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Quest Means Business
Nancy Pelosi: Democrats Proceeding with Articles of Impeachment; Ukrainian Lawmaker Says He Met with Giuliani in Kiev; Italian Sports Newspaper Defends Black Friday Front Page; Saudi Aramco Pulls Off The Biggest IPO In History; U.S. House Speaker Nancy Pelosi Virtually Seals Donald Trump's Fate To Become The U.S. Third President To Be Impeached; France Is Facing Widespread Strikes Over The Government's Various Plans To Reform The Pension System. Aired 3-4p ET
Aired December 05, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:09]
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: The closing hour on Wall Street. Losses early on, small gains and the market is
bouncing around.
You'll be forgiven for getting excited, but don't. The sort of movements we're seeing are very small at the moment across all the indices.
Essentially, they are unchanged. Those are the markets, and these are the reasons why.
In Riyadh history, Saudi Aramco pulls off the biggest IPO in history. John Defterios tells us how much they raised.
United Airlines Chief Executive Munoz heads for the exit after a turbulent three years at the helm.
And $700 billion cost of Donald Trump's trade war. The new Managing Director of the IMF speaks exclusively to CNN.
We are live from London on Thursday, December the 5th. I'm Richard Quest, and of course, take it with me, I mean business.
Good evening. Tonight, Saudi Aramco has made it official and taken the record for their largest, biggest IPO in history. A few moments ago, it
confirmed $25.6 billion had been raised with an IPO.
Now, that in itself is not the biggest number, but extrapolate out the one and a half percent sold to the total company and it makes Aramco the most
valuable, publicly traded company in the world. $1.7 trillion, still short of the $2 trillion the country's leaders were once hoping for.
John Defterios is in Vienna, even so, they may not have got that record of $2 trillion, but they've got a number with which they will be happy. How
did they do it?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, Richard, I was going to say, let's start off with the fact that the mystery is now over.
This has been carrying on for three years, as you know.
In fact, the Crown Prince Mohammad bin Salman told us in late 2017, he wanted to get it done in the first half of 2018, and then they had the
arrest of the Ritz Carlton 400 and the murder of Jamal Khashoggi. They want to try to put this behind them, they did it in a very controlled
setting.
What I mean by that, they are picking the national market of Riyadh, not the aspirations of New York or London, perhaps Tokyo or Shanghai -- a very
controlled market, if you will. They even lent money to the national investors to buy the shares as a trophy, a national trophy that they have.
And they even leaned on their neighbors, Richard, in the UAE and in Kuwait, to raise over $2 billion.
So this is the safe route out for Mohammed bin Salman, one and a half percent stake, not the five percent that you were talking about before.
And it's something that when it starts trade on December 11th, will only go higher. I can't imagine this is a government and let that stock ever drift
lower. But it is a sizable player with a valuation of $1.7 trillion. It has a bigger market cap than all top five IOCs in the world from
ExxonMobil, Chevron, BP and Total and others.
QUEST: John, what does it mean though, now, it is trading publicly? For most companies, it would mean greater shareholder scrutiny reporting to the
market every quarter, shareholder activism. Now, they've only sold one and a half percent. For Aramco, what does it mean?
DEFTERIOS: Well, I think actually, Richard, this is a company that's much more efficient than most would ever know. They have a very low cost
production at $2.00 to $4.00 a barrel, whether it's onshore or offshore.
They have been extremely transparent, revaluing the reserves now with nearly 270 million barrels, and they welcome this idea of opening the
books.
But to your point, it's not the scrutiny of Wall Street not the scrutiny of London or what you would find in Asia. But in fairness, the Riyadh market
is a member of the MSCI and it's a trigger point for the Crown Prince Mohammad bin Salman, to try to open up the economy to foreign direct
investment.
And on that front, since the issues that I talked about before, their FTI has nearly dried up. It is only a quarter of what it was back in 2012 and
the growth has flat-lined because of the uncertainty.
They're hoping at the end of 2019, they open 2020, they're chairing the G- 20 for all of that year and Aramco can serve as a catalyst.
Now, the other issue that came up here at OPEC, and the Ministers are still inside kind of debating the cuts for 2020 is whether the Aramco narrative
started to filter into their decision making.
I posed that question to the Minister of Petroleum for Iraq. Let's take a listen to what he had to say.
(BEGIN VIDEO CLIP)
THAMIR GHADHBAN, IRAQI OIL MINISTER: I don't see really the interlink between the two. After all, it is just three percent of the overall --
DEFTERIOS: Less than three percent?
GHADBHAN: Less than three percent, so why should it really affect our total impact on OPEC or the role of Saudi Arabia within OPEC. If this
leads to further commercialization and privatization, but more significant then we could talk about this, but now, I don't think so.
[15:05:29]
QUEST: John, what is the -- what is believed to be the real price? The non-speculative real price of oil, assuming that OPEC and OPEC Plus were
not gerrymandering the market?
