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QUEST MEANS BUSINESS

Consumer Sentiment Puts Brakes on Optimism; Qatar Takes Piece of Porsche; Organizers in London Promote Cycling to Work

Aired August 14, 2009 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, CNN INTERNATONAL ANCHOR: Too much, too soon. Wall Street loses its steam as America loses its confidence. The "sick man of Europe," Spain, takes a surprise slide in the second quarter. And Qatar revs up Porsche whilst Volkswagen gets the rest.

I'm Max Foster in for Richard Quest today. And this is QUEST MEANS BUSINESS.

Hello to you, it is a dismal end to the week on Wall Street, despite this week's raft of economic optimism from all quarters. Some far worse than expected: consumer confidence data as well in (INAUDIBLE) snuffed out all of those gains.

Here is how we stand right now. Let's take a look at the Big Board. Down as you can see, the Dow Jones down pretty significantly for this day, as opposed to the rest of the week. Susan Lisovicz is going to put all of this in context for us, because she is down there at the stock exchange.

It has been a really good week up until now, hasn't it, Susan?

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, you know, look, there is no denying the trend that we've seen basically since March. And the Federal Reserve really validated on Wednesday when it said that the U.S. economy was leveling out. That was the most optimistic statement we had heard from policy-makers, oh, in about a year.

And so there was a little bit more room to move on Thursday, move higher, that is. And the Dow and the S&P 500 in fact closed at their highs for the year. But a different sentiment, a different session today, the final trading day of the week. And it looks like now that this winning streak we've seen for the three major averages for the past month, four straight weeks, is in jeopardy.

It looks like at this point we're going to have a losing week for stocks. They have been in the red for most of the session. Why is that? Well, we've got some weak economic data very early into the session. It was a larger-than-expected drop in consumer sentiment.

The University of Michigan index fell to its lowest level since March, hmm. That was when the market hit its low point of this recession. And so one day after we have the highs for the year, we're seeing a broad-based sell-off with a little bit less than two hours to go in the session.

Right now the Dow, the Nasdaq, and the S&P 500 are each down at least 1.5 percent. It is a broad-based sell-off -- Max.

FOSTER: It's so confusing with all of this information we're getting through right now, isn't it? Susan, just help us out. Is the data today somehow conflicting with what the Fed had to say earlier this week?

LISOVICZ: That's right. And you know, when the Fed said things were leveling out, you know, I guess you can really parse its words. The Fed is typically very careful about that. But what happened the very next day when investors chose to ignore some weakness.

Well, where did the weakness come from? It came from the consumer sector. And consumer spending really accounts for the bulk of economic activity in the U.S. We're seeing more of that today.

Numbers from J.C. Penney, that is a mid-tier department store retailer. It says its earnings were better than expected. It made money. But its sales fell. And that's something that a lot of folks are looking at, Max, because there are a lot of ways that you can massage your earnings, you can cut costs.

And we've seen lots of companies of all sorts cutting costs. But sales fell, and that's something we heard on Thursday from Wal-Mart. And then there is Abercrombie & Fitch. This is a youth retailer, a specialty store. I'm sure you're familiar with it.

This is a store that is really taking it on the chin, because it has basically refused to acknowledge that there is a recession. It has not lowered its prices when a lot of competitors are. So cool will work when times are good, but cool can mean value when you don't have a job.

So Abercrombie basically says it is going to start cutting prices on its apparel and guess what, Abercrombie is one of the few retail stocks that was higher today. It's up by nearly 4 percent. But, Max, just a little caveat, don't expect discounts over at Abercrombie's very cool store in Mayfair.

FOSTER: No, not.

LISOVICZ: Don't expect it right away.

FOSTER: That wouldn't look right, would it? Not at Mayfair. Thank you so much, Susan, for that.

We're going to get some more analysis on this and get some more context for you. George Tkaczuk is a broker from the RMB Group. He joins me now from Chicago.

Thank you so much for joining us. The question is, really, are the markets out of touch with the data coming out. They're trying to keep up with all of this information, trying to judge the economy. But are they doing it correctly right now?

GEORGE TKACZUK, STOCK BROKER, RMB GROUP: Well, the markets are reacting, knee-jerk to the numbers. You know, all week long, the markets were up strongly, down the next day, up the next day.

