIN VIDEO CLIP)
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER (through translator): I am reading reports today that Greece is conducting urgent talks with all
its creditors or potential creditors. Liquidity in Greece appears to be getting tighter. I don't have figures at my disposal, so all scenarios are
possible. Within our possibilities, we will do everything we can to help Greece. But only within the framework we agreed on.
(END VIDEO CLIP)
QUEST: It's up to the people involved to actually make the changes if they're able. How can they do so with red lines on one side and red lines
on the other.
I asked the EU economics commissioner, Pierre Moscovici, if progress really had been made and what it will take to make a real difference.
(BEGIN VIDEOTAPE)
PIERRE MOSCOVICI, EU ECONOMICS COMMISSIONER: I think the spirit has changed, that the discussions are becoming more and more constructive, but
we are not yet at an agreement point. We need to go on with that. We've got little time for that because there is a question of liquidity, because
we reforms need to be done.
This morning, I also announced the forecast for Greece, only 0.5 percent of growth this year. And in the previous forecast, it was 2.5, and
before even 3 percent.
So, if the Greek people want to see growth and jobs -- and that's why the need -- absolutely. We need those reforms. So, we need an agreement,
and I urge the Greek authorities to move towards those reforms. We worked hard, we worked strongly on that.
[16:04:51] QUEST: Of course, the opposite point of view, Commissioner, is that dwindling growth number gives them reason for saying
they can't face any more austerity. There can't be any more cuts in pensions or welfare or anything like that, and there simply is too much
hardship to start with.
MOSCOVICI: Well, again, I don't want to enter into that kind of worst case, because it leads nowhere. What we need to do is work, work, work.
We need to negotiate. We need to negotiate with good faith.
We need to define together a set of reforms which is at the same time capable of satisfying some of the social objectives of the government, I
fully agree on that. But also economic reforms that are absolutely crucial for the Greek economy to recover, that's what I want.
If you got economic efficiency on the one hand and social fairness on the other hand, we'll all be satisfied. I don't want austerity for Greece,
but I think that there needs to be strong structural reforms and also a sound fiscal policy.
And again, let's get out of the rat race saying it's not my fault, it's the other one. Let's move together to a strong and constructive
negotiation.
QUEST: I look at the latest growth numbers, Commissioner, and they make interesting reading, because growth is back, but the question is, what
needs to be done now? And are you satisfied?
MOSCOVICI: We can never be satisfied when unemployment is over 10 percent the level of the eurozone and of the EU. And when some countries
like Spain, like Greece, are over the 20 percent of people who are unemployed.
So, what I said is that we've got now the economic spring in Europe. But I don't want only spring. I want four seasons, and I want four seasons
for four years and more. That's what we need to have more growth, more jobs. And this is why nobody must be satisfied with cyclical recovery.
We need to transform that into a structural recover, and that means structural reforms for our economy to be freer, for our economy to be more
competitive, more productive for industry to be stronger.
And this is why I encourage all the countries of Europe and the eurozone to go on, tend to accelerate those structural reforms.
(END VIDEOTAPE)
QUEST: Go on and accelerate those structural reforms, says Pierre Moscovici. European markets fell on Tuesday over renewed worries about
Greece. The US trade deficit soared in March. It suggests first quarter GDP may have contracted.
The DAX dropped 2.5 percent. And the DAX, of course, hit a record high last month. So, some sort of corrections can be expected. And the
CAC feel more than 2 percent, so very sharp falls. And the US markets --
(RINGS BELL)
QUEST: -- didn't fare much better. The Dow Jones Industrials is off. I get your pardon, it's over there. The Dow Jones Industrials -- forgive
me --
(LAUGHTER)
QUEST: -- is off 142 at the close, a loss of some 0.75 percent. The NASDAQ and the S&P were also lower.
The death of David Goldberg has taken the tech industry into mourning tonight. A funeral is due to be held later today for the 47-year-old chief
executive of Survey Monkey. Mr. Goldberg was married to Facebook's chief operating officer, Sheryl Sandberg. He died of a head of a head trauma
last weekend while on vacation with his family in Mexico.
In a post on the White House Facebook page, President Barack Obama wrote, "David Goldberg embodied the definition of a real leader, someone
who was always looking for ways to empower others. He was generous and kind with everybody and cared less about the limelight than making sure
that the people he worked with and loved succeeded in whatever they did."
Samuel Burke has been following this story, and Samuel's with me now from New York. The man was only his late 40s. Dread -- young family.
Sheryl Sandberg is his wife. Dreadfully sad. His achievements, though, are quite enormous, aren't they?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: That's right, Richard. A lot of people only knew him as the husband of Sheryl Sandberg. They saw
him by her side in interviews on programs like "60 Minutes" supporting her.