DEFTERIOS: Well, Richard, this is a very good point because the real wild card is the U.S. producers. They added 1.8 million barrels a day in 2019,
and there's a divided camp when according to the sources I've been speaking with when that big blue in the United States, particularly in the Permian
starts to run out of fuel right now.
Many are believing that's going to happen midway through 2020. But again, the Iraqi Oil Minister said, look, we've kept the shale producers out
before and that was a mistake.
So the discussion behind closed doors right now Richard is cut another 500,000 barrels a day. What does it tell us? There's a new sheriff in
town and that is the half-brother of the Crown Prince. His name is Abdulaziz bin Salman. This is his first OPEC meeting. He is saying not
just 1.2 million barrels a day. I'm willing to go 1.7 to shore up the market, and perhaps even help my share price for Aramco going forward.
That's controversial.
If they did not cut right now, Richard, and they decided to pull out of that 1.2 million barrels a day that's originally on the table. This would
be a very different energy market.
In fact, they have concerns about the future. You come into a meeting with $63.00 a barrel, you think they would just roll over the agreement.
They're worried about slow growth in 2020 and the U.S.-China trade dispute.
QUEST: John Defterios. John in Vienna. Thank you, sir.
Now the other big story of the day, the U.S. House Speaker Nancy Pelosi virtually seals Donald Trump's fate to become the U.S. third President to
be impeached.
It was brief remarks that she made at the Capitol when Speaker Pelosi announced that Democrats are proceeding with Articles of Impeachment.
Two months of investigation, she said has made it clear, the President abused his power by pressing Ukraine to help in the 2020 election.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): Our democracy is what is at stake. The President leaves us no choice but to act because he is trying to corrupt
once again the election for his own benefit.
The President has engaged in abuse of power, undermining our national security and jeopardizing the integrity of our elections.
His actions are in defiance of the vision of our founders and the oath of office that he takes to preserve, protect and defend the Constitution of
the United States.
(END VIDEO CLIP)
QUEST: Lauren Fox joins me. Let's take this as rapid fire to start with, and then we can get into some analysis. Number one, it's almost certain
now -- well, like certain now that Articles will be brought forward and the House will vote to impeach, correct?
FOX: Well, that's right, Richard. One of the things that you have to remember is that Nancy Pelosi has been speaking to her caucus every step of
the way. She would not have made that announcement this morning if she wasn't confident she had their support.
QUEST: So then it goes across to the -- sorry, before that -- do we know when that is likely to happen? Will it have happened before Christmas?
FOX: That is the expectation at this point that it will happen before Christmas. They're going to have to have an Articles of Impeachment vote
in committee before it makes it to the full House floor, but yes, that's the expectation that they will do this before the holiday.
QUEST: And do we know when Mitch McConnell intends for the trial -- Trump's trial -- to take place in the Senate?
FOX: Well, that is a wait and see game. Republicans are keeping their powder dry at this moment because they want to make sure that those
articles actually get voted on in the House before they jump ahead for trying to impeach a President of their own party. Of course, that's why
they're being so careful.
QUEST: Finally, does it matter that he is impeached? If he can't -- he won't be convicted and removed in an election year where you know, the
country is so divisive. What difference does it make?
FOX: Well, I think Richard, this is still a historically significant moment. As you mentioned at the top, this is only going to be the third
President of the United States who would be impeached, so even if he is acquitted in the Senate, and that is the expectation at this point. It's
significant.
The Democrats went down this road that they did this two-month investigation, that all of these career officials were willing to break
ranks, come forward as part of the investigation. So still a very significant fact, even if it only is an impeachment in the House and not a
removal in the Senate -- Richard.
[15:10:15]
QUEST: Right, but Lauren, the numbers of our -- and correct me if I'm wrong, please. The numbers show that Americans who believe one way or
another we're not moved a jot -- much by -- during the impeachment hearings.
So what's the clever thinking on Capitol Hill about how an impeached Trump fares with the electorate?
FOX: Well, you know, Nancy Pelosi said this morning in her press conference that this was not a political consideration. And if it were,
you might have seen the Democrats making a different decision.
But instead they said, you know, this is so important to the Constitution, to the role of democracy that they needed to move forward. So even the
fact that they do not have the entire American public support, they still felt like it was worth moving forward.
But you did see Republicans yesterday during the hearing in the Judiciary Committee, making it very clear that that's a different stance in what
Pelosi had in the spring when she argued that this is such a divisive issue that you don't go there unless you have the full support of Republicans and
Democrats on Capitol Hill -- Richard.
QUEST: Lauren, thank you. You've helped us enormously understand things tonight. And CNN is hosting a Town Hall with House Speaker Nancy Pelosi at
9:00 p.m. Eastern. That's on Thursday night. It's 10 in the morning on Friday in Hong Kong.