So they are reacting in a way you would expect them to react. But generally speaking, I know today is a terrible day for the markets, everyone is looking at this morning's data and they pretty much forgot some of the data earlier in the week.

You know, we had non-farm productivity, which was up 6.4 percent on Tuesday. That was really a good number. It's funny, the market sold off that next day, then rallied into the Fed meeting, rallied the next day after the Fed meeting.

So the markets are playing around and not -- I figure on the S&P, as long as it stays above 990, I still say we're very much in an uptrend and we could see some further upside.

Everyone is focused on the consumer, but yet there is a lot of retailers that are doing very well.

FOSTER: The question is, though, you say there is more upside, but a lot of people would suggest that actually the market is pushing higher -- investors are pushing the markets up too far too quickly, and they should really be digesting this -- all of this news -- this economic news before getting too over-excited about it.

Shouldn't they just calm down a bit, otherwise, they could risk choking off the whole thing?

TKACZUK: Well, that is always going to happen any time in every new bull market. You know, there's that saying in markets, you know, it's either going to scare you out or wear you out. So a lot of people, they're seeing these high new levels. They're saying, oh, we're pushing it too hard, the economic data is not there.

But there is a lot of forward-looking economic data. We expect GDP to be a little bit higher that will justify these higher prices. Of course, the unemployment figures, you know, they're still saying there is no way, but again, we know that's a lagging indicator.

So it's always going to seem like the markets are pushing too hard too fast. But that's typically what happens in a recovery. It's hard to find conviction in markets going up.

FOSTER: And in terms of the money that people have taken out of the markets today, where is that going? Are they cashing it or are they putting it into safer areas, say, bonds and the dollar, for example?

TKACZUK: It looks like it's moving in to bonds. The dollar is still under some pressure. It's getting a little bit of uptick today. But it looks like a lot of money is moving into the Treasuries. And that's -- you know, they're viewing that as a safe haven. And again, we don't know if that's just -- actually, it has been going up all week long.

So it's a little difficult to say that's really what's driving that or the fact that they realize the Fed is not going to raise rates, they've pretty much telegraphed for quite a while.

FOSTER: OK. George Tkaczuk at RMB Group in Chicago, thank you so much for joining us.

TKACZUK: Thank you.

FOSTER: Now Spain, it seems, is the new "sick man of Europe." The country's economy shrank more than expected in the second quarter. GDP fell 1 percent. And that follows a 1.9 percent slump in the first quarter of this year.

For over a decade Spain was at the forefront of European growth. But the country has been left reeling from the collapse of a debt-fueled construction boom, really.

And while Spain is still stuck in the doldrums, France and Germany are hauling themselves out of recession. Data out on Thursday showed an unexpected rebound after shrinking for a year. Both economies grew 0.3 percent in the second quarter.

Now joining France and Germany is Hong Kong. The country's economy has broken out of a year-long recession. GDP grew 3.3 percent in the second quarter, that was much stronger that the expected 1.2 percent rebound.

Hong Kong joins a growing list of Asian economies, turning around much more quickly than expected. And the markets responded accordingly to that data. In Europe, four straight weeks of gains come crashing down.

London's FTSE, the Paris CAC-40, and Zurich's SMI all wrapped up the trading week in negative territory. Miners were the biggest losers here in London. Banks also took a big hit with Commerzbank and Deutsche Bank falling over 2 percent.

Though over in Asia markets ended the week higher. Japan's Nikkei close up three-quarters of 1 percent. Hong Kong's Hang Seng finished up a fraction. South Korean shares closed higher there by financial and technology stocks.

So that's the market news. Let's go to the news headlines for you. Fionnula is in the London newsroom -- Fionnula.

FIONNULA SWEENEY, CNN INTERNATIONAL ANCHOR: Max, Taiwan's president warns the death toll from Typhoon Morakot may soar. A baby saved here, but more than 100 other people confirmed dead so far after the storm brought on severe flooding and mudslides.

Now Ma Ying-jeou says 400 more are likely buried in a remote village. The military has been called in to help rescue thousands more trapped by collapsed bridges and washed out roads.

Firefighters struggled to halt a blaze in Northern California. The so-called Lockheed Fire has burned several buildings, hundreds more homes are at risk, over 2,000 evacuees are still in shelters hoping the fire gets contained. Right now, roughly 15 square kilometers have been charred by the blaze.