But inside the tech community, he was very well-known. In fact, he was the CEO of Survey Monkey, as you mentioned, and he took the company
from just 12 employees to nearly 500 employees. And he actually -- the company's reports have a valuation of nearly $2 billion.
Now, before that, he worked as the director of music at Yahoo!, because they acquired his small start-up company of Streaming Music. That
was very avant-garde when he started this company back in 1993, and then it was acquired by Yahoo!. So, very well-known, very well-liked.
I'm hearing from people in the tech community that he did so much for people, gave them advice, helped steer them through their careers and asked
for nothing in return.
QUEST: And I think it's a testament to the man's humanity and the man's ability and humanity as it is, that the president of the United
States gave such a glowing tribute to him.
[16:10:05] BURKE: Absolutely. I think that just speaks to how he touched so many people's lives, including the first family. And actually,
Richard, we hadn't heard from Sheryl Sandberg since her husband died on Friday. And now for the first time, we've just seen a post from her on
Facebook, of course, replying to that message that you referenced from Barack Obama. She just posted.
And what she says is, quote, "Thank you President Barack Obama for this beautiful tribute and for your friendship to our family. Dave
Goldberg admired you for your leadership, passion, and your deep love of sports."
QUEST: Samuel Burke in New York with sad reporting for us today. Samuel, thank you. David Goldberg, who died at the weekend.
Money and politics. People in Britain and beyond are watching to see what the UK decides this week and how it'll impact business. We're going
to give you the insight, and we're going to focus particularly on business and the British election, after the break.
(COMMERCIAL BREAK)
QUEST: HSBC says it will decide by the end of the year whether it's going to move its headquarters from the United Kingdom and probably to Hong
Kong, which is courting it hard. The chief exec, Stuart Gulliver says, "We will make the decision over the next few months to weigh everything. It
will be the next few months, not years."
The issue is politically charged, as the UK parties argue about how to safeguard against another banking crisis. All of this is an election
issue.
Mr. Gulliver at HSBC says the future of HSBC's retail bank in Britain is in question. The bank is waiting to see the impact of new regulations
that would force it to wring fence its UK retail business.
The banks have been particularly hard-hit by regulation -- unfairly so, in their views; quite properly so in the view of the critics. Nina Dos
Santos spoke to Martin Gilbert, the chief exec of the Scottish investment company Aberdeen Asset Management, and asked how concerned he is about the
prospect of a hung parliament in Britain.
(BEGIN VIDEO CLIP)
MARTIN GILBERT, CEO, ABERDEEN ASSET MANAGEMENT: I think the only danger is if there's quite a lengthy period between the results being
announced and whatever coalition happens to be in power at the end of it.
And markets don't like uncertainty, so, that's the potential danger. But once that is decided, I suspect markets will continue much as they have
in the past.
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: There's a lot of nervousness south of the Scottish border in the rest of the UK about the
potential for the Scottish National Party to have a big say and sway over politics and financial decisions for the rest of the UK.
At the helm of a big Scottish company that is obviously a big UK company as well, what do you make of that? What is your comment there on
the importance of the Scottish National Party, potentially, after May the 7th?
GILBERT: I think it would be unlikely they'll have this sort of clean sweep of winning every seat in Scotland. But having been through the
referendum and, as you say, being a company headquartered in Scotland, we believe that whatever result the voters gave, we would live with.
[16:15:08] And I think it's exactly the same in this instance. Whatever result is voted on in the UK, we as a business headquartered in
Scotland operating in the rest of the UK and globally will learn to live with.
(END VIDEO CLIP)
QUEST: Learn to live with the outcome. CNN's political contributor Robin Oakley is with me to discuss the business climate for this. It
really -- is it as clear-cut as Tory is pro-business, Labour anti-business in this election?
ROBIN OAKLEY, CNN POLITICAL CONTRIBUTOR: Not quite as simple as that. But the whole thing is business likes continuity. Business likes a quite
life of certainty. And the one thing that is going to give uncertainty in the near future int his country is politics. A hung parliament, they don't
like that sort of atmosphere.
But yes, the basic thing in your question, the Conservatives have had a more pro-business climate, and business in general is worried about the
direction of travel under Labour.
QUEST: Right. And of course, Labour has promised to reintroduce the 50 percent top rate of income tax. It's going to get rid of the non-dom
tax status for wealthy overseas residents, and it's going to introduce the mansion tax. So, if you are a CEO and a business leader, you're going to
jump in.
OAKLEY: I was going to say, and a tax on bankers' bonuses.
QUEST: Bankers' bonuses, how could I forget them?
(RINGS BELL)
OAKLEY: Oh, yes.
QUEST: There's not much in Labour for you, they would say.
