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QUEST MEANS BUSINESS
Omnicom-Publicis Mega Merger; Rival Clients in Merger; Central Banks in Focus; Economic Impact; Merger Monday; Swiss Train Crash; Cannes Jewel Heist; Dollar Stronger
Aired July 29, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: And a new opportunity. Tonight, Sir Martin Sorrell of WPP gives me his verdict on the Omnicom-Publicis deal.
Long hours, low pay, and the latest iPhone. Apple vows to investigate new claims of exploitation in its factories.
Also on the show, a diamond heist in Cannes. How one man with a gun made off with literally millions of dollars worth of gems.
Hello, I'm Nina Dos Santos and this is QUEST MEANS BUSINESS.
Tonight, two of the world's biggest advertising companies are set to create a giant trans-Atlantic firm worth no less than $35 billion. Omnicom and Publicis have agreed plans to merge. Rivals are surprised. They're also skeptical as well about this deal.
Sir Martin Sorrell of WPP said that it was both bold and brave, but also a strategic paradox. Omnicom's agencies have clients that include all sorts of big household names, such as, for instance, as you can see here, AT&T, Volkswagen, as well as a whole host of others.
Publicis, on the other hand, well, its brands have a similarly impressive array of contacts, as you can see there, and clients, Kraft foods, Toyota, as well as many, many more, including the likes of Walmart and Lenovo. We're talking about brands that are advertised everywhere, from billboards to Facebook.
Let's have a look at how shares in the companies actually did. They rose on the back of the deal, which was pitched as a merger of equals. Stock for both companies has been rising in today's session, as you can see, Omnicom ending the day up around about two thirds of one percent. Publicis also up by a lesser amount in percentage terms.
But here's the key thing: it's being viewed as a game-changer for the whole of the advertising industry, as you can see, rivals like Havas ending the day up nearly 5 percent in the CAC 40 French markets. And WPP, which until now, has been the world's largest advertiser, that one ending the day up around about two thirds of one percent, as you can see.
Now, if this deal actually goes through, it has been pitched as a merger of equals, and it means that WPP will no longer be the biggest player in the world of advertising.
Just before we went to air with QUEST MEANS BUSINESS, I asked Sir Martin Sorrell, the CEO of WPP, what it meant for him and also his firm.
MARTIN SORRELL, CEO, WPP (via telephone): There will be very significant, organic opportunities. Obviously, when a merger of this size -- it's a seismic shift in the industry -- and when a merger of this size happens or even is discussed, because it's going to take six to nine months, according to the two companies to push this through the regulators in 46 jurisdictions, this causes client and people -- and we're already seeing it 24 hours into this -- to reassess where they are and what they want to do.
And when you have these sort of changes -- it's sort of -- it's symptomatic of the sort of thing that we saw at the time of the Saatchi- Bates merger, which was a similar situation in many respects, and that caused -- that was a seismic shift -- and that caused very significant changes in the way that clients felt about the business and, indeed, people did.
DOS SANTOS: Yes.
SORRELL: And the effects of that have reverberated for many years.
DOS SANTOS: So, how is this going to leave the advertising world? And will this also encourage you to take over another company to get back in the number one slot, if you like?
SORRELL: Well, the number one slot, as I said -- we were number two, number one, number two, number one, and if this thing goes through, number two. I don't think that that is something that really rules our thinking. We have four strategic adjectives.
And post-this deal, if it happens, we will have the highest concentration of the first target, which is fast-growth markets, the highest concentration of digital, the highest concentration of consumer insight, application to technology and big data.
Both Omnicom and Publicis have been talking about big data today, and I'm hard-pressed even at a company of their size to find much in the way of big data in comparison to the stuff that we have, for example, in our consumer insight division.
And finally, it's about horizontality, which is getting people to work together in more comprehensive ways, which is, if Publicis and Omnicom are going to get any revenue synergies out of this, they have to do it. '
And of course, historically, Omnicom had been a very decentralized company, that has been Wren's style, and Maurice Levy has been a much more in-your-face, centralized operation out of Paris, very engaged with clients, and it's a very different approach than the Omnicom approach.
So, this is going to be a clash of cultures, and a clash of styles, and somebody is going to have to adapt for it to be successful.
So, going back to your question, I think that we've seen just in the first 24 hours a number of clients and talent are concerned about what this means for them. So, there will be a reassessment, and that will throw out lots of opportunities, I think, organically for us.
And we said, Nina, as you know, that we'll spend 300-400 million pounds a year on in-fill built on acquisitions and we'll continue to do that. So, I think it's steady as we go. We carry on with our strategy, we're not blown off course by that.
Obviously, what Omnicom is saying is that our strategy is right. What they're doing is trying to bulk up on digital in fast-growth markets. And that's what Publicis brings for them, and they've been lax in the last ten years in doing that.
DOS SANTOS: Well, that's WPP CEO Sir Martin Sorrell, there, speaking to me earlier before coming on air this evening.
When you've bringing together two of the world's giants in the industry, it's obvious that potential conflicts are inevitable. Let's have a look at some of the ones that these companies may face.
You heard Sir Martin alluding to this kind of issue during that interview a couple of moments ago. Omnicom, for instance, works with, as you can see there, Pepsi, while Publicis, on the other hand, handles its big rival, Coca-Cola.