Now, to France, which is facing widespread strikes over the government's various plans to reform the pension system. You've got firefighters,
traffic controllers, train operators, teachers. A vast swathe of the economy is being hit by industrial action.
Even healthcare workers walked off the job and it's unclear when they will return.
In demonstrations in Paris, there was violence. Protesters threw bricks at the police who responded with tear gas. And a spokesman for the President
says, he is calm and determined. The protesters are determined as well.
(BEGIN VIDEO CLIP)
MICHAEL LAURENT, RETIRED CONSTRUCTION WORKER (through translator): Today, I demonstrate for the next generation because when you see that we have
worked all our lives, I have worked 43 years. I have a 1,200 euro pension. I doubt that younger people will have a pension like we currently have.
If they want it, they will have to work until they are 70 years old. It is untenable.
(END VIDEO CLIP)
QUEST: Now, that's the problem. What the President has been trying to do hasn't been seriously attempted since 1995.
A single point based pension scheme to replace 42 different plans with a special tax or retirement age breaks for workers in certain industries.
That's the current position.
Now, the government plans to keep the retirement age at 62. Although, it may reduce benefits to workers who leave the labor force before the age of
64.
Now, if you mix into this the broader economy, discontent has challenged Macron since day one. You've seen the yellow vest activists joining in
today's protest as well.
Melissa Bell has been following them. And Melissa Bell is in Paris.
(BEGIN VIDEOTAPE)
MELISSA BELL, CNN PARIS CORRESPONDENT: Public sector unions opposed to the performed pension reform that is on the table here in France had threatened
to bring France to a standstill this Thursday, and they got pretty close to achieving just that. Ninety percent of trains in France were canceled
today. Many people just choosing to stay at home, rather than braving the transport difficulties to get to work.
There were, however, many people out on the streets. Here in Paris, according to the Interior Ministry figures, 65,000 people took to the
streets to express their dissatisfaction. And for the first time, the unions were joined in their march by yellow vest protesters.
That march at times turned violent. There were teargas thrown by the police, exchanges of projectiles at one point around the Plaza La
Republique, quite a bit of tension and anger out there in the crowd. How much longer will it last? This is one of the big questions at this stage
and in particular, for Emmanuel Macron, that reforming President who said that he is determined to push this pension reform through.
The rail unions have announced that their strike will last at least until Monday on Friday, a number of flights will be cancelled. Air France has
said that that it will cancel 30 percent of its interior flights and 10 percent of its medium haul international flights.
So you can expect a lot more travel chaos to come. Emmanuel Macron has vowed to push ahead, however, the last time that a universal pension reform
system was reached for in France was 1995. It took the government just three weeks to fold and shelve its plans.
The question is whether Emmanuel Macron will get past this opposition in order to get his reforms through.
Melissa Bell, CNN, Paris.
(END VIDEOTAPE)
That's how they all finished in Europe.
[15:15:06]
QUEST: Now, to the markets and how they all finished in Europe. Well, mixed is the best way to describe it probably there anyway.
Banks and constructions were the best gainers. Apparel company, Montclair rallied only seven percent on takeover talk, which we'll be talking about
in just a moment.
In another moment, Oscar Munoz, the CEO of United Airlines, he had a heart transplant while he was running the company and obviously, very extremely
controversial in terms of various decisions and events that happened.
He is now leaving the company. We will hear from that in a moment.
And the new Managing Director of the IMF counts the cost of the trade war. She speaks exclusively to CNN. In a moment.
(COMMERCIAL BREAK)
QUEST: United Airlines Chief Exec, Oscar Munoz is to step down in May, when he will become the airline's Executive Chairman.
Now, United's stock is a touch lower today on Wall Street. But overall, it's up 54 percent during Munoz's tenure. He will be succeeded by the
United's President, Scott Kirby, who was wooed away from rival American Airlines some three years ago, pretty much with the promise that when Munoz
went, he would get the job.
Unfortunately, Munoz spent much of his time at United in the public spotlight waging PR battles and weathering negative headlines.
(BEGIN VIDEOTAPE)
QUEST (voice over): Oscar Munoz time at United as its Chief Executive was tumultuous, to say the least. Only five weeks after taking the job, he
suffered a heart attack and needed a heart transplant.
Two months after surgery and Oscar Munoz was back at work full time. He told me the job is what kept him going.
(BEGIN VIDEO CLIP)
OSCAR MUNOZ, CEO, UNITED AIRLINES: It's great to be back. I feel terrific. And I'm constantly energized by the spirit and the commitment
and the professionalism of our employees and my United family.
(END VIDEO CLIP)
QUEST (voice over): That spirit was tested in 2017 when he faced a public relations disaster of epic proportions. A passenger, Dr. David Dao was
dragged off an overbooked United flight. Video was taken. The incident went viral.
Munoz was accused of being callous in his initial response. The backlash was so bad that companies scrapped its plans to add Chairman to his duties
as CEO.
