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QUEST MEANS BUSINESS
Dow Plunging on Worrying Numbers; Official iPhone Comes to China; Alcatel-Lucent Chief Addresses Poor Earnings Report
Aired October 30, 2009 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Talk about Wall Street's wet weekend, the Dow is diving, there is a deluge of worrying numbers.
Meanwhile, Apple takes on the biggest market of them all, China gets the iPhone. There is one core ingredient missing.
And saying it your way, the Internet opening up to every language on the planet.
A busy hour ahead because I'm Richard Quest, and yes, I mean business.
Good evening. The morning after the night before on Wall Street. And the Dow Jones Industrials is down some 230 points.
QUEST: The numbers that you need to see at this hour, a worrying session, off 237, down 2.37 percent, 9,726 on the market. It's largely due to a slump in America's September consumer spending. That turned tail as the popular "Cash for Clunkers" program came to an end.
All of this has to be seen in the perspective of the flush of optimism on Thursday, when we saw third-quarter GDP numbers at 3.5 percent. However, Friday's numbers are confirming what economists have been pointing out, that the recovery is not as durable as some numbers seemed to suggest.
If you are confused how on a Thursday the market can rally so sharply and on a Friday turn turtle, we need Maggie Lake...
... in New York to help us -- not to -- well, you know that. I'm pleased you're smiling.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Turn turtle, I like that.
QUEST: Yes, well, Maggie, I mean, come on, sensible people knew that the third-quarter number wasn't realistic. So why the rally and why it's down now?
LAKE: Yes, and here's the question, Richard. Is there anything in any of this that is new? No. Everyone for weeks and weeks and weeks and weeks has been questioning the sustainability of the recovery. So that has to tell you that maybe this isn't sort of a big picture issue going on, but a little bit more about the sort of inside baseball fundamentals of the market.
What I mean is that some of that longer-term money may be moving off to the sideline after we got through earnings season, because they don't know what is going to happen in the future. And some of the shorter term people are in there.
And I don't think it's about the spending number. Everything everyone is talking about here has to do with the dollar. Money is -- the dollar is gaining at the expense of stocks. Some people have -- think that has to do with a sort of risk barometer. Other people are questioning that correlation. But that seems to be the real trigger, the real relationship here that people are watching, the dollar and stocks.
All right. But hang on, Maggie. What we are getting to situation is what we've all known and been predicting, and that is a slow, sluggish recovery. And -- which really throws into relief that the market was over- bought in many ways in recent months.
I know our boss thinks that you and I will see a wet weekend on any given day in the summer. I know that we're constantly being berated for our views on this. But the fact is the numbers are speaking today.
LAKE: Yes. Yes, that's right. And you can't -- we have to deal with reality here and remind people who are watching these markets run up that there are real things to worry about. But I will tell you something else, Richard, to sort of be contrarian here, and I worry about all of this, but almost to a person, traders, analysts who are speaking all over the press here in the U.S., say that this is bad today, it can continue into next week.
There is a lot of event risk out there. The Fed, the jobs number, which everyone is very worried about, auto sales. But then they, in the same breath, all say they believe stocks will be higher at the end of the year from where they are right now.
QUEST: Right. All right. That's from a low base. Maggie Lake in New York with that market reaction. Actually, before -- while we're talking, Maggie, 9,700 is looking a little bit dodgy at the moment. We could be under that, we could be under -- yes, oh, go on, go on?
LAKE: Yes, I just wanted to tell people -- for people who are out there thinking about maybe doing something over the weekend or for our viewers who are sort of actively invested, watch how bad it gets this afternoon, even though people think it will rebound in the next couple of weeks, if it breaks support levels here, it could be really messy at the beginning of next week, so be careful.
QUEST: All right. Maggie Lake in New York.
And Europe's main markets -- they were also pretty grim. End of the week and it all looked rather unpleasant. Come and have a look. I'll go into the details in a minute, but I just wanted to get an overview, first of all. The Paris CAC 40 down nearly 3. The DAX over 3.
Let's begin, come into the London FTSE, off 1.8 percent. And I think the reason the FTSE there is it was a dollar play, it was also mining stocks where the mining sector was down heavily, commodity prices fell. The London market down 1.8 percent. Five thousand, I suspect, if this trend continues, cannot be held into next week.