Volkswagen has also used Omnicom in the past, while Toyota has used Publicis. And again, they're rivals. And AT&T was an Omnicom account, while its rival here in the United States, Verizon, was handled by Publicis.
So, these are the kinds of things that they're going to have to sort out going forward and one of the reasons why some people are saying they are skeptical about perhaps this merger going through as a merger of equals, as it has been pitched.
Joining me to take a closer look at the fine print of this deal is Felicia Taylor. As you can see, she's standing by in New York. This took everybody surprise, really, didn't it, Felicia? Who'd have thought that the two almost -- some of the two biggest in the advertising world are set to get even bigger. Surely being more nimble is the way forward in this industry.
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Well, I happen to agree with you, and most of the analysts that I've spoken to happen to agree with you as well that bigger is not better in this case necessarily.
But what it does give them is $500 million in terms of synergies. Some people may be losing their jobs, that's what they're being quoted by, and they have a market cap in revenues of 23 -- almost $23 billion. So, indeed, this will become a behemoth.
And some people are saying that that will give them the ability to really forge forward when it comes to social media and those media behemoths, as they call them, Facebook and Google, and make their presence known there. So, it'll give them that sort of stratosphere to be able to be in that marketplace, which they -- neither one of them really have been either before this.
But, as you've been pointing out, there are definite conflicts in terms of the companies that they represent. In particular, one analyst said they've got about $6.5 billion worth of conflicts. The most notable one is Coca-Cola and Pepsi. This particular analyst said he just didn't believe that Coca-Cola and Pepsi would stay under one umbrella.
That, though, creates an opportunity for WPP. If Coca-Cola or Pepsi were to leave this new entity, that means that WPP could reap the benefits.
The other thing that Sir Martin pointed out was this clash of cultures. You well know that the French are very nationalistic. They're not necessarily going to enjoy this idea of an English company coming in and being part of what a company that they're very proud of in France.
But the other play that's out there is that Monsieur Levy wants to step down. This is part of cessation program. He has offered to shareholders a suggestion in terms of a replacement for him, they didn't accept it. His belief is maybe that he is going to leave when Publicis- Omnicom would be the world's number one ad agency.
So, there are other reasons that are playing and other factors that are playing in this deal. Another analyst said to me that they're talking that this is going to happen in the next three to six months. He doesn't agree with that whatsoever. He said it's going to take more like 12 months to 2 years. So, this is not a done deal. As you well know, it has to still be approved by regulators. Nina?
DOS SANTOS: Yes, that's one of the reasons why Sir Martin Sorrell was pointing out that he was skeptical about it. But I suppose from a clientele point of view as well, people will be looking at this very nervously, Felicia, thinking we have even less room for maneuver on these already very big fees that these companies charge us when we want to create adverts.
TAYLOR: Well, there's the -- there's two sides to this one also. There's the belief that they won't be nimble enough, that they won't be able to charge the fees that they have in the past. And then there's this other belief that they're actually going to be able to save money.
In order to keep these companies underneath that single umbrella of the Publicis-Omnicom name, they will charge lesser fees and thereby save their clients some money. So, it's interesting because obviously this is going to be an enormous company with tremendous reach.
Will they be able to navigate the new waters of social media quickly enough and digital and technology to really make a presence? Advertising is not just about buying ads on TV anymore. You've got to remember, they design websites, they -- it's about creativity.
There are many different platforms, now, that advertisers -- advertising companies are responsible for. It's not just magazines and television. It's a whole new world out there.
DOS SANTOS: It certainly is, and that'll be the challenge -- won't it? -- to try and navigate those waters and to stay current when you're a $35 billion company. Thank you so much, Felicia Taylor there, joining us live from New York.
Now, central banks are taking center stage. Three meet this week. We'll be having an update whether they're likely to stay on with their stimulus plans or whether they may rein it back in to home.
DOS SANTOS: Hello and welcome back. You're watching QUEST MEANS BUSINESS live from the CNN Center in Atlanta.
So, we've got a pretty busy economic week to come ahead, and monetary policy will remain the focal point of attention for traders out there. The central banks of the United States, the UK, and the European Central Bank are all set to deliver key announcements on their monetary policy strategy going forward this week.
Let's start out with the big one, because the Federal Reserve goes first on Wednesday, as you can see here. Investors will be looking for clues as to when the Fed may decide to wind down that all-important asset purchase program. Yes, that's coded language for quantitative easing or money printing.
Ben Bernanke said just a fortnight ago that it could be as early as the end of this very year. He's also said that the time table was data- dependent, though. And that will add significance to GDP figures that come out for the United States on the same day as well. You can imagine that they'll certainly give some people clues for direction on monetary policy going forward as well.
Now, the Bank of England and the European Central Bank are also set to meet on interest rates and announce their decisions on Thursday this time. Both are expected to keep interest rates firmly on hold for the moment.
But the US jobs report will also provide more food for thought for Ben Bernanke and his colleagues at the Fed. It'll be out on Friday. Economists polled by Reuters say that they expect the US economy probably added around about 185,000 jobs. That's 10,000 fewer than the month before for the month of July.
