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QUEST MEANS BUSINESS
eBay Hacked; Cost of Security Breaches; US Markets Rally; European Unity; European Integration; New GM Recalls; Bringing Back Detroit; McDonald's HQ Shuttered
Aired May 21, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: How appropriate, US -- or former US ambassadors to China ringing the closing bell to celebrate 35 anniversaries -- 35th anniversary of diplomatic relations. At the top of the hour -- maybe he thought he was actually bashing the Chinese over cyber hacking. It is tonight, Wednesday, May the 21st.
Hacked for months and only now coming clean, eBay tells users to change their passwords.
A case of united we stand. Michel Barnier tells me the EU's part of the solution, not part of the problem.
And luxury living rooms at 30,000 feet. Etihad's chief exec gives us a guided tour of The Residence.
I'm Richard Quest, and of course, in London, I mean business.
Good evening. We start tonight with serious news: eBay has become the latest major corporation to fall victim to cyber violation. The auction site's in crisis management mode, urging users -- that's you and me -- to reset our passwords after criminals hacked into its system and stole account data. Who's at risk?
QUEST: Customer information -- our information. Names, addresses, phone numbers, birthdates. Also, eBay says hackers may be able to decrypt account passwords. It's taken at least two months for the company to realize its systems have been compromised, and eBay does not know how many of its 148 million active users have been affected.
Straight to Samuel Burke in New York. Samuel, how serious, how deep, and what is likely to be the effect?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: It's very serious, according to cyber experts, but one difference here to note from other hacks is that so far, eBay says there's no evidence to show that financial information was hacked, like credit card numbers.
So far, just passwords, like you mentioned, and other personal data, but not the credit card numbers, and not the accounts of PayPal, which is, of course, part of the eBay company. But if you use your password on another website where you have credit card information, that could be the problem, sharing passwords, as always.
QUEST: And is this global, or is this just linked to eBay in the United States? Is this a worldwide eBay problem?
BURKE: So far, it would appear that it's a global problem. They haven't said how many of their nearly 150 million customers, but they say they're asking nearly all of them to reset those passwords.
QUEST: Samuel Burke's in New York. Larry Clinton is president and CEO of the Internet Security Alliance and joins me now from Washington, DC. Mr. Clinton, it's becoming ubiquitous, some would say inevitable, that these companies are being hacked. Who's at fault?
LARRY CLINTON, PRESIDENT AND CEO, INTERNET SECURITY ALLIANCE: Well, the system, frankly, is at fault. The system is basically built to be insecure. And all the advantages currently favor the attackers. Attacks are cheap, easy, profitable. Defense is hard, expensive. It's hard to show a return on investment for things you prevented.
So, all the incentives are favoring the attackers. We have to completely rethink this problem and develop a much more government-industry collaboration to stop it. Right now, what we are seeing is that there are only two kinds of companies, those that know that they've been successfully attacked and those that don't that they've been successfully attacked. But everything is vulnerable.
QUEST: Right. But to solve this -- and you interestingly talk about a government and industry alliance to solve it. I don't quite understand what government has to do. I can certainly see that companies need to spend more money on their internet security.
CLINTON: Well, companies do need to spend more money on their internet security, but in point of fact, many of them are. Spending on cyber security on the private sector side has doubled in the last five years from about $40 billion to about $80 billion.
To put that in perspective, the entire budget of the US Department of Homeland Security is about $60 billion. So, we are spending a lot of money. I don't think that we are spending it wisely. We have to rethink the problem.
This isn't just a problem with the technology. It's a problem with the fundamental economics of the system. And there's a difference between security --
QUEST: OK, no, I'm -- let me jump in here, because I don't understand. I don't understand. When you say it's a fundamental -- it's a problem with the fundamental economics, it seems to me fairly straightforward. Well, I'm not being simplistic. You have a problem, you need to spend money to solve it, and you need to have the right people to do it. So, what am I missing here?
CLINTON: Well, there are multiple different problems. And in point of fact, what we all want is for our industries to make more money, get more people hired, promote our economies.
And the way that we do this in the modern, digital world is by deploying all sorts of systems, such as Cloud computing, bring your own device to work, voice-over internet protocol, long international supply chains.
All these things dramatically reduce business cost, but increase their -- or make them increasingly less secure. So, government has got to get in here and help balance the table a little bit. We have to do a much more aggressive education program so that corporate boards of directors understand that it is their problem, not just their IT department's problem.
QUEST: All right.
CLINTON: And we need to provide economic incentives to get companies that are not spending appropriately to begin spending more appropriately.
QUEST: Isn't one of the real issues here that the revolution is underway and we are moving into a new era? We've never -- as you just alluded to this, Cloud computing, bring your own devices. The sheer number of devices.