But that's just -- that's not a prediction, that's not a prediction, that's just a guess. Look at the Xetra DAX at -- down 3 percent. This is just simply unpleasant. Financial shares among the biggest losers, Allianz off 4.4, Deutsche Bank down 4. Commerzbank down 3 percent.
The banking sector, there is a deep worry about sustainability of the recovery. And of course what -- if it doesn't happen then, what that means for bank profits and bank capital requirements.
The Paris CAC 40 off 2.8 percent. The world's largest steel-maker, ArcelorMittal, was down 5 percent. BNP Paribas was down. Interesting, the biggest loser in this market was Alcatel-Lucent, which saw its loss increase.
And we'll have the CEO of Alcatel-Lucent, Ben Verwaayen, we'll be talking to him later on the program. But Alcatel down 10.6 percent. The CAC overall. Now, the markets as they are trading in Europe.
There is no time like a sell-off when we need to reflect upon the past. This week we've been doing it, as we reminded you, past and present. This week collided (sic) the 80th anniversary of the Wall Street crash, which of course eventually led to the Great Depression. One man better- qualified to talk about this than most is the winner of FT "Business Book of the Year," Liaquat Ahamed.
His book is "Lords of Finance," and it charts the errors that were made back in the 1930s. There are parallels to today. I asked him if he knew that the book held hidden prophecies.
LIAQUAT AHAMED, AUTHOR, "LORDS OF FINANCE": I wrote it because I thought that financial crises had become a part of the financial -- the economic landscape. I did not realize that the month that it was issued we would have the greatest financial meltdown since the Great Depression.
QUEST: Were you one of those who saw similarities running up to it? Were you one of those who said it's all going to end in tears, we're doomed?
AHAMED: Somewhat. I did think that -- I certainly thought that real estate was in a bubble. So the similarities were, we had a bubble, then it was in the stock market, this time it was in real estate. In both cases, the bubble was caused by a mistake in Fed policy.
And in both cases, the mistake in Fed policy was associated with a malfunctioning international financial system. So those parallels are really quite eerie. And in both cases, when the bubble burst, we got a banking crisis.
QUEST: The chairman of the Fed, Ben Bernanke, said recently, giving a speech, he looked at Milton Friedman, and he said, we're not going to make the mistakes that we made back then. He is obviously a student of the Great Depression.
Is it -- they made some pretty dramatic mistakes back in the 1920s.
QUEST: But what was the core mistake?
AHAMED: There were three core mistakes. One was to let the banking system collapse, so not to bail out the banks. Secondly, to think that budget deficits are always a bad thing, and to raise taxes in the middle of the Great Depression. In 1932, Hoover raised taxes.
And thirdly, folly of all follies, they raised interest rates in the middle of the Great Depression. Germany raised interest rates from 4 percent to 15 percent because of the scramble for gold that occurred in 1931.
We did none of those three things. And basically Ben Bernanke is promising Milton Friedman that he wasn't going to repeat those three mistakes.
QUEST: When they made those mistakes, did they do so out of philosophical policy, they knew what they were doing? Or did they do it out of ignorance? Back in the 1930s, we just didn't understand as much as we do today?
AHAMED: They did it out of ignorance in part, and they did it in part because they believed that their prime objective was to maintain the value of the currency, and that they should be willing to tolerate very high levels of unemployment to maintain the value of the currency. No one now thinks that is a good idea.
The U.K., in 1992, when we were part of the ERM, sort of flirted with that idea. And we abandoned it very quickly.
QUEST: But -- yes, but not before rates went up into the high teens.
AHAMED: And we had a major recession. And then we let the currency go and we got ourselves out of the recession. We've learned our lessons.
QUEST: But there is a competing economic theory in all of this. You can let the currency go, but you end up with a beggar-thy-neighbor policy. And to some extent we are seeing that at the moment with, for example, if you look at U.S. exports, the decision to let the currency go is now being reflected in greater economic activity. So...
AHAMED: Yes, I fully hear you that there is a danger that if every currency decides to compete against every other currency...
QUEST: Switzerland in this crisis decided to let the currency go.
AHAMED: Yes. And beggar-thy-neighbor currency policies are essentially a cousin of protectionism.
QUEST: And that is the winner of this year's Financial Times and Goldman Sachs "Business Book of the Year." (INAUDIBLE) a fascinating discussion, the historical perspective, putting it into today's terms.
