BUSINESS-01
Cyberattacks; Trump Tweets Target Toyota; Sears, Macy's, Kohl Report Dismal
Holiday Sales; NASDAQ Closes at Record High; Self-Driving Technology Take
Spotlight at CES; Cadillac Launches On-Demand Subscription Service;
Carnival Get Personal with New Device; T-Mobile CEO Takes on Trump. Aired
4-5p ET - Part 1>
Burke >
Arnold Donald, John Legere>
teams up with a Blackberry boss to help companies stay secure. And Trump
turns his tweets towards Toyota and the new Mexican car factory. The big
three U.S. department stores, Sears, Macy's, and Kohl's are all reporting
dismal holiday sales. The future of self-driving cars that are on display
at the Consumer Electronic Show. General Motors has launched a Cadillac
subscription service that lets you reserve any model you want, wherever you
want. Giuliani and Partners announcing it will join forces with Blackberry
to fight cybercrime. Carnival Cruises has unveiled a wearable device that
apparently knows your every need. T-Mobile announced that all charges are
rolled into what you pay, no taxes or fees.>
Technology; Electronics; Consumers; Retail Industry; Latin America; Travel;
Crime>
[16:00:00] RICHARD QUEST, CNN ANCHOR: Yes, I think we can declare that to be a firm gavel that brought trading to a close. Today is Thursday. It's the 5th January.
Tonight, Russia responds to the Senate's hearing on hacking. And the U.S. Senator tells me tonight the cyber-attacks could still be going on.
Rudy Giuliani teams up with a Blackberry boss to help companies stay secure. You'll hear from both men on this program.
And Trump turns his tweets towards Toyota and the new Mexican car factory and the company responds. I'm Richard Quest. It is simply a very busy day. And of course, I mean business.
Good evening. Tonight, in the past few minutes, a Russian state media has again denied that the country carried out cyber espionage against the United States during the presidential election. It comes as the U.S. intelligence is rejecting the view of President-elect Donald Trump and says more certain than ever that hacking during the U.S. election could only have been authorized by Russia's senior-most officials.
Testifying on Capitol Hill, the nation's top intelligence officials and lawmakers were united. They said Russia poses a major threat to the United States. It's a charge that President-elect Trump has continually dismissed. The chair of the Senate Armed Services Committee, Senator John McCain, says, there's no escaping the fact, the hacking was an unprecedented attack on U.S. democracy.
Now, if we take a look at what the intelligence leaders have been describing, they were talking about an entire wide range of threats. So, you had them from Russia, from China, from Iran, from North Korea, all were cited as cyber threats against the United States. For example, in the case of Russia, the quote is, "It's full-scope cyber actor." Most of the time in the hearing was spent talking about Russia and indeed, President Vladimir Putin. The Kremlin in its response now says, it is sick and tired of irresponsible allegations. However, Senator Lindsey Graham says more robust policy is need against this man, Vladimir Putin.
(BEGIN VIDEO CLIP)
LINDSEY GRAHAM, U.S. SENATE REPUBLICAN: Ladies and gentlemen, it is time now not to throw pebbles, but to throw rocks. I wish we were not here. If it was up to me, we would all live in peace. But Putin's up to no good and he better be stopped. And Mr. President-elect, when you listen to these people, you can be skeptical, but understand they're the best among us and they're trying to protect us. Thank you all.
JOHN MCCAIN, U.S. SENATE REPUBLICAN: Would you have any response to that diatribe.
JAMES CLAPPER, DIRECTOR OF U.S. NATIONAL INTELLIGENCE: The senator and I have had our innings before, uh be I find myself in completely agreement with what he just said and I appreciate it.
(END VIDEO CLIP)
QUEST: Senators critical of Trump's reluctance to blame Russia want broader investigations. Now, the intelligence leaders say that Russia requires vigilance instead of moving on. So, when we turn to the President-elect, and remember, he will be in charge, he will be the commander in chief of this wide, vast array of intelligence agencies. When we come to that, General James Clapper, the director of U.S. National Intelligence. He says, foreign countries are concerned about Trump's criticism of U.S. community and he says public trust and confidence is crucial.