OAKLEY: They would say. But the one thing that they -- business tends to have against the Conservatives is that referendum David Cameron
keeps promising on Britain's future participation in Europe, in or out, decision in 2017. Lots of uncertainty up to the end of 2017. Business
doesn't like that at all.
The one big card Labour has got to play with business is they are not offering any referendum on Europe. They're saying Britain must stay in
Europe, that it would be bad for people's jobs for Britain to run the risk of coming out of Europe.
And of course, if we came out of Europe as a result of all these shenanigans and the negotiations, a Brexit would probably soon be followed
by a Scotsit, with the the Scots saying, we don't want to come out of Europe, so let's have another referendum on independence, thank you.
QUEST: I think it's difficult for viewers who are not as au courant with the English system or the British system to realize just how different
this election is to anything we've seen before.
OAKLEY: Well, absolutely. Because this is possibly the start of the end of big party domination of politics in Britain. This is the start,
probably, of the coalition age.
I suspect that we're going to carry on with -- the old tribal loyalties of Labour and Conservative in different heartlands across the
country have broken down. It's a much more mobile society, and people don't sort of vote by the habit of their parents any longer.
We've got the rise of the Greens, we've got the rise of UKIP, we've got the rise of nationalist parties in Wales as well as in Scotland. All
that has changed the picture, but we haven't got a system which really copes with that. So, one of the things that will come out of this
election, I think, is a lot more talk about potential electoral reform.
QUEST: Oh, again. Thank you very much, indeed. Robin Oakley will be with us and helping us understand every twist of the way. Thank you,
Robin.
OAKLEY: Thank you.
QUEST: Now, we're looking for the next great thing. That's the message from John Chambers. He's about to bow out as the chief executive
of Cisco. John Chambers joined me and told me where he sees the company, what it's going to be doing, and how he's going to make sure he's not a
backseat driver.
(COMMERCIAL BREAK)
[16:20:18] QUEST: One of Silicon Valley's biggest companies is getting a new chief executive, and it's the first new CEO for this company.
The company is Cisco, and it's the first time it's a new one in two decades. John Chambers took the top job at Cisco in 1995. Join me at the
super screens and you'll see exactly what.
So, John Chambers basically said that there are three characteristics that make a good leader. The first is producing results. The second is
building a quality team. And the third is the ability to communicate direction. Those are the criteria, the characteristics that he says are
absolutely essential.
So, how did he match his own characteristics. Well, take a look at the results. On results, the year Mr. Chambers took over, Cisco made a
profit of just over $400 million. Now, last year, it made roughly 20 times that, just under $8 billion. New market capitalization topped $500 billion
in 2000.
And even today, though, with such good results, investors aren't quite so eager for Cisco shares. It's worth about $150 billion today. So, the
500 has come down quite sharply.
Who is going to take over? This is the man. His name is Chuck Roberts. He's been the replacement and is a 17-year veteran of the
company. He's worked across the board in the company and, according to John Chambers, the man is a superb visionary. But more importantly, he's
also a great executor of strategy.
What is the key divisional issue for Cisco? Communicate the direction of the company. For example, the core root of the business is sliding.
There's movement into video and on demand devices.
And then, of course, you have the whole question of the internet of things. Cisco has been absolutely rigorous in trying to break more into
Cloud services, a wider area than just selling boxes to companies.
Replacing the head of an organization is difficult at the best of times. Even more so when the chief exec has been there for two decades.
John Chambers told me, Cisco has been working at change for years.
(BEGIN VIDEOTAPE)
JOHN CHAMBERS, OUTGOING CEO, CISCO: We actually began that process three years go. Three years ago, the board asked me how long was I going
to stay in the role, assuming after it every year, and how long was I committed. And I said two to four years, and I really mean it.
And they at that time asked me to prepare several candidates internally, and they were going to look externally, that could do the job
and do it well.
Now, why now, if you were to say, John, what would you have liked to see three years ago at the time of the transition, I would have said, first
I'd like to see very strong business momentum versus our peers. Second, I'd like to see a world-class new CEO coming in.
And third, if I had really a stretch goal or a wish, if you will, or a dream, I would say let's be on the cusp of the next great thing for Cisco,
much like the information age during the 1990s --
QUEST: Right.
CHAMBERS: -- that drove Cisco's growth at 65 percent per year. We're there on digitization. So, the bottom line is, all the stars have aligned,
the timing is perfect, and that's why you see us do it now.
QUEST: The CEO is more than just making sure the lights stay on and making sure the company's OK. It's about the vision thing, isn't it? It's
where the company's going to go. And quite often, the internal candidate who knows where the bodies are buried and who knows the internal politics
doesn't have that same strength of vision. How are you going to deal with that?