QUEST: Twenty years ago, we didn't have this. So, it's not to be -- it's not surprising, perhaps, that --
QUEST: -- at the moment, regulation and companies are behind the curve, because the rules are being made up at the moment.
CLINTON: You are exactly right. We, for the most part, have not realized that the digital revolution has taken hold. And frankly, it's happened all so quickly and so easily, and frankly, so much fun for everybody, that we have not anticipated appropriately the downside of this tremendous digital revolution.
And we absolutely have to, as I say, rethink this problem. We have to get much more aggressive about it. We need industry to work with government, and we need to do much more education. And we have to take more responsibility for our own security.
Nobody wants to reset their passwords. Nobody wants to have multiple passwords, et cetera, et cetera.
CLINTON: But these things are required now. If you're going to use these sophisticated and wonderful technological devices, you're going to have to have more responsibility yourself, and that's true --
CLINTON: -- with the corporate boards as well as the individuals.
QUEST: Larry Clinton, thank you for joining us, making sense of this tonight.
CLINTON: My pleasure.
QUEST: As we've talked often enough on this program about the difficulties of passwords. First it was a password with a capital, then it was a password with a capital and a digit, then it was a password with a capital and a digit and a funny squiggle.
And now, of course, you can't use the same password that you've used once before in the last three or five years or whatever. And before long, we've all forgot what the passwords were anyway.
US markets rallied -- don't start me on passwords. The gains have erased yesterday's losses. There's lots of movement -- it was retail stocks. Interestingly, eBay wasn't badly affected by what happened. But eBay --
QUEST: -- but the retail stocks, if you look, the market was up 158 points, a gain of just shy of one percent. Target stock was up slightly, despite earnings. And frankly, when you really want to understand why this market went up, it really is the oldest line in the book: it went up because it didn't go down.
Even the Fed minutes, which came out in Washington, didn't give much guidance as to what was going to happen next, and so the market went on a frolic of a rally.
Here in Europe, voters in 28 countries preparing to go to the polls. In a moment, Europe's commissioner for financial services explains togetherness has never been so important.
QUEST: On the eve of crucial elections to the European parliament, the commissioner for financial services has called for greater unity. Michel Barnier says Europe must avoid a slide into irrelevance and has released a new book. It's called "To Rest or Be Free."
I asked the commissioner, since Europe's suffering slow growth, high unemployment and, seemingly, promises which failed to deliver, is he surprised, frankly, that there's such a lack of enthusiasm about the whole scheme?
MICHEL BARNIER, EU FINANCIAL SERVICES COMMISSIONER (through translator): That is quite correct, Richard, and it's in that context that the crisis sometimes of economic depression, of suffering for many European people, for Greece, Portugal, and others who've made a lot of effort.
And now, we have European elections, and that shows the rise in populism, and that is why some people seek protectionism.
QUEST: I was going to say, you have an electorate in Europe that is angry with the EU or with the European Commission, but I don't think they're even angry. I think they don't care. I think they just feel that Europe is remote.
BARNIER (through translator): And that is what we are confronting today. Even if I can say that sometimes as a European commissioner that I was elected as a European -- member of the European parliament before being a commissioner, and so, I want to remind Brussels that we are making proposals.
And these proposals we made, which have to be decided by the European parliament that's being renewed on Sunday, which is legitimate.
QUEST: I can't decide, sir, if you're part of the solution or part of the problem. Which is it?
BARNIER (through translator): I think that quite clearly we look at the world as it is today. In my little book, I -- at the end of this book, I published a table, and here you can see the ten most powerful countries of the world and what appears today, there are only four European countries amongst the ten first in the first column.
And every ten years, there is one country that comes off the table, and in 2050, if we look at the G8, there's no longer a single European country. That is why Europe is part of the solution, it's not the problem. If we think about this together, we are outside the table, we no longer, we are spectators.
Around the table, there will be China, United States, India, Mexico, Brazil, Russia, but there will not be any European countries, and that is why Europe is part of the solution. We have to be together in the Atlantic alliance.
QUEST: One often feels with French politicians there is a certain love-hate relationship with our neighborhood superpower, the US. But you - - you are very firm about this. The economics of Europe are inextricably linked to the future of a transatlantic deal with the US, isn't it?
BARNIER (through translator): We are allies, we're strengthened and balanced through this Atlantic alliance, and that is what has led me to -- approve the relaunching of the negotiations of this commercial agreement, this partnership.
When we launched this agreement a few months ago, this agreement has to be fair and free, free and fair. These are the two objectives we have not reached as yet. We need to ensure this agreement does not question the social and cultural and food models which we are attached to.
But we need to have more transparency with time in order to reach a fair and free agreement --
QUEST: That's the problem, Commissioner. You want your cake and eat it. You want to keep certain things, like the food, and you want to keep the intellectual property, and you want to ring fence certain areas, and the other side says, well, that's not the definition of free trade.