So, obviously, job creation needs to be, many say, well over these kind of figures to try and bring down that unemployment rate down below 7.5 percent. Which, by the way, is still luxurious in comparison to European standards.
Well, let's gauge the impact of all of these decisions. As you can see, we now join PIMCO's Mohamed El-Erian, who joins us now, live from Newport Beach, California. Great to have you on the show, as usual, Mohamed.
Let's start out with the Fed. It's navigating a very difficult line, here, isn't it? On the one hand, it doesn't want to destroy the equity markets, but at least to support the bond markets and vice versa.
MOHAMED EL-ERIAN, CEO, PIMCO: Oh, absolutely. The Fed, also the ECB, the Bank of England, have been doing all the heavy lifting in terms of trying to promote growth and jobs, trying to promote financial stability, and their room for maneuver is declining.
So, what they're trying to do is signal more and more the convince the private sector to do the heavy lifting. And that's what we're going to hear from all central banks this week.
DOS SANTOS: We heard Janet Yellen, who is quoted on the front of the "Wall Street Journal" today saying that she was concerned about inflation in the United States. Traditionally, this kind of hawkish message, though, really -- it hasn't really gotten much traction. We haven't seen much inflation in the US.
If they don't turn off the taps before the end of the year, even if it seems as though they may well do, do you think we will see the specter of inflation in the US?
EL-ERIAN: Not this year. Inflation is not the issue, growth is. So, as you mentioned, we're going to get the second GDP growth rate on Wednesday. It would not surprise us if it's below 1 percent.
Put another way, if you take year-on-year, we may be growing in the United States just between 1 and 1.5 percent, which is very little, given how much stimulus has been applied to this economy. So, the major concern really is economic growth and jobs.
DOS SANTOS: And that's way below the kind of predictions that the US government and also the Fed are expecting 2.5 to 3 percent. Jobs report on Friday, 185,000. Does that tally with your own predictions?
EL-ERIAN: Yes, I think a major concern is less with the number and more with the composition. So, we're seeing a few things that have to stop. One is much more part-time employment, which ends up double-counting the jobs created, because one person goes to having two jobs, and there's a number of reasons for that, and that double counts.
Second, the composition in terms of long-term unemployed and youth unemployment. We haven't made enough of a dent in these two problems, and that speaks to future income growth and future labor flexibility. So, we're going to be as focused on the details as we will be on the number.
DOS SANTOS: Under-employment, the kind of issue that you're talking about here, where people have had to take part-time jobs and have had two or more part-time jobs since the 2008 crash, do you think we're ever really going to get a grip on that? Because that's something that's also worrying policymakers in Europe as well.
EL-ERIAN: I hope so. We need to get a grip on that. We need to get a grip on youth unemployment. The numbers in Europe, 25 percent youth unemployment with 62 percent for Greece. Those are alarming and horrible numbers.
So, we have structural challenges, and unfortunately, as hard as the central banks are trying, they don't have the right tools. Other policymaking entities have to step up, and that's really a political issue more than it is an economic issue.
DOS SANTOS: OK, Mohamed El-Erian, there, joining us from PIMCO in Newport Beach, California. Thanks so much for being with us on QUEST MEANS BUSINESS this Monday to set the tone of the week.
Well, of course, it's a big week for corporate America as well, so it's not just policymakers that are going to be making the headlines. Let's go over to Alison Kosik, who's joining us now, live from the New York Stock Exchange.
So, well and truly through earnings season, getting toward the tail end of it. Does the kind of message that we're hearing from policymakers and the Fed tally with what corporations are saying? They seem to be a bit bearish.
KOSIK: A little bit, a little bit. But I think what you're seeing today is less the focus on what the Fed is doing and more about some business activity. It really has been quite the Merger Monday on Wall Street.
In addition to the Omnicom-Publicis merger, there were also deals in the retail and pharmaceutical sectors today. Canadian retailer Hudson Bay is buying Saks in a deal worth almost $3 billion, including debt.
Hudson's Bay already owns rival luxury retailer Lord & Taylor, and it means the group is going to now be running 320 stores across the US and Canada, and there have been rumors for several years that Saks would be bought out.
So, it was expected. It was going to be -- going for around $18 a share. Hudson's Bay ended up paying $16. Still, as Saks' CEO points out, it's a 30 percent premium over the closing price back on May 20th, when speculation of a takeover first began.
Then, there's the deal involving over-the-counter drug maker Perrigo. It announced a more than $8.5 billion deal to buy Irish drug maker Elan. Perrigo is the biggest maker of generic drugs for US retailers, and by moving its home base to Ireland, what happens is it avoids the big corporate tax rates here in the US.
You may remember that Elan was at the center of insider -- of an insider trading scandal involving SAC Capital and a group of Elan investors sued SAC to recoup money allegedly made when the hedge fund illegally traded Elan securities.
So, with all this merger news, it is kind of easy, Nina, to forget that we're still in the thick of corporate earnings season, but about a fifth of the S&P 500 companies are reporting over the next five days. We are going to be hearing from BP, Exxon-Mobile, Pfizer, Procter & Gamble, many, many others, a lot to track. Nina?
DOS SANTOS: OK, Alison Kosik there at the New York Stock Exchange. Thanks so much for bringing us the roundup of the earnings so far and what we can expect later on in the week.
