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Quest Means Business
Scientists Warn of Major Threat to Food Supply; El Paso Suspect's Mother Called Police Weeks Before Attack; Indian Prime Minister Vows to Fight Kashmir Terrorism; Wall Street Licks Its Trade War Wounds After Days Of Volatility; Travelers in Hong Kong May Now Need To Be Extra Cautious; the U.N. Says We Must Change The Way We Produce Food In Order To Save The Planet. Aired 3-4p ET
Aired August 08, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL HOST: Rising bond deals, solid numbers from the Chinese exporters. Take a look here. The Dow is up 300 points. The
question is, will all of this excitement actually last? What a wild week it has been for U.S. stocks.
The Dow is up, as I mentioned after several days of volatility, every single sector is in the green. Let me show you what investors are watching
right now.
The question is, what trade war? China's exports rise, but exporters warn that it certainly will not last. Investors get a lift. The company's road
to profitability may turn off some riders. And the climate crisis, the U.N. says we must change the way we produce food in order to save the
planet.
Welcome. We're coming to you live from the world's financial capital in New York City. It is Thursday, August 8th. I am Zain Asher, in for my
colleague, Richard Quest, and this, my friends is QUEST MEANS BUSINESS.
All right. Good evening. Tonight, Wall Street licks its trade war wounds after days of volatility. Investors are jumping back into the market lured
by rising bond deals and a strong unexpected trade data from China. Take a look here, the Dow is up 300 points or so. We are off the highs of the
day, but still hovering around those highs.
The market though overall does remain on edge. CNN's Fear and Greed Index shows the mood, the sentiment right now -- extreme fear. That is based on
the factors like volatility and demand for safe havens. It is no surprise given the point swings we've seen this week, more than 900 points on
Monday. Investors know we are literally -- we are literally one tweet away from another day like that.
Ben Phillips is Chief Investment Officer at EventShares. He joins us live now from LA. Ben, thank you so much for being with us. So these large
swings we're seeing in the market are becoming all too common. Volatility is really something that investors just have to get used to in this
environment.
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Yes, I think that's right. I mean, we're in a very uncertain policy time when it comes to
trade policy and also Fed policy. And these are what are going to be driving markets for the coming years most likely, or as long as we have
President Trump in the White House, I think expect some more volatility.
He is willing to confront China and the market is uneasy about that. But maybe it's -- maybe it's overdue.
ASHER: So given all of that, I mean, how much should we be reading into this sort of dramatic 300 point rise, given the level of uncertainty and
fear surrounding the trade war?
PHILLIPS: Well, I think -- so we have a tweet, right? And that that makes people reevaluate, okay, are we going to have a breakdown in global trade,
which is bad for global growth, and it's bad for confidence. And so you'll have CEOs investing less, you'll generally see, you know, just weaker
sentiment.
So the question is, you know, today we see actual data, and the data says, "Oh, wait, exports are a little bit better out of China. Imports didn't
fall as bad as feared. So you know what? The global economy is doing okay. Chinese economy is doing okay. And the U.S. economy is doing okay."
So people are looking at the data. But there's mixed signals with the sentiment in just the tweets.
ASHER: Let's talk about one tweet, specifically. Donald Trump actually tweeted today, he made several tweets, actually, criticizing the strong
dollar, putting pressure again on Jerome Powell and the Fed to actually cut rates even more. Just walk us through how much of a concern is a strong
dollar when it comes to this trade war with China?
PHILLIPS: Well, I think people including President Trump are giving the Fed too much credit for what they can control. So you know, the dollar is
driven like any other asset class. It is supply and demand. So there's supplies for dollars and there's demand for dollars. And that's what
actually drives the price of dollar versus other currencies.
And so I think people again are giving the Fed too much credit thinking that they can control exchange rates, they can do things like that. We're
at an unprecedented time where the Fed is adding liquidity and goosing the economy at the top of a cycle. And is the Fed's job really to prevent
recessions? Our view is I don't -- I don't think so.
ASHER: All right. So the Fed doesn't have that much power. But just the fact that you have the U.S. President in sort of unprecedented moves,
repeatedly criticizing Jerome Powell, repeatedly trying to sway the Fed in terms of how many interest rate cuts they can make this year. What message
does that send to investors and to the market overall?
PHILLIPS: Well, I think it does make investors concerned if the Fed is becoming more politicized. And the question is, are they? I would say,
you know, we think it's possible that the Fed is starting to bend a little bit to political pressure.
I mean, Jerome Powell, he wants to keep his job. And you know, most people do want to keep their jobs. And so he's going to acquiesce a little bit to
Trump's demands, I think, and I think that's what we're seeing if we see more and more rate cuts at a top of a cycle that's unprecedented to see.
Presidents pressuring the Fed and also the Fed cutting this really late in the cycle before we've seen real economic weakness.
ASHER: All right. Ben Phillips, good to have you. Thank you so much. Appreciate that.
PHILLIPS: Thank you.
[15:05:06] ASHER: A surprising twist in China's trade war with the U.S. despite sweeping tariffs on the world's biggest economy, Chinese trade is
actually booming.
Exports of July rose by more than three percent as Ben Phillips was just touching on there, compared to a year earlier, thanks to a steady recovery
over the past six months. China's exporters are looking to other corners of the globe to compensate for slowing demand from the United States.
As you can see -- take a look at this map here -- European and South East Asian economies have helped pick up the slack left by Mr. Trump's trade
war. I'm joined now by David Dollar. He is a senior fellow at the John L. Thornton China Center at the Brookings Institution.