We'll bring you the news in just a moment, there is one development that we do need to bring you on the corporate front. The oil giant BP has been fined $87 million. That is a record, by the U.S. Labor Department, for failing to correct safety violations at its Texas oil refinery.
You will, of course, remember, 15 people died, 170 people were injured. It was a massive explosion in 2005. BP entered into an agreement to fix potential hazards, an agreement that the Labor Department says it has failed to meet. The fine is the largest in the Labor Department's history. BP has (INAUDIBLE) it is to appeal against that decision.
That's the corporate news for you. Now news of the day, Adrian Finighan is at the CNN news desk. Good evening.
ADRIAN FINIGHAN, CNN INTERNATIONAL ANCHOR: Good evening, Richard.
Bitter political rivals may have reached a break-through in Honduras, and supporters of ousted President Manuel Zelaya are overjoyed. Negotiators for Zelaya and de facto President Roberto Micheletti have agreed to form a unity government. The deal could pave the way for Mr. Zelaya's return to power. But congress must first decide whether to reinstate the leader who was ousted in June.
U.S. President Barack Obama talks with advisers at the White House as he continues to develop an Afghanistan strategy. The top general in Afghanistan has asked for thousands of additional U.S. troops to confront militants. Aides to Mr. Obama say that he won't make any decision for a few more weeks.
The U.S. and European Union want answers. They're asking Iran to clarify its position on a U.N.-brokered draft agreement for its nuclear program. Officials say that Tehran is calling for key revisions on a deal that calls for Tehran to send most of its low enriched uranium to Russia for further enrichment.
Environmentalists are blasting E.U. leaders for failing to achieve lasting results for the climate summit in Brussels. Leaders pledged to pay their fair share into an annual fund to help developing nations fight the effects of global warming. But they failed to agree on an actual dollar figure. And E.U. states aren't required to contribute to the fund before 2013.
Richard, I'll be back with more news on "WORLD ONE" at 8:30 p.m. London time. And we're going to get down a little bit, check out the new video game that lets you become a DJ at home. Its makers are hoping that it will be a huge hit. Apparently anyone can do it, even you, Richard. Perfect for you to get a bit of street cred.
QUEST: Watch your mouth, young Finighan!
QUEST: I used to work in radio, I can -- but in my day, it was vinyl, and you turned -- believe me, I can -- don't you be laughing at that. Adrian Finighan.
QUEST: We'll leave him where he belongs.
One of the hottest tickets in town in technology may be meeting a challenge in China. Apple's iPhone on official release. It's already losing the price war to itself. We'll get a talk about that in just a moment. QUEST MEANS BUSINESS Friday, good evening.
QUEST: A giant in the world of mobile phones, but a giant among mobile markets. And they haven't exactly hit it off. The iPhone went on official release in China today. The technology-hungry country gave it a subdued reaction. It doesn't seem to have taken off in quite the way it has elsewhere. At least early days, it is just day one.
Emily Chang has been finding out why.
EMILY CHANG, CNN INTERNATIONAL CORRESPONDENT (voice-over): It has always been made in China, but this is the first time it's being sold in China.
"I've been waiting for seven hours," says this man, who was first in line.
All this despite the eye-popping price tag. Apple and telecom partner China Unicom are selling the new phones for $700 to more than $1,000, with a limited selection of applications, and without Wi-Fi, in compliance with Chinese government regulations.
With these drawbacks, it's unclear how the iPhone will officially fare in the largest mobile market in the world.
Unofficially, iPhones have been selling on the gray market in China for more than two years. An estimated 2 million already in use, most smuggled in from the U.S. and Hong Kong. Not only do they have Wi-Fi, but they're cheaper too.
(on camera): They're really easy to get?
UNIDENTIFIED FEMALE: Yes.
CHANG (voice-over): "I just popped in a SIM card, and downloaded the applications I wanted."
I decided to try for myself.
(on camera): Do you have iPhone?
How do I know that this is real?
UNIDENTIFIED FEMALE: You can (INAUDIBLE) me, your (INAUDIBLE) me.
CHANG: OK. So this is a real iPhone that they've smuggled in from the United States. We're trying to log onto baidu.com, China's largest search engine, and there it is. Wi-Fi-enabled. Now we start the bargaining process.
(voice-over): She agreed to sell it to me for less than $500.
Then there is the rest of the competition, like counterfeit iPhones.