And let's move away from business news for a moment's time and tell you about some news just coming into us here at CNN. We've had reports from Switzerland that two commuter trains have collided head-on between the cities of Moudon and also Payerne. Swiss press have been reporting that at least 33 people remain injured as a result of that accident. A number of them, it seems, have been seriously injured.
A spokesman for Swiss Railways says that he didn't know the exact cause of this particular crash. We'll bring you more on this story as soon as we get it, but obviously, it has been a disastrous couple of weeks for the railways across Europe with, of course, more than 70 people being left dead after that train crash and derailment in Santiago de Compostela last week in Spain.
We'll take a quick break here on QUEST MEANS BUSINESS. Do stay with us. We'll have more after this.
DOS SANTOS: Hello and welcome back. The estimated value of diamonds stolen by a lone gunman in the French Riviera has now more than doubled. Local police initially said that an armed robber managed to make off with jewelry worth around about $53 million from the Carlton Hotel in Cannes on Sunday morning.
Now, authorities are saying that the gems are more likely to have been worth closer to that figure, $136 million. A hunt is currently underway to try and find the thief responsible for this. Let's cross live to Cannes, where we can join Erin McLaughlin, who's been in the south of France for a couple of days, following this story as it's unfolded. Erin?
ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: Hi, Nina. Well, the Carlton Hotel is considered by many to be the place to stay in Cannes, known for its glitz and its glamour. So, people were pretty shocked and surprised when they heard the news that a man was able to walk into the hotel with a shotgun -- or a hand gun, rather -- and leave with over $100 million worth of jewelry.
MCLAUGHLIN (voice-over): It's a story straight out of a Hitchcock film.
UNIDENTIFIED MALE: -- filmed on the beautiful French Riviera.
MCLAUGHLIN: One man walks into a hotel in Cannes, France, and walks out with $136 million worth of diamond jewelry.
GRACE KELLY AS FRANCES STEVENS, "TO CATCH A THIEF": Diamonds. The only thing in the world you can't resist.
MCLAUGHLIN: The Carlton Hotel, the setting for the iconic movie "To Catch a Thief" was the site of one of Europe's biggest jewelry heists Sunday morning.
UNIDENTIFIED FEMALE: This was a gun, and nobody stopped him. Nobody -- I don't know, there was nobody around, and they just gave him $40 million worth of jewelry. It's just incredible.
MCLAUGHLIN: Police say a robber, whose face was covered by a hat and scarf, threatened to shoot exhibitors and guests during the hold-up. Cannes, home of the International Film Festival, is known for its glitz and glamour. But lately, it's become a magnet for jewelry theft.
In May, a $2.6 million necklace belonging to jeweler de Grisogono was taken from a hotel party. Later that same month, over a million dollars worth of Chopard jewels were stolen from a safe in the Novotel Hotel.
This latest heist comes just two days after a member of the notorious Pink Panther jewel thief gang escaped from a Swiss prison. However, it is too soon to say there is any link to this incident. Authorities this morning are looking through surveillance footage of the crime.
DONALD PALMIERI, SECURITY EXPERT: Diamonds are like cash. They're the most concentrated form of wealth on the face of the Earth. So, they can be very influential in acquiring weapons, in acquiring drugs, or anything else that we want to keep out of society.
MCLAUGHLIN: Thankfully, no one was injured in yesterday's heist. No shots were fired, and at the moment, there are more questions than answers as to how this could have happened, why there wasn't more security at the hotel, considering this is looking like one of the biggest gem heists in contemporary European history, Nina.
DOS SANTOS: Yes. And obviously, this is the peak of the summer season over there in Cannes. The Carlton Hotel is somewhere that Barack Obama stayed at during the G20 when it happened there a couple of years ago. The big question is, why wasn't there more security? Is a hotel the best base to be showing $130 billion worth of gems?
MCLAUGHLIN: Well, right now, neither the hotel nor authorities are answering any of those questions. But to walk through the lobby of the Carlton Hotel today, it looked like business as usual. You would never know there was anything that went on there yesterday, considering also that there were actually cases of jewels, including sapphires and emeralds, still on display inside the hotel lobby, although this particular exhibition in question was closed today, Nina.
DOS SANTOS: OK, Erin McLaughlin there in Cannes in the south of France. Thanks so much for that.
Time for a Currency Conundrum for you out there. The US state of Minnesota has passed a law tightening regulations over gold coin dealers. Authorities are trying to bar a certain group of people from entering this particular industry. So, my question this evening is, which particular group? Is it A children? B, could it be Wall Street traders? Or C, ex- convicts. We'll have the answer for you later on in the program.
Well, speaking of currencies, the dollar is currently stronger against most of the major currencies -- the British pound and the euro. It is slightly weaker, though, against the Japanese yen.
DOS SANTOS: Hello and welcome back, I'm Nina Dos Santos, live from the CNN Center. These are the news headlines this hour.
Let's update you on some breaking news that we've had here into CNN in the last 30 minutes or so. Reports are coming in of a commuter train crash, which has occurred in Switzerland. A spokesman for Swiss Railways says that two commuter trains collided head-on between the cities of Moudon and also Payerne.
He said that the case of the crash so far is unknown at this stage. Swiss press has been reporting that at least 33 people have been injured as a result of the accident, none of them seriously. We'll of course bring you more on this story as we get it.
