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Quest Means Business
Jeff Bezos, Amazon: The Workers Are Getting A Raise; Tesla Has Been Allayed With Some Strong Numbers On The Latest Quarter; Volkswagen Has Terminated The Audi Chief Executive, Rupert Stadler's Contract; Volkswagen Dumps Jailed Audi CEO; Brexit Uncertainty Delays Jaguar Investment; Boris Johnson Calls U.K. Brexit Plan "Sad;" Oil Rises To Its Highest Since November 2014; Dow, S&P 500 On Track For All-Time Highs; U.S. Stocks Hit Record Highs With NAFTA Deal; Tencent Music Files Paperwork For U.S. IPO; A New Zealand Firm Starts Four-Day Work Week. Aired: 3-4p ET
Aired October 02, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: We are one hour away from the closing bell on Wall Street, and look, the Dow Jones, and our market is
absolutely on a tear gaining half a percent, maybe off the highs the day but don't worry about that, it is still a record high for the Dow, not so
for the S&P, the NASDAQ is eking out just a very small loss. These are the markets, and this is the reason and the drivers of what's driving the day.
Jeff Bezos, Amazon - the workers are getting a raise and it's being called the shots heard around the world. We've got oil prices hitting new highs
as sanctions on Iran start to bite it. It didn't affect the Dow and Tesla's crazy quarter might actually have been profitable for the car
company. I am going to get close up and personal with the Model 3 that everybody is talking about on this program.
Live from the world's financial capital, New York City on Tuesday, October 2nd, I am Richard Quest. I mean business.
Everybody, good evening to you. Whether you work on a trading floor or an Amazon warehouse floor, today, it's all about green arrows. The Dow is on
track for a record close of the day, continues as it looks for the last hour. It will be a record. We've had 11 records so far this year.
And Amazon has fired what Bernie Sanders is calling a shot heard around the world. The company is delivering a new pay package to its lowest paid
employees. It's going to introduce a new minimum wage of $15.00 an hour for US workers. An important thing here is hundreds of thousands will be
affected, 250,000 fulltime staff and 100,000 seasonal staff at Christmas will all be eligible for the minimum $15.00 an hour and that's effective
from November the 1st.
The UK which is also a major place for Amazon, workers there will be getting a rise at $13.63. It's a bit less everywhere else. Jay Carney is
Amazon's senior Vice President of Global Corporate Affairs. He is also as you'll know the former White House press secretary under President Obama
speaking to me on the "EXPRESS," Mr. Carney told me what the effect this would have on Amazon's workforce.
(BEGIN VIDEOTAPE)
JAY CARNEY, SENIOR VICE PRESIDENT OF GLOBAL CORPORATE AFFAIRS, AMAZON: Prior to this hike which takes effect in just a few weeks, our average
hourly compensation was $15.00, so now the floor is $15.00. What this means is that, 250,000 fulltime employees in the United States, plus an
additional 100,000 seasonal workers and part time workers will see their wages go up whether they are below $15.00 or above it, and we think this
will be reflected in our next quarterly report, in our guidance, but we saw an opportunity to lead her and we're really happy about the move we're
making.
QUEST: How much do you expect it will cost to make this change?
CARNEY: You know, I don't have a figure for that and I'll leave that to our CFO in the future, but it's a significant investment in our workers
because we believe even though we've always paid competitively, we looked very closely at what our wages were across the country as well as in the UK
by the way, and saw an opportunity, not just to raise them incrementally, but to really leap ahead and set a standard that we hope others will follow
by moving to a $15.00 an hour minimum wage and in the UK, you know, we're moving to 10 pounds 50 in London and 9 pounds 50 elsewhere.
QUEST: So you would say wherever Amazon has employees, the trend will be the same?
CARNEY: Well, we are a global company, we have operations in many, many countries and we will look at them as we go. Right now, the announcement
is in the United States where obviously, we have our largest employee base as well as the UK and then we'll assess the other ventures as we go
forward.
QUEST: Listen to what Bernie Sanders had to say this morning about Amazon.
(BEGIN VIDEO CLIP)
BERNIE SANDERS, US SENATOR, VERMONT, INDEPENDENT: What Mr. Bezos today has done is not only enormously important for Amazon's hundreds of thousands of
employees, it could well be, and I think it will be a shot heard around the world.
(END VIDEO CLIP)
[15:05:16]
QUEST: A shot heard around the world. Now, Amazon is either the largest or the second largest private employer in the United States. What message
is Jeff Bezos sending by this?
CARNEY: Well, we're not the largest just to be clear. Walmart, you may have heard of them has significantly more employees, but we are large. We
have more than half a million employees globally and this specific wage hike affects 350,000 employees including 250,000 fulltime employees.
So we are hoping and Jeff Bezos, the CEO called for this, this morning that other companies will follow us in this direction and will also raise wages
for their workers. We think it's the right thing to do. We are also going to - and I am going to help advocate here in Washington that Congress look
at raising the Federal minimum wage. It's $7.25 an hour. $15.00 is more than twice that. $7.25 is much too low.