A rare questioning of power in Iran where Supreme Leader Ayatollah Ali Khamenei has received an unprecedented challenge from a group of former reformist lawmakers. In a letter, the group asked the powerful clerical body to investigate Khamenei, and denounces the crackdown that has rocked the country since the elections in June.

And in the United States, President Obama and family are headed to the western part of the country where Mr. Obama will answer questions on health care reform before taking a vacation.

The president will be in the states of Montana and Colorado in the next two days, rallying support at town hall meetings.

And those are the headlines. Back to you, Max, in the studio.

FOSTER: Fionnuala, thank you so much for that.

Now it has taken a long time, but Porsche is giving outsiders a say on how it runs the firm. The German sports car maker finally accepts a lift from the Middle East.

(COMMERCIAL BREAK)

FOSTER: Germany's auto industry is set for an historic shake-up. New developments in the protracted merger of Porsche and Volkswagen. Fred Pleitgen joins us live from Berlin.

Fred, you've been following this story all along. You have another twist.

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Hi, Max. Yes, certainly another twist in the ongoing saga of the merger between Volkswagen and Porsche. Today Porsche announced that the Emirate of Qatar would buy a 10 percent stake in the German sports car maker that, of course, is badly in debt after that failed takeover attempt of Volkswagen earlier this year.

Now the other thing that's going to be happening as part of this deal is that the Emirate is also going to be taking over almost all of the VW stock options that Porsche holds. And that will help the Porsche company to reduce a lot of the debt it has after that failed takeover attempt.

Really what you're seeing today, Max, is that this deal that we're seeing today is the lubricator for the deal that we saw made yesterday, when both Porsche and VW announced that they were going to merge under the Volkswagen umbrella to try and create one of the biggest, and possibly soon, the biggest car manufacturing company in the world -- Max.

FOSTER: Yes, Fred, just interested in what the two sides get out of this specifically. I presume Porsche is getting money. What is the other side getting from this?

PLEITGEN: Yes. You're absolutely right. Porsche and VW are both getting money. I mean, as I said, Porsche, after that failed takeover attempt of VW, is really, really badly in debt. You're talking somewhere in the range of between $7 billion and $10 billion that Porsche is in debt. And certainly this will help ease some of that, if you will.

Now for Volkswagen, this is also a very good deal because they want the Emirate of Qatar to be one of the main shareholders in that new company that is going to emerge that will have both Porsche and all of the Volkswagen brands under it.

Now the Qataris, for their part, they're going to get a pretty good deal themselves because what they're investing in is really very two -- two very solid companies. Porsche is a very solid automaker. They do have this debt that they've acquired in the past couple of years, but their automaking business is very, very solid.

And Volkswagen, as you know, Max, is really one of the companies that is doing much better than a lot of automakers currently in the crisis, and was one of the first to emerge from that crisis.

But the -- really, the main important thing in all of this is how is the ownership of this new car company, of Porsche-VW, going to be structured after this deal is done? After Porsche and VW merge?

What you're going to have then is three main stakeholders. You're going to have the families of Piech and Porsche that are going to have 50 percent of this company. You're going to have the German state of Lower Saxony holding 20 percent of this new auto giant. And then you're going to be having the Emirate of Qatar holding another between 17 and 19 percent.

So what you have then, Max, is three very solid stakeholders in that company. And that would make a hostile takeover of this company almost impossible in the foreseeable future -- Max.

FOSTER: So complicated, Fred. Thank you so much.

Well, the Porsche-VW deal and its years of acrimony between the two firms, it all started back in 2005 when Porsche announced plans to buy a 20 percent stake in Volkswagen. Porsche continued to up its stock in VW.

Then last October it said it controlled nearly 75 percent of Volkswagen. And that resulted in a mad scramble for VW shares, briefly making it the most valuable company on the planet, would you believe.

Fast-forward to May this year, and the global downturn. Car shares plunge and Porsche drops its takeover plans, saying it wants to merge instead. Cue the Qatar Investment Authority and its interests in buying a stake. Well, CNN's Jim Boulden has been following this deal like a hawk as well, he joins me now.

Fred said it, didn't he? It's so complicated. The most complicated deal he could imagine really.

(CROSSTALK)

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: I think -- I think it might be over. We might be seeing here an end to it.

FOSTER: What are you going to do?

