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Quest Means Business
The Preliminary Crash Report From Ethiopian Airlines Flight 302 Is Out; President Trump Threatens The Mexican Auto Industry Unless More Is Done to Stop Drugs Being Smuggled Across the Border. Aired: 3-4p ET
Aired April 04, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, ANCHOR, CNN: Welcome to "Quest Means Business." Right now, the Dow up some 150 plus points led by Boeing as the streets awaits
any news on those trade deal talks.
In tonight's show, Boeing on the defensive after a preliminary report clears the pilots who tried to save the doomed 737 MAX 8. In an exclusive
interview tonight, the CEO of Ethiopian Airlines tells us what it will take to restore confidence in the plane.
President Trump threatens the Mexican auto industry unless more is done to stop drugs being smuggled across the border.
And Tesla stock take the hits after the firm reveals a slump in sales while the CEO is in an ego showdown with regulators.
Live from London on Thursday, April the 4th, I'm Julia Chatterley. This is "Quest Means Business."
Hello and welcome once again to the show. Tonight horror in the skies. The preliminary crash report from Ethiopian Airlines Flight 302 is out. It
provides a terrifying second by second account that appears to absolve the pilots and poses a myriad of new questions for Boeing.
The documents first obtained by CNN show how the pilots battled Boeing's automated systems for nearly the whole of the six minute flight. Sensors
incorrectly told the onboard computer the plane was at risk of stalling and despite the pilot's best efforts, it executed multiple un-commanded nose
dives.
The report says the pilots recognized the problem and followed procedures prescribed by Boeing to try and save the plane. The captain repeatedly
called out, "Pull up, pull up," but as the aircraft last height, the forces pulling it down with too strong to overcome. All 157 people on board died
when the 737 MAX 8 hit the ground.
Events appeared to mirror what happened on board another 737 MAX, the one belonging to Lion Air the crashed off Indonesia in October with the loss of
all 189 people on board.
In an exclusive interview, Richard Quest spoke to the CEO of Ethiopian Airlines. He said the report confirms his pilots did everything they
could. Richard asked if he is now certain it was Boeing's MCAS software that led to the crash.
(BEGIN VIDEO CLIP)
TEWOLDE GEBREMARIAM, CEO, ETHIOPIAN AIRLINES: The situation as you know, it has been -- it has never been known in the industry, it is not in our
flight operations manual. It's not in our training manual. It was only disclosed after the Lion Air crash.
So at this stage, although there three heavy automatic and un-commanded nose dive from the flight control system, in today's category and in
today's terminology, it looks like the MCAS was activated.
RICHARD QUEST, ANCHOR, CNN: Are you surprised that the report doesn't specifically say that this Maneuvering Characteristics Augmentation System,
it doesn't act, as far as I can see so far, it doesn't actually use those words -- I may be wrong and say that was the cause or at least that kicked
in. It just talks about un-commanded nose downs.
GEBREMARIAM: Yes, Richard. I'm not surprised because this is a preliminary report, and the accident investigation is going to continue
with detailed analysis. So at this stage, all what we know from the FDR and CVR is that there were un-commanded nose dive automatic activation
three times in the airplane.
So, further, we have to find out what part of the flight control system was causing this un-commanded nose dive activation.
QUEST: The report has two recommendations. Firstly, that the maneuvering characteristic system -- the flight control system is reviewed. And
secondly, that testing is up for safety. Are you confident in the actions Boeing is taking, the so called software patch?
GEBREMARIAM: No, we cannot be confident at this stage. As you know, even Boeing is testing the solution. So it is still at its initial stage.
[15:05:10]
GEBREMARIAM: We would have to learn more about it. The industry is trying to learn more about it. Regulators are trying to learn more about it and
then it has to go through the FAA certification. So we cannot comment on that, because it's really at a very early stage.
QUEST: What will it take for you to be confident enough to put your planes back in the air? Bearing in mind, it was the same FAA that said it was
safe with MCAS. So now, what would it take before you are confident and secure in your mind to put your planes, your staff, your passengers back in
the air on a 737 MAX 8?
GEBREMARIAM: That's definitely a long way, Richard, because number one, we are the victim on this accident. So we have a special responsibility more
than the others. Of course, the airplane more than 370 airplanes are grounded. And I would imagine that the FAA will take this seriously,
Boeing will take it seriously. And that's what they are doing so far.
But the other regulators also, IATA, China and the others will also take this case seriously. And then we will be following this old regulators
because in our case, it's a special case, it's a special situation that we are in. So definitely, we will be the last one to follow.
QUEST: And related to this, Tewolde, the plane, I mean, obviously, an incredibly awful event for your airline. But the criticisms have been made
of Ethiopian on training, that your pilots may not have known about these things, whatever it might be, does today, at least allow you to say, "We
got it right. Our pilots knew what they were doing, and they still were unable to control the plane."