(BEGIN VIDEO CLIP)
CLAPPER: Both in this country and I think the dependence that other countries, other nations have on the U.S. Intelligence Community. And I have received many expressions of concern from foreign counterparts about, you know, the disparagement of the U.S. Intelligence Community, or I should say, what has been interpreted as disparagement of the intelligence community.
(END VIDEO CLIP)
QUEST: There seems to be a certain bipartisan agreement, whether or not on Donald Trump's comments, but at least about the activities of countries like Russia. Jack Reed is the top Democrat on the Senate Armed Forces Committee. Shortly before we came on air, he joined me. And I said, Senator, was he shocked by the consensus that Russia is to blame for so many cyber-attacks?
(BEGIN VIDEOTAPE)
[16:05:00] JACK REED, U.S. SENATE DEMOCRAT: Well, I think it was a very clear statement of Russian involvement, and it is very sobering, not just the terms of the their involvement, but the scope of it. One of the aspects that became more apparent today is that this was not just taking some hacked emails and putting them out. This involved very elaborate use of twitter feeds, of bot mechanisms so you could disseminate this information through thousands of different sources. That complexity together with promulgating fake news stories, I think that was one of the takeaways that was most revealing and also most disturbing.
QUEST: And do you find that there is agreement, pretty much, on both sides of the aisle? Forget the President-elect for the moment. Are you finding that there's agreement between yourself and your Republican colleagues about this?
REED: I think there is agreement. I think there's agreement that Russia was deliberately, consciously involved in the election, that they had a comprehensive strategy involving not just hacking into some computers, but also fake news stories. Getting through a network of different sources through social media, that they had a definite motivation and purpose. All of that will become more clear in the next few days as the reports are released. But this is something that I think both sides agree.
QUEST: Do you agree with Senator McCain or rather, Director Clapper, when he says, whether or not what they did constitutes an act of war is a heavy, heavy policy call that I don't think the intelligence community should make. Do you believe the Russian actions were de facto an act of war?
REED: I think what has been illustrated by this debate and by the whole series of questions is that we have not yet clearly defined in the cyberspace what constitutes the rules of the road, if you will. If something is an act of war, if something is a use of espionage, for example, which General Clapper recognized is used by every major country. I think that's part of what we have to do as a nation, as a Congress, so to find -- and as a world community, to define what the rules are. The President-elect, his disdain, some would say, for the intelligence conclusions, not the raw intelligence. How damaging has his comments been, do you believe, to the intelligence community?
REED: Well, I think they've been quite damages. General Clapper noted, he's been receiving calls from his foreign colleagues, who rely upon the United States Intelligence Community for support, for direction and cooperation. Also, I think in terms of the community itself. Thousands of very courageous people, who are risking their lives, many of them, now feel as if their efforts are not worthy of recognition.
QUEST: Senator, I guess the question is obviously, when this report comes out, or is the unclassified version, there has to be more, would you agree, than just restating the fact? Because the public now need to know and merely saying we believe this, that, or the other, won't cut it?
REED: Well, I think what will come out is not only the facts and the confidence they have in those facts, but also the motivation of the Russian government. To some extent, the degree of involvement, as specifically as possible, of the Russian government. But also, I think, the warning that this activity is still going on. It's going on in other countries as they prepare for elections. If we don't prepare ourselves, it will be something we'll have to consider as we go forward with our election. This is the fundamental basis of our democracy, these elections. And I think people are increasingly uncomfortable when they're beginning to recognize that influences other than debates and discussions and the merits of the candidates could have played a role in the campaign.