BOULDEN: What's so fascinating here is that, you know, Porsche pushed to try to take over Volkswagen, obviously a much bigger company. The worst possible timing, the recession comes in and look what happens. It has to be taken over. It has to go to the Middle East to get money. It loses its independence.

But it does keep the whole thing in family hands, in German hands. And as Fred said at the end of -- there, it makes it very unlikely for any kind of takeover. Volkswagen wants to be the largest auto company in the world. This gives it a premium brand that it didn't have before.

OK. Not doing so great at the moment, premium companies aren't doing so great, but think about it. We get back into -- get out of recession, people want to buy Porsches. We know that. Volkswagen doesn't have that.

Now it will have 10 different brands around Europe all doing reasonably well with good management.

FOSTER: There are -- the Qatari stake is a voting stake, isn't it? So it can have a say. I presume it won't have -- get too heavily involved and it will allow the management to get on with its job. Is that the impression you get?

BOULDEN: The -- a lot of the Middle Eastern companies like to be very quiet when it comes to these things. You know who has the blocking stake in here is the government. Lower Saxony continues to have that stake, to make sure it doesn't lose Volkswagen, that someone doesn't take all of the plants and leave Germany.

So that's the blocking stake that remains. Everything that has happened in here has to happen with the local government's approval. And of course, that is what has happened.

FOSTER: And I guess consumers aren't going to notice much difference, the same brands are going to be available to them, perhaps prices may change or something, but basically it's a great line-up under one brand.

BOULDEN: Well, as a company decision here, they're going to be able to cut costs. They're going to be able to merge things together. They're going to be able to merge things together. They're going to be able to have management working together.

So there is a lot of business sense in doing these kind of deals and doing them now during a recession. So they're going to take a lot of cost out of the structure, and they're going to have a lot of managers who will be working on both Porsche and Volkswagen.

FOSTER: And in terms of what Fred was alluding to, this could be one of the biggest companies in the world. He's not -- you know, that's the absolute truth, isn't it?

BOULDEN: Yes.

FOSTER: They could well catch up with those big Japanese makers who are basically leading things at the moment.

BOULDEN: Yes.

FOSTER: . in a very strong position.

BOULDEN: Well, number one-number two, Toyota-GM. Toyota not having a great time, certainly not in the kind of trouble that GM has been in. But obviously GM is now a whole new company.

Volkswagen is sitting there with the ability and the management, and now the money when they go out and sell all of the new shares in the beginning of the next decade, then they could get themselves into being the world number one.

You couldn't -- you certainly wouldn't want to bet against that happening.

FOSTER: And fascinating to see such huge businesses effectively still family-run.

BOULDEN: Yes. In Germany that's what you get.

FOSTER: OK. Jim, thank you so much.

Now, (INAUDIBLE) bosses in London are urging commuters to swap four wheels for two, but is getting the saddle good for business? Up next, our very own Charles Hodson hops onto his bike to find out.

(COMMERCIAL BREAK)

FOSTER: Now commuters here in London are being encouraged to take up cycling under a new initiative called "Cycle Fridays." Experienced riders will lead several groups of new cyclists from the suburbs into central London. The aim is getting novices up to speed on the benefits of saddling up here in the capital.

Over very own Charles Hodson knows his cycle lanes inside out. He cycles in every day, and he has even appeared on CNN more than once in his biker gear. So who better to send out onto the streets to find out if the two-wheel commute is really good for business.

(BEGIN VIDEOTAPE)

CHARLES HODSON, CNN INTERNATIONAL CORRESPONDENT: It doesn't take much to sell me on the joys of cycling. I do this every day. I feel a lot healthier. It saves me a lot of money and hassle going on public transport.

But what about employers? Do the companies that employ people like me also benefit from the deal?

(voice-over): Charlie Lloyd works for London Cycling Campaign, organizers of the Cycle Fridays.

CHARLIE LLOYD, LONDON CYCLING CAMPAIGN: The big benefit for business is that they have a healthier and a happier workforce. And that translates into real savings, reduced staff turnover, which saves money.

The biggest benefit is perhaps reduced absenteeism from healthy, happy workers. In the Netherlands, the TNO Research Institute has estimated that a 1 percent increase in cycling to work would save the Dutch economy 27 million euros. That's over $30 million -- every year.