GEBREMARIAM: Yes, Richard, we have always been confident on our pilots. We have always been confident on our training standard, global standard.
As you know, we have one of the best aviation academy with the state of the art training technologies comparable to the rest of the world. And we have
always been confident on that.
But today, we are very proud of our pilots, because it is proved in the preliminary report that they have done beyond what they are expected to do.
And today was daylight for us to prove wrong or the speculators with false allegations.
QUEST: So finally tonight, Tewolde, what are your emotions? That clearly you are presented with a plane that may have had an inherent issue that has
caused this, but you now know that you're getting a better idea of understanding -- what's your thoughts on that?
GEBREMARIAM: Well, you know, Richard, the accident is a tragic one which has killed 157 people, so my condolences still go to the families of the
victims. On the other hand, today I'm more relieved on some doubts being aired by some media, some false allegations, some false speculations that
we have now put them all to rest because it has been proved that the pilots were well trained and they have demonstrated in exercising all the
emergency procedures recommended by the manufacturer and approved by the regulator.
QUEST: And your feelings towards Boeing tonight?
GEBREMARIAM: Well, as I have said right from the beginning, you know, Boeing is our longtime partner. Boeing has an excellent safety record,
more than hundred years. So we have no reason to doubt but on this airplane, there seems to be a problem. And I think Boeing is trying to do
the right thing and we will have to remain partners and we have to - we'll have to work together to make aviation safer and safer.
(END VIDEO TAPE)
[15:10:00]
CHATTERLEY: In the last few moments, a Boeing statement has just been released. Let me bring that up you, quote, "We are at Boeing sorry for the
lives lost and the recent 737 MAX accidents. These tragedies continue to weigh heavily on our hearts and minds, and we extend our sympathies to the
loved ones of the passengers and crew on board Lion Air Flight 610 and Ethiopian Airlines Flight 302. All of us feel the immense gravity of these
events across our company, and recognize the devastation of the families and friends of the loved ones who perished." In a separate quote, "We own
it. We take responsibility."
Let's talk more about this. Mary Schiavo was Inspector General at the U.S. Transportation Department. She now represents families of air crash
victims and currently has litigation pending against Boeing. Mary, great to have you with us. I mean, that was just a little subset of this broader
statement from Boeing at this moment, but my read on this is that Boeing is coming out directly here and hands up, it was the MCAS system, we're taking
responsibility and we're working to fix it. You're take here.
MARY SCHIAVO, TRANSPORTATION ANALYST, CNN: As well, they should. I mean, this is something that Boeing should have done right from the start. They
should have done this after the Lion Air crash. But obviously, for anyone to have any confidence in a Boeing aircraft again, they have to step up the
plate and take responsibility.
And key in that statement, I thought is where they said, the MCAS system went off. It was unintended to go off when it did, obviously, you don't
want to push the nose down on takeoff. Anyone who has ever flown a plane even though you know me, I like small planes, everyone knows you cannot
have a system that pushes the nose down on takeoff. It is sad and unfortunate that it took an Ethiopia crash after the Lion Air crash to have
this happen.
But this is what Boeing needed to do immediately after the Lion Air crash and now after this one, and they said again, we will make sure this does
not -- the MCAS system does not have another unintended misfiring. In other words, this system won't go off. That's a tough promise to keep
because it's happened twice.
CHATTERLEY: Mary, you raise an important point, and that was what we got from this preliminary report. And this isn't conclusions, just the early
stages, with the similarities between what we saw here in this Ethiopian Airlines flight and what we saw five months ago in the Lion Air crash here.
I mean, you raise a very important point here. Hindsight is perfect sight. But there will be all sorts of questions here not only for Boeing, but for
the FAA, and why this aircraft wasn't grounded after that Lion Air flight crash and actually, we had to wait five months and another flight crash
before affirmative action was taken.
SCHIAVO: Well, I think I have an idea. And then I see this in so many crashes that I've worked over the years because after the first one, they
always blame the pilots, they say, well, the pilots would have been able to or should have been able to fly out of it.
You know, we go back to this daring do Barnstormer days, of whoa, you know, the brag of pilots of years gone by, "I can fly anything. I can fly a barn
door." Well, you can't because you're flying a computer now. And in this case, you weren't even told that the computer in this computer system was
there.
So we heard and I think very unfairly after the Lion Air crash, you know, trying to blame the pilot, saying the pilot should have able to shut off
the system and fly out of it. But with Ethiopia, we now know they had just you know, 40 seconds or less. And they tried to shut it off, and it didn't
work, apparently according to this preliminary report, which is only preliminary.
But that puts a whole new face on this problem and it puts it squarely at Boeing's doorstep and it was correct for them to say, "We take
responsibility." I think that's what the world needs to hear from Boeing right now.