(END VIDEOTAPE)
QUEST: Senator Jack Reed joining me from Congress earlier. Later in this program, you'll hear from the chief executive of Blackberry, John Chen. And the former mayor of New York, Rudy Giuliani. They're teaming up on a new cybersecurity venture, and they've put in perspective for us exactly the severity of the cybersecurity threat.
Donald Trump once again taking aim at the world's biggest carmakers. This time he's telling Toyota, no way, over a new plant in Mexico.
[16:10:00] And he says, "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for the U.S. NO WAY! Build plant in U.S. or pay big border tax."
So, he has now, the President-elect, taken aim at three of the world's biggest car companies. Toyota for its factory up there. You'll be familiar with General Motors over their plan for the Cruz cars, the hatchbacks to import. And Ford, Ford canceled plans for its Mexican factory and instead said it will recreate the jobs and investment up in Michigan.
Toyota shares took a noticeable dip right after the tweet. Just look at that. That's what you call a presidential drop. Straight down it goes. It does recover, but it doesn't recover all the way. In a statement to CNN, Toyota says it looks forward to working with the Trump administration, and then goes into a line description of just how much investment it has in the U.S., how many employees. All of which brings me elegantly to Peter Valdes-Dapena, who is CNNMoney's senior automotive reporter. Good evening, sir. From this bash against Toyota. What do we make of it?
PETER VALDES-DAPENA, CNNMONEY SENIOR AUTOMOTIVE REPORTER: Well, right now, I think it's unlikely Toyota is building a plant in Mexico, primarily to feed Corollas to the U.S. Right now Corollas made in the U.S. are made in Mississippi and Ontario, Canada. It's the best-selling car in the world. And there are markets all over the world. South America and Europe that also buy Corollas.
QUEST: So, what he's basically saying is, right. Assuming as indeed it was the case General Motors, the factory that makes the Cruise. Most of those cars are exported to other parts of the world. Surely, what the Trump President-elect is saying, well that's fair enough, just don't import them into the U.S.
VALDES-DAPENA: He could say that. And Toyota may get away with not importing those Corollas into the U.S. Fine, we just won't import them into the U.S. We can add in our other factories and continue supplying the cars that way. Toyota also make trucks in Mexico that it also makes in the U.S. as a support.
QUEST: How much of this is a bash against the company versus a bash against NAFTA itself? Isn't that really was behind it?
VALDES-DAPENA: Yes, really what I think he's objecting to is the fact, that you can make vehicles in Mexico, any company can make vehicles in Mexico. And he's right, it is much less expensive to produce in Mexico than in the U.S. and he's also right as you're seeing new car factories being opened up, they're not being opened up here in the states, they're being opened up in Mexico. So, he's correct to say that there is possibly an issue there.
QUEST: So, pull the strands together. Ford basically capitulated. However, they want to frame it. The way they put it, even congratulating and saying they had confidence. General Motors is still deciding what to do. Now you've got Toyota. What are the car companies saying amongst themselves?
VALDES-DAPENA: What I think they're saying amongst themselves? It's interesting to go back in time and look at the press releases. When Toyota first announced this factory, they weren't shy about it. They said, we're building this great new factory in Mexico. No one thought it was a problem. All of a sudden, they're being confronted with it as a an embarrassment, as a bad thing. I'm sure their scrambling around, trying to see what to do. Toyota has already laid groundwork on this factory. They can't back out now. So they're going to have to figure out how to make this look good or hope people just forget about it over time.
QUEST: Right. Good to see you, sir, thank you.
Online shopping has vanquished the department store as Sears and Macy's close stores. Amazon is moving into the mall. Isn't that an interesting dynamic. Why should one be leaving, the other arriving and we're all still buying so much online.
[16:15:00] (COMMERCIAL BREAK)
QUEST: The music of the shopping mall, as we're looking to see where we're going to spend our money. Step into the QUEST MEANS BUSINESS mall. And now the big three U.S. department stores all reported dismal holiday sales. Sears is closing 150 stores. Macy's is closing 68 stores and cutting 10,000 jobs. And the clue to it all is here in the mall.