(END VIDEOTAPE)
QUEST: Now, we can't ignore the political pressure that Amazon has been facing. Only four weeks ago, Bernie Sanders, who you heard there
introduced the so-called "Stop BEZOS Act." Now, it targeted companies like Amazon where staff still can't make ends meet without claiming public
assistance.
Today, Sanders said, "Other companies must follow Amazon's lead."
(BEGIN VIDEO CLIP)
SANDERS: I think the word is going to go out to companies like Walmart, the companies like McDonalds and the fast food industry, to the retail
industry in America. You cannot continue to pay your workers starvation wages. Learn from what Bezos has done. He has done the right thing,
you've got to do it as well.
(END VIDEO CLIP)
QUEST: So Bernie Sanders who is an avowed socialist and those are his views. So the money for those increases to make $15.00 an hour ultimately
comes from Amazon customers and let's be blunt about this, by the way, get your phone ready. You need to - or your tablets or your - and your device.
We're going to give you a question that we'll need your interpretation on.
We're asking you today at CNN.com/join, are you willing to pay more or will you take your place the business to cheaper sites that pay their staff
lower wages? In other words, how significant is the price point when you make your purchases? Because if you're just going to go for the cheapest
wherever you find it on any app, any Web site, then obviously, you wouldn't pay more.
But if you will pay more, it's because you do believe it is right, but let's see how to vote. CNN.com/join is where we'll show you the results in
just a moment and we will discuss them after that.
More on the political pressure that's involved. CNN's Cristina Alesci is here. Interesting questions, CNN.com/join on whether or not people would
pay more because that's the reality of this, at some point, but does Amazon have scale enough that they can make this gesture and still keep prices
low?
CRISTINA ALESCI, CNN CORRESPONDENT: Well, they do have higher margin businesses. When you look at their business overall, it's not just what
you and I use to get our shampoo every day, right? They have a storage business. They have an advertising business and I was speaking to an
investor earlier today who told me, they can leverage potentially the higher margins in those businesses to subsidize some of these wage
increases, but make no mistake about it. This is 60 percent of their workers.
They have about 570,000 employees, 350 of them, I think, the executive told you will see their wages go up.
QUEST: Let's put this in perspective. The Federal minimum wage is $7.25. Most of Amazon's employees will be covered by other minimum wages, for
example, which might be as much as $11.50 or indeed $15.00 already.
ALESCI: Exactly.
QUEST: But we're still only talking $15.00 an hour.
ALESCI: We're still only talking about $15.00 and you're right. They were under pressure - political pressure, but they are also under the pressure
of a tighter job market. We're at 4 percent unemployment in the US. Where are the employees going to come from if you don't pay them more. And other
retailers have done this, too.
QUEST: We look at the Amazon share price graph because, now look, this just goes back to 17. You're down at 9.64 just October '17, a year ago.
So over the last year ...
ALESCI: Incredible.
QUEST: 19.83, and what is impressive about this graph is you get these - obviously, these movements with the market, I think that was where they had
a bad quarter and to these results they took a tumble, but that's previously.
ALESCI: Usually, not a problem for them to have a bad quarter, but for some reason ...
QUEST: For some reason, there's a wobble there. But that for many was a buying opportunity.
ALESCI: Absolutely. Yes, and you know what? I don't think this is a bad business decision because if you think about it, Amazon is going to go put
its might ...
[15:10:16]
ALESCI: ... to fight for a higher minimum wage. That puts pressure on its competitors who by the way are also operating on razor thin margins to
raise wages for their employees. So they may have - Amazon might have a little bit more ability to go out there and put more retailers out of
business.
QUEST: This really is the company that you love and you hate.
ALESCI: I definitely agree with you on that. I have a big love-hate relationship.
QUEST: We all - I mean, I'm not sure who buys from it, we all buy from it, but at the same time ...
ALESCI: But we kind of hate the experience sometimes.
QUEST: And we also recognize that it is costing other people jobs in terms of bricks and mortar, but that finally, Jeff Bezos himself and with "The
Washington Post" with all of his other, and now philanthropy, he has revolutionized retailing.
ALESCI: He has definitely revolutionized retailing and there is speculation that he is going to revolutionize a host of other industries,
too. Amazon is not stopping at retail. They are going after insurance. They are going after financial products. We are talking about a potential
behemoth, the likes of which we may not have seen before.
QUEST: The answers, thank you, the answers are in by a margin of three to one. Most of you are willing to pay more so that workers can get paid
more. You can see it over there, 76 percent of you said you would pay more and you know something, I mean, I haven't got my phone here to vote, but
you can add me on that as well.
Here's a cash cruncher, Tesla have been allayed with some strong numbers on the latest quarter. The electric car maker delivered over 83,000 vehicles,
that's 50 percent better than it was seen before. Clare Sebastian is with me to talk about that. Good to see you.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes.
QUEST: Oh, yes.
