Return to Transcripts main page
Quest Means Business
Autoworkers Walk Off Job At Three US Plants; Flash Floods Leave Trail Of Utter Destruction In Libya; Qatar Airways CEO: Australia's Rejection Is Unfair; United States Sentiment Slips As Oil Rises; Drought Slowing Transit Through Panama Canal; Neal: We're Facing A "Riskier, More Uncertain World". Aired 3-4p ET
Aired September 15, 2023 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:24]
RICHARD QUEST, CNN INTERNATIONAL HOST: The weekend is almost upon us. There is an hour to go of trading on Wall Street, but gasping our way to the end.
I don't think we'll be too disappointed to see the day over, off 230 points, good gains earlier in the week, but they are now being wiped off
the market.
So it's an end of the week, downer, if you will, and there are lots of reasons why including this particular event. An historic strike has
targeted three major US car makers, all at the same time. President Biden is speaking out in support of the workers.
More than a hundred ships racing to pass through the Panama Canal as a drought means traffic has to slow down.
And the scourge of shrinkflation, Carrefour goes on the offensive to warn customers about smaller portions.
I promise you, there will be some good news, I think. Live from New York, Friday, September the 15th. There you are, that's the good news. It's
Friday.
I'm Richard Quest, and I mean business.
Good evening.
One of the most powerful unions in the United States is now taking unprecedented action against America's Big 3 carmakers. Members of the
United Auto Workers, UAW have walked off the job at three plants, including this Stellantis factory in Ohio, where they were greeted by cheers. Others
have targeted a Ford plant in Michigan and a GM factory in Missouri. It is the first time the union has fought all three car companies at the same
time.
This morning, President Biden voiced his support for the workers and was urging quick resolutions.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: Let's be clear, no one wants a strike. I'll say it again, no one wants a strike. But I respect the workers
right to use their options under the collective bargaining system, and I understand that workers' frustration.
Over generations, auto workers sacrifice so much to keep the industry alive and strong, especially during the economic crisis and the pandemic.
Workers deserve a fair share of the benefits they helped create for an enterprise.
(END VIDEO CLIP)
WATTERS: Workers at that Stellantis plant in Ohio are now signing up for their strike pay. CNN's Gabe Cohen is there and reports on what's taking
place.
(BEGIN VIDEOTAPE)
GABE COHEN, CNN CORRESPONDENT: Well, this is what day one of the auto workers strike here in Toledo, Ohio looks like. You can see this huge line
of people here in the parking lot outside of the local union office, this line snaking all the way through the lot.
There are about 5,800 members of this local union and they are arriving here today to sign up for strike pay, about $100.00 a day that they're
going to be paid by the union.
Just three miles down the road, the Stellantis factory where right now, there are right around 15 picketers outside each and every gate and they
are going to be there 24/7 for the foreseeable future.
There are roughly 13,000 auto workers now on strike across the United States as the gap between the UAW union and the Big 3 automakers -- Ford,
General Motors and Stellantis seems to still be wide.
We were told last night by the head of the Auto Workers Union, that there would be no bargaining today, that today is about picketing, striking,
demonstrating and that they would likely be back at the table on Saturday.
But for now, thousands of workers arriving, getting ready for that $100.00 a day strike pay and getting ready to hit the picket line.
Gabe Cohen, CNN, Toledo, Ohio.
(END VIDEOTAPE)
QUEST: Now, the chief executive of General Motors says she is frustrated by the union's decision. It's the second strike the company has faced in four
years.
The union's 2019 strike against GM, that lasted six weeks, and the company said at the time, it was losing $90 million a day by fourth week. This
time, Mary Barra told CNN's Vanessa Yurkevich, their offer, the company's offer is very competitive.
(BEGIN VIDEO CLIP)
MARY BARRA, CEO, GM: We understand the world has changed, and that's why we put a historic offer on the table with the increases.
I think our manufacturing team is the best on the field, the way they managed through the COVID situation and continued to build cars, trucks,
and crossover; the way that we managed and they, you know, moved with us as we went through the semiconductor shortage, and still the supply challenges
that we see today.
They are very resilient and I -- you know, I want to recognize them because our manufacturing team along with the engineering team for the last two
years has been number one in JD Power Quality.
[15:05:12]
So we have a very talented team. We put a historic offer on the table, and so, that's why I'm so disappointed and frustrated.
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: The union is demanding, asking for a 40 percent wage increase over four years. They're
asking for that in part because they say CEOs like yourself, leading the Big 3 are making those kind of pay increases over the course of the last
four years.
You've seen a 34 percent pay increase in your salary, you make almost $30 million. Why should your workers not get the same type of pay increases
that you're getting leading the company?