BARNIER (through translator): I think that freedom must be accompanied by a certain number of rules. If you look, Richard, at freedom without rules and what it has given the financial markets, it's led to the subprimes, bonuses, and led to toxic products in the United States and in Europe. So, we need to have rules, rules which must be understandable.
QUEST: That's Michel Barnier with a robust defense of his policy and his views. "Se Reposer ou Etre Libre" is the book, "To Rest or Be Free."
Ken Rogoff is the former chief economist at the IMF and, of course, now at Harvard. He says Europe should act more like a single country, both for its own sake and for the rest of the world. Ken joins me now from Harvard.
You heard the commissioner there. I suspect there are not too many grounds of agreement between the two of you on big issues of industrial policy, but do you fundamentally think he's right when you -- when talks about the need for unity?
KEN ROGOFF, FORMER CHIEF ECONOMIST, IMF: I do, Richard. I mean, I don't see another way at this point. I think the die is cast, once they've gone as far as they have. I think it would be very dangerous to go backwards.
I would like to see Europe as a counterweight to the United States. I'd like to see it be a real world power. I don't see how it can be without moving towards greater unity. The problem is, they don't want to give up the nation state at all. And so, it's hard to strike a compromise.
QUEST: Right, but Barnier does believe -- and he's quite open in this book -- that there needs to be greater economic union. Now, of course, you would also say, I guess, that the only way the euro can work is through that greater union. But can you see it happening?
ROGOFF: I don't know. When I talk to the French and tell them -- the French people and tell them they need to be like a country with Germany, they tell me that I must be drinking wine and beer at the same time, whatever that means. I think it means I'm crazy.
But I don't really see another alternative. I mean, it doesn't have to be like the United States. It can be a looser federation, like Canada. But clearly, they need to be able to take fiscal decisions, they need a banking union. We've seen what happens. It will destabilize if they don't.
QUEST: And the -- everybody says at the moment, now is not the time for complacency. Things are -- we may be out of -- the crisis may be over, but we're not out of the woods, seems to be the sort of rubric to get over this one. How much more work and how worried are you of what might happen next?
ROGOFF: Well, I guess the major risk is really that there's just so much social dissension, so much unhappiness, that the leaders lose their power to enforce these rules moving forward. The banking union, for example.
And then markets might start to doubt whether Mario Draghi will really have the power to back up his guarantees. So, that's really the danger.
I think at the moment, things -- they bought time. A lot of time. And maybe this election, which is going to reflect a lot of anger, there's going to be a lot of votes on the far left, on the far right, and a small turnout, maybe this will be a blip and things will move forward.
But we don't know. If the vote is -- if the voting turnout's small enough and the fringe parties gain enough power, it could be very disruptive.
QUEST: And at the same time, of course, in the US yesterday, there was a variety of primaries for various state levels, and of course, the midterms are coming up. Are we moving into a situation, do you think, Ken, where on either side of the Atlantic, election fever means nothing much gets done. Because for example, the UK goes to the polls next year.
ROGOFF: Well, you know, it's not unusual that after a deep financial crisis, you get these fissures, this factionalization, this polarization of the political process. And in the United States and Europe, it can mean paralysis for a long time. The UK has a different system. It can mean a pendulum going from one side to the next.
But there's certainly enormous polarization around the world, and the United States, they just don't seem to be willing to do anything together until the Republicans or the Democrats control both the Congress and the presidency.
QUEST: Ken Rogoff from Harvard. Thank you, sir, for joining us. We much appreciate it. Voting, of course, begins in the UK tomorrow --
ROGOFF: Thank you.
QUEST: -- on Thursday. And we -- continues over the next several days, depending on what the traditional voting or day of voting is in the various countries. So, it's quite an elongated process. Not quite as bad as India's five-week election, of course, and who knows whether the result will be as dramatic as Mr. Modi in Delhi.
When we come back, GM sets a wretched new record. Wednesday brought a recall the automaker would rather forget. This is QUEST MEANS BUSINESS from London.
QUEST: General Motors is adding to its recall pile. It's asking customers to return 200,000 cars at risk of overheating and fire. Now, that's on top --
QUEST: -- of the 2.4 million vehicles recalled on Tuesday for the seat belt problem. GM has issued more of these sort of notices this year than ever before. The company has recalled 15.8 million vehicles around the world. That's more than it's sold in the last five years since it filed for bankruptcy.
Alison Kosik joins me now from New York. Alison, here's the question, and here's the issue: are there more recalls, or are they being more dedicated about issuing them, or are we just more aware of them? Have they lowered the bar before they have a recall?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: There definitely is a record number of recalls here, and I think you're seeing a company be uber careful at this point. No doubt about it, the recall tally, Richard, is growing, and it's growing very quickly. I'd say it's turned into quite the nightmare for GM.