(on camera): London is obviously a very large city. It's, therefore, very congested. There's a lot of pressure on roads and on public transport.

To what extent does cycling help?

LLOYD: Well, cycling helps all the time, every person who switches from any mode of transport to cycling. It means there's more capacity on the roads; there's more capacity in the tubes, which are horribly overcrowded; more capacity on the bus network; and the cyclists themselves, they're getting to work quicker.

HODSON: Well, Charlie, thank you very much.

Neat. See you another time.

LLOYD: Sure.

HODSON: Cheerio, then.

LLOYD: OK.

So everyone benefits. But safety is still an issue. So I've got three golden rules. First, wear the kit. Better a live nerd than dead cool. Second, keep an eye out for people who are not driving carefully. They could cause you a problem. And if they do cause you a problem, you get cut off or something like that, stay cool. Don't get angry. Road rage never did anyone any good.

Charles Hodson, CNN, London.

(END VIDEO TAPE)

FOSTER: And that bike folds up into a small little bag, would you believe?

Anyway, in the old (INAUDIBLE) hot, sweaty and expensive subway, then hello cycling -- that's if you're brave enough. And another way you can save money is to exercise in the fresh air. Forget the gym membership, though. Take up free running.

Zain Verjee has her toking (ph) pants on.

(BEGIN VIDEOTAPE)

ZAIN VERJEE, CNN CORRESPONDENT (voice-over): Real life superheroes spinning through the air in style, owning the streets.

STICKY, FREERUNNER: Exhilarating. Yes, it's like -- it's just -- it's just the biggest buzz ever.

VERJEE: They're not looking for the bad guys, but just looking for a good time -- and a good workout.

ASIO, FREERUNNER: I like to keep my mind blank and just focus on something I'd like to achieve, you know, and just work on getting up.

VERJEE: It's called free running, jumping, sliding, slipping -- using the city's concrete jungle as their gym.

(on camera): You thought you could never be like Spider Man?

Well, you can. Check out Kelly. He climbed this pole. These guys are judged on technical difficulty, execution, creativity and fluidity. It's pretty amazing, right?

Wow!

Kelly, come back down.

UNIDENTIFIED MALE: And Chad (INAUDIBLE).

VERJEE: (voice-over): I was up for a lesson. I was a bit nervous.

ASIO: Being scared is a part of what we do. Obviously, if you're not scared, you're not human.

VERJEE: A simple jump...

KERBIE, FREERUNNER: Yes?

VERJEE: (on camera): Yes!

KERBIE: Not bad?

VERJEE: (voice-over): ...and a ground roll. Nah, that was easy. But I know I'm not quite up to that standard just yet.

KERBIE: Accidents do happen. They do happen to the professionals. They happen to beginners.

VERJEE: The professionals are heading to London to compete.

EZ, DIRECTOR, URBAN FREE FLOW: There's 27 athletes competing, 16 different nations. We have countries as far as Australia, Mexico, Brazil, America.

VERJEE: The freerunners say they feel like 21st century adventurers.

UNIDENTIFIED MALE: What's fun about freerunning is the freedom it gives you. You know, it lets your mind feed you on the horizon in a way you can actually sort of (INAUDIBLE) and you can go anywhere you like.

STICKY: The way it pushes you -- it pushes you to the extent to which you wouldn't normally do, to go outside your comfort zone.

VERJEE: (on camera): Safety is really important. You have to start slow and stay low. All you really need is a pair of trainers and an open mind and then the world is your playground.

(END VIDEO TAPE)

FOSTER: Did she jump?

We're going to find out.

And there you are.

Zain Verjee reporting and jumping.

Now, a not so healthy debate is raging in the U.S. Over the nation's health care.

(BEGIN VIDEO CLIP)

SEN. CLAIRE MCCASKILL (D), MISSOURI: Hey! Hey! OK, ma'am...

(END VIDEO CLIP)

FOSTER: Friction is most certainly in the air, as town hall meetings turn into scenes of chaos. We'll bring you the economics behind the politics and how the row has gone transatlantic, after the break.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster in London in for Richard Quest.

And this is QUEST MEANS BUSINESS here on CNN.

Now, the president of the United States is on the road to sell his health care vision to the public. He's in Montana this Friday. And judging by some of the response his Congress and Senate members have already had, he could face -- he could be facing a pretty emotional crowd.