BARRA: Well, if you look at compensation, my compensation, 92 percent of it is based on performance of the company. I think one of the strong aspects
of the way our compensation for represented employees is designed, is not only are we putting a 20 percent increase on the table, we have profit
sharing.
So when the company does well, everyone does well. And for the last several years that's resulted in record profit sharing for our represented
employees.
I think you have to look at the whole compensation package, not only 20 percent increase in gross wage, but also the profit sharing aspect of it,
world class health care, and there are several other features.
So we think we have a very competitive offer on the table, and that's why we want to get back there and get this done.
(END VIDEO CLIP)
QUEST: Now to give you a firsthand look at the devastation caused by this flash flooding that took place this week in Libya.
Our Jomana Karadsheh has made her way to Derna, which is the hardest hit city, and what she found is terrifying.
(BEGIN VIDEOTAPE)
JOMANA KARADSHEH, CNN INTERNATIONAL CORRESPONDENT: We've all covered wars, natural disasters before, but none of us have seen anything like this. I
mean, we drove into Derna, late last night. And even during night time in the dark, you could still see the destruction.
And now during the day, this is just utter, utter destruction. And it really feels like you're walking through a warzone like massive bombs had
gone off here. And this is what people here would tell you.
You know, you've got several cities along the Libyan coast that were impacted by Storm Daniel, by the flooding over the weekend, but nothing
like this, what people are describing here as this catastrophe.
What happened in Derna, of course, as you know, is those two dams that burst and you have the floodwaters that swept through the whole of the
city, washing out entire buildings, neighborhoods, homes, infrastructure, families, and brought it all down here to the sea, to the Mediterranean.
I mean, it's very difficult for us to really move the camera around because of the communication issues. The communications were disrupted in the city,
so our connection is not very stable. But looking into the sea, what we see here is people's lives in there.
You see homes, you see doorframes, windows, furniture, clothes, cars, everything, and they are still right now searching for dead bodies, bodies
that are still washing up on the shore six days after this tragedy happened.
Right now, Libyan officials are saying about 5,000 people have been killed. There are still 10,000 people unaccounted for and officials that we've been
speaking to say they don't expect to find any more survivors right now.
And what you've got here, where we are is all these volunteers from different parts of the country who are working, who are trying to assist in
this recovery effort and it is such a tough task. They're telling us they're not equipped to deal with something like this. They don't have the
means and capabilities to do this.
One young man I was speaking to just a short time ago, just describing how people were just tying ropes to themselves and holding each other as they
would dive into the sea and start pulling out body after body. This one young man telling me, in one day, he pulled 40 bodies just by himself.
And right now, the volunteers here are saying look, they need heavy equipment. You've got cars that are stuck in there and they don't know how
many people are still in there. They are worried that there are people still, dead bodies, of course in these cars and they want support, they
want help.
They want heavy equipment, they want divers, they want diving equipment to try and get -- recover as many bodies as they can. They have had some
international support. We have seen some teams here on the ground. The Turks were already out on a rubber boat just a short time ago.
You have helicopters in the air, but it is nowhere near enough.
(END VIDEOTAPE)
[15:10:05]
QUEST: Jomana Karadsheh reporting.
When we return, the chief of Qatar Airways, Akbar Al Baker is with me. He will join me to talk about his airline that's found itself at the center of
a political brouhaha in Australia and I'm not sure that that was the chief.
(COMMERCIAL BREAK)
QUEST: One of the fastest growing airlines in the world Qatar has found itself at the center of a political storm in Australia.
Qatar applied to dramatically increase the number of flights to Australia. The government there refused the request. Now, Australia's opposition
leader has claimed that that government is running a protection racket for the national carrier, Qantas and a decision to be scrutinized by Senate
inquiry in the coming months.
The CEO of Qatar Airways joins me from Seattle where you're also celebrating a new -- a big expansion into the United States. Akbar Al Baker
is with me.
Chief, it is good to see you, sir.
Let's start with the Australia business. Do you think there was some funny business in refusing your application to fly there? And are you now more
hopeful that you'll get permission?
AKBAR AL BAKER, CEO, QATAR AIRWAYS: I am always hopeful for the government to listen to our case very carefully, and then make a decision.
You know, we can never influence a government decision, but the fact remains is that we were very surprised for getting this rights blocked or
unapproved, I can say.
There is a parliamentary inquiry and it is very difficult for me to make any comments. We have full confidence in the government and in the
parliament and in the Senate of the Australian government.
So we will have to wait and see what conclusion they get up to, but we found it to be very unfair. Our legitimate request to be not granted,
especially at a time when we were so supportive of Australia repatriating the stranded citizens from around the world to and out of Australia,
helping them, receiving medical supplies and spare parts et cetera et cetera during the COVID period when the national carrier and their partners
completely stopped operating in Australia, we were there for the people of Australia.