And it is starting to get expensive. Last week, GM agreed to pay that $35 million fine to NTSA. That was for delays to a previous ignition recall. GM says this week's recalls are going to cost the company $400 million. Add that to the $1.3 billion hit the company took in the first quarter from dealing with recalls.
Look at the stock, though. Down about 6 percent since the first announcement in February. Not a huge hit, and we are seeing the stock up to day. And consumers don't seem to be too fazed, at least not yet. Sales are still up there for March and April.
So, while the company has a lot to handle, consumers don't seem to be too worried. That is crucial for General Motors. But once again, what they're doing is they're trying to turn the company around and become more conscious about every little possible problem there is, just to be extra special careful. Richard?
QUEST: The issue of cost is whether or not it is indicative of badly- produced vehicles that ultimately would -- will drive away customers, or whether it, as you say, it's an abundance of caution and customers actually appreciate that sort of level of clarity and transparency.
KOSIK: Oh, and --
QUEST: Which do you think?
KOSIK: And that's the scary thing is, you're wondering, OK, well, why all of these recalls, 15 million? We're only into May. This is -- in the past five months? It's really eye-popping. And a lot of this actually goes back to the manufacturer, meaning of the parts, of the specific parts.
So, I think you're probably going to wind up seeing a lot of automakers follow in GM's footsteps trying to dot their Is and cross their Ts. Hopefully, though, they'll do that dotting of the I and crossing of the T before the cars are actually rolled out to consumers, Richard.
QUEST: Alison Kosik in New York. Thank you, Alison. Now, JPMorgan's committing $100 million to help the US city of Detroit, once a thriving automobile manufacturing hub, you'll be well aware, the Motor City has fallen on very hard times, suffering severe population loss, high unemployment. Last July, Detroit made history when it filed for bankruptcy, $18 billion of debt.
Here's how JPMorgan's investment will be divvied up. Half of it will be directly injected into projects to help revitalize the local economy. The bank says partnering with existing non-profits allows the money to easily reach key parts of the recovery across the city.
Another $25 million helps the ongoing demolition effort. That's the 80,000 vacant buildings, they have to be destroyed, and the area has to be cleaned up. Smaller amounts going to job training, small business loans, and Detroit's mass transit system.
In Chicago, Illinois, McDonald's corporate headquarters has been shut down after a protest from fast food workers over low pay. Ted Rowlands is at the scene of the protest. Demonstrations have just finished.
Quite a serious matter when the headquarters is shut. Was that because the demonstrations promised to get ugly?
TED ROWLANDS, CNN CORRESPONDENT: Well, Richard, technically, McDonald's says we didn't shut down our corporate headquarters, we have many different spots on our campuses throughout this area of Oak Brook, Illinois, just outside Chicago.
They did shut down operations in one area that they said they did because of an abundance of caution. Thousands of protesters were expected. This is an area that is on a corner with busy streets. There's pedestrian traffic.
So, they said that the local police urged them to move everybody to a different spot, which is what they did. The protest then moved, as well, to this other McDonald's spot. They were expecting 2,000 or more. Maybe about 900 showed up, 100 arrests.
The numbers aren't important, though. The bottom line is this dialogue is continuing in the US, should fast food workers be paid more? They're asking for $15 an hour, not the minimum wage, they want $15 an hour, and they want the ability to unionize.
McDonald's did send out a representative to talk with the media after the protest, and from McDonald's standpoint, they say hey, listen, we follow all the rules and regulations of the United States and then some. We pay our workers a little bit more than most people.
There's movement within our company. If you stick with us, you can move up. You can be a manager, you can get all the way to the corporate offices. And another facet of this, the franchisees own the individual restaurants. They actually come up with the specific wages. It's an ongoing debate, Richard, as you know.
QUEST: So, they're -- right, but for viewers watching elsewhere in the world, the question, briefly, Ted, of unionizing. Of course, what fundamentally does McDonald's have, besides they don't want to have to battle against a powerful union, how do they justify saying to the workers, no, we'd rather you didn't -- or we don't want you to unionize?
ROWLANDS: Well, they say that -- they don't say that. They say everybody who works for them, it's up to them. If they want to unionize, unionize. We're not against that. That's the corporate stance, the public stance.
It's complicated because of the franchisees. There are so many McDonald's owners that the unions would, theoretically, have to unionize within an ownership group first and then expand. They are -- the workers are claiming they need the corporate nod for this to happen, and it's just not happening.