SEBASTIAN: Yes, it was a strong set of numbers from Tesla. And frankly, they needed that, Richard. They need to start rebuilding their
relationship with the markets and they need to fulfilling promises, so the fact that it was - it didn't beat estimates, it was in line with their
guidance. They said 50,000 to 55,000 Model 3 would be produced. They came in at about 53,000. But the fact that it was in line was a big
achievement.
QUEST: So they are making the Model 3 and the more expensive ones which were also on target?
SEBASTIAN: The Model X and Model S was on target, and the Model 3, they are still not producing the $35,000.00 one. They are still producing the
more expensive models, which for analysts does signal that this will help with profitability going forward. But certainly, it doesn't necessarily
show that it is going to be sustainable because some time next year, they are going to start selling the $35,000.00 model.
QUEST: Okay, but for another round there.
SEBASTIAN: Right.
QUEST: What about this story there that there are cars -- Tesla cars being parked everywhere. The "New York Times" had it - journey footage of cars
being parked and it follows on from what the company has said what Musk has said and they said today, about delivery issues.
SEBASTIAN: He said that they've stabilized the production hell as he called it and now they are in logistics delivery hell ...
QUEST: What's the problem?
SEBASTIAN: So the problem, we were seeing these disgruntled users on Twitter, tweeting pictures of cars in car parks. It seems to be that as
they ramped up, they didn't have enough logistical capability to actually deliver the cars. So that's causing the delivery ...
QUEST: But that's basic stuff. I mean, that is basic industrial stuff. I mean, I am not trying to be clever than them, but that is basic industrial
stuff that if you're going to manufacture cars -- Ford, GM, and Fiat- Chrysler -- have managed to work out.
SEBASTIAN: I think this reinforces, Richard, the bottom line about Tesla which is they are a tech company learning to be an automaker on the fly
essentially. They are learning as they go. As they did the ramp up, they didn't have the logistics to match. They now say that they are going to
try and improve that. They say they are working towards that. They are clearing the backlog. They did have fewer cars that were listed in transit
this quarter than in the last quarter, so that essentially paused a bit. But there were still about 12,000 in transit.
QUEST: Have you ever actually driven a Tesla?
SEBASTIAN: I haven't.
QUEST: But you've never even been in a Tesla?
SEBASTIAN: No.
QUEST: And you spent a lot of time talking about Tesla.
SEBASTIAN: I know. I need to try that. I think you're going to try that.
QUEST: I am. It's coming up after the break. We shall continue talking to Tesla when "Quest Means Business" hits the road. Join me outside. We
have a Model 3 of our own and our motoring expert, Peter Valdes Dapena is there. On the other side of this break, I should be with him.
[15:15:00]
QUEST: I promised you a Tesla 3 and indeed, that is exactly what I have for you. This glamorous vehicle that we now report onto the street here in
Manhattan. Now why am I getting all excited? Because this is the Model 3, which much - but first, Peter is with me, our motoring correspondent. You
have been driving this vehicle. How is it?
PETER VALDES DAPENA, CNN MOTORING CORRESPONDENT: I have. It's quite exciting. This is the performance version, so you hear a lot about
$35,000.00 - this one is $79,000.00.
QUEST: So this is a 3?
VALDES DAPENA: This is a Model 3.
QUEST: And how does that compare to the X's, the next one - and that would be ...
VALDES DAPENA: The Model S.
QUEST: Yes, the Model S.
VALDES DAPENA: Okay, this is going to be a smaller car. This is the performance version, so 450 horse power, basically, it's sort of as what
most talk about where you've got a larger car with the Model S.
QUEST: In terms of price, this to the S?
VALDES DAPENA: This ends up roughly where the Model S starts. So they are going to overlap a little bit, so a customer for this car actually has a
choice to make. He could get like a base model, Model S to get more room.
QUEST: Was it fun to drive?
VALDES DAPENA: Yes, it is fun to drive. Three and a half seconds, zero to 60. This has the performance wheel and tire package and it runs corners
pretty nicely.
QUEST: What did you not like about it?
VALDES DAPENA: Compared to - well, the price - at this price, you could get a pretty nice Audi or Mercedes. You get something that has a little
bit more refinement to it. I could get some things like maybe adjustable suspension settings, and it will be - it will stiffen the ride. I might
like better seats. The corners are pretty hard and the seats don't hold you in as much.
QUEST: Right, but if you were only paying $35,000.00 to $40,000.00 for it, would you be satisfied with it?
VALDES DAPENA: It's hard to say. Tesla has it made and so I haven't driven the $35,000.00. But I've driven the $56,000.00 version. I've
driven this version. At $35,000.00, there you're getting your range of something like - okay, you're getting in the range of something like a
Chevy Bolt EV for $35,000.00.
QUEST: Describe - get in there, describe what you see, what you like about this in terms of the look of it.
VALDES DAPENA: Okay, this - the look is terrific. It's very simple, very straightforward. You'll notice, there are no gauges. Everything is over
here on the screen. My speedometer is here for example. I am actually fine with this. It works great as a display. What I don't like is having
to use this screen to do things like adjust my mirrors and my windshield wipers.