[15:15:14]
QUEST: In the United States, there is no such shortage of expansion. I mean, aren't you running out of places to fly to yet?
AL BAKER: No. The United States is a huge country, and there are still several destinations, there are several cities that we are looking at
operating to.
QUEST: But I mean, is it now part of this operating to the US new cities, is it very much part of a closer and better relationship with American
Airlines, your Oneworld partner? Because I think you'd agree that under new leadership, the relationship between the two is better than it has been.
AL BAKER: Absolutely, we have the strongest and closest relationship with our Oneworld partner, American Airlines. We are also working very closely
with the Alaskan over here. We have a close relationship with JetBlue. So yes, we see that now that the relationship being so strong, the sky is the
limit for our joint relationship to keep on growing.
QUEST: So where do you grow? How do you actually take it to the next level, if you will? You've got an enormous number of bilaterals, you have a lot of
Oneworld linking, you've got a stronger route network. But what does it -- what do you actually now need to do?
AL BAKER: We just need to see how we can grow our business further by getting more closer to each other as long as our regulators from both sides
allow, and we get antitrust immunity, hopefully we have applied for.
And then, like I said that we can just keep on growing our business together.
QUEST: You're hoping for ATI, antitrust immunity, that makes a big difference, doesn't it? The moment you can JV an arrangement. I mean,
you've got code shares and it is all very nice, and it's all very friendly, but it is the JV that really puts gas in the tank.
AL BAKER: You're absolutely right, we have applied and we are just waiting for the authorities in the United States to process it.
QUEST: If you take a look at the issues facing the industry, you've got higher fuel prices, the Saudis supposedly wanting a hundred bucks a barrel.
You've got the OEMs, the manufacturers. They can't make the planes fast enough, and you've got the engine manufacturers, who all have got problems
of one shape, form, or another.
You're all facing massive delays in terms of delivery of metal, is that right?
AL BAKER: Absolutely, Richard. We are facing the greatest challenge since I got into the aviation business.
There are issues with engines from all the manufacturers. There are supply chain problems. There are issues with getting spares for our own airplanes
that already we are flying. So there are challenges, and I don't know how we are going to overcome this in the near future.
I know that the aircraft manufacturers, both Airbus and Boeing telling us that they're working very hard to get their supply chain back to normal,
which I do know that they are doing so, but the problem is only there is so much they can do because they don't have control.
And I think the biggest mistake both these manufacturers did is trying to outsource a lot of jobs that they were doing in-house previously to save
money, and now, you can see that this is hitting back at them.
QUEST: Related to that, coming at a time of historic increase in demand, travel demand like nothing else before, which of course then raises the
whole climate question. Now, I know you've been highly critical of the industry's commitments in a sense, whilst agreeing on the necessity, you
don't think they're realistic?
AL BAKER: Like I told you before during the AITA AGM.
QUEST: Yes.
AL BAKER: The availability of sustainable aviation fuel is a huge challenge, and I think that everybody in the industry is promising, but I
don't think those promises will be delivered in time.
QUEST: It can't be, because there's just simply not the physical ability, unless and everybody keeps falling back on the argument, well, government
needs to do more, government needs to put more resources or government needs to give more tax breaks.
AL BAKER: No, that is not the case. It is not about tax breaks, it is about oil producer.
[15:20:10]
The oil producer like Shell, ExxonMobil, Total -- all of these people, they need to get their act together in order for them to produce stuff in
volume, in order to get economies of scale to reduce the price to our industry.
QUEST: Finally, you're in Seattle. I mean, to the moment I heard you're in Seattle, I thought up, he's been to Boeing to buy some planes.
AL BAKER: Now, as a matter of fact, I'm in Seattle doing our financiers conference, which we do every other year. I'm not buying any more
airplanes. I think we have enough airplanes in the pipeline for them to deliver, and I just hope that they deliver to us on time.
QUEST: I think that'll be more than a hope than an expectation. Akbar, it is good to see you. Chief, I'll see you in Riyadh in a few weeks' time at
ICAO.
Thank you, sir, for joining us. Thank you.
AL BAKER: Thanks.
QUEST: Returning to our top story, the historic auto strike affecting the Big US 3 automakers, GM, Ford and Stellantis. If it drags on, the damage
will be uncountable. One estimate by the Anderson Economic Group puts the cost at the 10-day stoppage at more than $5 billion, which proves me wrong
and that it is calculable.
That takes into account lost wages, earnings and impacts the chip supply. Today's action was targeted and isn't expected to cause major issues for
the Big 3. Their stocks, you can see pretty much held their own; of course, that will change.
Now, this is Alan Amici. He is the chief executive of the Center for Automotive Research. You saw him briefly a second ago, but he's actually
the head of the Automotive Research. He's with me now.