Mourners in Spain are remembering the lives lost in last week's fatal train derailment and crash there. 79 people died in the country's worst train disaster in decades. The memorial said this is taking place at a church near the site of the crash in Santiago de Compostela.
And in Italy, investigators are trying to figure out what caused a tour bus crash that killed at least 38 people. The bus was on its way to Naples when it veered off a bridge and tumbled 30 meters down into a ravine. Children are among the dead. The driver was also killed.
Police say that at least 43 people are dead and nearly 200 hundred injured after a string of car and roadside bombs exploded across Iraq. Interior ministry officials say that attacks were carried out by what they called enemies of Iraq. All of them occurred in predominantly Shiite areas. No one so far has claimed responsibility.
For the first time in three years, Israelis and Palestinians will sit around the negotiating table in Washington tonight. The U.S. secretary of state, John Kerry, has said that the peace talks are likely to be, quote, "a difficult process." The aim of these talks is to establish a Palestinian state with agreed-upon borders with Israel.
Let's bring you more on that situation in Switzerland as we were saying before there has been a commuter train crash head-on between the two commuter trains traveling between Moudon and also -- Moudon and Payerne.
Let's bring over Reto Schaerli who joins us. He's a spokesman for Swiss Railways.
Reto, thank you very much for coming on QUEST MEANS BUSINESS. What more can you tell us about how this happened and how many people have been injured?
RETO SCHAERLI, SPOKESMAN, SWISS RAILWAYS: There are 44 people as we know around now injured. Four are severely injured and four people are slightly injured. I can't give you -- I don't have any information to how this collision happened. I can only confirm it happened at a small village named Granges-pres-Marnand in the canton of Vaud. It's in the region of Slovan (ph).
DOS SANTOS: Mr. Schaerli, can I just make sure I've got those figures right: 44 injured, you said, how many of them seriously?
SCHAERLI: Seriously injured are four people and four people are slightly injured. We have this information -- we got this information from the local police.
DOS SANTOS: Any reports of casualty so far?
SCHAERLI: No, we don't have any information so far.
DOS SANTOS: Given the seriousness of these injuries here, do you anticipate casualty as a result of this head-on collision?
SCHAERLI: I don't have any information -- any further information. I can only say 44 people are injured for seriously and 40 slightly.
DOS SANTOS: Could you give us a bit more information here for those who aren't familiar with the geography of this particular area, about the commuter route?
We're talking about a commuter train, two commuter trains, colliding head-on between Moudon and Payerne. Is this a busy route for traffic?
SCHAERLI: Compared to the other lines in Switzerland, it's not as busy as other lines. It's a small village and two commuter trains; they travel between Moudon and Payerne. They collided; we don't know how exactly. It will be searched as the police is running operations on the place and I don't know, but we don't have any more information to how this collision happened.
DOS SANTOS: In the scheme of accidents on the railways in Switzerland, how serious is this?
SCHAERLI: Yes, it's -- for this -- for this year, it's the most severe accident we had in Switzerland.
DOS SANTOS: How concerned are you about safety on the Swiss Railways?
How do you think that this may have happened?
I appreciate that it's only to speculate.
SCHAERLI: I don't have any information at this moment. We don't -- we only can confirm that it happened; 44 people are injured. But how it happened, we can't -- we don't have any information about it.
DOS SANTOS: Are emergency services making their way to the scene?
What have they found so far?
SCHAERLI: Sorry, I didn't understand your question.
DOS SANTOS: Are emergency services on the scene at the moment?
SCHAERLI: Yes, there are many emergency people on scene, even a helicopter and ambulances, police, fire department, from all the region they got (inaudible). It's a small village, so they need help from the (inaudible).
DOS SANTOS: OK. Reto Schaerli there, the spokesman for Swiss Railways, joining us live on the telephone.
Thank you so much for bringing us the latest information that you have on news of that head-on collision between two commuter trains, as you can see on the map there, which occurred in Switzerland between Moudon and Payerne.
So as you just said, one of the trains was on its way towards Lausanne in the canton of Vaud in Switzerland, 44 people, according to that spokesman for Swiss Railways have been injured, four of them seriously. Emergency crews and ambulances are on the scene. No reports of casualties at present.
Let's head back towards business news. Apple is sending audit teams to China to investigate claims of poor working conditions at one of its suppliers.
Pegatron, which assembles iPhones and Mac computers is accused of employing underage workers to work long hours for low pay. China Labor Watch estimates that employees in three Pegatron factories worked an average of some 66-69 hours per week. Apple's own limit is 60.
Well, it says that workers are paid around about $1.50 per hour. That adds up as less than half of the local income per single month. So obviously it's quite below the average figures here. And China Labor Watch also claims that staff are housed in 12-person dormitories with cold showers, so pretty bad facilities.
The accusations come just remember a year and a half after Apple joined the fair labor organization or association, I should say, to give it its full name. That was after issues at Foxconn factories that supplied parts for iPhones as well.
Well, Apple says that it's been working with China Labor Watch for several months to try and address problems with the organization and that the organization has actually raised. It says that the group's latest report, quote, as you can see here, "contains claims that are new to us and we will investigate them immediately."