You have disappointing sales from Sears, Macy's, and Kohl' s. You have Sears closing all those stores. You have Macy's closing 10 percent of all their stores nationwide, across the United States. And the reason, of course, are all these new smaller stores across the shopping mall. For example, UPS, it is very busy tonight. It's called national returns day. It's believed post holidays, customer will send back 1.3 million packages. That's that sweater and socks on their way back.
UPS. can thank Amazon for all the packages that are going. But Amazon, perhaps perversely, is opening a bookstore with real books, not virtual ones, right here in the Time Warner Center this year. Part of a trend from bricks and mortar from Amazon. And Amazon says it may extend into American apparel, which of course, is thinking of making an offer for the bankrupt retailer. How odd if Amazon buys a clothing store that has real bricks and mortar.
As for our old friend Apple, the virtual store got busier than ever, as more users went to the app store for their new phones. New Year's Day was the busiest day ever. So, as you can see, the shopping mall is a story of retailing in the 21st century.
The market itself tells a very difficult story of what's happening. Down 42 points on the Dow Jones industrials. Much sharply lower earlier in the session, but it did rally back up toward the close. Not hugely, 20,000, still a very difficult level to reach. Paul La Monica is with us. Why is the market finding it so difficult to reach 20,000?
PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: It is odd. I think it is an important psychological number and maybe you're seeing some resistance there. To be fair, even with the sell-off that we had today, markets off to a nice start for the first two days, first week of the year. And of course, as you mentioned, we have that big jobs report tomorrow. I don't think anyone wants to --
QUEST: What are we expecting on the jobs report?
LA MONICA: A little more than 170,000 jobs added, which again, is good, but not great. Unemployment rate maybe ticking up a tiny bit. But at 4.7 percent, President Obama can leave office knowing that his job as a job creator was a pretty good one, even though he doesn't deserve all the credit, of course.
QUEST: Right. Now, the NASDAQ closed at a high.
LA MONICA: All-time high to close, yes.
QUEST: But it's interesting because post Trump -- immediate Trump victory, it was the NASDAQ that was in heavy water, trying to make progress, because of worries about the supply chain in a trade war. The Dow in the more traditional, now we seem to be seeing a bit of a difference there.
LA MONICA: Yes, I think fundamentals are once again taking control. And despite all of any animosity that might be between Trump and leaders in Silicon Valley, I think smart investors realize that Donald Trump is not going to try to kill Apple and Facebook and Amazon and Google. It's not in his best interest to obviously do that. Those are four fantastic companies with great earnings and revenue potential. That's why they're rebounding this year. Netflix has started to rebound.
[16:20:00] QUEST: And when he had that meeting at Trump Tower with the digital summit, he made that clear to them. But at the same time, he's also bashing away at those markets where they are growing and hope to grow further, and which are part of their supply chain. China, of course, is the one I'm thinking of.
LA MONICA: Without question. I think investors have to be nervous about that. They have to be wary of the tough talk on immigration, whether or not that winds up potentially hurting tech companies, which do rely on HB1 visas for attracting a certain amount of talent. But I think at the end of the day, most savvy investors realize no matter what Trump tweets. And ironically enough, he's using one of the most sad, publicly traded tech companies as his vessel, Twitter, to attack all these other companies. Everyone else is doing just fine.
QUEST: I promise I won't hold this to you.
LA MONICA: Hold to what?
QUEST: Give me a date for Dow 20,000?
LA MONICA: Oh, Dow 20,000. It's not going to be tomorrow. Of course, that means it will be tomorrow.
QUEST: If it's tomorrow, it's got a long way to go. Only it's only got 101 points.
LA MONICA: One hundred and one points --
QUEST: We're going to -- all right. We don't have a view one way or the other. But I'll look at all the emails you sent. Those of you who sent on the Dow 20,000.