David, thank you so much for being with us. So, it might be somewhat surprising for some people to see that in this -- in the middle of a trade
war with the U.S., that Chinese exports are actually on the rise, three percent. Just walk us through why?
DAVID DOLLAR, SENIOR FELLOW AT THE JOHN L. THORNTON CHINA CENTER, BROOKINGS INSTITUTION: Well, first, I wouldn't call three percent a boom, I think
was a surprisingly good number, but it's still very modest. That's measured in U.S. dollars.
It's interesting that their exports in Chinese yuan went up about 10 percent and that's the effect of depreciation, which we may want to talk
about later.
In terms of the actual exports in dollars, part of what's happening is value chains are reorganizing. So, some producers who can't sell from
China to the U.S. are shifting and selling those same products into Europe. So you see a big increase in China's exports to Europe. And then you also
see some movement of value chains to Southeast Asia.
But remember, China is producing a lot of the value add in those chains. So they're exporting to Southeast Asia, places like Vietnam. Vietnam does
the final assembly, it comes to the United States. U.S. imports are rising very rapidly and a lot of that is Chinese content. It's just not coming
directly from China, it is going through Southeast Asia on the way. So all of this, I think is to be expected.
ASHER: So you mentioned depreciation, what sort of impact is depreciation having on these numbers?
DOLLAR: Well, I think these numbers really illustrate the importance of it. So three percent in the Chinese market is a pretty modest growth rate.
But then with depreciation that becomes 10 percent. So if you're a Chinese exporter and you're paying your workers Chinese yuan and you're paying your
interest payments in Chinese yuan, 10 percent, that's the increase you got in Chinese yuan from your exports over the last year. So that's pretty
strong inducement for the Chinese economy.
ASHER: So is this -- sort of these positive numbers -- I know, you mentioned that three percent is hardly a boom, but it's probably better
than expected. Is that likely just to be a sort of temporary sort of positive number for China, given the environment they're in?
DOLLAR: Well, actually, those July numbers line up pretty nicely with what was happening already for China during the rest of 2019. So, I don't think
we can say it's just a monthly blip. Now it's true, these U.S. tariffs have been phased then over time, and now there's another round, probably
coming on September 1.
So as the U.S. ratchets up protection, we may not see the same results, but I think we will see some of the same because as I said, this is rerouting a
value chain. So as the U.S. ramps up the protection, we will see more Chinese exports to Europe and Southeast Asia. That's what we saw in this
data.
ASHER: And with the import numbers, the import numbers were lower. What does that tell you about the domestic environment, the domestic economy?
DOLLAR: Right, so the import numbers have been negative all year. And that does suggest real weakness in the Chinese economy. They were slowing
down before the trade war started because of their own deleveraging. That's still going on.
So I think the import numbers were worrisome. And the best you can say about July is it was less negative than we'd seen in the first six months
of the year and that suggests the Chinese economy is stabilizing and that would certainly be good news for the world economy.
ASHER: All right, David Dollar live for us. Appreciate it.
DOLLAR: Great to talk to you.
ASHER: Chinese trade data lifted the stocks in Europe to a second day of gains. All four major indices closed higher as better than expected
Chinese exports and a steadying yuan soothed investor sentiment. London's FTSE lagged, thanks so a slightly higher pound; while the DAX rallied
despite Germany's Adidas posting disappointing earnings and Thyssenkrupp's fourth quarter profit warnings.
Travelers in Hong Kong may now need to be extra cautious. The United States has joined several other countries in warning its visitors about
traveling to the city amid large scale protests. The demonstrations have been mostly peaceful, but some have turned violent and brought parts of the
city to a standstill.
The protests have taken a toll on Hong Kong's economy. Sales at one retailer were down 30 percent in July. CNN's Kristie Lu Stout has more on
whether the slowdown is a sign of things to come.
(BEGIN VIDEOTAPE)
[15:10:00] KRISTIE LU STOUT, CNN INTERNATIONAL ANCHOR (voice over): The temperature is rising in Hong Kong's long hot summer, a pro-democracy
protest. Amid the chaos, flight cancellations and violent clashes, all of this is shaking the city's reputation as a stable business hub and damaging
its retail market. Hong Kong retail figures are falling with sales in June down 6.7 percent.
Michael Tien, a pro-Beijing lawmaker also founded the work wear brand G2000 in 1985; he now oversees over 700 stores across Asia, including this
flagship in Hong Kong.
But the usual crowds of customers in particular, mainland Chinese tourists are no longer here.
(BEGIN VIDEO CLIP)
MICHAEL TIEN, PRO-BEIJING LAWMAKER AND FOUNDER, G2000: We have about six or seven stores, I don't know, 30 some other marts in Hong Kong that had a
drop off about 30 percent in sales, 30, three zero, and then the rest of the stores in Hong Kong dropped about 10 percent.
I think the bulk of the drop is due to the complete disappearance of a million tourists, and I don't blame them.
(END VIDEO CLIP)
LU STOUT (on camera): And little wonder since many of the protests run through major shopping areas of Hong Kong putting here on Nathan Road. It
seems that many of the visitors who would usually come to buy fashion or jewelry are just staying away.
LU STOUT (voice over): The pressures on the economy had prompted a warning from the Hong Kong Finance Chief.
"The Hong Kong economy is facing an acute situation," he says citing the trade war along with the protests, Chen adds that the city's economy could
plunge into recession.
To a certain degree, Hong Kong has been here before. It has weathered previous crises like the SARS outbreak of 2003, as well as the 2014 pro-
democracy Umbrella Movement, which saw thousands of protesters occupy city streets for more than two months.
