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Quest Means Business
Uber Sells Chinese Business to Didi; Telsa Make $2.6 Billion Offer for SolarCity; U.S. Oil Prices Fall Below $40; U.K. Productions Falls to Lowest Since 2013; Scuoler: I Expect Bank of England Stimulus; Trump in Dispute with Fallen Soldier's Parents; Olympic Games Begin in Four Days; Typhoon Nida Shuts Down Hong Kong; Venezuela Decrees Forced Labor; CNN Obtains Rare Access to Theranos Lab. Aired 4-5p ET
Aired August 01, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] ZAIN ASHER, CNN ANCHOR: That round of applause marks the end of another choppy trading day on Wall Street. Part of the problem was oil
prices. We saw it at around $40 a barrel. Energy stocks are actually a real drag. The closing bell has rung. It is Monday, August 1st. Tonight,
Uber is taxing out of China. The only thing surging was the company's debt.
And Donald Trump is under fire for criticizing a dead soldier's family.
And a lab is behind a multibillion dollar controversy. Our exclusive tour of Theranos Laboratories
I'm Zain Asher and this is QUEST MEANS BUSINESS.
Good evening. Tonight Uber has cancelled its trip in China and hitched a ride with rival Didi Chuxing instead. Didi will take over Uber's
operations in the country. In return Uber will take an 18 percent stake in Didi, making it literally the biggest shareholder. The megadeal makes the
end of Uber's long and very expensive drawn-out quest to dominate the Chinese market. Here's our Andrew Stevens with more.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN MONEY, ASIA PACIFIC EDITOR: Basically this was a war of attrition over more than two years. And the bigger team with the deeper
pockets ended up winning. Didi Chuxing is in something like 400 cities, it's got 300 million registered users against Uber's 50 million, and they
could last longer. Both sides were losing money and losing money heavily, trying to get market share. They were paying subsidies to both their
drivers and to their passengers as well. We don't know the exact numbers, but it's been widely reported that Uber was losing a billion dollars a
year, and they were in that market for more than two years.
A chastening time for Uber. But they do walk away with a pretty substantial consolation prize, if you like, a 17.7percent stake in really
now the only ride sharing game in town in the biggest market in the world, which is China of course. As far as for the retail public goes, prices are
probably going to have to go up now. Because there has been so many discounts. Now with only Didi lift, they are going to want to see profits
turning fairly quickly.
(END VIDEOTAPE)
That was Andrew Stevens reporting there. The deal complicates an already complex family tree of ridesharing services in China. Our Samuel Burke is
joining us live now from London. So Samuel, Uber literally tried everything. They tried multiple promotions. The tried bonuses. They
tried subsidizing rides, nothing worked. Why not?
SAMUEL BURKE, CNN MONEY BUSINESS CORRESPONDENT: Well, at the end of the day, no matter what they did, you had this company, Didi, going at it just
as hard as they were going at it. And they had created so many partnerships along the way. The most important one -- you almost need a
family tree here, Zain, to see all the companies that are involved on both sides. But most importantly, you have Didi here, and they partnered with
Kuaidadi. That made them a very strong partnership. And that was what helped them take on Uber.
Below that, you had the investors in Didi. You had Alibaba, Tencent, Apple. Have you heard of any of these companies? I don't think they
wanted to see their money being thrown away in this war against Uber. So pressure, not only on this side, but also on the side of Uber. The had
Baidu investing, and then another Chinese giant. A lot of people thought, and at least Uber did, if they had a Chinese company partnering with them
that that would get them through. Well, it didn't.
You also have these partnerships. Andrew mentioned Didi, Lyft. The reason he used the word Lyft is because you have Lyft as a partner of Didi. GM is
invested in Lyft. They're into Didi. You see almost every corporation that you could imagine when it comes to ridesharing is involved in this one
way or another.
ASHER: I'm looking at that graphic and trying to piece it together and figure it out. It is so complicated. But I do have to ask you. What does
this deal mean for consumers, especially when it comes to raising prices?
BURKE: I think this is bad news for consumers, because basically what's been happening here is Uber and Didi have been cutting the rate so low that
it really wasn't realistic to ever keep them. They were subsidizing it. Interesting to note that the Chinese government was getting involved and
saying, "Let's cut out the subsidies, you have to at least run this at real world prices." That helped put the pressure on Uber. So I think at the
end of the day here, consumers are going to lose out, have real world prices. Drivers, it could be good for them. A lot of times when these
companies are at war, it hurts drivers. So it could be good news for those drivers in China, Zain.
ASHER: So Uber basically giving up on its model on its China market. What do we know about when Uber is going to go public? When will the IPO going
to come, Samuel? What do you think?
[16:05:06] BURKE: We're always pushing them on this. Things cooled off for a lot of tech companies. And for a while there all of a sudden
everybody went silent. Now you seen a couple of tech companies do well. Companies like Line, you and I were talking about this on the phone
actually earlier. That's a Japanese company.
All of a sudden there is new life for these companies. At the end of the day, we don't know, Zain. But what we do know, Uber now has this 20
percent investment in Didi. Then that company goes public, Uber could get a huge chunk of change. They're kind of thinking that maybe they have a
stake in the company in the way that Yahoo had in Alibaba. Also now, Didi is invested in Uber. They've put in a billion dollars. Actually, they've
put in significantly more than that. They've put in 32. So what they have is a huge stake in these companies when they go public. So it could be
good news, a payday for both of those companies.