CES, Consumer Electronic Show, is officially open in Las Vegas. And if the future of self-driving cars that are on display. Harmon was recently bought by Samsung, is presenting an entire section on autonomous cars. There are ten companies on the floor show, unveiling self-driving technology. Dinesh Paliwal, is the CEO of Harmon International. Good to see you, sir. And a core issue here is, we know the autonomous vehicle, self-driving, let's keep it nice in English. We know the self-driving car is coming. When does it probably get here, do you think?
We may be having a little bit of difficulty there. Can you hear me, sir? We seem to have having a little bit of difficulty with that. We'll continue to talk to Paul La Monica here on the U.S. markets. Just as well he didn't go off anywhere.
Back to the Fed yesterday. The Fed -- "The New York Times" put this succinctly when it said this morning, the Fed sees a pickup or a super bump, but it doesn't see a major boost to the economy as a result of Donald Trump.
LA MONICA: I think the -- I'm not sure I would go that far. I think what the Fed is acknowledging is that there is a difference between campaign talk and tweets and actual proposals, actual regulations and things that are going to become law. So, we need to find out what Trump and the Republican Congress, what that stimulus plan is going to look like. Is it really going to be $1 trillion? Is it really going to focus mostly on old infrastructure like roads and highways and bridges and not so much on the new economy? I think that --
QUEST: Right, but --
LA MONICA: -- I think that if you wind up getting a mix of boosting new businesses and not just trying to resurrect dying 20th century businesses, then that might be something that the Fed would even approve of.
QUEST: OK, but, the counterbalancing forces here. If you take, for example, inflation rate which is heading towards 2 percent. If growth starts moving further and faster, then interest rates will rise more quickly than the Fed otherwise would have anticipated. I mean, that's the conundrum here. To prevent this turning into a full-throttled boom.
LA MONICA: Right. The Fed realizes that they're going to be in a bit of a tough spot, especially because Donald Trump politicized the Fed during the campaign. Janet Yellen, whether or not she ends up sticking around for another term, while she's still there, she doesn't want to be accused by anyone of either trying to curry favor with Trump to keep her job or doing something to sabotage him. So, I think what's going to be interesting is, as we've talked before, will Yellen and whoever else succeeds her at the Fed end up being Paul Volcker, who didn't sabotage Ronald Reagan's chances of being reelected, or will they be Greenspan, who many still blame for George H.W. Bush being just a one-term president.
QUEST: Good to see you, Paul.
LA MONICA: Thank you.
QUEST: Don't go too far. We'll have more in just a moment. QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. And you are watching CNN and always on this network, the news comes first.
In Izmir, Turkey's third largest city, suspected Kurdish militants blew up a car and got into a shoot-out with police at a courthouse checkpoint, according to state media. A police officer and a employee were killed, along with two of the assailants. Officials say weapons found at the scene indicate a much larger attack was in the works.
Three top U.S. intelligence officials told a U.S. Senate Committee, they have no doubt Russia tried to interfere in the U.S. presidential election. Their testimony rebuts President-elect Donald Trump's doubts that the country was involved.
And the director of national intelligence has criticized those who appear to disparage U.S. intelligence agencies.
Police in Chicago have charged four people over the torture of a special needs teenager. The disturbing video was streamed live on Facebook. It showed the man bound and gagged. The suspects have been charged with kidnapping and hate crimes.
Now back to CES in Las Vegas. Dinesh Paliwal, is the CEO of Harmon International. Sir, my apologies that you couldn't hear me earlier. Some would say that's a blessing, but I think in an interview, it's a prerequisite that we hear each other. Let me ask you straight out, we'll call them driving cars for want of a better phrase. When will we see the true self-driving vehicle, do you think?
DINESH PALIWAL, CEO HARMON INTERNATIONAL: Richard, can you please come again. I think it's very noisy, probably, my side. But I'll try to answer it. I think I heard autonomous driving, but I couldn't hear whole sentence.
QUEST: Can you hear me now, sir? Is that better?