CHAMBER: I think it's unfair to say here's just a general stereotype. If you look at what Chuck does very well, he's very good on vision
strategy. But he's the best I've seen ever at Cisco on taking vision and strategy and executing.
So, if your vision and strategy is working well, you want somebody who can execute this who knows where the gears are. Not where the bodies are
buried, but where the gears are that will accelerate the machine going forward, has the trust of the people, your channels, your customers, your
engineering team to do it. And those are all the aspects that Chuck has.
QUEST: John, I've known you a long time, and this next question is never easy to ask, but I'm going to go for it anyway. How are you, sir --
CHAMBERS: OK.
QUEST: -- going to prevent yourself from being a backseat driver? Your staying on as the chairman, you're going to be helping him, you're
going to be helping Chuck. But let's face it, he's in the driving seat, not you.
[16:25:05] CHAMBERS: Richard, it's absolutely right. It's very important. I'm very good at seeing around corners. I study people
constantly in terms of leadership styles, successful CEOs, et cetera. I've been looking at this transition for a decade, and how do we make it not
only seamless, the smoothest one that's been done in the industry.
And what the outgoing CEO cannot do is be a backseat driver or second- guess the new CEO. Chuck will be the new CEO, period. He will make the decisions.
As executive chairman, I will focus on helping him where he wants me to help, probably in country digitization, probably in a lot of positioning
with strategic partnerships, key enterprise customers, and advisor to him on vision and strategy. I'll be his wingman, but he will be the CEO and he
will fly this.
And Richard, you've known me for a long period of time. I know very well what I know, and I know what I don't. So does Chuck. You will see us
have no issues between us. Chuck's going to be a great CEO.
QUEST: I'm going to ask you the question everybody's asking. Are you -- do you have political ambitions, because now's the time?
CHAMBERS: The priority list will be, candidly, doing a very good as executive chairman and being Chuck's wingman. The priority list is
spending more time with my family and my wife that I love so very much -- she's my high school sweetheart -- my kids and my grandkids.
Priority time externally on areas of giving back and perhaps helping our country do the digitization of our country, which we're behind on.
Germany, France, UK, China, India, are way ahead of us in terms of the next generation of the internet and the next generation of IT and operational
technology together.
So, no, I don't have political ambitions as such. I do very much enjoy being an advisor to political leaders on both sides, because I'm --
while I'm a strong Republican, I also really like Democrats, and I like getting things done. And so, I'd like to be more, perhaps, an advisor to
people in terms of what this country should be doing better. And I would be honored to have that role.
(END VIDEOTAPE)
QUEST: That's John Chambers who's, of course, retiring as chief executive.
Hewlett-Packard claims it was the victim of a $5 billion fraud when it bought the British software company Autonomy. Now, HP is setting out its
full case against Autonomy's founder, Mike Lynch, and it says that a former and fellow director inflated the company's revenues before selling it to
HP.
The UK company is seeking damages -- sorry, bet your pardon, the US company, forgive me -- the US company is seeking damages of more than $5
billion. Mr. Lynch denies the claims.
The earnings are in, and the Force is with Disney. Chief executive Bob Iger has announced profits and revenues are up, and he said the buzz
around the forthcoming Star Wars movie is unlike anything he's every seen. Its second trailer has now garnered over 200 million views.
Star Wars isn't the only reboot helping Disney's profits. As Clare Sebastian reports, the studio is bringing new life to its classic animated
films by using real actors.
(BEGIN VIDEOTAPE)
HELENA BONHAM CARTER AS THE FAIRY GODMOTHER, "CINDERELLA": Well, you shall go to the ball.
CLARE SEBASTIAN, CNN PRODUCER (voice-over): Cinderella in the flesh. A Wonderland with a human face. Even Sleeping Beauty, with a celebrity
villain. Disney is bring its back catalog into the future.
ROBERT MITCHELL, BOX OFFICE ANALYST: Now that you can do those stories with CGI rather than just animation, because really, the only way
you could do it in the 40s, 50s, 60s. It's allowing them to embrace a whole new sort of genre.
BONHAM CARTER AS THE RED QUEEN, "WONDERLAND": Alice has returned to Wonderland.
SEBASTIAN: In 2010, Alice returned in 3D.
TIM BURTON, DIRECTOR: The Mad Hatter, the White Rabbit, Cheshire Cat, Caterpillar. All those things are etched in our subconscious.
SEBASTIAN: With Tim Burton directing, Alice's profits mushroomed, the movie taking over a billion dollars worldwide.
In 2014, Disney eyed a repeat of that. "Maleficent" took more than three quarters of a billion. And this year, "Cinderella" has conjured
almost $500 million so far.
LILY JAMES AS CINDERELLA, "CINDERELLA": They're made of glass.