In front of Congress, Munoz admitted it was a horrible failure and promised the airline would do better.
(BEGIN VIDEO CLIP)
MUNOZ: No customer, no individual should ever be treated the way Mr. Dao was -- ever.
(END VIDEO CLIP)
QUEST (voice over): A year later, another PR disaster. This time, Kokito, a 10-month-old French bulldog died on a flight after a United flight
attendant forced the puppy's owner to place the dog in the overhead bin.
The furor had barely peaked when news broke that United had mistakenly shipped a Kansas bound dog to Japan.
Munoz told me he needed to overhaul United's culture from the ground up and empower his employees to make better common sense decisions.
(BEGIN VIDEO CLIP)
MUNOZ: Beyond the technical protocols and policies we're putting together, the values of the support customer service are what really are beginning to
take hold with our employees in the frontline.
(END VIDEO CLIP)
QUEST (voice over): Ultimately, these incidents fueled wholesale changes in the way airlines deal with overbooking and pets on planes.
United by most metrics is in much better shape than it was four years ago, largely as a result of the changes Munoz made and the leadership he
brought.
Munoz's predecessor had been ousted amid a Federal corruption probe. The airline had awful scores for customer satisfaction. The stock price was on
a downward slide.
Under Munoz, the shares are up more than 50 percent. The airline has settled many of its labor relations problems, particularly between the
flight attendants, and all the while it has steadily climbed the rankings for on-time performance.
To the flying public, Oscar Munoz will be remembered as the face of their frustration with air travel. Inside United, he is the CEO who got the
troubled airline back in the air.
(BEGIN VIDEO CLIP)
MUNOZ: The product will come, the product will be improved. Other people will have product and we're upping the game.
But at the end of the day, it's our people that will make the difference long term.
(END VIDEO CLIP)
QUEST: Brian Sumers is with me, the senior aviation business editor at "Skift." He is in Los Angeles. All right. Let's not to David Dao just at
the moment. Let's not talk about what happened there, instead for just to start with, focus on the way he turned -- I mean, when he took over, the
airline was in a dreadful state. The previous CEO had left in disgrace. There were unions who were at each other's throats and he came in and had
to solve all of that. How would you grade him?
BRIAN SUMERS, SENIOR AVIATION BUSINESS EDITOR, "SKIFT": Oh, I grade him at about a B, Richard, I would say.
One of the things that he did absolutely brilliantly was reset the culture at United, so people may remember if they flew their line five years ago,
nobody wanted to work there. The culture was bad. The unions were upset with management.
Oscar Munoz came in there and he said, we're going to reset things, we're going to make people feel better about coming to work, and then those
people are going to take better care of customers.
And he also prioritized the customer experience. So he did a really good job. He was almost like a politician as a CEO.
QUEST: Right.
SUMERS: A lot of the stuff on the back end, Richard, though was done by Scott Kirby, who was named CEO today. He is sort of the genius, the person
that made the airline run operationally better, commercially better, that sort of thing.
QUEST: Right, sure. But again, you know the genius in some sense of Munoz to coach Kirby, when he knows that Kirby probably isn't going to get the
top job there anytime soon because, Doug aint' moving out at American. So Scott comes across to United.
SUMERS: Absolutely. Scott has said publicly that he was actually fired from American -- pushed out. He apparently had been promised he would get
the top job at American at some point. And then Doug Parker, the CEO, came back there and said, wait, no, you're not going to get the top job and you
have to leave immediately.
Scott Kirby tells this story about how he basically got fired from American in one hour and then he had a job at United the next hour. It was really
that fast. Scott Kirby is one of the most sought after executives in airlines.
QUEST: And as I heard the story, the most extraordinary thing is Kirby didn't have a non-compete or even a non-compete for a short term, because
Doug Parker doesn't have one and doesn't believe in them. Therefore, Kirby was able to move right across the United pish-posh-posh next day.
SUMERS: No, that's absolutely right. The executives at American Airlines don't even have contracts. They are at-will employees. It's amazing and
rare for companies of that size.
QUEST: All right, so David Dao clearly was the weakest point of the Munoz leadership. And, you know, the Head of Coms left as a result, numerous
people left as a result.
[15:25:10]
QUEST: The airline turned round. I think you're being unfair with your B. I might be more tempted by an A minus or an A, Brian.
SUMERS: All right, it's your show, you're certainly allowed that. I think Munoz did a nice job. But frankly, Richard, if he had been doing such an
amazing job, he might have kept his job rather than being kicked upstairs here, right?
QUEST: Final question. Of the three carriers at the moment in the U.S., the three main dominant carriers -- United, Delta, American -- who is doing
the best, do you think?
SUMERS: Delta Airlines is doing by far the best. They may be the most profitable carrier in the world. They're so well run. Richard, they're so
well run as an airline that sometimes you'll talk to people privately at United or American and you'll say to them, well, why don't you do things as
well as Delta, and they'll look at you and they'll say, off the record, Brian, do you think we're Delta?