Apple says that if "workers have been underpaid," it says it will require that Pegatron reimburse them in full.
Pegatron has also issued its own statement, saying, quote, that it will be investigating all these kind of allegations "fully" and it'll take immediate actions to correct any violations to Chinese labor law.
For more on this, let's go over to Maggie Lake, who joins us now live from CNN New York with more.
It's not the first time that Apple has been left red-faced by all of this kind of thing. I suppose what it highlights, Maggie, is how difficult the supply chain is if you're a company like Apple, how to police the labor conditions in these very suppliers.
MAGGIE LAKE, CNN CORRESPONDENT: Exactly, Nina. That's exactly right. And something that you and I have talked about over and over again as we've seen, and not just in the tech sector, but certainly Apple has been a very proactive, trying to get out in front of it after all of the negative publicity surrounding Foxconn and the problems there.
We've seen them sending people over; Tim Cook has been out front addressing it. But so at the very top, they've made this a priority, trying to sort of respond to consumers. But it is awfully difficult to police when you've got something so spread out.
The other really interesting thing, Nina, as I sort of watched this and we heard this news today, is it's also been pushing Apple to do something else, and that is for the first time bring some of its manufacturing back home.
Now it's only a little sliver, when you look at their worldwide situation, but they are now producing the Mac Pro, which I think we have some footage of, right here in the U.S. It's a real change for them; a lot of people think it is a byproduct of this sort of difficulties that they're facing, not only with policing of global workforce, but also frankly, you know, the changing wage landscape in China.
They also have rolled out an ad campaign, a rather interesting ad campaign. Have a listen to this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You may rarely look at it, but you'll always feel it. This is our signature and it means everything.
(END VIDEO CLIP)
LAKE: Designed by Apple in California. Not made in California, but designed by Apple in California. They're also naming the new operating system based on locations throughout California that are meaningful for the company. So you could see it's been a little bit of a change and they're not the only ones; Google also starting to do that.
I mean, it has to be said, is this, you know, a real change in practices? Is it a PR stunt? The jury's still out. They are doing it on products, though, that are at the very high end, that are very expensive, not the ones where they have to really watch those profit margins, the lower ones.
Different story for Google, however. They are going to do the Moto X, the new phone, the -- really the first one since they bought Motorola Mobility, coming out under Google. That one going to be assembled in the U.S. and that is a mass market product. So we'll see if this is going to be a trend that continues.
But certainly Apple and all of its companies -- they're not the only one facing these problems, but they get a lot of attention because of the success of their products and how high-profile they are, Nina.
DOS SANTOS: And also they appeal to the image-conscious. That's what Apple has really gone for, hasn't it? And this obviously doesn't tally with that. If we find out that people are working really long hours, they're getting low pay, perhaps below the average wage there, does the consumer care?
LAKE: Yes. And we've asked people at Apple events, because this has been going on for (inaudible), do you care about this? It's what we find over and over again. And there's some similarities, I think, with the situation in Bangladesh, with the problem with the textiles and the fires and the tragedy there.
Consumers tell you they care; they tell you it matters to them. And as you point out, in particular, that Apple consumer, there have been some studies that -- from Boston Consulting Group that suggest that consumers would be willing to pay a premium in order to see it either made in the U.S. or under situations that were more fair to the workers. However, you'll also have other people tell you that doesn't translate into sales.
They say they care, but when it actually comes to purchasing product, it doesn't seem to make that much of a difference. And in fact, a group that was doing focus studies on that ad campaign from Apple said they didn't test well at all. So that's a sign in the U.S. didn't seem to come across with consumers.
So I think that's the problem, Nina, and so you start to really see that pressure from consumers it's hard for companies to sort of change or they don't feel they need to change, which is why a lot of the consumer advocates and the labor advocates would like to see consumers start to use the power of the purse and boycott when you've got these sort of unfair practices. But it's a complicated story.
DOS SANTOS: it certainly is, but you've wrapped it up very nicely for us this Monday. Maggie Lake there live in New York this hour.
Well, thousands of U.S. fast food workers are also on strike today. They're calling for chains like for instance McDonald's, Burger King as you can see there and Wendy's to lift their minimum wage to $15 an hour.
That's actually more than double the minimum wage in the United States, which currently stands as you can see there at $7.25 an hour. The average fast food wage is just over $9 an hour. So you can see their demands are quite a bit higher than what the average is.
Fast Food Forward, which is the group that organized this walkout, says that fast food workers in New York are only earning around about a quarter of what they actually need to survive inside the city. The group says that $15 an hour will enable people to afford life's basic necessities.
Zain Asher has been following the story for us this hour.
Zain, are they likely to get $15 an hour?
ZAIN ASHER, CNN CORRESPONDENT: You know what, it's double the minimum wage. It is highly unlikely. But here's the bottom line, Nina. Many of these workers say they're living below the poverty line, one worker telling me that he barely has enough disposable income to cover the travel costs of getting to work.
Now I actually went to one of these protests in Manhattan, in New York City, and I saw roughly around 50 workers hitting the streets. They were angry. They want the $15 an hour. And they're more than willing to walk out on their shifts in the middle of the afternoon to get it.