Sir, I think what I find fascinating is this change of strategy of the UAW to hit all three in some shape or form at once. Why did they change the
strategy?
ALAN AMICI, CHIEF EXECUTIVE, CENTER FOR AUTOMOTIVE RESEARCH: It is an interesting strategy and is a departure from the historical approaches to
the automakers.
I think their view was to try to maximize the impact. And of course, they're selecting targeted plants within those three companies. It's not
all of the plants and all of the companies, but it is an interesting approach, and I think it'll be effective.
QUEST: Right, and the plants that they are targeting are those -- I mean, they're not targeting the finishing plants. You know, where the things are
-- they are targeting those plants that will have knock-on effects for further plants to have to do more work.
AMICI: They are targeting some assembly plants, so with Stellantis, they are targeting the Wrangler and Gladiator plant which is in Toledo, Ohio.
For Ford Motor Company, they are targeting a Michigan assembly plant, which assembles the Ranger midsize pickup truck and the Bronco sport utility. And
for General Motors, it's in Wentzville, Missouri, which is a truck plant. It's a pickup truck -- midsize pickup truck plant. So they are in fact
targeting end-item assembly plants.
QUEST: And the gap between the two sides is huge at the moment. I've heard both Mary Barra speaking, and I've heard the CEO of Ford speaking, they
don't seem ready to give much ground yet.
AMICI: Well, the union was requesting approximately 40 percent of wage increase. They were asking for elimination of the tiered payments. They're
also asking for a return to pensions, and would like cost of living allowances.
And the union's viewpoint on this is during the Great Recession of 2007- 2008, the unions gave up a lot. And so two of the three automakers went into bankruptcy, and so the unions did contribute and they did create
concessions such that those companies could come out of bankruptcy, be viable and in fact, be successful.
And so the union is looking back on that saying, okay, now the three automakers are profitable, they are doing quite well. They're making this
transition from ICE to EVs. They would like to be compensated for those concessions that they made, you know, more than 12 years ago.
QUEST: When you put it like that, it is a justifiable request. The question, of course, is can the companies afford it, do you think?
AMICI: Yes, well, I think that's really the challenge is, from a labor standpoint, you want to be compensated, you're interested in job security,
you're interested in cost of living allowances, even perhaps a return to pensions.
On the flip side of that, Ford, General Motors, and Stellantis need to -- they need to be competitive. And one of the things that CEOs are thinking
about, one of the things that keeps them awake at night is how do you make EVs -- how do you make electric vehicles both affordable and profitable?
[15:25:09]
And so both parts of those components are how do you keep costs down? Or how do you reduce costs? And labor costs are certainly an element of those
costs, but it is a challenge for the automakers right now.
QUEST: I am just looking, if you take Stellantis which, of course, is the merged Fiat, French PSA, Chrysler -- these are very complicated
organizations with multiple different constituencies globally, which is not unique, in a sense, to the car companies, but it seems to be more difficult
now.
AMICI: Well, sure, I think it's a little bit more complex for a company like Stellantis that has significant operations in Europe, and you know,
the headquarters is being run out of Paris. And also in Fiat, which, of course, is primarily in Italy. And then the Chrysler component, which is in
North America.
General Motors, at one point was also a global automaker. They've largely withdrawn in terms of operations in Europe. So it's primarily North America
and China for General Motors. And Ford Motor Company still has a European component as well, but they're primarily in the United States.
So a little bit more complex for a company like Stellantis, a little more focused for Ford and General Motors.
QUEST: I won't hold you to this one, I promise you, I won't hold you to this answer. How long do you think this strike lasts?
AMICI: I'm optimistic. I'm hopeful that it's a very short -- a very short work stoppage. I think it'd be, you know, if they could do it within a
week, I think it'd be fantastic. One of the difficulties with a work stoppage is stopping and restarting the supply chain.
Automakers have incredibly complex supply chains that reach all the way around the world. So of course, North America, but in some cases, Japan,
China, and Europe, and when you turn off the supply chain, you stop ordering raw materials. The tier two suppliers stop ordering raw materials,
and so everything -- and then you send workers home because some of these companies can't continue to build parts if they don't have a customer for
them.
Restarting is difficult. I mean, we saw that in the pandemic, especially in the semiconductor space. It took quite a while before semiconductors were
flowing unconstrained to the automaker.
QUEST: Sir, it is good to see you. I'm grateful. You gave us great insight. Thank you.
In a moment, economic anxiety is rising as gas prices and inflation will go higher.
Mohamed El-Erian will give us an idea of where we're going, and how we're going to get there in a moment.
(COMMERCIAL BREAK)
[15:30:59]
QUEST: Hello, I'm Richard Quest. It may be Friday, but we've still got a good bit of QUEST MEANS BUSINESS to bring you.