What they're asking for is a dialogue. McDonald's says they're open to it. We'll have to wait and see. And of course, this protest wasn't just geared at McDonald's per se. It was here because of the --
ROWLANDS: -- shareholders' meeting tomorrow. But they want -- they're sending this message to all fast food restaurants in the US.
QUEST: Ted, thank you. Ted Rowlands in Chicago, just outside Chicago at McDonald's. Coming up after a short break, Putin pivots towards Asia as ties with Europe cools. Russia's now got a 30-year multibillion-dollar deal with China. It took him a decade to get it, but it's a significant one nonetheless. QUEST MEANS BUSINESS, good evening.
QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes first. The U.S. is to deploy 80 military personnel to help find more than 200 Nigerian school girls abducted last month. The trip will be stationed in neighboring Chad and will support surveillance and recognizance missions into Nigeria. Boko Haram, the group that claimed it's holding the girls, is being blamed for double bombings on Tuesday in the central city of Jos. A hundred and eighteen people were killed.
Egypt's former president Hosni Mubarak has been sentenced to three years in prison for embezzlement. Mubarak and his two sons were convicted of siphoning $18 million from the economy, money that had been allocated for removing presidential policies. The leaders of two opposing protest camps in Thailand sat down for talks on Wednesday in Bangkok. The meeting was organized by the Thai military in an attempt to end months of political unrest. There was no deal struck. The army chiefs asked everyone to return on Thursday with proposals in hand.
In Iran, six people who were arrested for dancing in a video to the song "Happy" by Pharrell Williams have been released according to the International Campaign for Human Rights in the country. The director of the video remains in custody. Iranian police made the arrest based on what they called an obscene videoclip that offended the public morals.
Russia and China have signed a landmark energy deal after a decade of negotiations. Russia's Gazprom will supply China with natural gas for 30 years beginning in 2018. President Putin secured the deal during his visit to Shanghai where he met Xi Jinping. It's likely to be worth more than $400 billion in total. Although we've not been told what the final price for the gas was, the move strengthens Russia's ties to the East as relations of course with the West are cooling because of the crisis in Ukraine. The agreement comes ahead of Russia's economic showcase at Saint Petersburg. Our correspondent and emerging markets editor John Defterios is in Saint Petersburg.
JOHN DEFTERIOS, CNN'S EMERGING MARKETS EDITOR AND ANCHOR OF "GLOBAL EXCHANGE" SHOW: Richard, this deal has been on the boil for ten years, and both parties can say it is finally cooked. There was a big gap to close here and that was on pricing. Russia was looking to get pricing close to the level it has with its exports to the European Union. China wanted to get something closer to the price it pays from central Asia. President Putin and President Zi Jinping of China able to close that gap, China signing a 30-year deal with $400 billion. There'll be two pipelines coming from Russia -- one from the Eastern Siberian region, the other one from the Sakhalin Islands. The infrastructure will cost nearly $40 billion. China has the option to pay half of that up front to get it moving. They want this delivered by 2018. But it's also extremely important in terms of the timing for Vladimir Putin, ahead of the Saint Petersburg International Economic Forum tomorrow he wanted to come back with a deal in his hands.
Saint Petersburg, a city of splendor for three centuries, bearing the name of the man who dreamt it all up -- Tsar Peter the Great. But since the year 2000 when Vladimir Putin took power, Saint Petersburg's been known as the hometown of the president and for those within his inner circle who carry sway within the Kremlin but also in the business community. Anna Scheibakova is bureau chief for the financial daily, Vedomosti.
ANNA SCHEIBAKOVA, BUREAU CHIEF, VEDOMOSTI: There are a lot Saint Petersburg-born people in Russian cabinet and also the office -- chief executive officers -- of Russian big monopolies like Gazprom or like Rosneft, like Sberbank.
DEFTERIOS: The city's rising prominence, the state-run energy giant Gazprom will move its headquarters here next year. The Saint Petersburg National Economic Forum is a chance for President Putin to showcase his administration, but also of course the city. It gives a chance for global CEOs to rub shoulders with those who matter most in this near $2 trillion economy. But the long, long list of no-shows has dramatically changed the tone in 2014.
At this forum a year ago, German Chancellor Angela Merkel shared the stage with the president on a panel that I chaired. Tensions between them were evident but so too were overriding bilateral trade interests. A few months later, Mr. Putin talked of reigniting growth at the G20 Summit here. In December, he moved to rescue Ukraine with a $15 billion bailout for his old ally, the now ousted Ukrainian President Viktor Yanukovich. He then hosted the high-priced Sochi Winter Olympics.
But it's Putin's annexation of Crimea and unrest in Eastern Ukraine that will define 2014 and very likely his legacy. His popularity has skyrocketed at home but that is weighed against economic isolation abroad.