QUEST: How is it performing in terms of the market. If you look overall, come and join me - if you look at it overall, how is it performing? Is
Tesla breaking the mold as they claim they intended to?
VALDES DAPENA: Well, right now, with a lot of backed up, pent up demand for this car, because they have like hundreds of thousands of reservations.
Sales are actually doing pretty darn well compared to other luxury cars in this class, quite well, in fact. What remains to be seen is as Tesla burns
through that demand and as automakers like Audi and BMW and Mercedes enter the market for electric cars, is something like this still going to hold
up?
[15:20:08]
QUEST: And that - talking about those other electric cars nicely takes us on to the Paris Auto Show. The Paris Auto Show - thank you, Peter, the
Paris Auto Show is underway at the moment and there indeed, cars like Audi's E-tron SUV made its first debut appearance. It's an electric
production vehicle with 250-mile range, and Mercedes has an electric luxury SUV. It's called the EQC and that will be on the streets in the next few
months.
So, as they battle the Tesla, which is now growing in Europe. Melissa Bell considers what Paris is showing about the electric vehicles to come.
(BEGIN VIDEO CLIP)
MELISSA BELL, CNN CORRESPONDENT: Richard, these are very much the cars of the future. The all-electric cars that are very much the darling of this
year's Paris motor show. It opens to the public on Thursday and these cars are everywhere, not just here on the Renault stand, Carlos Ghon has said
that 10 percent of his fleet will be all-electric by 2022.
You can see how these engines differ so greatly from the combustion engines that we're used to, but all around the Paris Motor Show this year, all you
can see are electric cars. Audi, Mercedes, have launched all-electric SUVs. The trouble for the makers of electric cars so far has been the cost
of the battery.
They are actually underneath these cars, and so far, they simply haven't been cost effective. The big gamble appears to be on the part of the car
markers but once that changes in about 2025, these electric cars will actually be much cheaper to make, much cheaper to service. They simply
require fewer people, and of course, they are very much in line with the times.
So soon enough, Richard, we will no longer be filling our cars at the petrol station with the fumes and the leakages and everything that we have
become used to, but we will all be plugging in our cars in a way that is much greener. Richard.
(END VIDEO CLIP)
QUEST: Melissa Bell reporting there from the Paris Auto Show and if electric cars are ...
[15:25:00]
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment, when I'll speak to one of Spotify's early investors as it
gets new competition from China and if you worked for Perpetual Garden in New Zealand, well, the weekend will be almost upon you. It's starting a
four-day working week and I'll speak to the company's founder from Auckland, as we continue tonight. This is CNN and on this network, the
facts always come first.
In Indonesia, the death toll has risen sharply following last week's earthquake and tsunami. 1,200 people are now confirmed death, thousands
of people are displaced and they are now in desperate search for food and supplies.
Two envelopes addressed to the Pentagon have tested positive for ricin, the highly toxic compound was detected in two pieces of mail sent to the
Secretary of Defense James Mattis and the Chief of Naval Operations, Admiral John Richardson. The suspicious envelopes were intercepted at the
Pentagon mail facility and never actually made it to the building proper.
A lawyer representing the woman suing Cristiano Ronaldo for rape says the accusation is not fake news as the football star has claimed. Kathryn
Mayorga says Ronaldo raped her in a Las Vegas hotel room in 2009. She claims she was paid $375,000.00 to buy her silence. Ronaldo's
representatives are denying the allegations.
The French Interior Minister has resigned. A spokeswoman for the Ministry says Gerard Collomb submitted his resignation to President Macron so he
himself could run for Mayor of his hometown. This is the third and most senior French Cabinet Minister to resign in the last six weeks.
The First Lady of the United States, Melania Trump is in Ghana. The first leg of her four-country tour of Africa. She visited a hospital in the
nation's capital and handed out teddy bears to children. Melania Trump travels next to Malawi, Kenya and Egypt. It's the first major trip the
First Lady has taken without her husband Donald Trump in her role as First Lady.
So we're talking about electric cars and the CEO who is in trouble, Volkswagen has terminated the Audi Chief Executive, Rupert Stadler's
contract. Stadler has been in jail since June in connection with the ongoing emissions probe. Jack Ewing is the author of " Faster, Higher,
Farther," an expose of the Volkswagen scandal. He joins us now. Good to see you, sir.
JACK EWING, AUTHOR: Thank you, Richard.
QUEST: And let's just talk - the scandal as such has caused Volkswagen and enormous amount of money. You've got the numbers. However, has it damaged
the company?
EWING: Yes, I think the biggest damage is actually what its caused is the $27 billion that they paid in fines and settlements because Volkswagen
sales are doing sort of okay. They haven't collapsed, but the money that they had to pay in settlements and fines is money that they really need to
be spending on research and development, developing new models, making this transition to electric cars.
QUEST: And the Rupert Stadler and the others who have been indicted in the United States, where do we stand in all of the legal - when is somebody
going to stand trial?