PALIWAL: Yes, that's a little better. Please come again.
QUEST: Right. So, self-driving cars, how soon are we going to see them?
PALIWAL: Richard, that's a great question. And I would actually say, in reality, the technology is here, but the infrastructure is not. So, if you were to really drive in selected safe lanes in London, San Francisco, Austin, or anywhere. I think you have the technology. But for the mass commercialization, I think we are five to ten years out. And again, key technology pillars are here. And that's what we are demonstrating here in CES. One of the missing pieces is cybersecurity.
[16:30:00] Because we all continue to sort of not pay so much attention that you cannot have connected car autonomous driving, which would be driven from the cloud servers. And right now, the cyber security has been one of the weakest link in the automotive industry and like banking sector.
QUEST: That is very important bearing in mind what we are talking about today with Russia hacking. Is there a real fear that somebody can cyber hack into one of these autonomous vehicles?
PALIWAL: I think it's very real. In fact, every year in Las Vegas in June, they do an event where they actually just try to hack almost every car. And frankly, cars were never designed to be connected, so they are very vulnerable. And right now, the new generation technology, the new platforms, the OEMs, the car companies are coming up with, they need to be embedded with software which can be kept current. Because we all know, no matter what software you have, if not current, it can be hacked. We've seen it plenty in the U.S. politics. There was a lot of hacking scandals.
I think this is one thing, we have invested heavily, Richard, and NICSA, here in the United States, conducted a study of all the worldwide cyber security companies four automotive, and we came out on the top. But I would say we're not going to declare victory. This is a running journey. We need to stay alert and paranoid. Besides cybersecurity, I think the cloud applications and the customization. Another thing, Richard, that's important as more and more technology comes in, we have to be careful not to make it monotonous environment in the car or home. So, customization and personalization is very important, which again makes cybersecurity very important, because we're exposing our personal data.
QUEST: Sir, good to see you, thank you for bearing with us for technical difficulties and the noise that is at CES. We much appreciated it.
While we're talking about vehicles, when I heard this story, I thought, this is fascinating. General Motors has launched a Cadillac subscription service. It's an app that lets you reserve any model you want, wherever you want, for $1,500 a month. If you want to buy a top of the range car, it's around $90,000. Like the one that you're seeing in this video. So, that's around 60 monthly installments. But instead, you could just basically -- you're not renting, you're not leasing. Melody Lee is here as Cadillacs brand director. You're not renting and you're not leasing and you're not buying. What are you doing?
MELODY LEE, BRAND DIRECTOR, CADILLAC: We think there's this opportunity between that traditional ownership model, which is what you've just said, that's leasing, that's financing, that's buying. On the other hand, you have ride sharing and car sharing and rental. In the middle, we think there's a desire and a demand for something like book by Cadillac. This is a subscription service for a luxury vehicle. Think of it as similar to a Netflix or a Spotify premium.
QUEST: Do you have to take it for a year or three years or whatever?
LEE: No. I think that's one of the beauties of Book by Cadillac, which is the flexibility. It is a month-to-month commitment.
QUEST: You've priced this at around $1,500 a month.
LEE: It's correct.
QUEST: What does that equate to in terms of buying a car. Is that what it would cost roughly on the payments of buying it?
LEE: We looked at a range of financial models starting with leasing and purchasing and we wanted to price this very competitively. Included in that $1,500 is registration, taxes, insurance, and routine maintenance. We're taking all of the pain of ownership away, and giving you the opportunity to just enjoy the joy of ownership.
QUEST: Right. But unlike Zipcar or the other ride sharing, I don't have to park it back at a particular place, do I? As long as I'm paying the monthly subscription, it's my car, in everything, except ownership.
LEE: A Cadillac from Book by Cadillac is always in your possession, until your needs change. So, once you are done with your ski trip and your escalade, you can turn the car back in for a CT-6 sedan to drive more people around the town. So, depending upon your needs, you exchange it for a different Cadillac.