CHATTERLEY: The question, Mary is, is it enough? I'm just going to pull another extract out, "Together, we will do everything possible to earn and
re-earn the trust and confidence from our customers and the flying public in the weeks and months ahead." I mean, we can put a financial price on
compensation to some degree on the cost of grounding flights. What we can't put a price on here is reputation -- reputational risk here, Mary can
Boeing get that back in the weeks and months here?
SCHIAVO: Well, I think that's entirely up to Boeing. What Boeing does in the wake of this, now people are suspect about this plane and they need to
be because now the whole world has learned that this plane has a tendency to pitch nose up. And it does that because of the new engines they put on
the MAX because of changes in landing gear that no one has talked about yet and changes they made to the tail. The tail is a little bit different than
other 737s.
Boeing really needs to go back and see if a software patch was the right thing for a plane that tends to pitch nose up. And if Boeing is willing to
bet its reputation as a company on that, then that's something that Boeing will have to solve largely by itself since we now know the US Federal
Aviation Administration isn't much help and doesn't have the expertise.
[15:15:10]
SCHIAVO: If they have a third one, this line is done. There will be no one willing to board 737 MAX ever again. So Boeing has got to get it
right. And I think they have to go back prior to the software patch to really satisfy the world that this plane is not going to put pitch nose up,
and not going to do something unintended that the pilots can't control. So they are at a crossroad.
CHATTERLEY: And make sure it's not just a software fix, it's a bigger -- and not a bigger problem, like a hardware problem or the structure of the
plane. Mary, you raise another very important point. Thank you. Mary Schiavo speaking there.
SCHIAVO: Thank you.
CHATTERLEY: All right, despite the harsh spotlight that has been turned on Boeing today and the questions being asked, the share price is up 3 percent
today. The shares are still down more than 6 percent since the Ethiopian Air crash, and that has cut Boeing's market cap by around $14 billion.
That's really just a bleep for Boeing.
Over the last three years, its shares have tripled in value. And that has got a lot to do with the success of the 737 MAX.
Jim Corridore is the Director of Industrials Equity Research at CFRA and he joins us now. Jim, fantastic to have you with us. In light of what you
just heard there in the statement from Boeing seeming accepting responsibility here for the failure of the MCAS, the anti-stall system,
what do you make of today?
JIM CORRIDORE, DIRECTOR OF INDUSTRIALS EQUITY RESEARCH, CFRA: Yes, that's tremendous news, I believe for the stock because I think that's exactly
what Boeing needed to do it. And Ms. Shiavo rightly said that Boeing needed to own this, and they are now owning it.
That would have been great if they did it earlier, but they are doing it now. After the preliminary findings from the reports show that the MCAS
system does seem to have engaged three times, Boeing is owning the situation and saying that they're going to do whatever they can to regain
passengers' trust. That's what I wanted to see from them and I think that's an important step in the right direction.
CHATTERLEY: Can they do that? Because if I look at what this jet means to Boeing, I mean, there's very few of them out there. In fact, grounding
them was not that big an issue. It's an order book of 80,000, an estimated future revenue stream of $550 billion, if they can't reassure customers,
reassure airlines that they can get these jets back up in the air and customers will still be willing to get one them, they have a real problem.
CORRIDORE: Yes, they definitely have a problem and they are doing what they can to fix it. But yes, they do have to restore passengers' trust and
their airline customers' trust. I think that was an important step.
Last night, a tweet from CEO, Dennis Muilenburg that he flew on a 737 MAX last night with the software patch, and things went off smoothly, that's a
very first step. If the CEO of the company is willing to put his life on the line to say that these planes are safe, that's in step in the right
direction.
Number two, here, they are taking ownership of the situation, saying they're going to do whatever they can. Number three, they have been
working on this software patch, it seems to be ready. And I don't think that they're willing to stake their reputation and not have it right.
Boeing has decades of safety in their culture. Even the CEO of Ethiopian Airlines you just had on said they're just still going to partner with
Boeing. That's an important admission that, you know, even the affected airline, and my heart goes out to all the victims, too is still willing to
work with Boeing.
Boeing is going to be around for decades to come and eventually they will restore trust from their passengers.
CHATTERLEY: Jim, and you make an important point about prior to this an exemplary safety record. And I think that is a very important point to
make here at this point to what more can they do? Because one of the other things that Mary suggested was, they have to get back to basics here and
not just assume that it's a software fix that can solve this. They need to go back and look at what they did with the engine, with the structure of
this plane and changes that were made to make sure that it's not just a software problem, and it could be something like a hardware problem here.
Do you think they'll be doing that already?
CORRIDORE: Yes, I'm sure they're looking at every aspects of the plane. And they're not going to say that it's safe and ready to be brought back
into service until they're certain. And yes, Ms. Schiavo did make a very good point that the engine size did change, the nose does tend to pitch up.