PETER TRUSCOTT, FORMER UK ENERGY MINISTER: If a military conflict were to spread into the Ukraine against the background of further economic and trade sanctions, then I think Putin might lose support. And then -- that is why think Russia is very wary of full military intervention in Eastern Southern Ukraine at the moment.
DEFTERIOS: During the height of the Western-led banking crisis, President Putin chided co-members of the G8 for their careless ways and lack of corporate governance. But the economic tide has now moved out on Russia with a dramatic slowdown in 2014.
TRUSCOTT: Putin was elected as president on the basis that he would improve people's living standards, and he's delivered that for a number of years. But now the situation's getting more tricky for him.
DEFTERIOS: Having most U.S. and some European corporate leaders staying away from his annual gathering on the Neva River will not assist in that effort.
DEFTERIOS: The no-shows here at the Saint Petersburg Forum is the first stage of perhaps what is a blow to Vladimir Putin's ego. But let's not forget Saint Petersburg was supposed to be the site for the G8 Summit here in June. That's why they moved the Saint Petersburg Forum up. That's now has been cancelled, it's a G7 Summit in Brussels. So it's important for Vladimir Putin to get this gas deal with China. Richard, back to you.
QUEST: John Defterios in Saint Petersburg. Thank you. As President Putin's strengthens those ties with China, Germany's finance minister has told us a strong partnership between Europe and Russia is crucial. In an exclusive interview, Wolfgang Schaeuble told Nina Dos Santos that it's not too late.
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER, VIA TRANSLATOR: Again and again we have told Russia's leadership we want a good partnership. We think such a partnership is in our joint interests. It's in the interest of Europeans and of the West and especially of Russia. And we believe that in the medium term, it will be more in Russia's interests. We are ready, but that requires Russia to stick to the rules and international law. In the 21st century, you cannot settle arguments with violence, with the threat of violence or the incitement of violence hanging over you. Or to unilaterally redraw borders. That's not acceptable, and for that reason we want a close partnership with Russia. It's not too late but we insist on the upholding of international law.
QUEST: The German finance minister there. Now, when we come back after the break, "Business Traveller" agenda takes our attention. Some people travel economy, others travel in business class, lucky few have first and then there's your own residence in the sky. I could be yours. Well -- maybe. (RINGS BELL).
QUEST: Now let's speaks "Business Traveller" update. In the never ending battle between the Gulf 3 -- Qatar, Emirates and Etihad to raise the bar in quality, it's gone one little bit higher because now there's a new way to fly that's called The Residence. Etihad is unveiling what it says is the most luxurious first class seat in history. Well, it's not really a seat as you'll see. Think of it as your own, not seat but suite because this actually gives you three rooms -- a bedroom, a bathroom, a shower and a living room with a dining room table. And it's all onboard the A380. There's only one residence on each plane. It's yours for $21,000 on a long-haul flight. And Becky Anderson decided to -- well who else -- to try out The Residence with the Etihad chief exec.
BECKY ANDERSON, CNN INTERNATIONAL'S ANCHOR AND HOST OF "CONNECT THE WORLD SHOW": It's exclusive, it's luxurious and oh, so expensive. At Etihad they call this their apartment, their first-class environment. Your bed is made for you, your slippers are provided, your pajamas. Sitting on the bed there's a little chocolate for you. But come and have a look at this.
The Residence by Etihad as this airline calls it -- your sitting room, your en suite bathroom and then a most wonderful, wonderful bedroom in the back. Oh, I have to try out this hand-made mattress -- shoes off! Oh! Perfect.
This level of luxury is a first for a commercial carrier. The goal -- to take a quantum leap over key rivals. Well, the offer also includes a bespoke butler. Mine's off doing something else at the moment, so I thought I'd drag in the CEO and president of the airline, James Hogan.
JAMES HOGAN, CEO AND PRESIDENT, ETIHAD AIRWAYS: Hey, Becky.
ANDERSON: Hello, sir.
HOGAN: How are you?
ANDERSON: Come in. Glad you could keep your date --
ANDERSON: Do join me -- in my boudoir.
HOGAN: The A380 and the introduction of 707 has given us the opportunity to raise the bar. And we sat back -- our planning team, our design team. We looked at the behavior, we looked at the various segmentation, we saw there was a need for those long-haul sectors -- ten hours, 15 hours where you could actually introduce The Residence, you could bring style into a commercial aircraft. And that's what we've done.
ANDERSON: Just walk me through the design process.
HOGAN: A different design to our competitors. It's the same number of seats in the upper deck, but we've surely introduced true innovation. We in fact started focus groups in Abu Dhabi, in London, in New York and Sydney -- only two days with our regular customers. Day one was tell us what you don't like about flying. And day two was let's build a cabin. What should air travel be in the future?
ANDERSON: You're going to be accused of this just being a bit of marketing.