Mohamed El-Erian is here. He's here. We'll be discussing how's rising oil prices could affect the Fed's war on inflation.
And the world's oldest insurer, Lloyd's of London, is telling us premiums will go up and extreme weather becomes more common. The CEO will be live on
that.
We'll only get to it after I've given you the headlines. Because as you know, you could almost join us, and you could join in.
This is CNN, and on this network the news always comes first.
Court documents are revealing the federal prosecutors obtained at least 32 messages sent from the Twitter account of the former President Trump. The
unsealed filing sheds light on the special counsel's probe into Mr. Trump's efforts to overturn his election loss.
France's President Emmanuel Macron says he's ambassador to Niger is being held hostage by the country's military junta. President Macron said the
ambassador and his diplomatic staff can't go out and they're being prevented from having food delivered.
President Macron says they are relying on military rations. France is refusing to recognize the military government that seize power in July.
The Colombian artist Fernando Botero has died at the age of 91. Now, his (PH) paintings and sculptures of plum figures, and either humorous or
serious situations.
He had become one of the richest artists in the world, his works frequently sold for more than 20 -- for more than $2 million.
Oil prices are already up. WTI, up half a percent, now above $90, leading to higher gas and anxiety over inflation. Today's consumer sentiment
numbers show people all worried about the economy.
The index dropped from previous month, as you can see. Not huge, but it's a drop. More -- though more people are asked believe economic conditions are
improving.
Mohamed El-Erian is the president of Queens' College, Cambridge. He is with me now.
Well, I think we're getting to that point that we all knew we were going to get to, which is this is the tricky bit. And you're going to get little
bits of data like oil prices going up. And do they feed through or not and core versus PPI and all that. But where are we do you think?
MOHAMED EL-ERIAN, PRESIDENT, QUEENS' COLLEGE, CAMBRIDGE UNIVERSITY: So, we are in the last mile. The last mile was going to be tricky, but it's
getting trickier.
Already, we've seen headline inflation go up from 3.1 percent in June to 3.7 percent in August, and it's going to go higher with what's going on in
the oil market.
So, it is getting trickier. This last mile, and the risk is either inflation on the one hand or a serious economic slowdown on the other.
There is a path between those two, but it's quite a narrow path.
QUEST: Yes, everyone keeps talking about the path in the middle. I don't think anybody actually believes that they can do it.
EL-ERIAN: It's hard. History doesn't help you. That's the first thing. Secondly, this is a very uncertain global economy.
The U.S. is exceptional in its economic performance, but go beyond the U.S., China, Europe, Japan, and the uncertainties are huge. So, it is a
very difficult last mile.
And also, the Fed itself is as Chair Powell said at Jackson Hole trying to be guided by the stars, but the sky is cloudy. So, it is very hard.
QUEST: So, talk -- let's look at the ECB. I listen yesterday to Christine Lagarde. Now, rates are at the highest level. They've suggested that they
are finished raising rates Bruno Le Maire is -- has said they hope they are.
[15:35:02]
But can they be sure they finished raising rates?
EL-ERIAN: They cannot. The ECB is a single mandate central bank, meaning, it only has one objective, low and stable inflation.
The Eurozone inflation is high and going higher. So, it's too early to declare victory at the ECB. And their task is even harder, as you know,
because the biggest risk right now to Europe is stagflation, where you get both high inflation and low growth.
So, we should have a lot of sympathy for what the ECB is trying to do.
QUEST: The Bank of England, I mean, it's just, it's -- sorry, I think you're having some problems with your earpiece, hopefully you can --
hopefully that's a little more comfortable. And the Bank of England is just in a mess.
EL-ERIAN: Yes, it is. I mean, if you go in degree of difficulty, think of the -- think of the Olympics, where the gymnast is trying more and more
difficult routine, the Bank of England is the hardest routine.
Not only do they have what the ECB faces, but in addition, they are dealing with Brexit, they are dealing with the complete change in international
relations, which makes their soft landing even harder.
So, in terms of degree of difficulty, Fed, ECB, Bank of England.
QUEST: Would they all not be better? I know, this is a sort of a controversial demo (PH), would they all not be better just to raise the
rates, crush inflation, take the economic hit? Yes, it will be bad, there may be a recession, electrical damage, possibly, but at least, you'll have
got it done.
We risk here, Mohamed, several years of slow, stagnant, pathetic growth, when we could get the -- a short, sharp, nasty will be better.
EL-ERIAN: Yes, the trouble, the short, nasty would be better is that you're dealing with a trilemma not a dilemma. In the old days, you would lower
inflation and worry about economic growth. These days, you have to worry not just about what happens when you aggressively hike interest rates to
low inflation, what happens to growth? But what happens to financial stability?