EWING: Well, the United States Department of Justice has indicted eight or nine people including a former Chief Executive...
QUEST: Some of whom have been sentenced.
EWING: Two have been sentenced and are in jail. Two people who were in the United States. Most of them are in Germany. Germany does not
extradite its own citizens, so most of them are safe as long as they stay in Germany, including the former Chief Executive, Martin Winterkorn.
Rupert Stadler, the Chief Executive of Audi is in jail in Germany because the prosecutors there felt that there was a chance he was going to obstruct
justice in the investigation there.
QUEST: Right, so - but it was such a huge scandal and it's cost so much money. And do you believe we've really got to the bottom of who knew what,
when and who misled and who deceived?
EWING: I think we're pretty close. I mean, I think it's pretty obvious and a judge in Germany has said this that he believes that certainly in
several months before this all became public in 2015 that the top management knew and he has said - he believes there is some evidence they
may have known from the very beginning 2006-2007 when Volkswagen first installed this illegal software. So, we're close I think to finding out.
QUEST: And when you say no, was this is a sort of - yes, yes, yes, type of way or yes, I have seen some papers on it, but really, let's do this and
let's - I suppose, it goes with the culpability.
[15:30:16] EWING: Well, I think that that has yet to be proven in court. I mean, I've read a story saying that there was a presentation in 2006 --
2007 that laid out in considerable detail how the only good sulfur was going to work, he was prepared for a meeting of top management.
Volkswagen says it was never presided to top management, and I think that is one of the issues that's going to be coming up.
QUEST: The other companies, BMW, Daimler, even in Asia, now we're starting to see various companies tainted by their own versions of this. Do you
believe it was a case of they're all up to it?
EWING: Yes, I think to varying degrees, anyone who was selling diesel was having trouble meeting the emissions requirements because it just didn't
work with the technology they had. I think the difference is that Volkswagen really marketed it heavily in the United States where the
penalties were much greater.
And as far as we know, Volkswagen was the only one -- go ahead --
QUEST: Right, but the other car companies, knowing the difficulties of getting the emissions standards correct and seeing that Volkswagen was
succeeding would have guessed that's how they're doing it and we better put something of our own in there. Is that logical to assume?
EWING: Yes, I think so. I think that they may not know exactly what Volkswagen was doing, they know it didn't quite add up and they had to
respond somehow.
QUEST: Final question, and this is asking for your opinion rather than your reporting of that. Do you believe that correct penalties have to
prevent as a deterrent for the future being imposed yet?
EWING: No, not yet. I think the only thing that's going to deter people from another future is people going to jail.
QUEST: For a long time?
EWING: For -- it doesn't take long to scare to a chief executive. A couple of years will do it.
QUEST: That's the quote of the day. It doesn't take long to scare a chief executive, a couple of years will do it. Good to see you, sir, thank you.
EWING: Thank you.
QUEST: As we continue, Jaguar says it's delaying a decision on making electric cars in the U.K., heartily because of uncertainty over Brexit.
The company is also said to be stockpiling parts in case the movement of goods between Britain and the U.S. is restricted in a no-deal Brexit.
On the express, the head of the Institute of Directors told me, he is backing Prime Minister Theresa May's Chequers' deal.
(BEGIN VIDEO CLIP)
STEPHEN MARTIN, DIRECTOR-GENERAL, INSTITUTE OF DIRECTORS: Chequers brings forward lots of things that we want, such as frictionless forwarders a way
of dealing with trade and a way of keeping route to Europe and the U.K. together.
But there's obviously some issues, some concerns, but it's a very good starting point and we welcome that.
(END VIDEO CLIP)
QUEST: Now, one person urging Theresa May to chuck the Chequers proposal in the bin is her outspoken former Foreign Minister Boris Johnson. He
calls her plan a sad and dangerous mistake.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, FORMER BRITISH FOREIGN MINISTER: It is dangerous and unstable, politically and economically. My fellow conservatives, this is
not democracy. That is not what we voted for.
(APPLAUSE)
(END VIDEO CLIP)
QUEST: Bianca Nobilo is at a conservative party conference in Birmingham. How much support does Boris Johnson and his views if not him himself have
among Tories there?
BIANCA NOBILO, CNN CORRESPONDENT: Well, I think it's important that you make the distinction there because compared to this time last year when I
was at party conferences, a little bit less support for Boris Johnson and most of that has come from these scathing attacks that's launched against
the Prime Minister in recent weeks.
Which I've been hearing from party members and MPs, I've actually helped to get people to rally around the Prime Minister, that and her treatment in
Salzburg by the EU. The question of whether or not his proposals have support is a different one. There's a movement here to chuck Chequers.
And even though in the main halls of the conference, we've got the choreographed messages from the ministers and Theresa May's cabinet on the
fringes. That's where all the buzzes and all the excitement, and that is where the push to chuck Chequers and go for a Canada-style Brexit is really
mounting.
And there's a sense that Chequers is the worst of both worlds, is a common refrain I've been hearing here.