But it's important to note that in these two accidents, the nose didn't pitch up. It pitched down because the MCAS system inadvertently set into
motion.
So this is the thing that Boeing is trying to fix right now to make sure that that never happens again, the pilots can immediately override the
system, the system, if the sensors don't agree, the system won't even engage any longer. So that's a step in the right direction, but certainly,
you're right, they need to look at everything from top to bottom, they cannot afford to make another mistake.
CHATTERLEY: But your longer term assessment here, Jim, very quickly is that Boeing will survive and will be fine.
CORRIDORE: Yes, the demand for commercial aerospace is so strong. There's only two major manufacturers Boeing and Airbus. Both of them have sold out
order books for the next seven to eight years. Airbus cannot handle all the demand as long as Boeing gets this right, they bring this plane back
into service. They get FAA certification. They get certification from foreign governments around the world. The plane continues to fly. There's
no further incidents. Everything will eventually be okay for the company.
[15:20:02]
CORRIDORE: Certainly there's going to be a huge financial impact, lawsuits, loss of revenues, some customer cancellation incidents, but the
long term demand is so strong that Boeing stock at least is going to be okay, we think.
CHATTERLEY: Yes, lots of caveats. But for now, Jim Corridore, thank you so much for joining us.
All right, we'll have much on the Ethiopian Air reports later at this hour. And we'll be looking at Boeing's relationship with the Trump
administration, too, and the self-confessed tariff man could soon be up to his old tricks. Mexico, look out. You're watching "Quest Means Business."
Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show. President Trump is backing away from his threats to immediately close the U.S. border with Mexico.
Although, he now says he will slap tariffs on auto imports from the south of the border unless Mexican authorities stop drugs from being smuggled
into the United States.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're going to give him a one-year warning and if the drugs don't stop or largely stop, we're going
to put tariffs on Mexico and products, in particular, cars. The whole ball game is cars. And if that doesn't stop the drugs, we close the border.
(END VIDEO CLIP)
CHATTERLEY: Earlier, I spoke to President Trump's former Director of Communications, Anthony Scaramucci. He told me it would be disastrous for
the U.S. to close the border.
(BEGIN VIDEO CLIP)
ANTHONY SCARAMUCCI, FORMER WHITE HOUSE DIRECTOR OF COMMUNICATIONS: Shutting the border is really something that the United States cannot do.
You've got $16 billion to $17 billion worth of commerce just coming into the state of Arizona on an annual basis. And this would be a disaster for
the U.S. economy.
(END VIDEO CLIP)
CHATTERLEY: Joining us now, Cristina Alesci. Cristina, The Mooch basically told me earlier today, it's not happening and the bark is worse
than the bite. But the President is still threatening here. Economic consequences huge for the United States, too.
CRISTINA ALESCI, POLITICS AND BUSINESS CORRESPONDENT, CNN: Yes, that's right. I think tariffs is his big point of leverage. And he sees it
potentially working in China and we know that the talks there are progressing towards some sort of, you know, PR victory for the President.
Some deal that he can tout.
But the question is, is it going to be the game changer that Trump really wants to see? And that is still unclear.
[15:25:00]
ALESCI: Look, what is clear is that China has said or as indicated that it is going to buy more U.S. goods and it looks like there's some kind of
mechanism whereby which the U.S. and China can resolve disputes over this deal and the U.S. can enforce the deal, especially when it comes to forced
technology transfer and wholly-owned subsidiaries of U.S. companies in China.
But the question really is, what does China do from here? I think what I've heard from many experts is that China has learned throughout this
process, that it needs another ally with a big economy. And that's why you see a lot of Chinese officials traveling over to Europe and making
alliances and talking to those economies because it's still wants a counterweight to the U.S.
CHATTERLEY: You know, it's interesting, Scaramucci said, "Look, this is not going to be too tough on China. It will be fair trade deal," because
they both recognize - both countries recognize at this point that they need each other going forward to your point, too, but you're also suggesting
that we do see progress on China opening up and tackling some of the big concerns for the U.S. here like intellectual property theft. That's far
tougher to address and enforce than just asking China to buy a few trade goods or buy more trade goods here. Are we seeing the tougher thorny
issues are going to be tackled in this deal?
ALESCI: What I'm hearing is that the two sides are moving towards some sort of mechanism, some way to hold China accountable to the promises that
it has made. Because remember, if history serves as an example of what's to come going forward, China has made these promises before.
China has promised to police forced technology transfers. China has promised to open up its economy and allow us companies to own their
subsidiaries, but we haven't seen them actually follow through on a lot of those things.
So I am hearing that the U.S. and China are moving towards a mechanism, but the question again is, is China going to back down and you know, move away
from sort of some of the bigger things that it does like corporate espionage or you know, there's a big fight over 5G right now and whether
the Chinese are able to spy on U.S. companies through 5G technology? Those are the big issues and it's unclear that those issues are actually being
addressed in these talks.