HOGAN: There's a high-end market, there's a high net worth market. Will they buy it? You bet they'll purchase it. We're going to introduce the aircraft in London. If you want to purchase The Residence, that's 21,000 U.S. dollars, and that's a fraction of the cost if you were taking a private jet.
ANDERSON: What sort of occupancy do you need for this to wash its feet?
HOGAN: Fifty percent. See we believe all year around, if achieve 50 percent utilization of The Residence, we'll wash our face. And your face.
QUEST: (LAUGHTER). Here's a bet -- which one of us -- which do you think, Becky or myself -- will be the first one to actually blag ourselves an upgrade into The Residence on Etihad? Somehow I don't think I stand a chance. Ms. Anderson with her stilettos are full throttle will beat me to that bet.
Now, when we come back, however flashy the plane seat may be, if you're traveling abroad, you still have to deal with mobile roaming charges. The European Commission is already planning to end them in Europe. Now, one mobile company is trying to beat them at their own game. It's a company called Truphone. It's unveiling plans to give high-speed data and calls in 66 countries here. Steve Robertson is the chief executive of Truphone. Steve, I've never -- roaming charges are the bugbear of just about -- or the bearbug even -- of just about every business traveler. And leisure travelers. Why is your system different?
STEVE ROBERTSON, CEO, TRUPHONE: So, one of the things that's unique about Truphone is we were born to be global. And most of the mobile industry starts as a national business. We start as an international business and bought -- built -- a network to support international business travelers.
QUEST: Right, but if I've already got a mobile, and I've already got whether it's T-Mobile, O2, --
QUEST: -- Boite, Telecom, whatever it is, or -- do I have to start changing? Can I keep that account or do I have to move to you?
ROBERTSON: So you have to move to us but you can keep your number. You can port your number in, and actually we can give you some new numbers as well for our countries. And the key thing is that our service is ubiquitous across to 66 countries.
QUEST: One of the problems you've got of course is that roaming charges, horrible though they are, are not as horrible as they were. I'll give you an example. In the U.S. I'm with T-Mobile which has now got unlimited data roaming globally and only 20 cents a call back. Doesn't that undercut you as roaming charges fall?
ROBERTSON: Well actually in that case it probably does undercut us. But it's not just about charges. It's about the quality of service as well. And one of the unique things about our network is that it always means our customers are close to one of our points of presence. So, you know, you must have been abroad yourself where you've been making a roaming call and maybe you're phoning a call, leave just down the road and it goes all the way back to the home country and all the way back again, the voice quality is poor. Or if you get -- connect to the internet -- the data speeds are poor. With Truphone customers --
ROBERTSON: -- they are really like local. Really like local. Local data, local voice.
QUEST: How are you making money then if you're cutting costs? Because as the CEO of -- as you'll be aware of -- of T-Mobile says, you know, it is the biggest con of all -- roaming charges. No company needs to charge those sorts of rates. So how are you making money?
ROBERTSON: The way we are making money is that we're focusing on the people who travel. We're a business that's designed for business travelers.
QUEST: And you have Roman Abramovich as one of your chairs (ph) -- he's put $70-odd million in, I believe to (inaudible) 23 percent?
QUEST: What does he bring to it besides a lot of money?
ROBERTSON: Well, one of the things he brings to it is he's one of our customers actually. And it's fantastic to have -- we've got a broad base of investors. Actually there's about 60 investors that support Truphone. So Mr. Abramovich is one of many who actually use our services -- customers as well as put their money into the company.
QUEST: Imagine the old -- I think it was Remington shavers wasn't it? -- he said, "I liked it so much I bought the company" --
QUEST: -- Steve Robertson, good to see you, sir. Thank you much.
QUEST: Well keep us informed on how Truphone's going.
ROBERTSON: Absolutely and thank you.
QUEST: Now, to the weather forecast and Jenny Harrison at the World Weather Center with the latest. We had some very nasty weather of course in Balkans. Bring us up to date.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Yes, it's getting better slowly but surely, Richard. Of course some areas have seen a rather more rain and water than others, and it's really about the standing water, in particular the rivers. Because not all of them actually peaked just yet. So it's been looking a lot better in the last 24 hours. In fact, before that as well. What we have got, however, is some very heavy rain work its way into Western Europe -- you can see there. But I'll talk about that in just a moment.