ASHER: All right, Samuel Burke, live for us there, thank you so much, appreciate that.
And as Didi takes control of China's ride sharing market, Elon Musk is trying to take control of the clean energy industry. Tesla has made a $2.6
billion offer for SolarCity, the top seller of solar panels in the United States. Musk is CEO of Tesla and chairman of SolarCity. Our Paul La
Monica has been following the deal. He joins me now. What investors have been scratching their heads over this deal. Help us make sense of it. How
does this deal really benefit Tesla? Especially when it comes to efficiency and cost savings as well.
PAUL R. LA MONICA, CNN MONEY CORRESPONDENT: Right. The goal for Tesla, because they just built that huge giga factory in Nevada to produce more
batteries. Their goal is to be the dominant player in alternative energy, not just selling electric cars, but also these solar panels. Investors
maybe aren't buying that just yet. I think there are concerns about Musk being spread too thin, because Tesla is trying to launch their affordable
Model 3 car. Musk is also preoccupied with that little SpaceX venture --
ASHER: So much going on for him.
LA MONICA: -- and add everything on top of that you've got the fact that - - oh, yeah, the people who run SolarCity are his cousins. Some people arguing that maybe there's a little bit of nepotism here. He was the
chairman before.
ASHER: Is there a conflict of interest in that? The fact that SolarCity is run by his cousins.
LA MONICA: Well I think it's reasonable to be concerned that maybe he won't be as objective because they are family. But I think that Musk and
others would argue that despite the fact that he has these blood ties, he still is a businessman at heart and is going to do what's best for his
company and not the extended Musk family. But I think investors are worried that the plan he has is just a little too ambitious.
ASHER: SolarCity has had issues with debt and losses as well. What would this deal mean for them do you think?
LA MONICA: I think it is a good thing that it may get SolarCity out of the public eye. It won't have investors worried about just their own profits
and losses, since it will get baked in to Tesla. But that doesn't completely eliminate the bigger concerns about Tesla and all the money it's
spending on the giga factory. On the new cars that is developing. This is just one more thing that could wind up being a huge money pit for Elon
Musk.
ASHER: So talk to us about -- you know, we talked about how investors have been responding, how they're skeptical of the deal. If you look at Tesla's
share prices, on Friday they had dropped, what was that about 10 percent. Now they're sort of rebounding a bit. Does that mean that Tesla investors
are sort of coming on board with this deal?
LA MONICA: I think they may be a little less concerned with more of the details emerging. And also, this is a deal that had been rumored for a
while. The price is not as steep as once expected. The bigger issue for Tesla right now is just proving to Wall Street that as companies like GM
and Ford and others in Europe and Asia are finding religion in electric cars, Tesla is going to have a lot of competition. This isn't a market
it's going to own exclusively and I think that is a big concern for investors right now.
ASHER: I have to ask you about oil prices. Oil hovering at around $40 a barrel. What will that mean for Tesla and the Model 3? They're trying to
get electric cars to appeal to the everyday, common man.
LA MONICA: That's a great question. When you look at the Model S and Model X, these are cars primarily the affluent are buying and driving.
They're probably not doing it because they want to save money on gas. Some of it is an environment statement and also it's a prestige factor. For the
average person that might be able to afford the Model 3, which is still going to be pretty pricey, the rumored price tag of around $35 to $40,000,
but it's definitely cheaper. People may not be as inclined to want to buy an electric car if gas prices remain this low for an extended period of
time.
ASHER: Who knows how long they're remain this low, $40 a barrel, we can hardly believe it. Paul la Monica, live for us there, thank you so much,
appreciate that
LA MONICA: Thank you, Zain.
ASHER: Well, stocks in Europe ended mostly lower. Bank shares were the biggest losers following the release of stress test. Shares in Italian
lender Unicredit closed off more than 9 percent. Monte dei Paschi shares rose slightly after a lender unveiled a multibillion dollar rescue plan.
That came despite a poor showing on the stress test.
[16:10:04] New signs that the Brexit vote may have done some notable damage to the British economy. July the first full month after the referendum saw
the biggest drop in British manufacturing since 2012. The crucial purchasing managers index or PMI slumped to 48.2. That's worse than
initially estimated, and way below the levels seen in June when production actually grew. Anything below 50, by the way, so you can interpret these
numbers, anything below 50 indicates a contraction rather than expansion. Ahead of the British manufacturers organization, EEF, says, "It's a wake-up
call for the U.K. economy." I asked Terry Scuoler, a little earlier, if this was a sign of things to come.
(BEGIN VIDEOTAPE)
TERRY SCUOLER, CEO, EEF: Perhaps too early to say yet. When we look at these numbers there's clearly a bit of a down dip. I'm not going to call
this a recession. Clearly one would argue this was linked to Brexit. This is one indicator. Clearly we've just got to regroup here, reflect here,
and just build our economy going forward. But you're right, perhaps this is a wake-up call and we do need to take notice of it.
ASHER: What will this mean for the Bank of England? Will they lower interest rates? What do you think?