MITCHELL: I think the success of that, particularly since it's mostly aimed at young girls, means that it was clear that there was interest in
these type of movies. And that's why, I think, Disney has suddenly been announcing films like "Dumbo" and "Pinocchio."
SEBASTIAN: "Dumbo," "Pinocchio," not to mention "The Jungle Book," "Mulan," and "Beauty and the Beast," will all be remade using real people.
Of course, with a film like "Dumbo," real people may be just the beginning.
[16:29:58] MITCHELL: Well, there will be flying elephant, but there will obviously be some sort of parallel story to humanize.
SEBASTIAN (on camera): So, what about the biggest animated hit of them all. Well, if you can't wait for the live-action remake of "Frozen,"
luckily, Disney has an app for that.
Clare Sebastian -- or Elsa -- CNN, London.
(END VIDEOTAPE)
(LAUGHTER)
QUEST: There's not much more you can say about after that. When we come back, the fast food chain Panera Bread is the latest company to ban
artificial ingredients. Some of them have been a real mouthful for customers.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Per-bu-
UNIDENTIFIED MALE: Butol hydra --
UNIDENTIFIED MALE: Winmill. These aren't real words.
(END VIDEO CLIP)
QUEST: The heir to the company will tell us how to pronounce what he's no longer going to use after the break.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when the head of the world's anti-doping agency tells me
why Interpol is targeting dangerous diet pills. In Nepal there's confusion, frustration and devastation. We're going to take you to the
staging area where aid is being distributed. Before that, this is CNN and on this network the news always comes first.
ISIS is claiming responsibility for Sunday's failed attack on the Muhammad cartoon contest in the United States in the state of Texas. Those two
gunmen killed by police were brothers of the Caliphate. But the statement from ISIS gives no evidence that the group had any contact with the
attackers. Dozens more migrants are feared to have died on Sunday while making the treacherous journey across the Mediterranean to get to Europe. The aid
group Save the Children says they fell from a boat like this one then drowned.
Italy's Coast Guard rescued thousands of migrants last weekend, including 3,400 on Saturday alone.
John Kerry has become the first U.S. secretary of state to visit Somalia. He made an unannounced visit and kept a low profile for security reasons.
Mr. Kerry says the U.S. will begin to reestablish diplomatic mission in Somalia after a break of more than 20 years.
(BEGIN VIDEOCLIP)
JOHN KERRY, U.S. SECRETARY OF STATE: I visited Somalia today because your country is turning around. Three years have passed since the new
provisional constitution was adopted and a parliament sworn in. With help from AMISOM, Somali forces have pushed al-Shabaab out of major
population centers. A determined international effort has put virtually all of Somalia's pirates out of business.
(END VIDEOCLIP)
[16:35:01] QUEST: A 21-year-old New York University student said he wanted to be arrested when he crossed the border into North Korea
illegally. Won Moon Joo has now been in North Korean custody for a couple of weeks.
In an exclusive interview with CNN's Will Ripley, he said he was hoping to bring about reconciliation between North and South Korea.
Greek Finance Minister Yanis Varoufakis says there's been "great progress" in his words in talks with the European Union over securing his country's
financial future. E.U.'s Economics Commission says the mood of the negotiations has improved.
Speaking to me on "Quest Means Business," Pierre Moscovici warned Greece could still run out of time.
(BEGIN VIDEOCLIP)
PIERRE MOSCOVICI, E.U. ECONOMICS COMMISSIONER: I think that the spirit has changed, that the discussions are becoming more and more
constructive but we are not yet at an agreement point. We need to go on with that - we've got little time for that because as you know, there is
the question liquidity because reforms need to be done.
(END VIDEOCLIP)
QUEST: A national food chain and cafe chain in the United States is jumping on the healthy food bandwagon and banning a long list of artificial
ingredients. Panera Bread says it's banning preservatives found in 150 of its
ingredients. It says it will offer "clean" salad that will avoid artificial colorings and flavors. Now what Panera is banning and the
preservatives it's doing, many other big food brands are making similar moves.
For instance, we talked about McDonald's last night on the program. Well McDonald's recently announced it would no longer serve chicken that's
treated with certain antibiotics. And the rival Chipotle has said it will eventually eliminate all genetically-modified food from its burritos.
How about Coca-Cola? Coca-Cola recently removed a chemical used as a flame retardant. And Pepsi will no longer use certain ingredients as a sweetener
in the United States. So, there you have the wide range. It seems everybody is getting - I was
going to say jumping on the bandwagon but perhaps that's a little unfair. Ron Shaich is the chief executive of Panera Bread. He joins me from just
outside Boston, Massachusetts. So, you're going to be getting rid of these various ingredients but it's a
tricky job to do it, isn't it? It's not as straight forward as just overnight saying, "We're not going to use them."