But in terms of a normal year, this green line is where the River Sava normally is. The red line is the historical maximum over the years and then this white line is where we are right now. And you can see that we've actually passed this particular point and if it continues to go which it's expected to do, it's actually the highest point it's ever been at this particular time of year, all the way back to when the recordkeeping actually began. So, this is the concern of course at just how high it can get. In some cases, there's some cities such as Saddleback, the year -- the water -- has begun to come down already, so some good news there, it peaked last Sunday. But unfortunately, it looks like this coming Sunday now is when the river will peak in and around Belgrade at just over 6 meters. So, again, as I say, it's going to continue to rise hopefully certainly though over the next few days. And of course a huge area within this entire region in the Southeast has been impacted in some shape or form, and mostly because of all these river -- this main river, the Sava -- and also these tributaries that come into and out of that. So, as I say, the flooding is widespread.
A few more showers in the forecast, mostly in the afternoon hours and maybe just a straight thunderstorm. But when it comes to accumulation the next 48 hours, nothing particularly heavy maybe 10 millimeters here, just millimeters -- not into Sofia of course -- this wasn't really badly flooded. But these areas to the north really hardly anything in the next couple of days. So we've got that going on in the Southeast, mainly dry looking a lot better. Very hot and dry across Eastern Europe and then this out towards the West is the next round of potentially quite severe thunderstorms. You can see here the warnings stretch all the way from Denmark right the way through the low countries -- Germany France down into the Northeast of Spain. Very heavy rain, large damaging hail potentially and also with the chance of a tornado.
However, where it is hot, well, people are doing this. Of course you might expect it. A little boy enjoying the fountains there in Moscow. And look at the temperatures again this Wednesday -- look at Saint Petersburg - - 33 Celsius. It's the second day we've had 33, the average is just 16 Celsius this time of year. Moscow getting up to 29, so 10 degrees above the average, and it's going to stay pretty warm over the next few days. Again, the temperatures in the high 20s, Saint Petersburg in the high 20s, so perhaps not as hot as it was. And then also Kiev a good 9 or so degrees above the average. But that heat is spreading across into Central Europe, so very nice and warm for Warsaw, Budapest and also Berlin over the next few days.
And let's just finally end on Cannes. It has been a very nice day. The temperature right now in the hours 22 Celsius, and for the next few days it should stay fine, dry and sunny. Very nice temperatures in the low 20s Celsius. Richard.
QUEST: Yes, but with my sea legs, you know, get a bit of -- a bit 'oompity,' you know, when I get on one of those yachts.
HARRISON: 'Oompity' -- (LAUGHTER). I want to see evidence, photographic evidence, of you looking and feeling "oompity," because I just don't know (LAUGHTER).
QUEST: Well, it is the dinner hour in Europe. I wanted to be a little bit delicate.
HARRISON: Yes. I think -- poor old thing -- you poor old inaudible.
QUEST: Hey, hey! Enough of the old (RINGS BELL). Thank you very much. That was Jenny Harrison. Now, when we come back, the French National Railway Company has a serious problem. It's an embarrassing blunder that'll cost tens of millions to fix, and it's all because nobody worked out -- well, never mind how they're running on time the trains -- how big they are.
QUEST: Now, an important warning when you board a train. But when it's important that you -- buy trains. France has spent more than $20 billion on new trains that are too wide for hundreds of stations. Jim Boulden has our report.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Before you buy an expensive sports car, you want to check if it fits in the garage. The same can be said when you're buying billions of dollars' worth of trains. You want to check whether the rolling stock fits when it comes into the station -- into all the stations. The French National Railway Company, the RFF, discovered that some of the 2,000 trains ordered from ALSTOM and Bombardier were, well, just too wide for the network's older stations.
The train company, SNCF reportedly based its orders on the dimensions of the newer, leaner platforms, not the older, wider ones. Apparently the wrong measurements were handed to SNCF by RFF. The mistake was found back in 2012. Three hundred platforms already had been retrofitted, with another 1,000 or so to go, costing up to $68 million the companies say. Well, at least redoing the platforms will be quote, "Totally useful and necessary," RFF says, and bring them up to international standards. So, who's to blame? The current government blames the previous government of course, saying it was absurd to split the train operators from the train network, adding a layer of bureaucracy. It seems what we have here is a failure to communicate. Jim Boulden, London.
QUEST: We'll have our "Profitable Moment" after the break.
QUEST: Tonight's "Profitable Moment." It will have to be very profitable if you want to enjoy The Residence by Etihad. Think about it -- in this day and age when we're all scrunched up into the back of the plane, low-cost carriers, paying for meals and for luggage and even for bringing on hand baggage, the idea of a three-room suite with your own bed and a bathroom and a butler and a mere $21,000 from Abu Dhabi to London. I don't know whether it's a great idea or something that's offensive of profligacy. What I do know is hand on heart and being honestly whatever the morals of it, I rather want to try it out just to say I have. In a world where we all look at what's the lowest common denominator and the cheapest price, how nice to be able to say, "Hang the cost, I'll go in the penthouse." And that's "Quest Means Business" for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, (RINGS BELL) hope it's profitable. I'll see you tomorrow.