But can it ride out this one? A movement that's been called Hong Kong's most serious political crisis in more in 20 years.
(BEGIN VIDEO CLIP)
ROBERT KOEPP, DIRECTOR, THE ECONOMIST CORPORATE NETWORK: So Hong Kong has some unusual economic resilience in its favor, and that relates to not only
the spirit of the Hong Kong people, let's say but in fact that Mainland China needs Hong Kong as much as Hong Kong needs Mainland China.
This is the one part of China that has an entirely open market that you can move capital in and out that's not only important for foreign enterprises,
it's also very important for Chinese enterprises. It's important for the Chinese government.
(END VIDEO CLIP)
LU STOUT (voice over): Retailers like Michael Tien remain hopeful for the future of Hong Kong.
(BEGIN VIDEO CLIP)
TIEN: I survived through SARS, I survivor though Occupy Central, you know, this is what Hong Kong is all about. You know, I'm so in love with it.
(END VIDEO CLIP)
LU STOUT (voice over): The Hong Kong Finance Chief and other political leaders have urged protesters to pull back from destabilizing action, but
that has not deterred them as they continue to occupy roads and shopping centers. Destabilizing business is a tactic that they see as vital in the
battle for the future of Hong Kong. Kristie Lu Stout, CNN, Hong Kong.
(END VIDEOTAPE)
ASHER: Kraft Heinz has lifted the lid on its financials and investors are finding them a bit hard to stomach. The Dow is down -- the stock is down
rather, definitely not the Dow because the Dow is actually doing very well today. The stock is down more than 11 percent.
The company revealed its first half profit was sliced in half and more than a billion dollars was swallowed up in write downs. The old Heinz like to
say, add 57 varieties of products like ketsup, its list of financial troubles isn't quite as long, but it's certainly growing by the day.
A major lump in sales contributed to the company's woes in 2019. It spent the first half of 2019 embroiled in an accounting scandal. That SEC review
is ongoing -- SEC review rather is ongoing -- alongside all of this, customers taste, consumer's taste is certainly changing and this year's
results show Kraft Heinz is struggling to keep up.
Paul La Monica joins us live now. So Paul, part of the thing -- issue -- rather with Kraft Heinz is that they had a slump in terms of 51 percent
down in terms of their profits. It's having issues with efficiency and also just trying to find opportunities to boost sales.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think that latter point is really what's most important, Zain. This is a company that has relied on
brands that are extremely well known, but that consumers seem to be shying away from.
Oscar Mayer lunch meats for example, Kraft macaroni and cheese and others, Velveeta, Cool Whip, Miracle Whip -- they've written down a lot of these
assets their value, because we're faced right now -- we're in a world where Beyond Meat and Impossible Foods are red hot and the new CEO of Kraft Heinz
even said on the company's conference call this morning, "Hey, we were one of the pioneers in the meatless burger segment with Boca Burger and we've
now suddenly found ourselves behind all of these rivals with plant based proteins."
So I think Kraft Heinz has to get back on track and find foods that cause customers want and worry less about all the cost cutting that they were
doing to reduce profits.
[15:15:04] LA MONICA: The merger is now several years in the rearview mirror, the story isn't going to be how many cost can we cut? It's, how
can we make food that consumers want to buy and eat?
ASHER: I mean, they face a competition in every single division. I mean even, the Sir Kensington ketsup, a much healthier alternative to ketsup and
Whole Foods is also competitor for them.
So just walk us through what Warren Buffett makes of all of this because obviously see Warren Buffett facilitated to the deal between Kraft and
Heinz, and you see these numbers where profits are down 51 percent in the first half of the year, what does someone like Warren Buffett make of that?
LA MONICA: Yes, you would have to think that Buffett is perhaps a little maybe impatient with how long it's going to take for this company to turn
things around. But Berkshire Hathaway is still the largest shareholder in Kraft Heinz.
I reached out to Buffett today, I haven't heard back yet to see whether or not there's any change in the mentality with regards to this business
particular investment. But, you know, keep in mind, he is really not calling the shots from an operational standpoint. He has left that for 3G
and 3G has already made management changes.
They had the former CEO step down. They recruited an executive from AB InBev, which is another 3G backed company to come in and take the reins of
Kraft Heinz.
So I think now, the tough choices are going to be not cutting costs, but how at a time where your profits are in trouble spending more on R&D so
that you can come up with these new innovative products.
ASHER: Because they really did work to cut costs initially when the merger took place a few years ago. But just in terms of Warren Buffett's
perspective, obviously, he conducted or helped facilitate the deal along with 3G Capital, as you mentioned, but this comes at a tricky time for him
because he is sitting on over $120 billion worth of cash.
Right now there are limited investment opportunities in terms of acquisitions, just walk us through what kind of environment he is in
financially.
LA MONICA: Yes, it's tough for Berkshire Hathaway, because I think that is a company that has been doing a lot of deals in the past couple of years,
and would like to do more. And Buffett has admitted as much in his shareholder letter at the big Woodstock for Capitalism Shareholder Event in
Omaha back in May.
But the problem is with stocks, even with this most recent volatility, Zain, you're not looking at a market that's down that much off of all-time
highs. So Buffett doesn't want to overpay for anything. But we all know with $122 billion in cash, there's got to be something that he would love
to buy if there's a much bigger dip than what we've had in recent days and weeks.
So I wouldn't be shocked if Buffett tries to do a deal, and you know, there's been a lot of speculation. He loves the transportation sector. He
owns a big railroad in Burlington, Northern Santa Fe. Berkshire Hathaway made waves a couple of years ago by buying huge stakes in four major U.S.
airlines -- United, American, Delta and Southwest -- could he conceivably make a play for one of them? I wouldn't rule it out.