(on camera): He's saying he'll sell it to me for 600 yuan, less than $100.
(voice-over): And the soon-to-be-released O-Phone (ph) from China Unicom's rival, China Mobile.
On top of that, analysts say Unicom has set iPhone prices too high for average consumers.
DUNCAN CLARK, MOBILE PHONE ANALYST: China Unicom, however, has not shown itself to be very adept at marketing. I'd like to say that China Unicom has never missed an opportunity to miss an opportunity.
CHANG: But for those who can afford it, they're not buying just a phone, but an image and a lifestyle.
"It's pretty nice," says this man, buying the phone for his wife.
Whether it's on the white market or the gray market, analysts say Apple is happy. It's all about volume and Apple is playing a global game.
Emily Chang, CNN, Beijing.
QUEST: So this latest ambitious chapter in the tale of iPhone's global success, what, of course, the Chinese launch could mean for the worldwide phenomenon that is the iPhone. And actually, of course, there's an interesting question to Rene Ritchie, the editor of The iPhone Blog, a news and review site, who joins me from Montreal.
Good evening. The decision to sell without the Wi-Fi capability, which, of course, is what is demanded in China, is that a big problem, do you think, for the iPhone user?
RENE RITCHIE, EDITOR, THEIPHONEBLOG.COM: I think it's a temporary problem at launch, because China did change that rule so the next generation of Chinese iPhones will have Wi-Fi. But to compete against the imports, the ones from Hong Kong that are unlocked, or Taiwan that are unlocked, without Wi-Fi and a higher price, that's a significant challenge.
QUEST: How important is China? I mean, because they have domestic competition in terms of -- for the iPhone, does Apple need to be there, if you like, for this particular product, do you think?
RITCHIE: Yes, absolutely. I mean, it's the world's biggest cell phone market. It's a $1 billion market. China Unicom is a secondary player, it has got about 150 million users as opposed to 500 million for China Mobile. But Apple is not even in the game there officially. And I think this is not about selling a lot of units, but just getting their foot in that massive door.
QUEST: You see, that's the interesting thing, because over in the West people will be familiar with the variety of Apple products that they can -- the cachet of the cool, et cetera and et cetera. From your experience and from what you know, has that translated into China?
RITCHIE: You mean, it started? It started with the Chinese Olympics. They put a beautiful Apple store right in the middle of Beijing. But it's definitely not the kind of brand or, you know, the quote-unquote "cult of personality" following they have in the U.S. yet.
QUEST: And the counterfeit iPhones, I mean, we know counterfeits appear just about everywhere, would you put your money on a counterfeit?
RITCHIE: No. It wouldn't have the user experience. I mean, the iPhone, even before the app store, it sold based on that user experience, which is a very easy phone to use. And the counterfeits might look on the surface like an iPhone, but they won't work like an iPhone. So I don't think that will be as big a difference as just the gray market ones.
QUEST: Rene, like life itself, be wary of it just looks good, wait until you try it out firstly. Rene Ritchie, joining us this Friday night, from Montreal.
Plunging profits and sliding shares, the numbers don't look great for telecoms equipment-maker Alcatel-Lucent. In this scenario, however, the boss, Ben Verwaayen, is still feeling good. He will be on the program after the break.
QUEST: Alcatel-Lucent is one of the world's largest suppliers of telecoms equipment. It reported seriously poor numbers, third quarter loss, more than quadrupled to around $270 million from last year. The company has been beset by cuts in spending. Obviously big telecoms companies major phone groups are not spending on capital expenditure.
Alcatel and Lucent came together hoping to create this telecoms behemoth. Despite the losses, the chief exec, Ben Verwaayen, insists things aren't that bad.
BEN VERWAAYEN, CEO, ALCATEL-LUCENT: Well, I would say we had a very good quarter, actually. Our top line was in-line with the minus-8 to 12 that we have said the market would demonstrate. We did better in gross margin. We did -- in our operating performance, we had a minus-11, which is almost a break-even. And we said for the full year we reiterated our guidance.
We made cash. This was the first third-quarter that I can find in history over at least the last couple of years that we made actually cash, net cash-flow of 362, pretty good. And I feel very good in our cost- cutting programs and the progress we're making in the market place.
QUEST: We can take Alcatel -- but we'll talk more about the actual company in a second. But we can take your company as a barometer in a sense, because when other groups start spending on telecoms, we know that cap-ex is returning into the market.