SCUOLER: Well, we thought the Bank of England was going to lower interest rates last month, did we not? I think, however, when we look forward to
Thursday, I think the governor and his team must surely be looking at some stimulus to our economy. Maybe to head off that potential downturn or
recession, as you mentioned earlier. So yes, I think we're in all probability looking at a rate cut here of perhaps 25 basis points. I think
more interestingly, of course, we could be looking at some other aspect of stimulus, perhaps further quantitative easing. So, yes, I think that
surely would be in the cards.
ASHER: And when you look at these numbers, what is particularly concerning? Is it new orders? Is it output? Is it employment? What is
of particular concern to you?
SCUOLER: We at EEF look at about eight or nine key indicators. And I think you've mentioned two of them there. Domestic demand, what we call
export demand, investment intention, I think have taken a knock here. Of course all the more reason why we just need to have confidence now in our
economy. All the more reason, by the way, why we need to look to our government in the coming months, on a reflective basis, to look at an
overarching industrial strategy, and look at the tea levers of growth. Surely we can look to our new Prime Minister, the new Business Secretary to
take those steps, in terms of whether it be infrastructure, whether it be progressive tax policy, to help boost our industry and economy.
ASHER: Where you surprised that the weaker pound didn't help boost export orders as much as anticipated?
SCUOLER: If we go back, of course, to 2010 when the pound fell markedly, there was limited benefit from the dropping of the pound. I remain fairly
confident that a weaker, more competitive pound is perhaps a better way of putting it, will in due course boost our exports. Remember, of course,
that a weaker pound means higher import prices, and that is a knock on effect to consumer pricing and potentially inflation. But I do on balance
over time firmly hold the view that a weaker pound will support our export drive and our export ambitions.
ASHER: Can these numbers tell us anything about what to expect from the construction sector and the services sector later on this week?
SCUOLER: I fear, if I'm honest, that we may see some further dipping of confidence here, although I hope that that is not indeed the case.
Equally, I would say in response to that, if that is the case, then of course we have a significant raft of potential very, very large
infrastructure programs on the table here, on the books here, and one could look at Southeast Airport expansion, Hs 2, some major defense programs, of
which one of course has been secured recently in terms of Trident nuclear submarine replacement. But we do need wherever possible, and the
government needs to get behind these, major investment programs and start committing to them. That would be seen as an enormous boost and incentive
to British business.
(END VIDEOTAPE)
ASHER: Coming up here on QUEST MEANS BUSINESS, Donald Trump takes to twitter in his ongoing feud with the parents of a fallen American soldier.
That's next.
[16:15:00] (COMMERCIAL BREAK)
ASHER: Donald Trump is currently holding a rally in Columbus, Ohio, and we'll bring you coverage from that state in just a moment. The father of a
slain Muslim-American soldier at the center of a controversial feud with the Republican nominee, told CNN's NEW DAY that he and his wife, they don't
want to drag this out. They don't want to prolong this dispute.
(BEGIN VIDEO CLIP)
KHIZR KHAN, FATHER OF FALLEN U.S. SOLDIER: We are private citizens. We are private people. We want to be out of this controversy. My good wife
Ghazala had been insisting that I not respond. I take a more dignified path than responding to undignified attacks and comments. Therefore, we
jointly decide that there is no need to escalate this. We have made the point.
(END VIDEO CLIP)
ASHER: Jason Carroll joins us live now from that Trump rally in Columbus, Ohio. So Jason, one of the things about this controversy or about covering
Donald Trump in general is actually staying shocked. Does this controversy feel different from all the other ones do you think?
JASON CARROLL, CNN U.S. CORRESPONDENT: I think it does to a number of people, especially, Zain, if you look at the response that is coming across
both sides of the aisle and not just from Hillary Clinton, who basically said I don't know where the bottom is when it comes to Donald Trump. But
when you look at other prominent GOP leaders who have come forward and have spoken out about this. Senate majority leader Mitch McConnell distancing
himself from this. House Speaker Paul Ryan issuing a statement about what Trump said as well.
Then you look at what Arizona Senator John McCain said. As you know, John McCain has been on the other side of the criticism as well. Trump
criticized John McCain at one point, saying that he was not a hero because he had been captured. John McCain saying that Donald Trump's views do not
represent the views of the Republican Party. So I think in this instance it is somewhat different. But when you talk to the people who are in here
at this particular rally where we are in Columbus, Ohio, as I have spoken to them, before Trump started speaking, and he just ended right now, but
Zain, they tell me the whole controversy over this family makes no difference to them whatsoever. They feel as though this is something
that's been Trumped up by the Clinton campaign and the media. And in their eyes, Donald Trump is speaking what they want to hear, in a sense, Zain.
ASHER: You know, it's interesting, Jason, because a lot of times we've heard people say that Donald Trump should start acting more presidential.
But why, when it works for him not to? It works for him to say the most controversial thing, because then he knows he'll get 24-hour media to cover
him.