ASHER: One thing we know about Warren Buffett is above all things that man is patient. All right, Paul La Monica live for us. Thank you so much.
The U.N. has a new dire warning about climate change. The bad news is that we need to overhaul our food supply for the planet to survive. The good
news is that farmers can actually be part of the solution. That story next.
(COMMERCIAL BREAK)
[15:20:58] ASHER: The United Nation says that if we want to save the planet, we need to change everything about the way we produce food. It's
already a brutal time for farmers and ranchers, trade wars, and a rise in protectionism are upending revenue streams and creating massive
uncertainty.
At the same time, they are feeling the direct impacts of climate change -- flooding, droughts and intense storms are decimating crops and livestock. A
new U.N. report says agriculture isn't a vicious cycle, both feeling the effects of and contributing to climate change.
Humans have now damaged a quarter of the Earth's visible land, and if we don't find a more sustainable food supply, we will face catastrophic global
warming.
One of the key recommendations from the report is to cut meat consumptions. So, we want you to join the conversation. Get out your phones and go to
cnn.com/join. Tonight, this is the question we are asking you. We are asking, will you -- will you eat less meat to tackle the climate crisis?
Will you at home eat less meat in order to tackle the climate crisis crisis? Voting is open now, cnn.com/join. We're going to see the results
on your screen in a minute.
Meanwhile, our Nick Paton Walsh went to cattle country in the American Heartland, and found that eating less meat is certainly easier said than
done.
(BEGIN VIDEOTAPE)
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: (voice-over): A new U.N. report has emerged to reveal the shocking truth about how our food
is ruining our planet, officially estimating that about a quarter of greenhouse gases in the last decade came from food, farming, and land use.
And that if we change what we eat and how we farm, we could eliminate nearly all of that. If we don't, the U.N. experts warn, chillingly, we
risk, quote, "long-term impacts, including rapid declines in productivity of agriculture."
And that's a big ask in Texas where beef, the biggest food culprit in greenhouse gas production, is a way of life. Among the ribs, grilled
steaks and excess, try telling people here that time is running out to fix the climate emergency.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Not today because this is delicious.
(END VIDEO CLIP)
WALSH (voice-over): Beef and dairy agriculture are a key and often overlooked cause of the greenhouse gases. Humankind must rapidly curtail
if we want to live like we do now.
WALSH (on camera): Well, think about it this way. Half a pound of beef causes as much greenhouse gas to be emitted as driving 55 of these cars for
one mile.
WALSH (voice-over): We drive out as the sun rises over beef country. Twelve million cattle in Texas where the extraordinary toll of something to
natural as beef on the planet emerges.
We have to make drastic changes by 2030 to keep global warming to 1.5 degrees. If we don't, beef and dairy will cause 10 percent of greenhouse
gases. If we do meet other 2030 emissions targets, they'll cause much more -- 30 percent. Either way, we must act. America's hunger is hit on a
natural edge here.
WALSH (on camera): The first thing that hits you is just the smell. There's just so many so tightly-packed together.
WALSH (voice-over): And there are nearly 1.5 billion cattle on Earth, one for every five people.
The United States and world will likely, this year, eat a record amount of beef. We're going the wrong way. But it is the bottom line livelihoods
that understandably matter more here.
WALSH (on camera): Now, when I said global warming, you said "they say." Do you believe in it or do you think this is all just a --
RAYMOND BUTLER, OWNER, NIXON LIVESTOCK COMMISSION: I don't believe in it.
WALSH: Why not?
BUTLER: I just don't.
WALSH: Why?
BUTLER: I just -- it's hard for me to believe that global warming has something to do with the rainfall.
WALSH: What would it take to change your mind about that?
BUTLER: There would have to be a drastic change. Yes, we have -- go through some droughts but that's just the normal periods. Here, this last
couple of years, we hadn't had much winter.
WALSH: You're saying you're seeing it get warmer down here already but you want it to get really bad before you'll believe the scientists?
BUTLER: Right.
WALSH (voice-over): The U.N. report predicts in the next three decades basic food like cereals will get about eight percent more expensive. And
says human use affects already nearly three-quarters of the Earth's ice- free surface.
[15:25:12] WALSH: Huge changes are already happening and huge changes must be made by humans if the way of enjoying life cherished here doesn't bring
our way of life to change entirely. Nick Paton Walsh, CNN.
(END VIDEOTAPE)
ASHER: Bruno Sarda is the President of CDP North America, formerly known as the Carbon Disclosure Project. It's a nonprofit that measures the
environmental impact of companies. He joins us live now. So how responsive are companies at this point to lowering their carbon footprint?
Are they committed?
BRUNO SARDA, PRESIDENT, CDP NORTH AMERICA: Many are. Clearly more needs to happen. You know, we work on behalf of investors at CDP who want more
disclosure from the businesses in which they're invested or the companies to which they loan money. Last year, we had over 7,000 companies
disclosing their environmental data to CDP representing over 50 percent of global market cap.
So we have a huge part of the business community committed to more transparency. Many are starting to also take action based on this
information. And the path forward clearly is we need more scale faster from more companies, and not every sector has embraced this at the same
pace.
ASHER: What are the challenges though -- I mean, for some companies, it is certainly easier to lower their carbon footprint than for others. What are
the major challenges and obstacles for companies to be committed to this?
SARDA: It really depends where your emissions come from. For a company that buys a lot of electricity, for example, large tech companies that run
a lot of data centers, they can commit to buying cleaner renewable energy today. And that really doesn't affect their core business, they're still
buying a lot of electric city and they're still doing what they were doing before.