(BEGIN VIDEO CLIP, COURTESY KMQV)

UNIDENTIFIED FEMALE: We are tired of this. This is why everybody in this room is so ticked off. I don't want this country turning into Russia, turning into a socialized country.

(END VIDEO CLIP)

MCCASKILL: Hey! Hey! Hey!

SEN. ARLEN SPECTER (D), PENNSYLVANIA: If you want to be let out of here, you're welcome to go. Now wait a minute. Now wait a minute. Now wait a minute.

UNIDENTIFIED MALE: One day God's going to stand before you and he's going to judge you and the rest of your damn cronies up on the Hill.

SPECTER: OK. OK. We've just...

(CROSSTALK)

SPECTER: We've just had a -- we've just had a demonstration of democracy, OK?

MCCASKILL: I don't understand this rudeness.

What is this?

(CROSSTALK)

MCCASKILL: I don't get it. I honestly don't get it.

Do you all think that you're persuading people when you shout out like that?

(CROSSTALK)

(END VIDEO CLIP)

FOSTER: She could be forgiven for thinking that's pretty extreme behavior, but Americans take their health care extremely seriously -- and for good reason. According to one study, the U.S. Spends nearly $8,000 on each citizen every year. That adds up to $2.4 trillion, or around 17 percent of GDP.

That may seem a lot to some and too little to others. But bear this in mind, in 1960, health care costs were only 5.2 percent of GDP. And now Britain is getting dragged into the health care row in the U.S. -- allegations that the U.K.'s national health service denies patients certain treatsment -- treatments -- are inflaming the U.S. Debate.

Critics have gone even further, as -- by airing TV ads featuring horror stories about U.K. patients. And now, British politicians are jumping into the fray.

Here's Jim Boulden.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: I want to know if it's coming out of my paycheck, yes or no?

JIM BOULDEN, CNN CORRESPONDENT (voice-over): Britain's National Health Service has landed right in the middle of a heated debate on how to reform American health care, with ads like this running in the U.S.

(BEGIN VIDEO CLIP, COURTESY YOUTUBE)

UNIDENTIFIED FEMALE: In Britain, Katie Bricknell denied the pap test that could have saved her from cervical cancer.

(END VIDEO CLIP)

BOULDEN: One of the women in the ad now says...

KATE BRICKNELL, PATIENT: You know, there's lots of people in the U.S. Who would benefit from a free health care service.

BOULDEN: Supporters are fighting back on Twitter, on Facebook and on the streets.

UNIDENTIFIED FEMALE: And my mom was taken ill a couple of years ago. And after she got the treatments and there was (INAUDIBLE) who saved her life. So I think -- I feel really bad (INAUDIBLE) clearly good.

UNIDENTIFIED MALE: Well, you couldn't possibly run a public health organization of the scale of the NHS without some people being unhappy and without issues. But I -- and I thank God I live here.

BOULDEN: Physicist Stephen Hawkins said he would not be alive if it weren't for the NHS. Prime Minister Gordon Brown and his wife are using Twitter to support the system. But a member of the opposition Conservative Party trashed the NHS on American television.

DANIEL HANNAN, CONSERVATIVE MEMBER OF EUROPEAN PARLIAMENT: You are, very often, just sent to the back of the cue. You turn up with a complaint, with an ailment and you're told, OK, how about October of next year or whatever it is.

BOULDEN: His party has criticized his words. The ruling Labor Party has pounced.

PETER MANDELSON, BRITISH BUSINESS SECRETARY: In championing the American system, they're championing good first rate health care for those who can buy the insurance and a very poor and second rate system for those who can't afford the insurance. We don't want that system in Britain.

BOULDEN: So, how does the NHS work?

The government-run system is paid by a tax on employees and employers. With a budget of around $150 billion, it's free at the point of use -- no insurance forms to fill out, no bills coming through the door. People can opt out using private insurance to pay for private doctors.

The NHS buys pharmaceuticals in bulk, often at much lower prices than the U.S. Most patients pay currently just $12 per prescription and medicine for children, retirees, the unemployed and chronically ill is free.

Ironically, the British government says one way to modernize NHS and cut costs is to pay private American companies to provide some care. Many doctors are not happy with the idea of a private company being involved.