CARROLL: Well, look. I mean, first of all, when it comes to acting more presidential, that's not just coming from the outside, it's coming from the
inside. You'll remember his wife Melania Trump said it. His children have advised him to be more presidential. When it comes to some of his friends,
he said last week, we were at a rally in Columbus, not just in Columbus, Ohio, but also in Denver, you know, and Trump even said there, he said a
friend of his had spoken to him and said, look, stay focused on Hillary Clinton, you don't need to talk about the Khans. You don't need to talk
about Michael Bloomberg, New York city's former mayor who also criticized him.
[16:20:00] They said, just stay focused on the issues, just stay focused on Clinton. But clearly it's something that Trump did not listen to. But
when it came to this town hall here in Columbus, I can tell you, it's just wrapping up now, not one question about what happened with the Khan family.
And Trump did not mention the Khans here either as well. So perhaps he may be finally starting to listen.
ASHER: His supporters don't even seem to care anyway. Jason Carroll, live for us there, thank you so much, we appreciate that.
Dylan Byers, CNN's media reporter, join us from Los Angeles. So Dylan, it's interesting, because amid all of this controversy, what you've seen is
Donald Trump lashing out at the media, lashing out on CNN. What's interesting is that, you know, we all know that Trump has benefitted from
24-hour news coverage. So why is it smart of him to portray himself as a victim of the media?
DYLAN BYERS, CNN MONEY, SENIOR MEDIA REPORTER: First of all, you're absolutely right that Trump has benefitted from 24-hour media coverage.
It's hard to imagine how he would have run as successful a campaign as he's run without national media, which has given him such a platform. And he
has dominated the news cycle day-after-day, hour-after-hour. The same reason he attacks the media is the same reason that he attacks anyone.
That he attacks Mexicans. That he attacks Muslins. He's catering to a very small but very vocal and very energized base that really doesn't trust
the media at all.
And, you know, look, I was just looking at his twitter account. The last six or seven tweets from him are all against CNN. He's really mad at CNN
right now. For him, he thinks that does well with his base. Having traveled around the country and gone to places like Iowa and New Hampshire
and Nevada and the two conventions recently, there's a lot of distrust of the media. They really love that. You'll never find a louder applause
line than the line that tries to take down the media. So that's proven very successful for him. The question is does that prove as successful
with the general election voting population. You know, there was an article from "The New York times" today that pointed out only 9 percent of
the country has cast its vote for either Donald Trump or Hillary Clinton. There are a lot more people out there with whom this anti-media line might
not go over so well.
ASHER: You know, it's interesting is that normally when there's a controversy with Donald Trump, we see him being very quick to sort of
change the media narrative. He's very, very good at that, Dylan. Why hasn't he done that this time? Why hasn't he come out with some other line
or some other story for the media to sort of hone in on?
BYERS: Well, that's a very good question. You know, throughout the Democratic Convention, Hillary Clinton and other Democrats tried to portray
Donald Trump as someone who is not just erratic, irresponsible, and unfit for the office of the presidency, but also someone who is very thin
skinned. Someone who could be baited by a tweet. Donald Trump doesn't like it when people go after him and he certainly doesn't like being a
victim of anyone else's attacks. One argument says this is strategic and he's trying to rile up anti-Muslin or islamophobia among his base. But
there's another argument that this just got under his skin and he didn't like being on the losing side of the narrative, so he dug in and as a
result only ended up digging himself in deeper.
ASHER: So I want to talk about the timetable for the presidential debates, because Donald Trump's camp says they don't like the dates that the
presidential debates are scheduled for because they coincide with NFL games. What's the real reason they're bringing this up?
BYERS: Well, some of the debates do coincide with NFL games, as they have for cycles going back for as long as I've been alive. Look, the commission
on presidential debates is a bipartisan organization. It comes together a year, more than a year before these debates take place. And it hammers out
dates that it can do. It's a hard thing to do. There are religious holidays, there are business holidays. There are major sporting events,
all sorts of things they have to wrestle with. They have to pin down the venues.
This isn't a partisan issue. This isn't the commission on presidential debates and Hillary Clinton and the Democrats getting together in a room
and deciding they're going to disadvantage Donald Trump. This is a really interesting thing about Donald Trump. In addition to trying to command the
news cycle and distract attention away from other things, he consistently complains that he's not getting fair treatment. He complains that he
wasn't getting fair treatment from Fox News and Megyn Kelly.
Right now he's complaining he doesn't get fair treatment from CNN. He's complaining that other candidates were on stage with him during the primary
weren't fair to him. And now once again he's trying to sort of push this narrative that somehow he's a victim of unfair treatment. I think at a
certain point you have to say, what is someone -- what do you call someone who just consistently complains that they're not getting fair treatment
when in fact the rules are what they have always been?
ASHER: You know what, it's worked for him. This whole year, this method has worked for him. Dylan Byers, live for us there, thanks so much, we
appreciate that.
BYERS: That's quite right, thank you.
[16:25:00] ASHER: We'll turn to a story we are following. Australian athletes say they were robbed when they had to evacuate the Olympic
Village. We reported a small fire, you remember this, a small fire broke out there on Friday, forcing the Australian team to leave the building.
Now that team says a laptop as well as some protective clothes were stolen from the Olympic Village. And this really does add to the list, the
growing list I should say, of problems that organizers have really had to deal with in the run up and the buildup to the Olympic Games. Security
remains a top concern. Only four days to go before the games begin. I want to go straight now to CNN's Nick Paton Walsh, He joins us live now
from Rio. So, Nick, I have to ask you, are people really confident -- are they confident with the local police's ability to handle security there?