If you're the company actually producing that power, then it's much more challenging for you to shift your capital to produce power in a different
way to meet consumer demand.
Similar in the food sector. Again, if you're a retailer, what you put on your shelf is an easier decision than you know, who sells you that product
to put on the shelf, and how they're going to produce or package it.
ASHER: So what are the consequences if companies don't step up? I mean, obviously, we're seeing more natural disasters in the world today. That's
just fact. But beyond just natural disasters, one of the consequences for businesses around the world if they don't do something.
SARDA: Well, here's what we know. I mean, the climate crisis affects everybody, including business. At CDP, we released a report in June,
identifying that actually, there's over a trillion dollars of risk identified by business in the next five years. This isn't out to 2030 or
2050, but a trillion in the next five years, if they don't act to address climate impacts and climate risks in their own businesses. This isn't in
society, these are truly business impacts, business costs.
At the same time, we see that business has identified over $2 trillion of opportunity for leaning into this transition. So the consequences as
highlighted in the recent IPCC report, if we don't get this right, a lot will go wrong. Certainly, the land use in itself and food production has
to play a huge role.
I mean, we could have completely decarbonized both power generation and transportation in 2015, and still could not achieve a less than two degree
level of warming by 2100 if we didn't address land use and food systems.
ASHER: Bruno, standby, I just want to recap for our audience. The results of the question that we asked, we've been asking whether you will actually
eat less meat, I am talking about you at home, whether you actually eat less meat to help tackle the climate crisis?
In fact, as you can see on the screen, most people are saying yes, 75 percent of people are saying yes. What is the level of urgency here when
it comes to changing the human diet? Obviously, you mentioned land as a natural resource, obviously suffering right now, what's the urgency?
SARDA: The climate crisis is real. And the effects are being felt now by -- certainly, by farmers whose crops are already feeling the effects of
climate change.
You know, a company that buys grain or food commodities can source them from many places, but a farmer, their land is where it is, and they live
where they do. And so one of the things we're going to see if we don't make changes rapidly is, you know, a lot of suffering in farming
communities, whether it's in the American Midwest or in Africa or elsewhere.
The good news is, I think, as your poll indicates, consumers are waking up to this fact. And there are many exciting products now hitting the shelves
that are providing very good, very healthy, frankly, very tasty alternatives. And, you know, last time I walked by the dairy section of a
grocery store, you could see that about half of what's been offered now is actually plant-based alternatives to milk.
[15:30:10]
And we're seeing that more and more in the other side's(ph) of protein including meat.
ZAIN ASHER, HOST, QUEST MEANS BUSINESS: All right, Bruno Sarda, thank you so much. I mean, obviously, there is so much pressure on the world right
now, we've got 10 billion people that are going to be living on this planet by the year 2050, so something has to be done. Bruno, thank you.
Ford CEO Jim Hackett says he's not worried about Elon Musk disrupting the car industry. He told CNN's Poppy Harlow who he believes is the original
disrupter, that story, next.
(COMMERCIAL BREAK)
ASHER: Hello everyone, I'm Zain Asher, there's more QUEST MEANS BUSINESS in a moment. When the CEO of Ford tells us why he is not worried about
competition from Tesla. And the high-end gym Equinox is facing calls for boycott after the gym's owner announced plans to host a fundraiser for
President Trump. We'll look at the risks for companies, the ties to this president.
Before that though, these are the headlines for you at this hour. CNN has learned that the mother of the suspected gunman in the El Paso mass
shooting had called police weeks before the attacks. She was concerned about her son owning an assault-type firearm because his age, maturity
level and lack of experience with guns. Twenty two people were killed when the shooter opened fire at a Wal-Mart last weekend.
After Donald Trump went to meet shooting victims in El Paso, it now emerges that most of -- most of the patients at the hospital he visited did
actually not want to spend time with the president. A source tells CNN that of the 8 patients being treated at University Medical Center, not one,
not one of them wanted to meet the president.
[15:35:00] The hospital eventually brought back two patients that had already been discharged who said they wished to meet Mr. Trump. India's
Prime Minister is defending his government's decision to assume more control over the Indian half, portion of Kashmir. Narendra Modi says it
will free the region of terrorism.
The move set off outrage in Pakistan. Both nuclear armed nations claim Kashmir. Could a potential constitutional crisis in the U.K. force the
queen to get involved when parliament returns from its Summer break next month. The new Prime Minister Boris Johnson may face a motion of no
confidence stemming from his insistence that the U.K. will leave the EU at the end of October even without a deal.
Some speculate the queen could be called in to resolve the possible impasse. In the U.S. state of Mississippi, immigration authorities have at
least about 300 of the almost 700 undocumented immigrants they rounded up on Wednesday. The raids happened at food processing plants in six cities
and are described as record-setting. A Trump administration official says the authorities are working to reunite detained parents with their
children.
Jim Hackett; the CEO of Ford says that he is not worried about electric rival Tesla. He told Poppy Harlow he respects Elon Musk, but argues the
ultimate disruptor was Henry Ford himself. He started off talking about the future of the car market.
(BEGIN VIDEO CLIP)
POPPY HARLOW, CNN ANCHOR: The heads of Lyft and Uber have not been tried about saying they don't want any of us to own cars. Will Ford be selling
cars and trucks in 20 years? Will you be selling rides?