I mean, nobody knows how the people in Atlanta run such a great airline. They basically never cancel flights. They have a great customer
experience. They do everything right.
Now, I know some people are going to watch the show and say, oh, well, I had a bad experience on Delta last week. But the bottom line is, Delta is
one of the best run airlines in the entire world.
QUEST: Can't disagree with you there. Richard Anderson first, and Ed Bastian took on which is unusual. We could talk about this all day, but we
can't. Thank you, sir. Very great to have you.
SUMERS: Thank you.
QUEST: As always. @RichardQuest by the way, is where you -- if you do want to take Brian up to this task on that, @RichardQuest is the old
Twitter handle.
When we return, the new head of the IMF issues a stark warning on trade tensions and the economic slowdown. She is talking to Eleni Giokos in a
moment. It is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS in a moment. We'll hear an exclusive interview with the new Managing Director
of the IMF.
[15:30:00]
And also the pound is soaring one week from the U.K. election. An election where Brexit might be more certain afterwards, but we need to examine why
selling is so strong.
And we'll do so after we have the news because this is CNN, and on this network, the facts always come first. U.S. House Speaker Nancy Pelosi says
Democrats are moving forward with articles of impeachment against President Trump, saying the president leaves them no choice. For his part, Donald
Trump is telling the house to impeach him fast so the process can move to the Senate where he says he'll get a fair trial.
President Trump's personal lawyer Rudy Giuliani may still be investigating conspiracy theories in Ukraine. In a Facebook post accompanied by this
photo, a controversial Ukrainian lawmaker says he met with Giuliani in Kiev to discuss what he described as Ukraine's inefficient use of American tax
dollars. In a text exchange with CNN's Dana Bash, Giuliani wouldn't confirm whether or not he is in Ukraine.
Italian newspaper is defending its front-page amid widespread criticism. It's a Rome-based sports newspaper and says its headline Black Friday has
been twisted into poison. Now, it refers to two star footballers in a preview of tomorrow's match between the homeland AC Milan. Both clubs say
they banned the newspaper from training facilities for the rest of the year.
The new managing director of the IMF has warned that U.S.-China trade tensions will cost the global economy $700 billion by 2020. Kristalina
Georgieva spoke exclusively to CNN's Eleni Giokos in Senegal. I beg your pardon, the satellite is working. Eleni, Kristalina has -- is new in the
job, very experienced from the --
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Yes --
QUEST: World Bank -- very experienced in the World Bank. But now she's got to actually get structural changes. So what does she want?
GIOKOS: Yes, so firstly, it's very interesting. This was a first big trip as the MD of the IMF. And she came to Africa and I'm just off the plane
from Dakar, Senegal. And it's interesting that she chose to come to the continent. And they spoke about two major things, so firstly, its
sustainable debts and sustainable developments.
These two topics, Richard, are not only very important for Africa, but the rest of the world. And we know that the world is more leverage now than
it's ever been, and the question is, can economies handle these levels of debt and still ensure that you've got economic growth. And in the back-
drop, of course, you've got the global trade war that's playing out.
We've heard these numbers before, $700 billion wiping off a significant amount of global growth. But the question is, is it going to be a new
normal? The fact that we're going to see a prolonged trade war, trade tensions between China and the U.S. And she says, well, we better gear up
for it. Take a listen.
(BEGIN VIDEO CLIP)
KRISTALINA GEORGIEVA, MANAGING DIRECTOR, IMF: First, we have been very clear what is the cost of trade war. By next year, we would lose as a
planet$700 billion. This is 0.8 percent of the global GDP. Everybody loses. Second, we have been also very clear what can be done so this
slowdown in a synchronized manner we have seen can be stopped and reversed.
And we say to countries three things, one, if you have monetary space, if you cut -- if you can cut the interest rates, please do it. Very few
countries now have that much space. Two, if you have fiscal space, please use it. Some countries do have fiscal space, and we're seeing even more
reluctant players like Germany --
GIOKOS: Yes --
GEORGIEVA: The Netherlands, South Korea, they're coming up with stimulus packages. Three, most important, everybody can do it, structural reforms,
labor market reforms, eliminate red tapes or private sector can boom, jobs can be created. So one, two, three, and I think we see governments around
the world actually listening.
GIOKOS: But a lot of countries don't have fiscal room to take up more tools out of the monetary policy box, that's the big problem. And the
world is very leveraged right now.
[15:35:00]
If you see a further slowdown or this trade war continuing, is the IMF ready to step in? Do you guys have enough resources to do that?
GEORGIEVA: That was the very good news that we got during our annual meetings in October, my inaugural. Our shareholders committed to provide
the IMF with fiscal financial capacity of $1 trillion. So, we do have sufficient firing power to step up. But we tell countries, do the right
thing so you don't need to come and knock on our door for money.