CHATTERLEY: Yes, watch this space. Cristina Alesci, thank you so much for that. And as Cristina mentioned, the best is clearly waiting to see what
comes from those trade talks.
Let's call it cautiously optimistic. The Dow is up in the final hour of trading. The S&P and NASDAQ are fairly flat. Payrolls tomorrow of course
key, but treading water makes sense.
I can give you a look at the Dow 30 stocks. Boeing shares up right now around 3 percent and that's responsible for a significant chunk of the
Dow's gains. Remember, the weighting there, more than 11 percent of that index -- Boeing.
All right, Paul La Monica is in New York. Paul, I want to start with the Jeff and MacKenzie Bezos. MacKenzie say she will be keeping 25 percent of
the couple's Amazon shares, but will have no voting rights after their divorce deal. That, of course, critical for investors because the fear was
that she'd maintain some element of control and that could cause problems going forward. Not the case, it seems.
PAUL LA MONICA, REPORTER, CNN BUSINESS: Exactly, this seems to be by both tweets from MacKenzie and Jeff Bezos to be an amicable agreement to
dissolve their marriage. And as a result of that, MacKenzie Bezos will still own a significant chunk of Amazon stock, about 4 percent. But she's
not going to have any of the voting shares. So you're right. I don't think any concerns that people might have had that we would have this feud
in the boardroom between, you know, ex-spouses that's not going to materialize.
And notably, she's also giving up her up stakes in Blue Origin and "The Washington Post" the rocket company and newspaper giant that Jeff Bezos
owns personally.
CHATTERLEY: So let's speak about more amicable joinings. Beyonce Knowles with Adidas. Talk me through what's going on there.
LA MONICA: Yes, Beyonce is taking her IVY Park brand to Adidas. They'll sell shoes and other fashion wear and remember, this is the company that
had been a partnership with Top Shop and that got dissolved because of the allegations of harassment that are made against Philip Green in the U.K.,
so IVY Park needed a new home and it looks like Adidas was more than happy to partner with Beyonce and you know, they've got Kanye as well, he is
another super star endorser.
So I think this just adds to all the buzz around Adidas over the past couple of years that not just athletes are great endorsers but they can get
these pop culture icons like Beyonce and Kanye West as well.
CHATTERLEY: Having an Adidas moment there, Paul.
LA MONICA: You say tomato, I say tomato. Yes.
CHATTERLEY: Yes, yes. Paul La Monica, thank you for that. All right, let's move on. Still to come, our in-depth look at the preliminary report
on the Ethiopian Airlines crash continues. What Boeing and its clients are saying up next.
(COMMERCIAL BREAK)
CHATTERLEY: Hello, I'm Julia Chatterley, there's more QUEST MEANS BUSINESS in a moment where Boeing's chief executive says we own it, as the company
faces a crisis of confidence in its 737 Max.
And Tesla CEO Elon Musk is facing the regulators just as sales of his cars take a big hit. First, though, these are the headlines on CNN at this
hour. Boeing says -- Boeing says its MCAS anti-stall system played a role in the crash of Ethiopian Airlines flight 302 and a Lion Airplane last
year.
The company vowed to take any and all safety measures, and said it would work to fix the problem. Officials in Ethiopia released a report that
found strong similarities between the two crashes. We're going to have more on this story in just a few moments time.
We also almost never hear from special counsel Robert Mueller's team, but some of his investigators are now voicing frustrations with how Donald
Trump's Attorney General is summarizing their Russia report. Sources say the investigators wrote multiple summaries of the report themselves and
their findings were more damaging to President Trump than William Barr let on.
Amid economic and political turmoil in Venezuela, a human rights organization says the healthcare system is in a state of utter collapse.
Human Rights Watch is calling for a full scale emergency response from the United Nations. It says infectious disease and child malnutrition rates
are rising sharply.
[15:35:00] German Chancellor Angela Merkel says the EU will do everything it can to prevent a no deal Brexit. She said she hopes British Prime
Minister Theresa May will be able to reach a deal with opposition leader Jeremy Corbyn.
Right, to our top story once again. Boeing is promising to take all necessary steps to make its 737 Max aircraft safer. In a video statement
released this hour, the company's CEO acknowledged its MCAS system which was meant to prevent accidents played a role in the crash of Ethiopian Air
flight 302 and last year's crash of Lion Air flight 610.
(BEGIN VIDEO CLIP)
DENNIS MUILENBURG, CHIEF EXECUTIVE OFFICER, BOEING: The full details of what happened in these two accidents will be issued by the government
authorities in the final reports. But with the release of the preliminary report of the Ethiopian Airlines flight 302 accident investigation, it's
apparent that in both flights, the Maneuvering Characteristics Augmentation System known as MCAS activated in response to erroneous angle of attack
information.