JIM HACKETT, CHIEF EXECUTIVE OFFICER, FORD: No, absolutely, we will be selling cars and trucks and other kinds of products because the future
disruption is not coming from rides. We already have them today. We already have rides today, so the disruption is different that's coming --
HARLOW: Wait, the future disruption is not coming from rides --
HACKETT: No, because --
HARLOW: So, is Lyft wrong, is Uber wrong?
HACKETT: The key -- and there's power in the Uber and the Lyft and Didi; the Chinese version of them, in that they can use autonomy to make the
costs of taxis go down, but so can your teenage daughter have a better chance of not being in a bad accident, having and owning a vehicle that has
all that intelligence.
HARLOW: So, you guys are working on an electric F-150, and there's this great video that just came out of the truck actually pulling a freight
train.
HACKETT: A million pounds.
HARLOW: I wonder if you wanted Elon Musk to see that, just maybe.
HACKETT: Well, he said -- he said he was working on a truck that could tow 300,000, so, we thought, well --
HARLOW: Just it's like a million.
HACKETT: It's a million --
HARLOW: No, just trend --
HACKETT: And then we went above that, as you know.
HARLOW: So, Elon Musk for his part said, and I quote, "there's a good chance that Ford doesn't make the next recession." Makes you smile, lights
the fire, I'm sure. He's claiming their truck is going to be as powerful as yours, but it's going to drive like a Porsche 911. What tells you,
Tesla and Elon Musk won't win?
HACKETT: Well, let's balance that because it meets the criteria what we talked at the beginning, which is, there's a disruptor coming. I happen to
compete with a rocket scientist who is really smart and I respect that about him. And yet, he's competing with the ultimate disruptor in Henry
Ford.
So, when you go 7 miles from here and you see the rouge complex, Henry bet the company, he goes bankrupt --
HARLOW: Yes --
HACKETT: Because there's no industrial model in the world that has 100,000 people working in it, that one did. And he took what took 12 hours to
build a vehicle before he built it, went down to 52 minutes. Today, we build an F-150 every 53 seconds.
HARLOW: Wow --
HACKETT: So, let's go back to the challenges of the disruptor. How well was their production system working? You know, how fast were they building
cars? Which is saying that fitness, as we were saying, is a -- is a compendium of things that you have to get right. It's not just the
technology in this case. We have to have an industrial model. Ford is really good at this.
HARLOW: Does he keep you up at night, Elon Musk?
HACKETT: Well, I like to make the threat of disruption the boogeyman, and they can come from everywhere. There's one part of your brain that says,
let's rationalize it is not as good as it might be. So, the railroads really not going to interrupt the Pony Express.
Look at our marketshare --
HARLOW: Right --
HACKETT: I go the other way and say, what's great about the way they're thinking about their products? And it's not just Amazon or Tesla. You
know, we pick more fit ideas, so one of the things we've instituted at Ford is the thing called curious minds, which means like the table, we want to
invite the smartest people in the world to come in and tell us what they're doing.
HARLOW: Yes --
HACKETT: So that we can derive from that how we might use that capability.
(END VIDEO CLIP)
[15:40:00] ASHER: Lyft is making in-roads in its battle with ride-sharing rival Uber, and the stock is up after it announced increased ridership in
its earnings core Wednesday. Uber shares are also higher ahead of its earnings announcement. Investors are encouraged after Lyft said the price
war between the two companies is actually easing.
Clare Sebastian is at the table with me now with more. So, Lyft is actually saying that it's going to be rising -- raising prices and that's
obviously a good sign for investors, not good for customers though.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Not good for customers, but for investors, this is exactly what they wanted to see because so far,
these two companies have been at loggerheads and have been heavily discounting to maintain or to grow marketshare particularly in this case.
Every single dollar that at the end of the day that they have earned and so far been subsidized with things like discounts and incentives. But Lyft is
saying that they are -- they're not only growing ride as they grew ride by 41 percent in the last quarter.
They grew revenue per ride at 22 percent, and that's even more aggressive because they've been raising prices, as you say, in some cities and they
still have been able to grow ride as they said. Modest price adjustments went live at the end of June, and they say they expect that these changes
will accelerate Lyft's path to profitability, and they further believe that these price adjustments reflect an industry trend.
That is very good news for Uber, that's why you see Uber still outperforming Lyft today. People are going to be looking at that and
thinking, well, Uber in the past doesn't need to discount as well, perhaps it will continue to grow revenue, but won't need to raise costs at the same
pace.
That is crucial for Wall Street. They are very focused on when these companies will eventually be profitable.
ASHER: So, the big question for Lyft is how do they eat into Uber's marketshare?
SEBASTIAN: Well, Lyft is growing faster than Uber. This is potentially -- I mean, Uber still has about 70 percent of the ride-hailing market in the
U.S., I think Lyft is something like 28 percent. So, they pretty much dominated together, but Lyft revenue grew at 72 percent in this quarter.
In the last quarter, which is the first quarter since going public, it was 95 percent.
Now, the growth rate for Uber is something like 20 percent. So, you know, Uber has other things, it's got Uber Eats, it's you know -- it's got its
moon-shots like autonomous vehicles and things like that. But it does need to kind of stay on top of things to make sure that Lyft isn't -- doesn't
get ahead of them, and obviously, they've got some way to go, but still, the growth rate is critical there.
ASHER: And just quickly, what's Uber going to be doing after the bell, do you think? Look into a crystal ball for me.