GIOKOS: Right now, at this moment, how are you feeling about all the uncertainties, you feel optimistic that we're going to work as a global
team because that's the message that you've giving everyone.
GEORGIEVA: What we see is that we need each other more, but it is harder and harder to come together. And institutions like the IMF have a duty to
bring our 189 membership and seek that consensus to take action together when this is necessary. I do believe that the world is changing much more
rapidly today than 20, 30 years ago. This is the new normal.
Uncertainty is the new normal. And therefore, we have to help our membership to be more agile, more adaptable to this fast-changing world.
Enjoy the pace of change today, it will never be that slow in the future.
(END VIDEO CLIP)
GIOKOS: And she makes it sound easy, right? Three things that we have to do to ensure that we don't continue on a global slowdown when we get rid
of the uncertainties, but it's easier said than done because there's politics involved. There's so many things that economies need to do. And
one thing we know for now is, there isn't a lot of political will and everyone is becoming a lot more protectionist.
So, Georgieva wants to create a global team, whether she's going to be able to achieve that through the IMF and its efforts is going to be an
interesting one to watch as she heads into 2020.
QUEST: Thank you. Eleni is in Johannesburg, thank you. To the markets, the Dow -- well, look at the Dow, it's down, but now it's back up -- but
now, it's down -- now, it's back up again. But we're only talking about 40 points, which does suggest that might eke out that gain by the closing
bell.
But it's really -- it was -- look, it's all about China and trade again where officials in China -- officials said trade negotiations are back on
track. They gave a boost. The U.S. Secretary -- Treasury Secretary confirmed that as well. Chad Bown is in Washington, a senior fellow at the
Peterson Institution Service economic adviser to President Obama.
The trade question -- the markets are still hanging on it. They haven't quite, you know, decided, well, to hell with it, we don't really matter.
Every time there's a movement that we're in the talks, we see it in the markets.
CHAD BOWN, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: So, that's right, so our next big deadline is December 15th --
QUEST: Right --
BOWN: Which is 10 days from now when the next slot of tariffs on $160 billion of U.S. imports from China are still scheduled to go on. So, you
know, we'll see if they get a deal, if President Trump gets a deal and announces at least a temporary pause on the tariff escalation. But for now
at least, you know, I think the markets are right to be a little bit concerned that those tariffs are still out there.
QUEST: So what do you make of this linkage that the president is trying to do between trade and those countries that don't meet their NATO
requirements? It's not flushed out, but there's a veiled -- well, wasn't a veiled suggestion, that if you don't meet 2 percent, then there'll be trade
action taken against you.
BOWN: So we've seen the president do this sort of thing before. President Trump likes to use tariffs as, you know, sort of the hammer with which to
address every international challenge that are seemingly out there. We saw this before this Summer, even after Mexico for example signed up to the new
NAFTA, the USMCA agreement and they were putting it through their Senate.
At the same time, President Trump out of nowhere said, well, you know, if you don't deal with my problems, my concerns on immigration and the
southern border of the United States, I'm going to hit you with tariffs. So, you know, he's sort of threatening to do the same sort of thing to NATO
allies here, and we'll have to wait and see. This is you know, kind of a common theme that comes out of President Trump.
[15:40:00]
QUEST: You were an economic adviser, you know how these thinking -- I agree, this particular White House is perhaps a little more unusual, the
most. But what will they -- what will they make of this spat with Canada? The Trudeau comments about advisors draws hitting the floor. The president
calling Trudeau two-faced.
Is it your thought that this somehow the U.S. President retaliates or is it just -- get forgotten?
BOWN: Look, this administration is different from any in modern memory. They -- you know, they choose to conduct diplomacy, if you want to call it
that differently than most traditional administrations would. And I think they've put trading partners and friends and the allies even in different
positions than they would otherwise have been.
And so, you see, you know, diplomatic gaffes being made on all sides. And you know, we're --
QUEST: Right --
BOWN: Just kind of in a new normal. What this ultimately leads to, who knows?
QUEST: Right. Finally on that new normal, interest rates. There seems to be a consensus that the ECB and the FOMC both on -- what -- different
levels, of course. But hold rates where they are for most of 2020. Do you subscribe to that?
BOWN: Well, I think it's going to be hard to tell. And obviously, it's going to depend on, you know, how the economy actually starts to perform as
we head into next year. And as you know, the IMF indeed indicated in your last segment, you know, what the implications of the trade war ultimately
are, and you know, what actions -- other actions on fiscal policy that some of these governments take. So, I think it's possible.
But I think a lot of it is still dependent on how the economy is ultimately going to, you know, start performing over the next -- over the next couple
of months.
QUEST: Thank you, sir, much appreciate it joining us tonight. Now --
BOWN: My pleasure --
QUEST: In a moment, a new merger could be on the horizon this holiday season. The owner of Gucci is reportedly looking to buy Moncler. It's
Italian company -- Anna Stewart, the sort of person who will know about this sort of luxury will be with us after the break.