RON SHAICH, CEO, PANERA BREAD: Absolutely not, Richard. I mean, this has been a ten-year effort for us. We have 12 people who've been working
on it for the last two years. This is endemic in the supply chain. We have to go all the way back to our suppliers, their suppliers and their
suppliers, and it affects not just ingredients but the ingredients affect the processing, the processing affects the shelf life. We have to deal
with all of them simultaneously.
QUEST: Is it - what's driving this? Is it consumers driving it? Are they actually saying we want this because, as you'll be aware, there have
been several cases including one involving Coca-Cola and others where changes have been made and it's had no noticeable impact on sales?
SHAICH: Yes, this isn't about sales. Listen, we've been involved in this for the better part of two decades. We built our business, one of the
most successful restaurant companies in America, based on making a difference in people's lives.
Eleven years ago we were the first chain in America to serve chicken raised without antibiotics - the first. People thought we were crazy. It was $2
to $3 a pound. Now you have McDonalds and Tyson coming along 11 years later and chasing us.
Six or seven years ago, we were the first people to take naturally- occurring - non-naturally-occurring trans fats out. Five years ago the first chain in America to post (AUDIO GAP).
QUEST: All right.
SHAICH: This is simply a part of it.
QUEST: But I can see there's a certain attractiveness to making these -
SHAICH: Yes.
QUEST: -- changes. But I do wonder - there are many other major issues concerning the fast food or the instant food industry.
SHAICH: First, we're not fast food. You got to choose another title with that.
QUEST: Even as I said it, I was groping for another word because I knew you were going to jump on me with that.
SHAICH: (LAUGHTER) You're right.
QUEST: But I've got one word for you, sir -
SHAICH: Go ahead.
QUEST: Obesity - oversized portions, dealing with proper consult (ph) on those issues.
SHAICH: I'm with you. I am so with you, Richard. I think, you know, the reality - you asked me a question a minute ago - who am I doing this
for? In some ways I'm doing it for my own children. I have an 11-year-old daughter, I have a 16-year-old son. They're in
Panera five to ten days - five to ten times a week. I'm eating there. We want to serve our guests the way we serve our own family.
[16:40:04] And simply put, what we're trying to do here is serve food that's good to eat -- that means minimally processed, that means "clean" -
without all those things we worry about. Secondly, we want to serve food people want to eat. What does that mean?
That means optionality, --
QUEST: Right.
SHAICH: -- giving people real choices and it also means transparency. And we're trying to be as transparent as we know how -
QUEST: Right.
SHAICH: -- with what's in it. People do have to make their own choices.
QUEST: So once -
SHAICH: We aren't the food police.
QUEST: Right, but once you've got rid of the various ingredients and your food is no longer fast - once you've got rid of the various
ingredients, -
SHAICH: Well -
QUEST: -- what's next? Where do you go next with it? Because clearly organic - all these various things people are wanting - can you do
it profitably?
SHAICH: Yes, well first, let me take both questions. I think our mission is to make a difference in the lives of our guests, straight up.
That's what we're trying to do. We recognize that there are real challenges to the standard American diet
and people are evolving. We want to serve nutritionally-densed, low- calorie alternatives. You see us doing that trying to follow the nutritional guidelines, we're taking our breads and we're shifting to
greater whole grains.
QUEST: All right, all right.
SHAICH: We're taking our soups and trying to reduce the sodium. We are trying in a real way to deal with issues of sugar. The reality is this
is --
QUEST: No --
SHAICH: -- not an endpoint. This is a journey we began a decade ago and we'll keep going.
QUEST: I have one request, sir. One -
SHAICH: Yes.
QUEST: -- request. That they are - you keep calling them your guests. They're not your guests - they're your customers. What is so
wrong in this day and age? Everybody wants to call somebody guests. What is so wrong with saying customers?
SHAICH: You know, we use the word interchangeably. You can choose it as you like. The reality is they are folks that come into our restaurant
and choose to walk across the street, pass the other established to come to us. Our most fundamental obligation is to treat them right. That's what
drives our business. Without that we have nothing, Richard.
QUEST: Ron, it's great to have you on the program, sir. Thank you for coming on --
SHAICH: Good to speak to you.
QUEST: -- putting the case. Really good to have you with us tonight. Thank you very much.
Coming up, no fiscal crisis no matter who wins the U.K. general election on Thursday. Find out who's making the prediction that there'll be no fiscal
crisis. In other words, are we all getting hot under the collar about nothing? In a moment.
(COMMERCIAL BREAK)
QUEST: There are less than 36 hours before the polls open in Britain and political leaders have been crisscrossing the small country in a last
push for votes in the general election. And the people they're talking to are mostly undecided.