SEBASTIAN: It's going to be -- if you look at analyst expectations, this is going to be a huge loss. They expect a loss north of $3 million --
ASHER: Yes --
SEBASTIAN: And that isn't just a three-month period. So, I think given that we've seen the execution from Lyft that they've been able to bring
costs down and grow revenue, there's going to be a lot of pressure on Uber --
ASHER: Right --
SEBASTIAN: To try to do the same, try to show that they are able to reign and spend --
ASHER: And they have some path to profitability as well. Clare Sebastian, thank you so much. Equinox and Soul Cycle are distancing themselves from
their billionaire owner. Stephen Ross is hosting a high dollar fundraiser for Donald Trump. Some of the gym's famous clientele are making a public
display of canceling their memberships.
[15:45:00] (COMMERCIAL BREAK)
ASHER: Equinox and SoulCycle, two luxury fitness brands favored by the rich and famous are spinning into crisis. They're trying to contain the
backlash over their owner hosting a fundraiser for Donald Trump. Stephen Ross is the billionaire Chairman of Related Companies, he's hosting a lunch
on Friday where attendees will pay up to a quarter of a million dollars for face time with the president.
Ross says he agrees with Trump on some issues and disagrees on others. He described himself to CNN as an outspoken champion of racial equality,
inclusion and diversity. Comedian Billy Eichner tweeted, "hey, Equinox, what's your policy for canceling memberships once a member finds out your
owner is enabling racism and mass murder."
Christine Teigen wrote "everyone who cancels their Equinox and SoulCycle memberships, meet me at the library and bring weights." New York Sports
Club, a competitor is seizing, pouncing in the opportunity, saying "commit to something better" which by the way is a play on Equinox's headline. So,
they're making fun of them.
There's no shortage of companies that have been targeted because of their ties with the American president. Most recently, Home Depot faced a
boycott after its founder said he would support Trump's re-election in 2020. Employees at Wayfair; the online furniture seller walked out because
the company was making beds used at migrant camps on the Mexico border.
Peter Shankman is a branding and social media consultant, he is with me in the studio now. So, Peter, part of the problem for Equinox more
specifically is that their brand exudes some degree of liberalism only because -- only because they have a heavy footprint in New York and L.A.
So, you imagine that, that doesn't -- it's not going to bode well --
PETER SHANKMAN, BRANDING & SOCIAL MEDIA CONSULTANT: Yes, they really are considered the East Coast and West Coast gym. You know, and New York City
is Equinox and the West Coast is Equinox, it's -- you know, it's more -- it's more L.A. than L.A. fitness, you know, that kind of thing --
ASHER: Right --
SHANKMAN: And so, for -- but here's the thing, no doubt it blindsided them. I guarantee you that there was a -- their publicity director was
just walking in a couple of days ago, a cup of coffee, a little Starbucks in hand, and her day just went completely --
ASHER: That's always how it goes though --
SHANKMAN: Right? So, you know, Equinox is not -- and yes, I understand what they're doing, they're not putting Trump 2020 banners in front of
every treadmill, right? They're not -- you know, they're not doing a spin classes to Trump's greatest hits, whatever. But there is a connection to
the most divisive president in U.S. history.
And any time there's a connection, no matter how small or weak, when it relates to Trump, there's going to be backlash. And so, I guarantee you,
they went into crisis mode immediately, but the investor, he didn't even think about it, right? In his mind, it's his money --
ASHER: But do you think -- there's a difference between people saying they're going to cancel --
SHANKMAN: Right --
ASHER: Memberships and actually doing it --
SHANKMAN: Exactly --
ASHER: And also, I always find it with these things, maybe the day and the day after, people are angry and then something else in the news takes over
and then everyone else forgotten about it.
SHANKMAN: I did an informal poll in @petershank on my Twitter account. And some people -- oh, yes, and this was yesterday -- like how many got
cancelled? I'm quitting right now, I'm going to New York's Sports Club -- you know, take that with a grain of salt because click-divism, the ability
to tweet out how angry you are is a lot easier than to actually go and do it.
To go down there, cancel your membership, find another gym -- you might have to walk longer, you might not be able to get your latte on the way
back --
ASHER: It's not just --
SHANKMAN: Whatever it is --
ASHER: But it is not just that, it's also that who are Equinox's real competitors? Like I don't -- are there any other luxury chains?
SHANKMAN: There's some -- there's some -- I mean, not luxury-luxury. New York Health and Racket Club is the closest thing I can think of, right?
They are not as luxury as Equinox. But again, that's Equinox's calling, right? So, if you look in a way, probably they might say, well, you know,
maybe I don't need the saffron-infused Jacuzzi after my workout, and I just need to go work out --
ASHER: Maybe, I don't need to spend $200 --
SHANKMAN: Exactly --
ASHER: On membership --
SHANKMAN: But here's the thing, you know, we're in a society that values that. I mean, let's face it, last time you and I worked out, if we didn't
post it online, if we didn't Instagram it, did it really happen to be really workout?
ASHER: No, kid you not --
SHANKMAN: Right, exactly, so, you know, I'm thinking people might go to Peloton, right? You know, that's the latest hottest craze, they're about to
go public, why not have a bike bring in your apartment, you know, whatever the case may be. But you know, they're not going to -- Equinox isn't going
to fold because of something like this --
ASHER: No, impossible --
SHANKMAN: They're not going to lose out for something like this, it's a couple of days of bad PR, the bigger picture though is brands need to be
aware that anything they do, if it's even remotely tied to the political agenda in America and on either side.
ASHER: On either side, that's a good point --
SHANKMAN: They're going to have to deal with it.
ASHER: Right, Peter Shankman live for us, thank you so much. All right, Samsung mocked Apple after the iPhone lost its headphone Jack, now Apple
executives may be raising their eyebrows at the new Samsung Galaxy Note 10. We'll explain why? That's next.