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: I think confidence gets a boost from the fact that Brazil has really had no history
of terrorism. Only in the past few weeks after a series of arrests has the word "ISIS" become part of the national dialogue here. You see on the
streets down here a remarkably overt security presence, almost too much, frankly. When I first arrived, I was shocked, you couldn't turn without
seeing heavily armed uniformed men almost wherever you turned. But one of the key things, the security at Olympic venues appears to have been
addressed very late by organizers and some say perhaps not entirely satisfactorily.
(BEGIN VIDEOTAPE)
WALSH (voice-over): You couldn't really get any more obvious when it comes to Rio trying to make you feel safe. Copacabana and almost everywhere you
look here and the venue for the opening ceremony, there's someone smiling with a gun. But they seemed to have missed something quite important.
(on camera) That is one of the biggest challenges for organizers, security screening for the huge crowds that want to get into the venues. But the
basic task of working out who is going to be manning the x-ray machines at the end of these lines has been left to the last minute.
(voice-over) Just one month ago they hired a contractor to man these machines. On Friday it was announced the military police would take over
as the contractor wasn't ready. But still, some employees of the contractor, not shown here, were being asked to come to work this weekend.
One agreed to talk to us anonymously. He wasn't asked to provide a police criminal background check, he says. And only had to do a quick online
training course.
UNIDENTIFIED MALE (trough translator): There are people who we will turn out for the job without any real training for the work we're being asked to
do. Our job is to look after people's security and some of the people doing the work in my view aren't up to that. The training course was very
quick. There should have been more to it.
WALSH: It's not clear, with just days you can count on one hand, to go whether he's needed again.
UNIDENTIFIED MALE: Today I was meant to do a six-hour shift but did eight hours. At the end, the supervisor came and said they didn't know when we
had to come back to work again.
WALSH: We tried to reach the contractor for comment. The Olympic chief, Thomas Bach, says he has total confidence in the security of the games.
The government says they're drafting thousands of retired police officers and firefighters to help. But away from the bright lights, some are asking
what else has been missed.
(END VIDEOTAPE)
WALSH: Now, consider this. We spoke to that employee yesterday. He went back to work this morning, early in the morning. Other colleagues turning
up too, despite the fact that three days earlier, their whole company they were working for had in effect been fired by the government. They are
still going to work thinking they're employed. Obviously, you can imagine, some scenes of chaos there at the x-ray machines. They are fulling three
days now away from needing to be completely operational. Rehearsals underway at the moment. And this really you must say, one of the most
fundamental parts of security, making sure people inside the Olympic venues themselves are safe. They needed 4 to 5,000 people to man those machines.
The company only got fired because they couldn't make that number. They got to 500. Now they're looking at bringing in military police as quickly
as possible to fill the holes. But some people are saying, look, these are organizational hiccups that happen sometimes. Others saying does this
betray bigger organizational failures. Security sadly always in the front of people's minds at a massive global sporting event like this, Zain
ASHER: And Nick, when you look at the terror threats sort of around the world, particularly in Europe right now, one of the main concerns is how to
protect soft targets, especially when it comes to lone wolf attacks. How are police in Brazil dealing with that very unique threat?
WALSH: They say they've been doing the best they can to monitor any potential threats here. A month ago here, they were talking about looking
at ticket lists for suspicious names. People have been turned around at airports here. There were about 10, 12 arrests in the past week. So
people have been communicating and certain ISIS sympathies on chat apps.
Here down on Copacabana, Ipanema, the kind of iconic beaches where so many of the tourists here will be staying, as I said. There's Humvees, there's
vast amounts of police, seemingly military police too who heavily armed as well. We saw a naval destroyer of some description, passing through the
bay.
[16:30:00] There's another boat is moored out there too, you can also hear the sound of helicopters. They're presence is extraordinarily overt.
They've mobilized, they say, 85,000 security personnel. That's sort of about one for every five guests they're potentially expecting here, a huge
operation. The question still is, if you're doing all that, how are you able to mess up who is running the x-rays around the Olympic venues?
Fingers crossed that they can sort it out in time, Zain.
ASHER: That's a big question. Nick Paton Walsh, live for us there, thank you so much. Appreciate that.
A typhoon that battered the Philippines over the weekend has landed in Hong Kong. We'll bring you a live report after the break, on one of the world's
top financial centers. That's next.
(COMMERCIAL BREAK)
[16:33:01] ASHER: Hello, everyone, I'm Zain Asher. Coming up in the next half hour of QUEST MEANS BUSINESS, we'll take you to Hong Kong where a
major typhoon has just made landfall.
The advertising world is up in arms after a top executive says that gender diversity is not a problem.
Before that, these are the top business news headlines or world news headlines I should say we are following at this hour.
Russia says all five people aboard a transport helicopter were killed when it was shot down in Syria. The Kremlin says the chopper was returning from
an aid mission to Aleppo. The United Nations says the city faces a humanitarian crisis with hundreds of thousands of people under siege from
the Syrian military.