The undecideds - always crucial in any election. But here more than most and in more cases than in the past, they hold the key to this hotly-
contested election. [16:45:04] The latest YouGov polls says the main parties, Conservative and
Labour, are tied. And that's even before you add in the margin of error. Rather than trying to guess the outcome, someone who's done that for us.
Deutsche Bank has put in predictions on what a post-election Britain will look like for investors.
Deutsche Bank's currency strategist Oliver Harvey joins me now here in London. Good to see you, Oliver.
OLIVER HARVEY, CURRENCY STRATEGIST, DEUTSCHE BANK: Very nice meeting you.
QUEST: All right. Your fundamental premise is what? That there'll be a hung parliament but that there'll be no calamity economically?
HARVEY: It's going to be hugely uncertain - this is the most uncertain general election we've had for nearly a century. So we're going
to get to election night itself and still have not that good an idea who's going to form the next government.
Investors I think will worry until we do get a government formed, but after we get a government formed, after that political uncertainty is settled, I
think some of these very gloomy political risks the people are referring to may be much - may not materialize.
QUEST: Right. But the sort of - markets hate uncertainty. Where would you expect to see wobbles - in which markets?
HARVEY: Well I'd expect to see some wobbles until we get a new government. In gilts for example, maybe some wobbles in sterling and if we
sort of look at the timeline, we're looking probably no idea who's going to form the next government after May the 7th. Two week - three weeks - until
the Queen's speech but then after that we should have a new government.
QUEST: But if you look at the - if you look at the promises - for example, the Lib Dems have said they're going to have a stability budget
within the first 50-odd days. The Tories have promised $8 billion more for the health service without necessarily saying where it's coming from, but
they are maintaining their plan to cut the deficit. Labour has done something similar but it's also said it's going to have to manage it (ph).
So put them all together -
HARVEY: So I see, yes.
QUEST: -- put them all together, what does it mean for economic growth?
HARVEY: Well, there's a huge amount of noise about the fiscal situation - parties making huge amounts of noises. But I think the reality
a lot of that is politics. And I think what will happen after the election, is we'll find that the deficit will continue to fall, but -
QUEST: Does it fall because of policies or because of growth?
HARVEY: It falls mainly because of growth I think.
QUEST: Yes, but then you're - but then you're not dealing with the structural deficit - you're only dealing with the cyclical.
HARVEY: Well, the structural deficit can fall as well. I think you will see some fiscal tightening. I don't think it needs to be as severe as
currently forecast by the Office for Budget Responsibility which is 2 percent in 2016. That's about as much fiscal tightening as we got in the
beginning of the parliament, so I think that will be a real headwind for growth.
But I think that all of the major parties, you'll probably see a slightly loose of fiscal starts and currently forecasted. We're not going to get a
fiscal crisis, we're not going to go back to 2010 when people were really getting worried about, you know, investors are really getting worried about
U.K. government debt. I think we're in a very different environment from then.
QUEST: When does the bank start raising interest rates?
HARVEY: Raising interest rates, yes.
QUEST: Because they will obviously be cognizant of inflationary expectations. Inflation's non-existent at the moment in the system and
they'll be watching to see -- what ever government comes in - their policies are. But when's your gut feeling now -
HARVEY: Well -
QUEST: -- are all bets off?
HARVEY: No. So the market currently expects the banking (inaudible) to raise rates a - in a long time, right? So eight or nine months ago, the
market expected - we'd already seen the first hike in interest rates in the U.K. - now the first hike's expected way back into Q3 next year, so I think
on balance actually, particularly given the economic cycle is very strong, we're the only country in the G5 that we're actually generating wage
growth. We're actually beginning to generate wage growth. That's not happening in
the U.S. where you have this big debate about fed hikes. I actually think that the balance of risks are that the Bank of England start hiking rates
much earlier than people are expecting. And then if that happens, the politics will be -
QUEST: (Inaudible) -
HARVEY: -- a sideshow - I think earlier than people are expecting.
QUEST: Before the end of the year or Q1 next year?
HARVEY: I think Q1 next year is more likely.
QUEST: Right. Finally, we were talking earlier in the program with Robin Oakley about the referendum. So just to put this into perspective, -
- you're a financial man, you're in the city and you're a businessman, you follow these things closely - it's your job - what does business believe on
this referendum question with the E.U.?
HARVEY: Well listen, foreign investment in the U.K. is hugely important. If we had a referendum, there was a chance that we could leave
the E.U. - that would be a negative. We've heard a lot about that. I think what we haven't heard which I think is an interesting point to make
is that if we had a renegotiation, if we had a referendum and we voted to stay in, there are actually some real benefits that could accrue to the
U.K. economy. The single market for services in Europe has not been completed. We have
lots of tariffs and the U.K. is pretty much the world leading (ph) economy in services.