(END VIDEO CLIP)
CHATTERLEY: This comes hours after CNN obtained the preliminary report into the crash of the Ethiopian Airliner. That report shows the aircraft's
pilots fought the plane's automated systems virtually from the minute it took off. Last year, Boeing CEO also talked about this as well.
Tom Foreman is following the story from Washington and will bring us up to speed on this. Now, Tom, my assessment of that statement and, of course,
what we've heard from Boeing in that release as well is that they're saying, look, we own this, we take responsibility, and now it's our job to
reassure customers and the public that we can make this safe. Would you agree with that?
TOM FOREMAN, CNN CORRESPONDENT: I would agree. I would say that they were sort of fish biting at that for several days. Now, they kept trying to
suggest, well, pilots ought to be able to handle this. The FAA kept suggesting, well, pilots should be able to sort their way through it.
I think this preliminary report today which is a harrowing read of pilots fighting a plane as it had these insane readings out there. There were one
of the angle of attack indicators show which angle the plane is going, at one point it was indicating there were going 70, 75 degrees up into the
sky.
And so this MCAS system overrode that, and said, well, I've got to bring this plane back down and ultimately led to this crash. The bottom line is,
when you hear that the data recorders and the flight recorders are telling you that this system led to a plane as it did in this report, going into
the ground at a 40 degree angle at close to 600 miles an hour.
Yes, that company has to get out in front and say, this is our responsibility. Hundreds of people died, we have to say this is the thing
and quit dodging around it. Now, will that be enough? I don't know, Julia.
CHATTERLEY: OK, so you posed so many questions there. One, they've said look, we're working on a software fix, we know they've been working on a
software fix since the Lion Air crash of course, five months ago. But we've had questions posed on this show that, you know, it goes beyond the
software system.
You have to make sure that the structure, the design of this plane also is not at fault if ultimately you want to reassure customers, reassure
airlines and the public that they're safe to use and get on these flights. They also have to do that too, surely.
FOREMAN: Yes, absolutely, they do. Look, we know that they knew from the Lion Air crash, there was a problem. Obviously, the people with lawsuits
and various regulators are going to say, then why didn't you on your own park these planes and say when we fix them, we'll make them fly again.
But you raised a very good point there, Julia, and this is one of the key questions. This is a very old air framed-type of plane, this has been
around a long time. It's the most popular in the world. And it is a real staple of Boeing's product line out there.
So changing the whole plane, redesigning the whole thing is an enormous and hugely expensive endeavor with no guarantee of success. But you're
correct, at some point, have you engineered and engineered and engineered to the point that you have a Volkswagen that is posing as an aircraft
carrier.
Oh, yes, that can be that. That's not really what it was meant to be. That's really the question here, Boeing may have a good answer to that.
Right now, embracing the software fix, embracing much more training of pilots, embracing a whole lot of other testing may be the best of many
expensive bad solutions even as they wrestle with the problem of many lives being lost here and the resultant lawsuits and the planes being grounded.
Yes, they have to come up with a way to make people believe in this plane again. And right now, it's not clear that the airline industry, the pilots
or the flying public does.
CHATTERLEY: And there's bigger questions here, it's not just about Boeing surely, it's about the FAA, it's about regulators involvement in this and
the certification process that Congress has allowed to become very integrated between regulators and companies like Boeing themselves.
[15:40:00] Do you think in light of this, perhaps that needs to be addressed as well, and changes will be made there too at whatever cost to
ensure that safety is paramount going forward?
FOREMAN: It will definitely be addressed. I don't know if changes will be made. Remember, in this country, we've really marched for a pretty good
wild down the road of saying, well, industry should take care of these things, government should not be so involved. Governments is not very
efficient, that's the view industry should do it.
And that has been fairly broad, yes, so on the Democratic side, there's more resistance to that. But there's been a reasonable amount of support
over there too in certain areas. I think what you have to see in these investigations is some clear answers.
Did the federal investigators truly get their hands dirty checking out this plane? Did they really serve in a supervisory role or were they some kind
of rubber stamps. I know many people at the FAA take their jobs very seriously. There's no question about that. The question is did the right
people take them seriously at the right time with the right company, and was there any pressure for them to not take it that seriously in the name
of corporate success and profits?
CHATTERLEY: It's a terrible question to ask, Tom, but I'm going to ask it anyway. If this hadn't been Indonesia or Ethiopian Airlines, we heard from
the CEO on the show earlier today, if this had been a Southwest flight failure --
FOREMAN: Oh, yes --
CHATTERLEY: That we had seen here, do you think the reaction would have been different?
FOREMAN: I -- you know, it's purely a guess, Julia, if it were a Southwest or an American Airlines plane here, I think they all would have been
grounded within hours. And the push for answers would have happened a whole lot faster. Now, I'm sure one argument you might hear is that some
people might say, well, the pilots here have a greater depth of experience and the -- more of the airlines bought all the options to make it safer,
but no, there's no question about that.