And so far we see a lot of cap-ex projects desirable but not coming to fruition.
VERWAAYEN: So there are two things here that compete. One is normal customers, people who use their mobile phones and use their broadband connections, they want more and more. They want in the palm of their hands more capacity, more capabilities, they want to send e-mails, but then again, they want to have videos, they want to have pictures. So that is a demand in the market.
On the other hand is the economic situation and what you see is that our customers, the service providers, want to restrict cap-ex. So what you see is they only make choices where they can make a difference for their customers. They don't take cap-ex and just spend, they spend it wisely.
And that means a shift in where the products are going. It means that the thing that are new and giving more applications, more (INAUDIBLE), doing much better than just simple expansion of footprint.
QUEST: Right. When do you expect to see a return to more normal expenditure by your customers? When are they going to say, Ben, it's time to green light the project, not put it on the back burner?
VERWAAYEN: So the market, as we see, will be very different going forward than what it was. But if you look to the total number we expect for 2010 a nominal growth, and nominal means between zero and 5 percent.
Of course, on a lower level, because of the fact that this year was substantially less. But we see for next year nominal growth. We see the U.S. basically back into spending mode, maybe because of the stimulus, maybe because of the demands from the customers. Europe is a little bit more difficult. And Asia, of course, is Asia.
QUEST: I know you're widely quoted as saying you don't believe in looking back in terms of whether or not it was right to put Alcatel and Lucent together. You believe in looking forward. And I know you're a company in transition.
But do you ever -- well, there are some who think that you can never get this grouping to work properly, and it's best to just split it up, sell it off, start over again.
VERWAAYEN: OK. So I know you for a long time, I'll tell you this, this is going to work. And you can keep me to my word.
QUEST: Ben Verwaayen talking to me earlier and we look forward to Ben coming back on the program frequently to discuss how that transformation process is going on.
Two of Asia's largest electronics companies reported, and their quarterly number were better than expected. Here's a round up of some of the major earnings news that we got. Let's start with Samsung over here, $3.1 billion, a record run for Q3.
Interestingly, the reason, of course, was rebound in the chip division, memory chips, which have done remarkably well, and as a result of that, Samsung did an impressive performance.
Not the same can be said for Sony over here, which saw a quarterly loss of 290 million. That's following a 228 million in Q1, it's one of those oddities of markets, you can lose the best part of $300 million, but the market still is pleased because it was only $300 million. They had expected a lot worse out of Sony.
To Chevron and the oil companies, down 51 percent. That, of course, on the back of the rising -- of the falling oil price. Their had been a lot more concerns about it. What Chevron did -- managed to do, which, for example, Shell did not do, was increase production. And that increase in production took -- if you like, took the power out of that sharp fall in profits. Profits still nearly $4 billion.
Now you're up to date with the corporate news, when we come back, for perhaps most of us, using the Internet is as simple as typing a language that we are very familiar with. What if you don't use the Latin script? We'll tell you about new changes for the Internet that will revolutionize it for a large number of people.
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
For millions -- hundreds of millions of people -- using the Internet is about to get a great deal easier. The debate has lasted years. Now, the non-profit organization that oversees the Web has unanimously approved the use of Hindi, Chinese, Arabic and other languages based on non-Latin script and characters.
In just a moment, we'll be talking to a senior director at ICANN.
First, though, the background from Errol Barnett.
ERROL BARNETT, CNN INTERNATIONAL CORRESPONDENT (voice-over): For about half of the world's 1.6 billion Internet users, Web surfing is about to get easier. People who speak Arabic, for example, will no longer need to use Latin script domain names like dot-com or dot-net.
WAEL GHANIM, GOOGLE PRODUCT AND MARKETING MANAGER (through translator): There are over 40 million users in the Arab world and this number is expected to increase in the coming days, which, in turn, makes the Arabic language one of the strategic languages through which a lot of companies, for instance, Google, are interested in.
BARNETT: However, some worry this could lead to greater worldwide miscommunication.
CHANG YONG-WOONG, INTERNET USER (through translator): If Korean is used during the international communication, foreigners won't be able to understand and won't be able to read it well enough, so there could be some problems in communication.
BARNETT: While others see the change opening up the Internet to a much broader population.