QUEST: So what happens next because Theresa May has to come out of this conference with something that suggests to the British people, her party
will not be united, but at least has a plan that stands the chance of working. And at the moment, you don't really need -- I mean, it's called
chuck Chequers, but it's already been chucked by the EU.
NOBILO: Yes, the EU have issues with key parts of the Chequers proposal and the Prime Minister doesn't look she's compromising on that any time
soon. She did also an olive branch to the Brexiteers yesterday when she announced her new immigration policy post-Brexit.
[15:35:00] Because of course, those who want to a hard Brexit generally want to take control back of the money, the laws and the borders. So she
was tackling one of those in particular. But she is standing firm on her Chequers plan. I think at this point, her credibility and her leadership
is almost synonymous with her plan for Brexit.
So if she moves on that or she allows it to get too attacked, well, the cabinet seem like they're willing to release this and look to a harder
Brexit and something along the lines --
QUEST: Right, OK --
NOBILO: Of Canada, and she becomes an even more precarious position.
QUEST: So just to remind viewers who are not following this closely as yourself, there really are two views here. There's the Chequers plan which
is the British government, which would give some form of access to the single market which the EU says is not acceptable because of the integrity
of this single market.
And on EU's own plan which would effectively have a border down the Irish channel, that's what being at the Irish Sea, which is not acceptable to
Theresa May. We're not closer to bridging that gap.
NOBILO: No, and Richard, you know, I've talked about this in the past, and that's a good way of putting it. The U.K. wouldn't count it as the breakup
of the United Kingdom, the EU wouldn't count it as the breakup of its internal market, so we're at this impasse.
And from the very beginning, the EU said, we're offering you two options, a no way option of close alignment and lots of access or a Canada option of
much less alignment but far less access to the key market of the EU. The Prime Minister is trying to carve this middle path.
Now, her chancellor said yesterday in his speech, that people thought the light bulb couldn't be invented before it was. And that was his argument
for suggesting that even though the EU says right now, this plan isn't feasible, that maybe they'll come around to the idea and all realize it
actually --
QUEST: Right --
NOBILO: It's a pretty intervention. Well, they're not that -- it's likely to happen, Richard, I think it remains to be seen.
QUEST: I mean, I could keep watching things, enjoy conferences such one can. It's been a good day for U.S. stocks, though, records on Wall Street.
We will come back with markets in just a moment -- and a record, and I can tell you well, you can see there, except the Dow.
(COMMERCIAL BREAK)
QUEST: Now, in just a few moments, we're expecting to see the latest record close for the U.S., which is this time tomorrow, we will probably be
changing Dow into 13 to 14 records for the Dow.
[15:40:00] It's up for the fourth straight day and it is going to be a record, because if you look at the markets in the last hour of trading.
The Dow boosted by Intel and optimism around global trade is up. But the S&P 500 has now eaten a small gain which clearly shows this is being
boosted, this is being boosted by simply the big stocks; Boeing, Intel, Caterpillar.
The broader market is down, so we want to say though, today would have to be red arrows even though it's a red, even though we are up on the Dow. So
because the Nasdaq and the S&P are both lower, two against one, so we are down.
Now, if we look at the price of oil, well, oil has risen to its highest level since -- through for the last four years. CNN's John Defterios has
more from Abu Dhabi.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Richard, near-term, the market is focused on a supply shortage due to U.S. snap-back sanctions
against Iran and the potential run-up to $100 a barrel. But within OPEC, they acknowledged what the industry calls the great energy transition where
electric cars will be a force to be reckoned with.
The real question is, when? Well, on the west, they speak of a 20-year transition to the pervasive use of electric cars. Players like Saudi
Arabia hope there's a 50-year window to utilize its more than 260 billion barrels of proven reserves.
That's a key reason that major state-owned oil companies in the Middle East are spending billions of dollars to hedge their bets with downstream
facilities like chemical plants or plastics. Now, while oil may be under threat, let us hope that the natural gas will serve as the transition fuel
to drive electric power.
Solar and wind power supplies are growing, but not the volume needed to fuel all those electric cars now projected to come down the pipeline.
Richard.
QUEST: John Defterios in Abu Dhabi. Jim Awad is the Senior Managing Director of the Advisory firm Hartland and Co. joins me now. Good to see
you, Jim.
JIM AWAD, SENIOR MANAGING DIRECTOR, HARTLAND & CO.: Always my pleasure.
QUEST: Oil --
AWAD: Yes --
QUEST: The rising price of oil, Jim, John Defterios explains the reasons why OPEC and the production. But how damaging is it when the oil prices
start to rise like this?
AWAD: Well, as long as the economy remains strong, it's very incremental, and as long as the prices are gradual and consistent, and supply is
available, it will not damage the economy, it's a restraint but it will not damage the economy.
And of course, there're some sectors of the economy that benefit from it where oil can hurt the economy if there was a supply disruption or if
there's a dramatic move. But for some reason, there were reward, and you went from 85 to 110 very quickly.