(COMMERCIAL BREAK)
[15:45:00]
QUEST: A distinctive belt with the double -- Gucci's owners Kering could be joining in on the shopping spree, sweeping up the luxury market,
reportedly looking to add Moncler to its wardrobe. The Italian sportswear company is famous for making jackets like these, and during a long list of
big-name tie-ups in the fashion industry.
What have we had so far? Last week, Louis Vuitton, the owner of course, LVMH added Tiffany to its collection. That deal was worth $16.2 billion.
And there are rumors there could be more on the horizon. Burberry of course, its shares in Burberry's Ferragamo and Tod's have all risen on
speculation they could be next year's takeover targets.
Remember not forgetting of course, Burberry's had a very difficult time in recent years. Now, maybe turning itself around. Tod's independent and
wonders what's next, say with Ferragamo, perhaps that's why you're seeing these independents up more than say Burberry. Anna Stewart is with me to
talk about this. What is it about Moncler and its jackets that's got everybody excited at Gucci.
ANNA STEWART, CNN REPORTER: Well, this is definitely one of the most successful, soft luxury brands, even more so than Ferragamo, frankly, in
Italy right now. Two-thousand-and three was when Remo with only bosses, he took it public six years ago, since then, the share price has actually
quadrupled. So big success story, great brand, but not much value that you can add if you were to buy it because it's already very successful on its
own.
QUEST: So, it's successful on its own. What does it add to Gucci?
STEWART: Well, it adds to Kering of course, is to rely on Gucci. Gucci represents --
QUEST: Right --
STEWART: Sixty percent of its sales --
QUEST: So, we're putting it in terms of that. Gucci doesn't have this, there's a bit of division, those are for Kering, it is a -- it is a
suitable babble.
STEWART: It is, but you know what? Analysts today were saying to me, yes, it is a very attractive brand, it's doing very well. It doesn't add much
value, and you know what? It doesn't bring what Kering really needs here which is hard luxury tools, Richard, watches, that is what it needs. That
is what LVMH brought in Tiffany's. That's where the Swiss bought his -- that is the fastest-growing segment in luxury.
QUEST: OK, when we look at those three that we've seen Ferragamo --
STEWART: Or a flatter --
QUEST: All of it -- Burberry. Now, look, Burberry has had numerous difficulties in the last 10 years.
STEWART: It has. It's had problems with management, it's had problems with style. Some of these things do go out of fashion. Burberry is
looking pretty hot today, but I think there's an interest here in how long can stand alone brands last.
Yes, they have great years, they have fantastic seasons, but do they all need to be swallowed up by these big groups. It's all about Richemont,
LVMH and Kering.
QUEST: Good to see you, thank you. One week from now, the polls will be just about to close in the United Kingdom. Tonight, the "Financial Times"
says it can't endorse either of the two top parties.
(COMMERCIAL BREAK)
[15:50:00]
QUEST: This time next week, there will only be one hour left of voting in Britain's general election as voters go to the polls for a new parliament.
The pound hit its highest level since May on Thursday, Conservative Party look set to secure a majority, investors see that as the most market
positive outcome. It allows the Prime Minister to finally push through his Brexit deal.
Business leaders certainly have a lot to consider whether they want to win. The Labor Party is promising to hold a second referendum, that could give
businesses more time to prepare to leave the EU and pledges to raise the minimum wage to 10 pounds and nationalize companies in the front and
center.
(BEGIN VIDEO CLIP)
JEREMY CORBYN, LEADER, LABOR PARTY: To share wealth, we need to share power, and that's what we'll do in government with bold, radical measures.
A labor government will mean better wages, greater security and more say, putting power in the hands of people. And we'll bring rail, mail, water
and the national grid. It's a public ownership.
(END VIDEO CLIP)
QUEST: Now, the conservatives promising not to raise income tax to reduce business rates, and above all Brexit by 2020. The Prime Minister says
ultimately that's what his opponent is missing. A concrete Brexit plan.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, PRIME MINISTER, UNITED KINGDOM: What we want to know is what is his plan to deliver? Brexit and what's the deal with what he wants
to do, and which side would he vote on that deal, and we still don't know. And do we have answers to those questions? Until we get Brexit done, none
of this carries any economic credibility whatever.
(END VIDEO CLIP)
QUEST: Edwin Morgan is director of Policy with the IOD, Institute of Directors. He's with me now, good to see you. To clarify, you don't take
a position on --
EDWIN MORGAN, DIRECTOR OF POLICY, INSTITUTE OF DIRECTORS: No, we are not party political.
QUEST: No, but the Labor Party's manifesto and its policies, many cases, it must be not so much, the idea of nationalizing first waves of the public
economy.