And what the central banks are worried about is if you -- if you go too hard at this, not only do you increase the risk of recession, but you also
increase the risk of financial instability.
So, that's -- now, that's another issue, which should, and you and I can discuss this for a long time is what is the right inflation target?
I, for one, don't think two percent is the right inflation target. We are living through major supply changes. We are living through a different
process of globalization. The labor markets have skill mismatches, companies are looking to diversify the supply chains, and we have an energy
transition.
And a world like that, two percent is not the right target right now.
QUEST: I can agree with you. But you can't change the target. You can't move the goalposts in the middle of the game, and particularly when you're
losing, and that's what it would look like. If you would set it a good time, let's shift the target to three percent or whatever. And this is the
economic backing for it.
But if you shift now, it looks like, well, we're losing the game with the goalpost.
EL-ERIAN: I agree. And I think we're going to end up doing it implicitly, not explicitly. So, by the end of the year, I think --
(CROSSTALK)
QUEST: Oh, oh, crafting.
EL-ERIAN: Central Bank -- Well, Central Banks are going to have a very simple choice. Either you pursue two percent and you crush the economy, or
you promised us two percent down the road, you promised us that the destination is ultimately two percent, but you pursue a three percent
journey.
And I think that between those two choices, we are more likely to end up in the second than in the first.
QUEST: We'll only realize that, of course, ex post facto. When X number of years down the road, we realized that. Mohamed, it's been great to see you,
sir. I'm glad to have you with us tonight. Thank you.
EL-ERIAN: Thank you.
QUEST: QUEST MEANS BUSINESS. When we come back: U.S. insurance. You don't need me to tell you. If you've looked at the premiums, they're going up,
and I mean up. the Lloyds of London chief executive John Neal is with me after the break.
(COMMERCIAL BREAK)
[15:41:54]
QUEST: There are 120 ships right now waiting to pass through the Panama Canal. Now, there is always a way to have one decide one way or another,
because it is one of the world's busiest commercial waterways.
This time, the bottleneck is really broken. Although it's never been as bad. It stems from a dry summer in what's usually a rain-soaked region. The
administrators warn that further drought conditions could make the backlog even worse.
And while the disruptions haven't had major impacts yet, the longer this goes on, the trouble it spells for consumers' supply chain.
CNN's Patrick Oppmann reports from Havana.
(BEGIN VIDEOTAPE)
PATRICK OPPMANN, CNN CORRESPONDENT (voice over): The Panama Canal is running low on water. A persistent drought caused in part by the El Nino
weather pattern has left water levels dangerously depleted.
Now, the global supply chain is under threat, as a holiday season approaches. The 80 Kilometer waterway connects the Atlantic and Pacific
oceans and is a vital route for transporting goods. Handling an estimated five percent of the world trade.
The canal was completed in 1914, revolutionizing how goods can be transported. And further expanded in 2016 to meet the skyrocketing demands
of global commerce.
But over the last 20 years, decreasing rainfall has reduced the water level of Panama's Lake Gatun. From 27 meters above sea level to 24 meters.
RICAURTE VASQUEZ, ADMINISTRATOR, PANAMA CANAL AUTHORITY (through translator): Call it climate change, whatever you want to call it. The true
fact is that precipitation levels are changing. And as I have said repeatedly, the Panama Canal is the only global maritime route that uses
freshwater.
OPPMANN (voice over): Canal officials have imposed draft restrictions, forcing ships to lighten their load.
A ship's draft limit is the minimum depth of water it can safely navigate. And if a ship is carrying too much cargo, it risks getting trapped in the
canal.
Since May, ships have had to reduce their cargo by as much as 25 percent. The Panama Canal Authority has also limited the number of vessels
authorized to enter the canal each day, creating a bottleneck with some ships waiting as long as 14 days to get through. As of Tuesday, 116 vessels
were waiting to pass.
The canals administrator warns the number of authorized vessels could decrease further the drought continues into next year.
VASQUEZ: In the coming months, I think there is the possibility in March and April, if the rain pattern remains the same as now, there would be
possible water restrictions.
Now, before reaching this point, the Panama Canal would have to make further restrictions on the number of transits. It will depend on the
amount of water and the Alajuela Lake for example.
OPPMANN (voice over): This has led to rising freight costs, which are likely to continue in the months leading up to both Christmas and the
Chinese New Year.
The canals administrator has said the drought wipe away $200 million in revenue in 2024. And he says they may need to build a new dam or connect
the canal to another nearby lake to keep water flowing.
Does the ever-increasing thirst for global goods crashes into the new realities of climate change?
[15:45:04]
Patrick Oppmann, CNN.