The United States has launched new air strikes against ISIS targets in Sirte, Libya, the northern coastal city and an ISIS stronghold. The
Pentagon announced that Libyan officials had asked the U.S. for help in its fight against the extremists.
And President Obama has paid tribute to the relatives of fallen American soldiers amid a controversy over Donald Trump's feud with one such family.
The Republican nominee has criticized the parents of a dead American soldier. They appeared at last week's Democratic national convention.
Mr. Obama said that such families deserve only respect.
(BEGIN VIDEO CLIP)
BARAK OBAMA, PRESIDENT OF THE UNITED STATES: No one has given more for our freedom and security than our Gold Star families. Michelle and I have
spent countless hours with them. We have grieved with them. There's a reason why last week in Philadelphia, I was humbled to be introduced by
Sharon Balkofer from Ohio, a Gold Star mom whose son Tom, a lieutenant colonel in the Army, gave his life in Afghanistan. I requested Sharon to
introduce me. Because I understood that our Gold Star families have made a sacrifice that most of us cannot even begin to imagine. They represent the
very best of our country.
(END VIDEO CLIP)
[16:35:05] ASHER: Turkey's foreign ministry is summoning a top German diplomat after the Turkish President was prevented from speaking via video
link at a pro-government rally in Cologne. The German Constitutional Court says it made that decision because of security concerns, Turkey's EU
minister called it back sliding on freedom of speech.
Pregnant women are being advised to avoid an area of Miami, Florida where there has been an outbreak of the Zika virus. The U.S. Center for Disease
Control says expects more cases to be reported in the area although nothing suggests widespread transmission.
Hong Kong has been hit by a typhoon that's forced cancellations of over 180 flights to and from this major financial hub. This is what the radar looks
like right now above Hong Kong which could see as much as 300 millimeters of rain. I want to go straight now to CNN's Ivan Watson who joins us live
from Hong Kong. Ivan, you are very, very bravely in the rain, weathering out this storm. Describe what you see, and how bad could the damage be?
IVAN WATSON, CNN, SENIOR INTERNATIONAL CORRESPONDENT: Well, you know, Hong Kong is no stranger to these powerful typhoons that are coming through.
This is rated right now as a signal 8 storm. It's got gusts of up to 105 kilometers an hour. You can kind of get a sense of the amount of wind and
rain that's blowing through here right now. The government took this very seriously, sending out alerts hours ahead of time, cancelling schools,
cancelling more than 150 flights, opening up storm shelters as well.
And one of the big concerns was that this storm formation could rank up to a signal 10 storm, which hasn't really happened since 2012. It's only
happened twice in the last 17 years. Fortunately, the Hong Kong observatory says that since the storm has basically made landfall here in
Hong Kong, that it seems to have lost some of its strength.
So you do have kind of high seas along here. We are getting battered by wind and rain. But it is not the much more powerful storm thus far that
was feared just a few hours ago, though we have to keep an eye on this. It's very unpredictable what the storm pattern could do in the coming
hours. Zain?
ASHER: So Ivan, this is sort of better, I guess, better than expected. Are people still heeding the warnings? Are they taking this seriously?
WATSON: Oh, yeah. I mean, Hong Kong takes these storms very, very seriously. You'll see the city for the most part shut down, businesses
shut down, schools shut down, streets almost deserted when the sun comes up, because the winds do come through, and they can carry debris, and they
can be quite dangerous.
This is a city that has experienced these powerful tropical cyclones before and knows how to deal with them carefully and has learned from the
experience of a half century ago when you would have casualties, thousands of people dying in some of the most powerful storms that come along.
The storm is expected then to continue moving and then to slam into the coast land of mainland, China, where you have many, many millions more
people. There are alerts about the possibilities of flooding, particularly in low lying areas. That's going to be one of the concerns. Also concerns
about possible landslides when you have such monumental amounts of rain coming down that can trigger those.
These are all scenarios again that Hong Kong is prepared for. And it's just going to be a period for people to keep an eye out and for the
boaters, the people who have ships in a city like this, also to keep an eye out for whatever may come in the hours ahead. Zain?
ASHER: Given that the city is shut down, what will this mean for businesses there?
WATSON: Well, it could perhaps lead to perhaps the stock market opening a bit later. That's happened in the past in some storms. We're not really
sure at this stage. Of course, precautions like keeping the kids home so that they're not out in the streets, in winds that could frankly knock over
a small child, and keeping stores closed. In a storm like this, when it comes to daytime, you'll see many of the stores will quite literally batten
down the hatches, so to speak, with the metal shutters down over buildings, over storefronts to protect them.
[16:40:02] These are some of the precautions you'll see. Hong Kong is a collection of over 200 islands, it has over 700 kilometers of coastline.
What we may be seeing here with the waves and the wind can be more extreme at some of these other islands that can be much more vulnerable to this
type of intense weather pattern, Zain.
ASHER: Ivan Watson, thank you so much for braving the wind and the rain, I feel so guilty for being so warm in my studio. Thank you so much for
bringing that report to us, we appreciate that.
Venezuela's food prices have gone from bad to worse. The military is assuming more and more control and it's now in charge of food production
and food distribution as well. Venezuela's ports are also under army control. And Amnesty International is condemning a government decree that
could force citizens to work on farms. Our Rafael Romo has this report.