QUEST: But at a 100, no, your economy can withstand it.
AWAD: At a 100, the economy can still withstand it, but it starts to become -- it's like a tightening news, it's like interest rates going up.
It's a restraining factor and at some point, it really becomes -- notice, well, you don't know where it is, but that number is north of a 100.
QUEST: We can see over your shoulder, the Dow had 13 records on the Dow, this time tomorrow, it could be 14. Now, the broader market, the S&P and
the Nasdaq, they are both down today --
AWAD: Right --
QUEST: But suggest that only a few Dow stocks are really propelling that market up.
AWAD: Right, so what's been propelling the market of the stocks that were in trouble because of worries about trade of NAFTA, and that their business
was going to be heard. Those stocks are benefitting in a rebound, now that we've got Canada and Mexico on board.
But it's not healthy if you have the Dow going up and the S&P and the Nasdaq and the Russell going down. It's saying that maybe we've come
pretty far, pretty fast, and although we're likely still in a bull market, rising interest rates, political uncertainty, rising oil prices are acting
as a little bit of a restraint on a market that's made all these new highs.
QUEST: The difficulty is what you do. What does one do? I mean, you know, the ordinary investor, never mind the free-up(ph) for hedge funds that have
gotten an entire bevy of sophisticated trading tools. Those who have invested long in equities --
AWAD: Yes --
QUEST: Because they needed or wanted to get the gains now have the tricky task of deciding how to unwind or not.
AWAD: Well, I don't think you unwind because the economy is very strong and it's profits that ultimately drives stock prices and earnings have
grown more than the stock market has gone up. So PE ratios have actually come down.
But we are late in the economic cycle, and my answer to that question is investors should upgrade their quality, sell their lower quality stocks,
sell their lower quality bonds, stick with dominant companies with good balance sheets and a world global footprints and -- but do stay invested.
QUEST: All right, stay invested. The one aspect -- because I just want to refer to the bond market --
AWAD: Yes --
QUEST: We've not -- knowing how to play the bond market at the moment is exceptionally difficult.
AWAD: Yes --
QUEST: Yields are going up, prices are going down, but of course if you've got the bond, you get yield on the dividend anyway.
[15:45:00] AWAD: Well, what I'd say is staggering immaturities that -- so that you know exactly when the bonds are going to mature. I have to think
the sweet spot is the two-year time period now because the incremental yield for going out for more than two years is very little.
So I would stay short with fixed maturities, and that's where you want to upgrade quality. There's so much debt that has been created in this
economic cycle and company that have gotten that, that shouldn't have, stick with quality.
QUEST: Good to see you, sir.
AWAD: OK, thank you --
QUEST: Always good to have you, thank you. The starting yen has been filed in one of the biggest IPOs of the year. It's Tencent Music, it's
ready to make its Wall Street dance to the tune in a moment.
(COMMERCIAL BREAK)
QUEST: The wheels are now in motion for what would be one of the biggest U.S. IPO is by Chinese company Tencent Music has filed to list on Wall
Street. Now, Tencent dominates music streaming in China. The offering would be worth up to a billion dollars, the company of course is worth much
more.
The company is looking to repeat the success of Spotify which is up 35 percent since its shares went public back in April. Par-Jorgen Parson is
one of Spotify's earliest investors. Lot to cover on this. Let's talk about though, let's begin with the Tencent Music.
Now, Spotify and Tencent have a quid pro quo holding in each other --
PAR-JORGEN PARSON, INVESTOR: That's correct --
QUEST: And do you see it as a plus or minus or neutral that Tencent Music will be moving to list on the same exchange that this Spotify is?
PARSON: No, I think it circles good part -- both Tencent and Spotify, I think they're paradigm of streaming music is something that is a bit of a
new model that needs to be -- under fully understood by the capital markets and I think Spotify was pioneering that and now Tencent is coming to the
market as well with a slightly different model though.
QUEST: In the sent that --
PARSON: That they are predominantly advertising finance where Spotify is subscription service.
QUEST: Right, if Tencent Music started to grow bigger in the west and started to take Spotify on, on your own turf, that would be a bigger
problem.
PARSON: Well, I will say that in any market, you need to own up to what the consumers are expecting and I think that Spotify has really been
exceptional at understanding what the western customers are really expecting from them.
[15:50:00] And I think the way that the music market in Chinese market, it's actually different than -- yes --
QUEST: So you wouldn't imagine Tencent Music would encroach.
PARSON: Well, I wouldn't rule it out for sure, and if I were the leaders of Tencent or Spotify for that matter, I would -- they see every market as
a potential market.
QUEST: The Spotify IPO, it was bizarre to say the least, the direct listing mechanism and we covered it wildly, funny though, actually
happened. But the market is like Spotify, and I think the achievement in Spotify is that it has managed to thrive against very large players like
Apple, so it might have been -- or Amazon even into -- that might have expected to squash it.
PARSON: No, I think when you are specialized in something like Spotify is, then you do have an urge because you can develop entirely for that
particular purpose. And you can see that Apple for instance, they have a lot of different objectives to meet when they release a product and legacy
to integrate too and so on and so forth.