Now one of the guys I spoke to says that he thinks that these fast food chains -- McDonald's and the like -- view their workers as completely disposable. And in his words, "almost like robots."
Now right now, as you mentioned, fast food workers in New York are paid roughly around $7.25 an hour. New York is actually one of the states where the minimum wage is actually equal to the federal minimum wage. Obviously they do want to double that, but they do know that that is highly unlikely.
Let me just show you, if you come back to me, one of the signs that was held up during these protests. I'm not sure if you can see it, but it's in Spanish, and it says, "Strike for a higher wage in order to survive in New York."
And the bottom line is a lot of these workers feel like they really can't survive on $7.25 an hour, especially when you consider that $11 an hour is what you need to be above the poverty line and that living expenses in New York really do warrant a higher wage. Take a look -- take a listen to what one worker told me.
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FRANKLIN LAPAZ, STRIKING WORKER: I have a second job and I'm trying to catch up on bills. And this is -- living in New York City is so expensive. You have to think about transportation, high taxes, food. Everything is just so expensive here.
(END VIDEO CLIP)
ASHER: And McDonald's and Burger King both told CNN that many of their restaurants are actually franchises and so they don't always have direct control over what employees are paid. McDonald's says that they actually believe that their wages are actually pretty competitive and that workers do have the opportunity of making more money by moving up the ranks.
And one good piece of news for these workers is that the minimum wage in New York will actually increase to $9 an hour by January 2016, Nina.
DOS SANTOS: OK, Zain Asher on the story for us this evening, thanks so much for that from New York City.
Now when we come back on QUEST MEANS BUSINESS, we'll tell you how a campaign (inaudible) British banknote turned into a backlash (inaudible).
DOS SANTOS: Let's return to our breaking news about the Swiss commuter train crash that occurred between the villages of Moudon and Payerne. At least 44 people have been injured in that head-on collision between those two cities and a number of people have been hurt rather seriously, it seems. That's according to a spokesman at the Swiss Railways, who was on this show just moments ago.
He says that the cause of the accident at this stage is unknown. Forty-four people so far have been injured, four of them seriously. We'll continue to update you on this developing story here at CNN.
But obviously this month has turned out to be a really devastating one for trains across Europe, with, of course, news that 79 people perished in last week's train accident and derailment that occurred in Spain in the city of Santiago de Compostela. A memorial service was held today for the victims of that.
(Inaudible) because Twitter says that it will include a button for reporting abuse after a feminist campaigner was bombarded with rape and death threats. Caroline Criado-Perez, pictured here, successfully petitioned the Bank of England to feature a woman on a banknote.
You might remember that I interviewed her on this very show, QUEST MEANS BUSINESS, just last Wednesday. That was the day that it was revealed that Jane Austen would be appearing on the British 10-pound note.
Well, following that announcement, Criado-Perez became the target of abusive tweets, at one stage receiving about 50 posts every single hour. Police in the United Kingdom arrested a 21-year-old man over the course of the weekend in connection with this case.
Atika Shubert has been following the story for us and as you can see, she joins us now live from CNN London.
ATIKA SHUBERT, CNN CORRESPONDENT: Yes, this was a pretty horrendous case of online abuse, and you say 50 tweets an hour; we're talking 50 tweets an hour over the course of two days, and some of that abuse is still continuing.
To get an idea of just how bad it was actually I have two tweets here. The first here is to Caroline. And this just gives you a flavor of it.
"Women that talk too much need to get raped," and that, frankly, is some of -- one of the nicer ones. There are, in fact, much more violent ones out there, much more graphic, pretty horrible stuff. And people that came to her aid, such as Labour MP Stella Creasy (ph), then ended up getting their own abuse, as you can see right there.
"(Inaudible) to an alley, you will definitely."
Well, I'll let you fill in the blank there. We've blurred it out for our viewers. But this is basically horrendous online abuse. And she was flooded with it. And continues to be flooded by it. Fortunately, a lot of people have come to her aid online and it's unlikely that it was just one person.
We do know that, of course, this 21-year-old man was arrested in Manchester, but it is likely to be more people.
And police say they are now taking these threats seriously, especially when you consider that a threat like this, a threat of rape was also accompanied with an address that was circulated online, claiming to be her home address. And so police say they are taking this very seriously, Nina.
DOS SANTOS: How many times has this happened in the past, because obviously we've heard repeated incidences of famous and non-famous people being targeted by Twitter. (Inaudible) finally the authorities and Twitter are getting a grip on this situation?
SHUBERT: Well, we don't know how many times this has happened. We've all seen some form of online abuse. But this is a pretty egregious example. And in this case, what makes it remarkable is that Caroline Criado-Perez basically fought back, taking up these Internet trolls to task, outing them online and then directing the police to them.
And I just want to show you what Twitter's response has been to all this.
This is from Tony Wang, who is the Twitter U.K. director here.
"We continue to listen to feedback and are working hard to bring the report button currently in iOS and mobile web to other major platforms."
So what there is at the moment is a petition for Twitter to put a report abuse button on everyone of their platforms to make it easier to flag up and screen out abuse.
DOS SANTOS: OK, Atika Shubert on the story, thank you very much for that, Atika Shubert there on the issue of Twitter trolls.
Now we'll be back in a moment's time with a full check on the world weather forecast. Don't go away.