And yes, when accidents happen in some places like Indonesia or Ethiopia, I mean, I don't want to be cynical about it, but that is a different impact
on the American political world than if it happens in Indianapolis.
CHATTERLEY: I agree with you, just gave me goose bumps.
FOREMAN: Yes --
CHATTERLEY: Tom Foreman, thank you so much for your insight there --
FOREMAN: Good to see you, Julia, bye --
CHATTERLEY: Likewise. All right, let's move on. Tesla has reported its biggest ever drop in car deliveries. The company says it's a blip, we'll
explain, we've got the details, stay with us.
[15:45:00] (COMMERCIAL BREAK)
CHATTERLEY: Tesla shares down more than 8 percent in the final hour of trading. They were off as much as 11 percent earlier. That's because
Tesla has delivered just 63,000 cars last quarter.
That's almost one-third lower than in their three months prior. The biggest quarterly fall in fact in Tesla's history, deliveries are still up
though, compared to last year. Tesla says a number of factors were to blame including a reduction in tax credits in the United States and
logistical problems with international shipments.
Tesla investors are also watching proceedings in a court in New York. Elon Musk is there for a hearing. U.S. regulators are asking a judge to hold
Musk in contempt of a legal agreement that requires Tesla's CEO to get pre- approval to tweet about the company. Joining us now, the car coach Lauren Fix, Lauren, great to have you with us.
What do you make of these numbers because we were expecting some weakness in the model 3 numbers, and we've seen that out for a year. No sign that
they're cannibalizing the X sales here, but I'm a little bit worried about what we saw there too, so talk me through it.
LAUREN FIX, CAR EXPERT: Well, first off, the S and the X models have downed quite a bit with only 1,200 sales. That's a huge dive based on what
we had expected. We knew that it would be a little soft, but we didn't realize that the impact would be that great.
And we are looking at model 3 sales down 0.03 percent, that would cause any car manufacturer to be extremely concerned about the future of the company
and the brand itself.
CHATTERLEY: Do you think it's a one quarter blip or are you seriously worried here?
FIX: I'm seriously worried. The reason is he's losing his $7,500 EV tax credit that is available in the United States, and that is now cut in half
as the end of the first quarter of 3,750, if consumers aren't getting the amount of money they think off of the car sort of a discount or an
incentive, it will cause them to look at other vehicles that are getting that $7,500 tax credit such as the Jaguar I-Pace, the Audi E-tron or even
the Nissan Leaf still has it available.
Remember, General Motors has also lost their EV tax credits. It's been cut in half to $3,750. This is a huge impact in the U.S. when you look at your
European sales and international sales, the impact that they can't get products through their countries quick enough clear their Customs, clear
their government regulations is an impact.
We also monitor the sales in Norway which does post on a weekly basis which is great. We're noticing that sales are down there as well and that Jaguar
and Audi and Mercedes are really picking up some of those sales.
CHATTERLEY: Yes, I mean, that's an interesting one. Other competition out there, and of course, we've seen some erratic behavior --
FIX: Yes --
CHATTERLEY: From Tesla. The price changes --
FIX: Yes --
CHATTERLEY: All sorts of things. Very quickly, how closely are you watching this hearing today, and the fact that authorities, the SEC trying
to hold him in contempt for again using Twitter when they were hoping that would be more regulated.
FIX: I am watching it very closely. I did hear that Judge Nathan said that she would not remove him from the C-suite or the board. That's
actually good for Tesla. But the sales are down dramatically -- I'm sorry, the stock market is down dramatically because of the sales numbers, that's
a big impact.
But the fact that the SEC is talking about fines and disciplining him on escalating basis is a concern. Elon does not like to listen to rules and
regulations. He likes to run it his own way, and every time he puts out a tweet, if the penalty continues to increase, it would be against him and
against the company.
Now, they're sorting out the details on what's considered an actual valuable tweet and what isn't. So there's a little bit of back and forth
going on right now as far as we could hear. We do have people inside the courtroom giving us feedback as we hear it. So we probably won't know
anything for a little bit.
CHATTERLEY: Yes, reasons to be cautious, Lauren, thank you so much for joining us --
FIX: Yes --
CHATTERLEY: Great to chat with you. All right, coming up --
FIX: Thank you --
CHATTERLEY: As the German Chancellor goes to Dublin to talk about the Brexit deadlock. We'll have the latest on Europe's problems with the
British and vice versa reports, next.
[15:50:00] (COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show. The German Chancellor Angela Merkel says the European Union will do all it can up to the last hour to avert a
no deal Brexit. She spent the day in Dublin meeting the Irish Prime Minister Leo Varadkar. Meanwhile, here in Britain, the house of lords
could approve a bill that would forbid a no deal Brexit by law.