(BEGIN VIDEOTAPE)
RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR: The decree was buried in a 48-page government publication. It comes directly from the
desk of the Venezuelan President Nicolas Maduro. The vaguely-worded decree says the government can force public and private sector employees to work
in the country's fields for periods of at least 60 days. This work period can be extended the decree says if circumstances merit.
Starting with the late President, socialist Hugo Chavez, Venezuela nationalized many companies, foreign and domestic. Many of those companies
have shut down or are no longer producing at the level they once did, which has created shortages of many products, including food staples.
This business leader says the President Maduro's decree is misguided.
FRANCISCO JOSE MARTINEZ, PRESIDENT VENEZUELAN CHAMBERS OF COMMERCE: This is the closest thing to slavery we've had.
ROMO: Amnesty international says the decree effectively amounts to forced labor and calls it unlawful. Some Venezuelan workers have been at odds
with the government for years. They claim tight currency controls, restrictions on imports, and expropriations of companies have disrupted the
labor market.
Former employees of Polar Enterprises one of the country's food and beverage producers protested against the government for weeks after part of
the company had to shut down for lack of raw materials. About 10,000 workers have been laid off due to the shutdown of Polar Enterprise's beer
production facilities like this one.
Those who have lost their jobs are not going quietly. They have been protesting on the streets saying the government is not only affecting
businesses but also killing jobs. We just want to live in peace, working and producing for our country and our families, this protesting worker
says. He may soon be producing for his country, not at the work site of his choice but at a government-run farm. Rafael Romo, CNN, Caracas.
(END VIDEOTAPE)
ASHER: Coming up next on QUEST MEANS BUSINESS, the chairman of Saatchi & Saatchi has been put on leave for negative comments on women in the
workforce. We will tell you what those comments were after the break.
(COMMERCIAL BREAK)
[16:45:20] ASHER: The chairman of Saatchi & Saatchi has been put on leave after coming under fire for comments about women. Kevin Roberts says women
are happier not taking on leadership roles and, quote, "their ambition is not a vertical ambition, it's this intrinsic, circular ambition to be
happy." There are already signs that the rest of the advertising industry simply does not agree.
YouTube's global head of creative marketing tweeted that Saatchi & Saatchi's clients need to hit them where it hurts. Lisen Stromberg is
chief operating officer of The 3 Percent Conference. Thank you so much for being with us.
Just explain to us, I mean, you would expect that the chairman of a global company would know better, would know what he can and can't say in public.
Where does this level of I guess ignorance, where does it come from?
LISEN STROMBERG, CHIEF OPERATING OFFICER, THE 3 PERCENT CONFERENCE: Well, I think we have a reality here which is a reflection of unconscious bias.
We like to say if you're a fish swimming in water, you don't know it's water. That's the reality of what he's experiencing and what we're seeing
right here.
ASHER: Why is the advertising industry still such a boys' club and how does it compare especially when it comes to women growing and moving up,
how does it compare to other industries?
STROMBERG: You're asking a great question, Zain. We're thrilled to tell you that we've just finished a fantastic piece of research called the
Elephant on Madison Avenue. We've partnered with the original group who did the Elephant in the Valley research, that talked about the reality of
women's lives in Silicon Valley. What we're now looking at is what's the truth for women on Madison Avenue.
We don't have the data yet, it just finished last week, but we'll have lots of information on what's the truth. What we have topline results is to
basically tell us that in fact it's still an issue. There's a lot of problems out there. But there's a lot of solutions. We're excited to
start working with agencies to solve that.
ASHER: The chairman, Kevin Roberts, he's been suspended. It's sort of like a leave of absence. Do you think that he should be permanently
terminated? Is that too harsh? What do you think?
STROMBERG: I don't know the entire story here. And we don't have the access to the entire interview. What we do know is that his statements
felt very, shall we say, "mad men" era and not 21st century. And so the question was it taken out of context or what did he really say? We would
like to believe that he's actually made a mistake and he really wants to do the right thing.
ASHER: So Lisen, if you had a chance to sit down with Kevin Roberts and I guess educate him, what would you say to him?
STROMBERG: Well, I would say look at the data. It's data that's going to actually change opinions. What's actually happening at your agency?
What's going on? Yes, you've got quite a few women, 65 percent of their staff is female. But senior management, that isn't true. Why not? What's
really going on? And do some analysis. We can work with them to solve that problem.
ASHER: So if other CEOs in other industries dominated by men are watching this controversy, what can they learn from this?
STROMBERG: That they might not be aware of what's really happening. They might not be bad men. They actually want to do the right thing and don't
know how. I like to think about Satya Nadella at Microsoft who says it's good karma and women have to wait for job opportunities and for pay to
happen for them, pay equity to happen for them. We're tired of waiting.
What can they do, they can get data, they can do the research, they can actually change the way their policies and procedures work for women and
for men.
ASHER: I think a lot of people were absolutely shocked when they read Kevin Roberts's comments, especially women. Thank you so much, we
appreciate you being with us.
CNN has obtained access to one of the most secretive labs in the world. An exclusive look inside Theranos, coming up. First though a highlight from
make, create, innovate, that's next.