DR. JUDY DAVIS, BRITISH MEDICAL ALLIANCE: Where I live, the number of G.P. practices -- primary care practices -- have been given to a large American corporation. And the patients are not happy. They're horrified when they find out what's happened. And the problem with the private sector is its in it for the money.

BOULDEN: The World Health Organization says the U.S. Spends more than twice what Britain does on health care per capita. Still, Britons have a higher life expectancy.

Jim Boulden, CNN, London.

(END VIDEO TAPE)

FOSTER: Let's get the headlines for you.

Fionnuala is in the London newsroom -- hi, Fionnuala.

FIONNUALA SWEENEY, CNN CORRESPONDENT: Max, the only man found guilty in the 1988 PanAm bombing over Lockerbie, Scotland is dropping his appeal and that could pave the way for Abdul Baset Ali al-Megrahi to win his freedom. Al-Megrahi is dying of cancer and is seeking release on compassionate grounds.

A unified call for justice from the leaders of Germany and Russia. German Chancellor Angela Merkel and the Russian president, Dmitry Medvedev, are condemning the recent murders of an activist and her husband in Chechnya. The two leaders are meeting in the Black Sea resort of Sochi to discuss trade, investment and human rights.

Afghan President Hamid Karzai maintains his lead in the latest poll, but his closest competitor is closing the gap ahead of next week's elections. Former Prime Minister Abdullah Abdullah now gets the backing of over a quarter of Afghans surveyed in the U.S. Government's funded poll and nine out of 10 Afghans say they plan to vote despite Taliban threats of violence.

A penguin at a British zoo is causing quite a stir and making a fashion statement at the same time. Take a look. This is Ralph, a 9-year- old Humboldt penguin who suddenly lost his feathers in one day. Rather than sequester him indoors while his new feathers grow in, the zoo staff created a wet suit to shield Ralph from the sun. And, as you can see, everything's just worked out swimmingly.

FOSTER: Yes, I wonder where you buy -- Fionnuala, do you know where you buy penguin suits these days?

Where -- is there a big market for that?

SWEENEY: I think it's probably The Spoke (ph) in his case.

FOSTER: Yes.

SWEENEY: (INAUDIBLE).

FOSTER: His head was shaved, though, strangely.

SWEENEY: Well, maybe he needed to wear some sun lotion.

Who knows?

FOSTER: Who knows?

The facts from Fionnuala Sweeney. It's all penguins who have more sun (INAUDIBLE).

SWEENEY: Max, thank you.

FOSTER: Thank you.

Now on to some sports news. And England's Premier League football season starts this Saturday. Champions Manchester United set off in defense of the title they won last season.

But clubs are kicking off, hoping to stay in the game -- game financially, too. They face some major challenges, like massive debts. They owe a combined $5.1 billion, about $1 billion of that owned -- owed by Man United themselves. The Deloitte's "Annual Review of Football Finance" expects the clubs to make $3.3 billion this year. It says teams will enjoy ball casting rights worth around double last year's value.

Now, English football may have an avid following here in the U.K., but it also has a strong foothold in Asia. After the break, our correspondents in Thailand and Japan have a look at its growing popularity.

But first, here's Emily Chang in Beijing. EMILY CHANG, CNN CORRESPONDENT: I'm Emily Chang on a football pitch in Beijing.

As football season kicks off in England, the Premier League is trying to stir football fever in the giant market of China. The most important thing is exposure. Manchester United, West Ham, Hull City and Spurs have all recently played games here before throngs of Chinese fans. Chelsea just launched a Chinese football Web site. And Chinese fans will soon be able to watch one game a week for free on TV, thanks to a new deal.

But football's biggest competitor in China is basketball, which, at the moment, is a far more popular sport. It doesn't help that China's national football team has been disappointing so far.

So part of the Premiership's strategy is also training. Warren Barton, a former Wimbledon and New Castle defender, is visiting China four times this year to work with coaches across the country. Either way, football is playing a long game in China.

(COMMERCIAL BREAK)

DAN RIVERS, CNN CORRESPONDENT: I'm Dan Rivers in the Manchester United Bar in Central Bangkok. And Thailand is a soccer crazy nation. They will be avidly looking forward to the beginning of the season this weekend.

They've been football mad here for decades, perhaps partly because there's so much betting that goes on on the games, even though it's actually illegal to gambling on football matches here in Thailand.