(END VIDEOTAPE)
QUEST: He talks about the realities of climate change on whether it's shipping delays, property loss, the cost is growing, and it's growing for
the insurance industry.
Extreme weather and natural disasters, leading to higher premiums. In places like California, it is now so risky, some companies have stopped
offering homeowners coverage there.
Florida is a -- is a insurance nightmare.
Lloyd's of London reported earnings last week, its chief executive says insurance prices in Europe will have to rise. The chief executive John Neal
is with me now.
John, I have what? Four -- three or four different policies. I'm on two or three different boards of buildings that have been building policies. And
every single one we're saying, help, the premiums nearly doubling!
JOHN NEAL, CHIEF EXECUTIVE OFFICER, LLOYD'S OF LONDON: Well, it feels awkward, doesn't it? Because as you said, we reported an outstanding set of
results for the first six months of the year with strong growth in premium up 22 percent and profitability of $4.8 billion.
But can I just say whilst that's good news for investors, we are thinking about customers because as you've been reporting, poise a riskier and more
uncertain world than it's ever been. Whether that's the financial consequences you're talking about of inflation, or interest rates, or
systemic exposures are played out through COVID, or war in Europe, or as you're talking about climate.
It's -- we've got a real responsibility for the customer to try and take risk off their balance sheet and put it on, so they can make some of the
brave decisions that they want to and they must.
QUEST: Right. But premiums going up 30, 40, 50 percent, sometimes even doubling, how is that justifiable?
NEAL: Well, I'll give -- because I know you like your stats. And you only been talking about a little bit today, when you look at Libyan floods, when
you look at Moroccan earthquake, we saw convective storms in the U.S. worse for 20 years, we saw a hurricane make landfall in California, first one
since 1935.
You'll look this stat, annual average losses arising from natural catastrophes now stand at $133 billion. That is twice what it was a decade
ago. So, you know, we've really just simply got to assess and understand risk. We've also got to give the customer the confidence that there is
value in the insurance policy they're buying. And I think we can do that.
QUEST: I wonder whether the insurer rather the customer, i.e., me, has to realize --
(CROSSTALK)
NEAL: Yes.
QUEST: I mean, you make a point. We all sort of forget that when we buy insurance, we just think of it as being our thing. But actually, you're
buying into an insurance risk of everybody. And it's everybody's risk to a certain extent.
So, if there is a global flood, or you are paying out in there, it will trickle down to everybody.
NEAL: Yes. I mean, as you know, I mean, that the theory is that the premiums that the many pay for the losses, hopefully of the few. So, yes,
we have to think across the pool when we charge the right premium.
QUEST: Right.
NEAL: But genuinely, it's becoming a riskier world, isn't it?
QUEST: We're getting -- all we getting to the stage where some things aren't insurable. I mean, the risks on are simply too great. I mean, God
forbid me saying this. But you know, the old expensive ones, a plane crash, et cetera. They are now the cheap -- relatively cheaper ones, compared to
the potential climate change, or environmental disasters or nuclear ones.
NEAL: Sure. I mean, I think the answer is when you look at the complex losses, we haven't really got to climate change, can you insure? The answer
is yes, you can. The things you can't insure against are things like war.
So, we when we look at the impact in the Ukraine, the assets being insured that the people can --
(CROSSTALK)
QUEST: Right.
NEAL: Their liability can be insured, but you can't insure against war.
QUEST: Right.
NEAL: So, the things you can insure against and the obvious things that governments have to step in for.
QUEST: I think, on Ukraine -- just -- let's end on that. On Ukraine, the ability to ensure safe passage on grain. Now, I know at Lloyd's, you had to
sort of -- you did an extremely good piece of work.
(CROSSTALK)
NEAL: Yes.
QUEST: That allowed it to continue. Because the moment the sanctions come in, and the moment it becomes verboten, then, clearly insurances don't
follow through, and you did have to do some work to ensure there would be passage. Are you prepared to do it again?
NEAL: Yes. And the short answer is yes. I mean, if I, again, if I give you an idea of the numbers, the Ukraine insurance markets worth about $1-1/2
billion. The U.S. market is worth $900 billion.
So, it's quite a tiny market. And it's actually functioning quite well, amazingly. Absent being able to give any war cover.
The issue and the challenge was then around into government actions, sanctions. And we had the conversations with the U.N. to allow the safe
transportation of grain and fertilizer.
[15:50:02]
So, we moved about 32 million tons of grain. And then, the Russians have decided they want to play at the moment within that framework.
We still stand ready, willing, and able, with the U.N. to provide the cover. So, it really does sit with the U.N. to try and manage that
conversation with the Russians to get it back to the table.
QUEST: John, next time we speak, it will be in your lovely building in London, I hope.
Thank you, sir.
NEAL: I hope so too.