ZHANG ZHIMING, INTERNET CAFE OWNER (through translator): If they can make this technology work and people can use their own language to enter in addresses, I think that that would really expand the practical applications of the Internet. People from different walks of life and different age groups could get more engaged with it.
BARNETT (on camera): Now one language question is how will people in the West, using Latin script tables like this, access Web sites in Korean, Hindi or in Arabic?
Well, officials at ICANN -- that's the Internet Corporation for Assigned Names & Numbers -- say they think technology will come along to solve that problem.
Errol Barnett, CNN, Atlanta.
(END VIDEO TAPE)
QUEST: Tina Dam is the senior director at ICANN.
She joins me now from Los Angeles.
Good evening, Tina.
Thank you for being with us.
I suppose the -- the truth of this is it's all about choice, isn't it?
Was it a technical problem that had to be solved or was it a philosophically one that the Internet had been regarded as a Western invention?
TINA DAM, SENIOR DIRECTOR, ICANN: Well, part of it has been a technical problem that had to be solved. But we're ready with that now, so there is not a lot of technical challenge -- challenges ahead of us.
But you're right, this is all about consumer choice. You can choose what language you want your Web address to be in, as opposed to having to be forced into using the Latin script.
QUEST: The -- the ability to use non-Latin script will be a huge benefit within a domestic market.
But what about this argument that says it will -- you know, for -- for Latin script users, now they'll have to have the same interface in reverse that non-Latin scripts have had until now?
DAM: Right. Well, the -- the question is really do you really need to access a site?
You know, if -- if you don't speak or understand or read Arabic, do you really need to access a site where all the content is on Arabic only?
You know, the fact that an address on an Arabic content-based Web site is in Latin characters is really just unfair. So putting that address into Arabic, as well, is going to, you know, make things so much smoother for so many users.
QUEST: All right, Tina, as we come to an end, if there's one more issue that has to be resolved, what do you think it is?
We've now, of course, got the World Wide Web. We've got the Internet in most of the countries, except where there are some restrictions. You have now gotten rid of Latin script.
So as far as ICANN is concerned, what is your next biggest issue to tackle?
DAM: Well, I think this first round is only going to be for country names. So it's country names as extensions on the -- on the Web addresses. The next thing around is going to be the generic terms. So just like we're used to seeing dot-com today, you know, dot-info and multiple other generic terms, as extensions in the Web addresses, those can become internationalized, as well.
So that will be one of the next steps.
QUEST: We look forward to that.
Many thanks, Tina.
Good of you to come into us and talk to us.
(INAUDIBLE) love to hear from you.
DAM: My pleasure.
QUEST: Thank you very much.
Now, in a moment, the burger giant frozen out of the cold economic climate -- when Iceland went bust, who knew that their McDonald's would also go down the tubes?
QUEST: Good evening.
If you're going to Iceland and you like Big Macs, go there fast because in a few hours from now, the Golden Arches will be shutting up shop.
CNN's Neil Curry on why it's throwing in the patty.
NEIL CURRY, CNN CORRESPONDENT (voice-over): Upon arrival at Reykjavik's international airport, there are few signs of the grief being experienced by Iceland's hardy citizens. A departure board displays a sign of things to come -- flights to Boston and New York brace themselves for a potential exodus of Icelanders in search of their beloved burgers.
Ships in Reykjavik Harbor lie anchored by the weight of depression that has befallen the city.
(on camera): Fishing, finance and fast food -- it's been a tough year for all three here in Iceland. And on a dreary day in October, the heavens themselves appeared to be weeping for the departure of the Happy Meal from his island.
(voice-over): The burger is an innocent victim bearing the brunt of an economic crisis that has crippled the banking and building sector. Iceland's plummeting currency has devoured profit margins on McDonald's' imported ingredients, forcing the franchise holder to close and set up a new chain with locally sought supplies.
GON OGMUNDSSON, MCDONALD'S FRANCHISE HOLDER: They will miss it, but they are very excited that we are creating a brand with local products. People are thinking of saving its currency and the -- and try to -- to make new jobs.
CURRY: Iceland's most famous filmmaker is Oscar nominee Fridrik Thor Fridriksson. He took us to the site of the ancient Viking parliament to assess the cultural contribution of McDonald's to this proud island race.
FRIDRIK THOR FRIDRIKSSON, ICELANDIC FILMMAKER: You see when McDonald's came here, when we were really worried that we will be like every town in the world, even though I miss them. We have just to look into our own culture and -- and create our own food.