(COMMERCIAL BREAK)
[16:51:15] ASHER: She was called the youngest female billionaire in the world. Her company quickly became a favorite among investors who boosted
its value to as much as $9 billion. But after the initial success, Elizabeth Holmes and her medical tech company Theranos have been mired in
controversy. Now the company is fighting numerous lawsuits. Forbes has lowered their net worth from $4.5 billion to absolutely nothing. Our
Sanjay Gupta gained access to one of Theranos' secretive labs.
(BEGIN VIDEOTAPE)
SANJAY GUPTA, CNN, CHIEF MEDICAL CORRESPONDENT: For the very first time, Elizabeth Holmes is opening up the secret labs of Theranos.
ELIZABETH HOLMES, CEO, THERANOS: No one has seen this. You're the first one.
GUPTA: In 2003, the 19-year-old Elizabeth Holmes dropped out of Stanford and founded Theranos, in the hopes of using small amounts of blood just a
few drops to do what normally took numerous tubes.
Testing blood may seem like a simple process but in fact there are numerous steps that can impact the results. For example, the tourniquet, how long
is that supposed to be on? Was that alcohol or iodine used to clean my arm? What's the size of the needle?
And why are there so many tubes? The anticlotting medicine is not standardized nor the various reagents used to do the testing itself, let
alone the machines that finally spit out the results. It is a big $75 billion industry with thousands of players controlling little pieces of the
process. Theranos wants all of it.
What resulted is this black box, a mini-lab, the company says it can run up to 40 different tests on a tiny sample of blood.
HOLMES: We designed it to allow for the same operations that a technologist can do in a laboratory.
GUPTA: Holmes believes a finger stick instead of a needle will make people more likely to get their blood tested. I'm going to do this myself.
Tiffany, hello. It's still a needle in there.
HOLMES: A lancet.
GUPTA: A lancet, OK.
HOLMES: The needle has a hole. Lancet is a poke.
GUPTA: For what it's worth, this Theranos blood test put my cholesterol at 170, my own doctor found it to be 169 just the week before. Holmes says
she wants to make this sort of testing available anywhere, any time.
HOLMES: There's no reason why these can't be distributed in a very, very decentralized locations.
GUPTA: In your home?
HOLMES: Yes.
GUPTA: Do you think people should have a clinical laboratory in their own house?
HOLMES: I think that is a very interesting space.
GUPTA: But wherever the tests occur, the results need to be precise and accurate. That's why the story of Theranos starts to crumble.
UNIDENTIFIED MALE: There were several labs that were tested that weren't totally accurate.
GUPTA: One study in the Journal for Clinical Investigations found the tests from Theranos' retail testing sites in Phoenix, Arizona to have
significant discrepancies. But even more damaging, they questioned Theranos' ability to run a clinical laboratory, citing, quote, an
assessment for the Centers for Medicare and Medicaid Services of their Newark, California lab which questioned Theranos' ability to a clinical
laboratory citing, "a global and long term failure of the quality control program."
And demanding they get their act together. Wall Street Journal's investigative reporter John Carryrou first broke that story last October.
JOHN CARRYROU, WALL STREET JOURNAL INVESTIGATIVE REPORTER: Theranos wasn't able to do so to the agency's satisfaction. The agency has now decided it
is going to shut that lab down and it's going to ban Elizabeth Holmes from the blood testing industry for at least two years.
GUPTA: Holmes has until September 5th to appeal. In her first interview since the CMS decision, she insists the technology was never to fault for
the erroneous results. Instead, she blames it on flawed operations and personnel.
[16:55:01] HOLMES: At the highest level, we didn't have the right leadership in the laboratory. And we didn't have the implementation of the
quality system in terms of procedures and the associated documentation to ensure that we were realizing the quality standards that we hold ourselves
to.
GUPTA: Of course in the middle of all this are patients, whose health depended on Theranos for accurate results. There's a man who goes by the
initials R.C. in Arizona who is suggesting that the lab results that he got from Theranos were not accurate and it led to him having a heart attack.
Based on what you know, is it possible that what he's saying is true? Could he have gotten a lab result that was so askew that he didn't act on
it and a month later he ended up having a heart attack?
HOLMES: I'm not the lab director. So --
GUPTA: I know, but you're the CEO and founder of the company. This is as serious as it gets.
HOLMES: What I know is that I've put the best people in place to be able to investigate every aspect of this and ensure that we meet the quality
standards that we hold ourselves too. And I know they're doing that.
CARRYROU: The biggest problem was going live with blood tests that didn't work or worked only part of the time.
GUPTA: Theranos is under the microscope of the U.S. Attorney's office and the Securities and Exchange Commission about whether it misled investors
about its technology. For now, Holmes and Theranos are hell-bent on gaining back the significantly eroded public trust and proving the product
they have to offer is the real deal. It's probably the most important question I think anybody who is watching has on this. Does it work?
HOLMES: Yes.
GUPTA: You're confident in that?
HOLMES: I am confident in that.
GUPTA: Dr. Sanjay Gupta, CNN, Palo Alto, California.
(END VIDEOTAPE)
ASHER: That was QUEST MEANS BUSINESS. Thank you so much for watching. I'm Zain Asher in New York. I'll see you again same time tomorrow.
END