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DOS SANTOS (voice-over): Here's the answer to tonight's "Currency Conundrum" for you out there, put you out of your misery in terms of suspense. Earlier, you may remember I asked you which group of people are currently being barred from becoming gold coin dealers (inaudible) and the answer is C, ex-convicts.
Authorities are currently trying to crack down on individuals with criminal records from entering this industry. Currently coin dealers don't need a license in Minnesota. Criminal background checks will be introduced after next year.
Let's go over to Tom Sater, who's got all your weather forecast for you at the CNN Weather Center.
TOM SATER, AMS METEOROLOGIST: Hi, Nina. Many in Europe (inaudible) not seeking relief from the heat are seeking relief from the deluge of heavy rain. Damaging winds and hails. Remember that the heat that we've had in areas of the northwest in the U.K., being replaced by a refreshing air mass, 19 in London, in Dublin as well, Paris 23. But all the heat now is getting pushed eastward. These are current readings, Bucharest at 32 degrees, 30 in Vienna.
But look at these numbers. We've had even the mercury scratched 40 degrees in parts of Hungary and Serbia as well, but 38 in Belgrade, Bucharest as well. These numbers, extremely high. We saw it in Italy; we've seen it make its way across the Adriatic and of course in between the refreshing air mass, which you see here in the form of some scattered showers, we've got violent weather.
It's the clash of air masses. We see this all the time. We've seen a large hail reports. In fact, over the weekend, even 7.5 cm in diameter, but 2 cm a little bit more like it, 90-100 kph winds. And now the violent weather really making its way in toward Belgium, another blast making its way through Prague.
Most likely some damaging winds with this batch as it moves to the north-northeast at a pretty good clip. So overall, cool air mass, and extreme warmth and in between the two is where we're going to find the hail.
We always now seem to find this high pressure set stage for a warm-up. We're going to find it being replaced in about 24-48 hours. Unfortunately, this African sub-Saharan heat is going to continue to move up.
And what we find, the dry air and the moist air right along this frontal system, is where we're going to find most of the violent weather. A very rare event now, not just a level 1 or 2, but a level 3. We had one late Friday into Saturday and we're seeing the stage set yet again, where maybe some large hail, damaging winds and possibly cloud and ground lightning, much as you see here in Germany in the last 24 hours.
So with that there is some good news Nina, as the front moves through, we will see temperatures return to more average numbers and I think it'll pick back up again in parts of Spain and Portugal. So hang in there. But if it does start to come down, seek shelter.
DOS SANTOS: OK, Tom Sater there at the CNN Weather Center. Thanks very much for that.
We'll be back in a moment's time with a final check on the U.S. stock market after the break.
DOS SANTOS: Hello and welcome back; you're watching QUEST MEANS BUSINESS.
Now U.S. stock markets are down, despite a flurry of mergers and acquisitions activity.
More than $46 billion worth of deals were announced before the opening bell even struck, and that included Omnicom and Publicis' plans to create a $35 billion advertising firm, which will be the world's largest, as you can see the Dow currently down around about just a tenth of 1 percent, around about 24 points at the moment.
Shares in both of those two companies are higher, but they are traded in the European markets, which of course are now shut. I'll come to that in a second's time.
But remember, the reason why people are sitting on their hands is because the Federal Reserve will be kicking off a series of key interest rate decisions and policymakers' decisions later on in the week. That'll include the Bank of England and the ECB.
Well, European markets seem to be in wait-and-see mode today again, despite the kind of M&A activity I was talking about. Only Zurich's market managed to close with any sort of significant movement, as you can see.
The SMI up around about a quarter of 1 percent in London though, stocks closing around about flat. That was on the back of reports that we could see Barclays raising more cash. It's going to be coming out with its figures later on tomorrow morning. So of course we'll have a look for that later on.
Well, that's it for this edition of QUEST MEANS BUSINESS. Thanks for joining me. I'm Nina dos Santos. I'll be back with a quick check on your headlines (inaudible).
DOS SANTOS (voice-over): You're watching CNN. These are the main headlines this hour.
Let's update you on that developing story coming in to us here at CNN about a commuter train crash, a head-on collision here, which has occurred in Switzerland. At least 44 people have been injured as a result of that, a number of them seriously after two trains collided head-on between the cities of Moudon and also Payerne. This is according to a spokesman for Swiss Railways.
Emergency services are currently at the scene; as yet, the cause of the crash remains unclear.
A memorial service is taking place for those who lost their lives in last week's train crash, which occurred in Spain. Seventy-nine people died in the country's worst train disaster in decades. The prime minister, Mariano Rajoy, and members of the Spanish royal family are all attending that mass near the crash site in Santiago de Compostela (ph).
Investigators are trying to figure out exactly what caused a tour bus to crash which killed 38 people in Italy. The bus was on its way to Naples when it veered off the bridge and tumbled 30 meters into a ravine. Children are among the dead. The driver was also killed.
And police say that at least 43 people are dead and nearly 200 hundred injured after a string of car and roadside explosions occurred in Iraq. Interior ministry officials say that attacks were carried out by enemies of Iraq. All of them occurred in predominantly Shiite areas.
That's a look at the headlines we're watching for you at CNN. "AMANPOUR" is next.