MORGAN: I think it's fair to say there are large sections of the laid manifesto that our members are absolutely not on board with, I would say
nationalizing water, rail, broadband, it's the latest one, open reach the actual -- so this is the Broadband networks, combined obviously with -- or
perhaps actually to give Broadband for free, which is something that I just don't think -- well, I think most businesses find quite hard to understand.
But it's not really been a very good election for business as a whole. All the parties are talking about increasing spending -- some increased
spending on infrastructure businesses do like, but with I feel this kind of getting out of control. Normally, businesses end up paying in the end.
QUEST: The "Financial Times" tonight says it can't endorse any party in this election because essentially no party is -- particularly in the
leaders. "The past elections, the FT variously supported the conservatives or a moderate labor. This time the main parties put ideological purity
before the good of Great Britain. Neither can command our support." What do you make of that?
MORGAN: I mean, I think that, you know, I have to say there are a range -- definite range of views within our membership, within businesses nor
homogenous. But I don't -- I think in general, they feel that actually (INAUDIBLE) much on the last few weeks talking to them, talking about
business. Brexit is obviously one that really divides opinion -- our members are very fed up at the moment. But it's not like any of them is so
business friendly --
QUEST: But your members -- even on Brexit --
MORGAN: Yes --
QUEST: Your members are split.
MORGAN: Yes, absolutely. So, I mean, they were heavily leaned towards remain at the time of the referendum. But since, most of them have sort of
got to a place where they're really just so fed up with where we are now. They want some kind of resolution.
QUEST: So --
MORGAN: A majority do back Boris' deal before when it came back.
QUEST: Right, and it's interesting to note the pound today went up because the view is if Boris Johnson wins next week, then Brexit becomes a
certainty, but that certainty is helpful to your members.
MORGAN: Certainty is sort of certainty answer is maybe of an overused term. Because this whole get-Brexit-done mantra -- well, yes, we'll get
the first stage of it done. We will leave the EU, but we still don't know the shape of the future trade deal --
QUEST: Right --
MORGAN: And that still may even matter --
QUEST: But do you still have a real fear that they won't be able to trade deal by the end of next year, and that the clock will run out on the
transition period or the implementation period.
MORGAN: Yes, that absolutely is fair. It's very -- it's for a short time to do a trade deal.
QUEST: Right --
MORGAN: Even if we're starting from a place where we're integrated --
QUEST: And if you have a government with a healthy majority, it will not need to -- we won't have any of the shenanigans that we've had over the
last 18 months.
MORGAN: Yes, I mean, hung parliaments, narrow majority is clearly and definitely doing just a bit of uncertainty. But at the same time, all our
members really care about is getting a deal that enables them to trade freely with the EU.
[15:55:00]
They don't care so much about how long it takes. That's the message we always get back from them.
QUEST: Business has had to adapt in the most phenomenal ways as a result of all of this. The thing that strikes me is that Britain is doing quite
well at the moment despite all this.
MORGAN: Yes, I mean, the thing is, yes, it's a testament -- I would say this to the strength of British companies, entrepreneurs, the ideas, all
those things are great. The big problem is that people aren't sitting on their hands and they're not investing.
QUEST: And you're seeing that of course in the numbers.
MORGAN: Absolutely, yes, we've seen there's been a consistent trend. We can see it between our members lower confidence, low investment and that's
the problem.
QUEST: This week is the election, thank you very much indeed.
MORGAN: Thank you.
QUEST: Thank you. We will have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, when Oscar Munoz became chief executive of United Airlines, he was a member of the board, and the airline
was in a terrible state. Jeff Smisek had been fired, the CEO on corruption allegations. And the airline was bottom in all metrics.
But interestingly, and I criticized Munoz at the time because he been on the board of directors during all these bad times at United. And I was
wondering, was the board asleep at the wheel? When they should have been holding things together. No, but truth be told, the first thing he did
when he came in, he acknowledged, he had to get a union agreement between the flight attendants from the old Continental and United.
He managed to do it. It was a priority, he did it. He had to get on-time performance back together. He to buy new aircraft for the fleet. He
managed to do it. Now all of the good things that he did and particularly, it was all about making the staff feel that somebody cared. That there was
somebody actually at the top.
The David Dao incident cannot be overlooked when that passenger was dragged from the plane, much of the good work that Munoz had done evaporated out
the window. His comments were crass, they were chosen, the PR guy who was in charge, he left the company to spend more time with his family.
And now Oscar Munoz is leaving United. But what I think is most important is here we had a CEO who actually came in and did something. And he
recognized that his principle task was to find his successor, his replacement, which is what he did with Scott Kirby. If more CEOs were
concerned about who comes next, not how long can I grab on, all companies would have been in a much better shape.
And that's QUEST MEANS BUSINESS for tonight, I'm Richard Quest in London, whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
A quick some between -- the day is done. All the lighting in-between tonight on Wall Street.
END