[15:50:00] (COMMERCIAL BREAK)
ASHER: Samsung is coming off a dismal quarter. Normally, the launch of a new product would be a good way to move on from that. When the company
showed off the Galaxy Note 10 on Wednesday, what got the most attention was a curious design decision. Samsung released ads mocking Apple when the
iPhone lost their headphone Jack, now it did the same thing and deleted the old ads -- it actually deleted the old ads where they were making fun of
Apple for this.
Let's bring in tech experts Shelly Palmer. So, Shelly, so first of all, why did -- I mean, this is also you know, eating humble pie for Samsung.
Why did they make this change?
SHELLY PALMER, CHIEF EXECUTIVE OFFICER, THE PALMER GROUP: Soul book, you know, this is a hot button for me because I went at Apple so hard when they
killed the headphone, Jack. And the reason is because the most wireless device in the world now required a harness that was ridiculous.
If you didn't have a wireless charger, then you needed a dongle --
ASHER: And --
PALMER: And you have your headphone, Jack, and the others -- well, so now, of course, Samsung is doing the same thing. And it's the wave of the
future, to be sure.
ASHER: Yes --
PALMER: The problem is it takes a lot of really good accessories and takes them out of the loop. However, if you've got a Samsung fast charger and I
do even for my iPhone, Samsung fast charger which somehow might be blasphemy. What you do is you put the phone on the wireless charger and
you use your wireless headphones and-or your wired headphones --
ASHER: I see --
PALMER: And you'll find through the -- it's just -- it's annoying if you have to charge it like on an airplane.
ASHER: Oh, yes --
PALMER: That's a little annoying.
ASHER: So, annoying for customers, but when it comes to their bottom line, how much of a win have the airports been for Apple?
PALMER: I think it has -- it has been a win. The thing that Samsung does that Apple doesn't do, that's super cool is the phone has share-charging --
ASHER: Oh --
PALMER: So, if you take your phone and put another phone on it and you will charge the other phone --
ASHER: Oh, that's amazing --
PALMER: It is very cool. So, the Note 10-plus and the Note 10 that just came out, I held it in my hand the other day --
ASHER: OK --
PALMER: It's magnificent. Like if you're a Note user, you know why you want it, and they've made it in two sizes. So if you -- if you're like a
smaller sized phone person, it's -- they are really looking at people who are trying to be very creative with their phones, video stuff is great.
It's pretty hardcore. They've taken this about as far as you're going to take a handset.
ASHER: But the thing is that Samsung has had some challenges when it comes to trying to innovate. For example, the foldable phone, that was a bit of
a disaster, also, the whole claims, that you know, you could put all phones under water. Not quite as true as they made out, and then the whole
lithium battery thing with phones expected -- I mean, just --
[15:55:00] PALMER: So, I'll push back a little bit.
ASHER: OK --
PALMER: So, the exploding phone was -- Apple had the same issue --
ASHER: Right --
PALMER: Same thing --
ASHER: OK --
PALMER: I mean, the lithium batteries are what they are -- lithium ion batteries. The folding phones they didn't ship to consumers, they shipped
to people like me, mine worked fine, my friends' didn't. They're going to bring it back out in a couple of weeks --
ASHER: Right --
PALMER: And if it doesn't work, they'll have hell to pay, but right now --
ASHER: Right --
PALMER: It should work. With respect to whether the IP 68 or IP 67, which is --
ASHER: Right --
PALMER: Are they going to one meter or three meters -- look, the level of innovation where it comes in for all phone companies, not just Samsung, not
just Apple, you're going to right now have iteration that looks like innovation. A little faster processor, a little better battery life, a
better screen.
And if that's your benchmark for getting better, the new Galaxy Note 10 and 10-Plus meet their criteria as will the new iPhone coming out like --
ASHER: OK --
PALMER: Right, they're iterative, not innovative. What are we waiting for, next?
ASHER: Yes --
PALMER: Augmented reality, really 5G from the carriers so that we can have a little late-and-see super high bandwidth --
ASHER: Like all these -- all these changes, whether it's with Apple or Samsung, even though Apple has taken the lead when it comes to iPads and
AirPods, that sort of thing -- all these changes, you mentioned have been so incremental, iterative -- we're waiting for the next big major design --
PALMER: I'll -- yes. And I will argue that iteration is a form of sustainable innovation, right?
ASHER: OK --
PALMER: When they're making it smaller, they're making it better and they're getting ready for the battery life that we're going to need for a
full-augmented reality world. Now, the question is, when is that coming and what's it --
ASHER: Right --
PALMER: Going to look like? Until then, you have to be happy with a little better processer, a little better screen, a little longer battery life
because that's what you can get.
ASHER: Yes --
PALMER: That's the level of innovation. They're also making them thinner, if that matters to anybody, they're making them --
ASHER: Well, consumers are hungry, they're hungry for more.
PALMER: I think --
ASHER: Shelly Palmer live for us, thank you, appreciate it. All right, there are just moments left to trade on Wall Street, we'll have the final
numbers and the closing bell right after this.
(COMMERCIAL BREAK)
ASHER: There are moments left to trade on Wall Street. The Dow is actually up more than 300 points, on the broader market is the Nasdaq and
the S&P 500 on their third day of gains. Let's take a look at the Dow component individually, there we have it, all green, all green, Disney
shares are up after analysts actually upgraded the stock, Caterpillar up 1 percent despite Goldman Sachs lowering its price target.
All right, that is QUEST MEANS BUSINESS, I am Zain Asher in New York, the news continues, of course, right here on CNN.
(BELL RINGING)
END