QUEST: John Neal, joining me from London.
NEAL: Thank you. Good bye.
QUEST: Thank you.
One major retailer says good things are coming in smaller and smaller packages these days, and costing more, it shrinkflation, of course, after
the break.
(COMMERCIAL BREAK)
QUEST: Name on shame. As long as grocery bills rise French supermarket is basically telling -- producer telling customers who is to blame for the
rising prices and the size of their products getting smaller.
Carrefour putting shrinkflation stickers on all kinds of goods, from Lindt chocolate to Lipton iced tea. It basically says you're not getting as much
as you were. Anna Stewart reports.
ANNA STEWART, CNN CORRESPONDENT: You may have wondered if some of your groceries are getting smaller, and you're probably not imagining it. It's a
phenomenon known as shrinkflation, where food companies reduce the size of their products, while keeping prices the same or even raising them.
It's perhaps not surprising given current inflation levels, major food brands are experiencing higher prices for raw materials and, of course,
they want to protect their profit margins.
While in France, shrinkflation will be made abundantly clear if you do your shop at a Carrefour supermarket.
The company says it has added signs to 26 products, including Lipton iced tea, Lay's chips and Lindt chocolate. According to the supermarket's
director of client communication, Stefen Bompais, who spoke to CNN affiliate BFMTV, a 300-gram bag of Lay's chips is now 250 grams, and its
price has increased 25 percent.
The French government has made clear it wants to curb rising food prices and actually the number of products with price caps in French supermarkets
recently doubled to 5,000.
The French finance minister has even shamed big multinationals including Nestle, Unilever, and PepsiCo for not doing enough to help French
consumers. Richard?
[15:55:02]
QUEST: Anna Stewart, reporting there.
And, of course, as Bruno Le Maire, who you saw earlier in the piece.
Apple says it will update the software for its iPhone 12 in France to make it less radioactive. French regulators have ordered the model off the
shelf, they say it exceeds the E.U.'s limit for radiofrequency exposure.
Apple says it's been certified around the world as safe. But now, other countries are interested in getting the update. Belgium's asked Apple to
make it available.
Clare Duffy is with me. So, is this thing toxic?
CLARE DUFFY, CNN BUSINESS WRITER: So, no. Essentially, it is not. This is not an issue that is going to interfere with anybody's health. Even the
French regulators say that, although, these radiation exposure limits were exceeding the countries' -- the radiation exposure from the iPhone 12 was
exceeding the country's limits, it was still far below where you're ever going to have an issue with someone's health.
Essentially, what they're measuring here is the radiation exposure to someone's body from the iPhone held either in a hand or kept in a pocket.
And again, French regulators saying essentially that this is a situation where rules are rules, Apple needs to come into compliance, although
there's no real health risk here, which is something that Apple has also emphasized, Richard.
QUEST: So, one would imagine the quickest, easiest, simplest thing is for Apple to do the update for all of phones of that type.
DUFFY: Yes. And you know, right now Apple is saying it's going to issue the software update in France, which it sounds like is going to take care of
French regulators' concerns, based on what the regulators have said.
But, you know, I think that is the biggest question here, whether Apple will be asked to or go ahead and just proactively roll out this software
update to other iPhone 12s in Europe or across the world.
Apple has really emphasized the fact that it believes its phones are in compliance with global regulations, all relevant radiofrequency exposure
limit regulations. And so, you know, I think the company is sort of making a statement here by saying we're going to do this in France because they've
asked us to, but we are in compliance everywhere else.
QUEST: Duffy, have a good weekend.
DUFFY: Thank you.
QUEST: We'll have a "PROFITABLE MOMENT" after the break.
(COMMERCIAL BREAK)
QUEST: There was so much in tonight's program, it's difficult to know what to pick up on as a "PROFITABLE MOMENT". And maybe that is the "PROFITABLE
MOMENT".
Listening to Mohamed El-Erian talking about the economic question and where we are going in this difficult position. I always knew we were going to end
up here. The last mile was going to be the trickiest to crush inflation, or arguably crushed the economy in doing so.
That is what the problem is going to be and it's not gone away. Or do you fudge your way to your heart's content? Well, we'll get there in the
future. The classic government central bank promise, be interesting to see how they square that circle.
Because they're going to be doing at a time of great economic and geopolitical uncertainty. And it will only take one little wobble on the
wheel for the whole thing to turn turtle. And we're seeing those wobbles everywhere.
And that's what's going to make it so much more difficult navigating this particular course. But I'm going to put all that for another day because
this weekend, of course, is Rosh HaShanah for those of us who are celebrating the Jewish New Year, let me wish you the Shanah tovah.
[16:00:07]
And for everybody else, I wish you whatever you're up to over the weekend. I hope it's profitable.
END