So the Department for Business Innovation & Skills estimates 7 percent of U.K. GDP if we get opening up with a single market for services. So I
think that's something where people aren't talking about at the moment over a referendum.
QUEST: You'll be up all night on Thursday night, no doubt.
HARVEY: I will indeed.
QUEST: Watching with us. See you, sir.
HARVEY: Pleasure.
QUEST: (Inaudible). The main party leaders here in the U.K. have spent the day crisscrossing the country. Those last-minute votes --
squeeze every bit of it. CNN's the place for extensive coverage of the results. We'll have live coverage all this week and special coverage from
Thursday when the first vote is cast and the new government takes shape. [16:50:05] And on Thursday night, I will be on a big red bus around London gaging the views as the results come in. Hashtag #bigredbus.
(COMMERCIAL BREAK)
QUEST: Interpol has issued a global warning over diet pills that may have killed one woman in England and left a man in France gravely ill. The
parents of Eloise Parry say she burned from the inside after taking a pill containing something known as DNP. The compound dramatically speeds up
metabolism to fatal levels and police say they're seeing an increase in demand for DNP.
David Howman is the director general of the Worldwide Anti-Doping Agency. On the line I asked him to explain exactly what is Interpol warning about?
(BEGIN VIDEOCLIP)
DAVID HOWMAN, DIRECTOR GENERAL, WORLD ANTI-DOPING AGENCY: A particular diet pill called DNP for short and it's one that was used
actually way back in the 1930s. And it was discovered even in those days that it was dangerous. And the FDA in the United States actually took it
off their approved list in 1938. Somehow it's made a resurgence and over recent times we've seen a couple of
deaths. So we feel it pretty important to get out there in front of the issue rather than allow more deaths to occur.
QUEST: I've sort of - as part of sort of working out or whatever, I've gone online to sort of look and see what supplements are available
online and it's an entirely bewildering list of long-sounding names with exotic potential results but dubious credentials. Would you agree?
HOWMAN: Absolutely, and we get asked all the time by the elite athletes of the world is this something that is safe? Is it something that
has got anything in it which is banned? And because there's no regulation, Richard, what we have a labeling problem as well.
So if people can put stuff on the labels for these products -- which at the end of the day has no resemblance to what is actually in it -- that's a big
concern.
QUEST: Whose duty - whose duty is this? Because you're now moving into the area of national regulation or in the case of maybe a European
institution at large, who - where does the duty lie in this case?
HOWMAN: While it's not only our duty, I think it's our responsibility to bring issues to the ears and eyes of the public that that these things
are out here and they are potentially dangerous. Our job is when we find these sort of issues, to bring them to the
attention of the governments and our body is made up 50 percent of government representatives and 50 percent from the sports movements. So we
do that and then we have to leave it to the regulatory bodies.
QUEST: Finally, Director General, the - this particular - this particular substance that you're talking about - that we're talking about,
DNP - what is it about this one that you've clearly decided to go on the war path? Because there are many substances out there, some are probably
and arguably more dangerous or at least could be so - why this one and why now?
HOWMAN: We work closely with Interpol and we also work closely with the World Customs Organization. And both those bodies have noticed this
substance - this particular thing, DNP - across borders and in other words being bought by people across the internet and potentially for use by
athletes -- those who are wanting to lose weight or to look good. [16:55:11] And we just feel along with Interpol that if we do not warn
people about the dangers of these sort of substances, we're not doing our job properly. So there were a couple of deaths, there were a couple of
seizures of the product and the timing of it was such that we felt we'd better get out there before there's another fatality.
(END VIDEOCLIP)
QUEST: I'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." When did the word 'customer' become a dirty word - to be replaced by airlines and restaurants and bars
and grocery stories with 'guest'? We're all 'guests.' Would the next 'guest' come up to be served? We
welcome our 'guests' onboard. I am not your guest! I am your customer, I am your passenger, I am the person who is paying for the privilege. I'm
not a 'guest.' This use of the word 'guest' - does somehow make the economic transaction almost redundant I think is wrong.
Instead, cut (ph) shops and restaurants and bars should celebrate the fact that you're my paying customer. We will treat you promptly - instead of
trying to dress it up, wash it out and hope everybody feels a little bit better than themselves by calling them a guest.
As Mark Twain once said, it's better to use the right word than dally with its second cousin. And that's "Quest Means Business" for tonight - not
guests, you're our viewers. I'm Richard Quest in London. Whatever you're up to in the hours ahead, (RINGS BELL) let's do it again tomorrow.
(Inaudible).
END