Another reason that, perhaps, football has become so popular is it's become embroiled in politics more recently, with the ousted prime minister, Thaksin Shinawatra actually ending up buying Manchester City, the rival team, of course, to Manchester United.

This is the piece de la resistance of this bar, with a VIP area decorated with all these signed shirts. And this one is signed by none other than Sir Alex Ferguson himself.

This will be packed with fans on Sunday, when they come and watch Manchester United take on Birmingham at (INAUDIBLE).

MORGAN NEILL, CNN HAVANA BUREAU CHIEF: I'm Morgan Neill in Tokyo, Japan.

While the kickoff of the Premier League is drawing some attention here -- you can see the jerseys of some of the biggest teams on sale -- maybe not as much as in other countries. And that's because Japan has its own very successful football league, with an estimated 23 million fans and bringing in more than $120 million in 2008 -- teams like Gamba Osaka, Tokyo Verdy, and the J League's most successful ever team, the Kashima Antlers, to provide plenty of action to keep fans here interested at home.

(END VIDEO TAPE)

FOSTER: Well, what's crucial to those first games is what the weather is going to be like.

And Guillermo is going to tell us.

Is it going to be good for the fans...

GUILLERMO ARDUINO, CNN METEOROLOGIST: I think so.

FOSTER: ...(INAUDIBLE).

ARDUINO: Absolutely. I think it's going to be great, because if you see, everything is going on in the north. So London appears to be fine. It's going to be warmer. It's going to stay dry. So especially 2:00 p.m. Your time, up to 7:00 p.m. It's going to be partly cloudy, partly sunny. Things are going to be fine.

To the north is where we see all the action taking place and all of those rain showers. You see the last 12 hours, we see here how Northern England, Scotland, Northern Ireland, part of Ireland with bad weather. But to the south, conditions look OK. That's because there's a ridge of high pressure that is keeping things dry. So this is taking you into the forecast two days from now. So it can give you a little bit of an idea what's going to happen on the weekend.

Some clouds are going to come, especially there. And then things are going to clear out and we see no precipitation at all in the midlands and into the northeast, where the problems are.

This, Max, is pretty much the pattern that extends all the way into Sunday. So you see high pressure. It's going to be warmer. All those people who are going to venture out into the beaches in France, into Spain, in the Balearics, in Italy, in the islands here, Sardinia and Corsica looking fine, all the way into the Balkan Peninsula.

The unstable weather and the cooler conditions remains, especially in the north, all the way through Sunday. The Baltics here and in Finland, too. So Turkey is going to be fine, too.

Again, the next 48 hours, the action taking place in the north. The south fine. Especially Italy is going to be OK. Thirty-three in Rome; 34 in Madrid for Saturday; 31 in Bucharest. So you see -- 22 in Stockholm. Not bad.

Look at London. That is why I say that it's going to be a little bit warmer. Twenty-four the high that we expect there. Compare that with 16 in Glasgow.

Delays, delays, delays with a little bit breezy in London, but Dublin is getting the brunt of it, as you see, with some rain showers, too. The same into Inverness, into Glasgow, into Edinboro, then Copenhagen.

Still in the north, elsewhere things up here to be fine, all the way down into Milan, Rome, looking OK. In Cypress, fine; the Middle East here and into Turkey, things are looking fine.

If you are wondering about Beijing -- if you're watching from there right now quite late or if you're going there, the heat wave is coming to an end. These are the numbers that we were dealing with. Before Monday, definitely, it's going to be over.

What's going to happen now, we'll get a low pressure system here, bringing cooler conditions, in general terms, and also some rain showers for Beijing and northward. Then some more rain. Instability in Hong Kong improving, though. Delhi still with a lot of activity there. Mumbai also it rained. And we need it in there. Singapore with some rain showers, as well.

If you are going skiing in Argentina or in Chile right now, anywhere from Mendoza, Las Lenas in Argentina, Santiago, Portijo (ph), down into San Martin de los Andes, Chapelco, Bariloca, all those areas -- we are expecting winds that are very intense, that -- the chance of avalanches, as well. So follow signage, follow what the authorities are saying, because it's very dangerous, indeed -- Max.

FOSTER: All canceled (INAUDIBLE)...

ARDUINO: No, never!

FOSTER: Come on. Skiing in the rain this weekend.

Thank you.

That's it for this edition of QUEST MEANS BUSINESS.

END

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