It comes as the government tries to cross -- tries to cross-party approach to breaking the deadlock in parliament. Joining us now Hadas Gold. All
right, let's talk about the lords, first, I spoke to lord Donnie Sully(ph) today, and he said they aren't going to pass this, they aren't going to try
by law ruling out a no deal Brexit.
HADAS GOLD, CNN REPORTER: Rare, and it is so rare that we see the house of lords be the center of attention or the action as in the comments. But
yes, the lords will be probably debating through the night. We've even seen the web saying that they plan to keep everyone around until 6:30-7:30
in the morning, and were taking breakfast orders.
This is a big deal for the house of lords. If this gets approved as it will likely, it will then go to royal ascent, and if it turns into law,
then it would require Theresa May to get an extension on that Article 50 date. She was already planning to go Brussels next week.
As this is going on, as you noted, she's in a cross-party talks with Jeremy Corbyn's party; the Labor Party trying to get some way on some sort of
consensus. Because as we've seen, she's tried multiple times within her own party to get enough votes and with some of their allies like in the
DUP.
That hasn't worked, so now they go to Labor. That got enough people mad that included two of her own government ministers resigned over just as she
was talking to Jeremy Corbyn. The question though is, what red lines on both sides are they willing to cross in order to come to some sort of an
agreement?
Will it be a Customs Union, will it even possibly be a second referendum? Now, I have been stunned in the last few days to hear from some government
quarters including for example Chancellor Philip Hammond saying, maybe we should put a second referendum option to MPs because so far, Theresa May
has said over and over again, as long as she's in power, there will not be a second referendum. Now, that seems to be changing.
CHATTERLEY: I mean, she's not expected to be in power for very much longer. So the question is to start giving them grounds. I mean, furious
response from all sides here about the prospect of having a second referendum and ultimately what the next question would be. Would there be
an option to remain in light of the referendum that's already taking place?
GOLD: Right, huge questions here. And also what sort of deal would be the other option? Will it be Theresa May's deal? Would it be some sort of new
deal that she forms together with Jeremy Corbyn. And then we're not even talking and about the EU and what the EU will say to all of this.
CHATTERLEY: Talk to me about the leak, and I'm not talking about an information or leak. Just to add more drama to the situation --
GOLD: So, as though could be the most perfect metaphor. Today, the House of Commons had to be adjourned and cleared out because of a torrential leak
of water. There was rain today and it's a very old building and they had to stop all action and clear the floor.
I advise everyone to go watch the video because you can hear the water rushing in, and if that isn't a metaphor for where we are right now with
Brexit, then I don't know what else would be --
CHATTERLEY: Yes, welcome to the United Kingdom where it rains a lot. Hadas Gold, thank you so much for that.
GOLD: Thanks Julia --
CHATTERLEY: All right, so let's take a look at what's going on as far as the European markets are concerned. They closed pretty much lower as you
can see. The Xetra Dax over in Germany just bucking that trend. They rose despite a weaker-than-expected set of economic data.
[15:55:00] Factory orders for February fell 4 percent month over month. The biggest drop in two years. Now, it wouldn't be QUEST MEANS BUSINESS
without Richard's profitable moment and he'll have that for us right after this, don't go anywhere.
(COMMERCIAL BREAK)
RICHARD QUEST, CNN: Profitable moment. The preliminary report into the Ethiopian plane crash starts the confirmation process of what we all knew.
That there was an MCAS involvement in both Lion Air and Ethiopian, and that this new safety system put in by Boeing was largely to blame.
So now, what comes next? Well, attention has to refocus back to Boeing where the software patch is being put together, the FAA then have to
approve it. But there's a greater detail here. Because both organizations have been questioned about their abilities in safety and certification,
they have a heavy onerous duty now to convince us that the plane will be safe when it starts flying again.
And that they have done their job properly. And the person no more that they'll have to satisfy is other than the CEO of Ethiopian Airlines. He
reminded us, it was his pilots, his passengers and his plane that crashed. Tonight's it's not surprisingly that same CEO is at least vindicated in
that Ethiopian Airlines runs a fine shop with pilots who are properly trained on planes that are certified to fly.
It's been no small improvement for an airline that's been roundly criticized so far. But there's much more work to be done before the 737
Max 8s can fly again.
CHATTERLEY: Richard Quest there with his profitable moment. And that's it for QUEST MEANS BUSINESS, I'm Julia Chatterley in London, I can give you a
quick look at the Dow here as we head towards the end of trade. We're higher by some six-tens of 1 percent supported in huge partner here by the
performance of Boeing, we await trade headlines, payrolls data, of course tomorrow and that's closing bell.
And you can hear it there ringing behind the scenes there, the trading day this Thursday is over. That's it, once again for the show, "THE LEAD" with
Jake Tapper up next, thanks for watching.
(BELL RINGING)
END