So I think that Spotify inherently has an advantage there to be focused.
QUEST: You're a venture capitalist, tell me, what's the next thing I should be looking at, what's the next Spotify or elsewhere in the market --
PARSON: Yes, so we're investors in "FuboTV". "FuboTV" which is an over- the-top streaming service for live sports and you're on there as well --
QUEST: Yes --
PARSON: With its -- yes, and it's a phenomenally successful model to bring streaming to devices -- digital devices of sports which you typically only
can through cable today.
QUEST: Good to see you, sir, thank you very much indeed, "Fubo" --
PARSON: "Fubo" --
QUEST: "Fubo" --
PARSON: Yes --
QUEST: "Fubo" --
PARSON: Thank you.
QUEST: Thank you. In New Zealand, a three-day weekend may soon become the new norm. Perpetual Guardian is an advisory firm and it's allowing its
employees to work four days a week while being paid for five. The company is saying productivity has actually increased.
Chief Executive Andrew Barnes joins me now from Auckland. Good to see you, sir. This is a very interesting idea. First of all, the employees have to
opt in to this, don't they? And there has to be some form of productivity goal to ensure they're not slacking.
ANDREW BARNES, FOUNDER, PERPETUAL GUARDIAN: That's exactly right, Richard. How it works is each of our employees opts in, we're running it for the
year cycle, and for that, they have committed to deliver a level of productivity that's agreed between management and the employee.
If they deliver that productivity, then I will gift them a day off every week.
QUEST: Andrew, does this work in all forms of work? I mean, productivity gains, how would you for example -- I mean, what -- how do you judge
productivity gains in this -- can it work in different companies?
BARNES: I believe it can. I think the start point is you have a sensible conversation with your employees about what they think productivity,
acceptable letter with productivity is. Obviously, as a manager and an owner, we have a view of what acceptable productivity is.
At the highest level, the profitability --
QUEST: Why --
BARNES: Of the company asking the revenue levels to become.
QUEST: I know you opted the data and you saw the research, and certainly from what you've seen, staff are happier, they're working harder and
they're working more productively. It seems to be a win-win, but why am I suspicious that it is?
BARNES: Well, frankly, this is something that we've known about for years. I think one of the very earliest experiments, this was a British munitions
factory in the first World War that cuts its working day from seven days to six days. The productivity of its -- shelves went up, the quality of the
shelves went up.
We've known about this for a long time, but those of us of my generation -- our generation, we are committed to the fact that working long hours equals
working harder, equals working smarter. And we've got to get over that and look at the effectiveness of that type of working day in the 21st century.
QUEST: And then you get this, obviously, like today, we're reporting Amazon increasing the minimum wage to $15 an hour for Amazon employees.
This balancing act between increasing pay versus time off or four-day week, and -- because I know you're still paying in the same amount as for the
five as for the five.
But which do employees prefer more free time or higher pay or probably both?
BARNES: Well, in the critical point, Richard, is asked. When we did our initial trial, we went to the employees and said what do you want? How
would you do this? And I know that there are some companies where people will say, we just rather have flexibility and I obey --
[15:55:00] QUEST: Right --
BARNES: But work longer hours. So I think the starting point is actually to have that open, honest style with your employees. And that bizarrely is
the thing that gets you the better productivity. It's just, you know, having that open conversation.
QUEST: Do you work a four-day week?
BARNES: But in all of the companies that I own, I work a four-day week --
QUEST: Yes --
BARNES: Sadly, worked --
QUEST: And none of them have gone bankrupt yet?
BARNES: No, none of them have gone bankrupt yet.
QUEST: Good to see you, sir, thank you. This is a fascinating story, the four-day week in New Zealand, good to see you, sir, thank you for joining
us in the morning for your Wednesday. Look at the markets, need to leave you before we go for a profitable moment because the Dow is at a record and
with the 14th record so far this year, not in any way near the same as the S&P at 19 or the Nasdaq at 20.
Well, it's still good nonetheless, and we will have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, on this program, we have discussed this evening, two different ways of remuneration. Amazon with its new $15
an app of 350,000 employees, quite a remarkable announcement, and just right at the end of the show, you heard Permanent Guardian saying a four-
day week in our working lives which are dominated by the tyranny of the urgent.
And by that, I mean, the e-mails that never end, morning, noon and night. The voice-mails if you still even use that. The text messages, the
WhatsApp, the ever incessant requirement and demand to produce. So it is reassuring and refreshing that we are able to bring you stories of life,
work, balance.
Basically Amazon paying more, Permanent Guardian giving time off. Because it is true, we will work as hardened, not harder if there's real reward or
perceived to be benefit. And that doesn't mean just cash in the pocket, it means for instance like in New Zealand working a four-day week.
More of it. That's what I'd say. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the
hours ahead, I hope it's profitable.
(BELL RINGING)
The bell is ringing, the Dow is at a record, the day is done.
END