CURRY: As the winter sun gave way to long Icelandic nights, the Blue Lagoon, normally one of the country's most famous tourist attractions, steams in apparent fury at the culinary crisis.
(on camera): The imminent departure of McDonald's from Iceland is having an immediate effect. I'm here at the Blue Lagoon, one of Iceland's most popular tourist attractions. I would expect the water behind me to be full of people. But they're somewhere else tonight, somewhere which, emotionally, means a lot to them. And I think I know where.
(voice-over): Icelanders are driving to the drive-through in their droves, ready to risk one final brain freeze from their favorite (INAUDIBLE). Less than 24 hours from now, McDonald's will have served its last Icelandic burger, leaving these poor, unfortunate customers to seek solace elsewhere.
I ask how they will cope with the passing of (INAUDIBLE).
UNIDENTIFIED CHILD: I think it's a big deal now, but it won't be in the future.
CURRY: Clearly, many are in denial. Some too emotional to talk. Others are bravely trying to move on.
UNIDENTIFIED MALE: And they probably know about the -- the (INAUDIBLE) real Viking Icelandic -- it's a, you know, seal testicles.
CURRY: The Icelandic Big Mac will join Dodo Steaks on the list of foregone food stuffs. If nostalgia was a condiment, it would join salty tears to add a little extra spice to my last fast feast. On Saturday, the famous Golden Arches will flicker for one last time then disappear forever into the darkness of the Nordic winter.
Neil Curry, CNN, Reykjavik, Iceland.
(END VIDEO TAPE)
QUEST: There's only one word for that report -- absolutely delicious -- a curried McDonald.
All right, now to turn our attention to serious stuff and it comes to us in the weather forecast, where there's been landfall of a powerful typhoon. It happened a couple of hours ago.
Guillermo is at the World Weather Center -- these typhoons are often deadly.
What do we know about this one?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, the -- it made landfall an hour-and-a-half, two hours ago. It is going to go through Manila and that's the main concern. The good thing is that it's moving very quickly so it's not going to have time to dump a lot of water. But the winds are going to be significant in the area.
There are 3,000 passengers stranded because Gloria Macapagal-Arroyo, the president of the country, said no shipping activities whatsoever. A really sensible measure to take, because it is very dangerous, indeed.
You see it's going to continue on its way toward Vietnam here, packing winds of 180 kilometers per hour, 150 depending on the development of the cyclone.
More coming up on CNN.
Let me tell you that in Europe, we see a change, Richard. I'm sorry to report that this period of warm conditions is coming to an end. We are going to see rain this weekend in London. We have high pressure here in Central Europe that was bringing the warm conditions. But once this high moves away, then the new low is going to arrive and it's going to bring the rain showers and the change in precipitation.
I'll have details. The snow continues to affect the east and the cold areas of the northeastern parts of Europe. You see that we're going to see rain all over. London, look at Sunday, the high is 15, but the low is 7. So that's where we see the change.
We're not going to enjoy that period of warm weather anymore. Mornings and evenings are going to be very chilly and the temperatures will continue to go down. Then a high pressure comes in and keeps things quite quiet.
Then you see the system goes one, another one, three, two and they go into the North Sea.
For tomorrow, though, 18 is the high for London, 15 in Paris, nice in Madrid still. But bitterly cold conditions are in Russia right now, in single digits in part of Eastern Europe as you see 8 in Berlin -- Richard.
QUEST: I don't care. I'm off to Abu Dhabi this weekend for the...
QUEST: ...for the Grand Prix, where it's going to be nice and warm.
And Guillermo, many thanks, indeed.
ARDUINO: Thank you.
QUEST: Now, just before we leave you tonight, those of you who follow us on Facebook know that the woman in charge of QUEST MEANS BUSINESS is big boss Sarah. Big boss Sarah, who terrorizes us on a daily basis. She is now going to be moving on to pastures new. We leave her to other parts of the CNN empire. That is here at the helm of the good ship, QMB for tonight.
Give us a wave, Sarah, as you go to a different part of this organization.
And that, as they say, is QUEST MEANS BUSINESS.
I'm Richard Quest.
I'm in Abu Dhabi next week.
Whatever you're up to in the hours ahead, Sarah, I hope it's profitable.
"MARKETPLACE MIDDLE EAST" with John Defterios is next.