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QUEST MEANS BUSINESS

GM Looks to Repay U.S.; Mercedes Buys F1 Champ; South Africa Denies Shoot-to-Kill Policy

Aired November 16, 2009 - 14:00:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Thanks for the loan, now let's settle up. General Motors says it's ready to repay emergency funds.

Changing lanes in Formula One, Mercedes takes over the new world champions.

And on target, 2010, and yet South Africa's minister of tourism tells me the police don't have a shoot-to-kill policy.

I'm Richard Quest, it's the start of a new week. And all week, I mean business.

Good evening. It must be an unusual feeling at the top of General Motors. There is more cash in the bank than they need, which is amazing what a month and a bankruptcy protection can do for a company. On this program tonight, QUEST MEANS BUSINESS, we're going to look at the hurdles still ahead for General Motors.

But also, we're going to put into perspective just how they've turned it 'round, and ask whether it's truly smoke and mirrors. We do need to check in with the U.S. markets, why so early in the program?

(RINGS BELL)

That's the reason why, 1.45 percent. We're over 10,400. The S&P market also at a 13-month high, with 150-odd points to the good. The reason retail sales jumped better than expected, at 1.4 percent in October, there was a weak dollar which pushed energy and commodity shares higher.

And of course, there was the gold, which also rose to record highs. It all gave a very strong -- look at that, even while we're speaking, we're now over 154 points.

General Motors is ready to start giving U.S. taxpayers and Canadian government their money back, even though the company is still operating at a loss since it emerged from bankruptcy earlier this year.

GM says it is doing much better than expected. Now that is a relative concept and has to be put into that. For instance, if you look at what the actual third-quarter number was, it was, it was still a loss, 1.2 billion for the quarter, smaller, of course, than it made in the run-up to bankruptcy.

The chief exec who you'll hear from in just a moment, Fritz Henderson, says that GM is showing steady signs of progress. Sales down 25 percent year-on-year. They were boosted in Q3 by the "Cash for Clunkers" program.

This is the big talking point, though. Now apparently GM can start to repay some government money. Installments of a billion dollars first will be paid in December. Canada will also be getting a hefty installment of over nearly $200 million. That's a nice, festive seasonal gift if ever there was one.

If this is on track, then the money could be paid back four years earlier than expected. But there's still an enormous amount of debt to be paid, $50 billion. And remember that the U.S. government is still holding more than 60 percent of General Motors. GM, to all intents and purposes -- not to, it is. It is a private company. So that is the scenario under which we bring in Maggie Lake in New York.

Maggie, the numbers were phenomenally complicated. Help me understand, was it a good quarter or what?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: It depends on which way you want to look at it, Richard. I think we're back to the situation of things being less worse. And, sorry, I'm hearing myself back, so I'm just going to take my earpiece out.

So things are less worse. They're still losing money. Fritz Henderson, the CEO, making a real point not to sound celebratory here, he is the first to admit that things are stable, but he didn't even want to say things were recovering. The big question looming over this is can GM make the cars that people want to buy now that some of the other finances - - you know, they've restructured and reduced some of their costs in other areas.

On that point, Henderson absolutely remains convinced they can. Have a listen.

(BEGIN VIDEO CLIP)

FRITZ HENDERSON, CEO, GENERAL MOTORS: Consideration of our brands has begun to show some improvement, consumer consideration, particularly of our core brands. A open question has been, can, for example, here in the U.S., Chevrolet, Buick, GMC, and Cadillac, really pick up the pace and fill the space that is being vacated by particularly Pontiac and Saturn? I think we've been encouraged by the results we've seen to date.

(END VIDEO CLIP)

LAKE: OK. Here is the problem, though. When it comes to their competitors, GM is actually losing market share globally, just a little bit in that last quarter. And when you look at the third quarter, Ford and Toyota seem to do much better. Toyota turning a surprise profit. So they've got a higher bar that they need to reach. Clearly they're not there yet.

The other big thing, of course, you touched on, the fact that they are going to accelerate, start to repay those government loans earlier than scheduled. You know, that a lot of people pointed to as a sign that the company certainly much more confident about their finances.

QUEST: Maggie, I'm not sure whether you can hear me terribly clearly or not...

LAKE: Yes, I can.

QUEST: Good. I was going to say, I won't shout. But if this is the scenario, why are they going to pay back money? Why not just -- why do they want to pay it back so quickly, so soon?

LAKE: Right. Because it's not due until 2000 -- for another five years, so why not take that time and really solidify yourself? I think it has to do with the image problem, Richard. And this is what they're trying to do now, get past that bankruptcy phase and address the public relations problem that they have in terms of their credibility with the consumer.

They want to get rid of that sick patient on life support scenario that comes along with, you know, owing the government. There is a lot backlash from taxpayers. They want to start to pay that back to show they're confident about being the new GM, as they said.

We should point out, though, for all the hoopla about paying taxpayers back early, it has been pointed out by the government's own accounting -- the Government Accounting Office, that even if they repay all of the loans, the taxpayer is not going to recoup our investment in GM unless that stock hits levels that it didn't even hit when the company was healthy.

So that we've got a long way to go before GM is actually out from under the government and the taxpayer recoups that investment. But at least they're trying to get back on the right foot and send a message that they plan to do that.

In fact, Henderson said in a press conference today, it is his mission to prove the GAO wrong.

QUEST: All right. Of course, the GAO is saying that some of that money would never be paid back. Maggie Lake in New York.

For all the fanfare when it comes to making money, General Motors and, of course, its Opel subsidiary in Europe is still a long way off. It was losing more than a billion in the third quarter. Well, in that same period, Ford actually made a billion profit in earnings.

And interestingly, about that, that was largely because the "Cash for Clunkers" program absolutely poured the business into the Ford Motor Company. Toyota in Japan, the world's biggest car-maker, earned $242 million in the same period, it was a fraction of previous earnings, but like Ford, it was at least profitable in the quarter.

Rebecca Lindland is director of automotive research for the Americas, IHS Global Insight. Rebecca joins me now from Lexington, Massachusetts. Good evening to you. Many thanks for taking the time to help me understand in this -- I mean, well, the numbers were difficult. We've got Opel, that's it. They can't change -- they change their mind about.

What really happened with General Motors?

REBECCA LINDLAND, IHS GLOBAL INSIGHT: Well, first of all, thank you for having me on. But I think that really what happened with Opel is, I've equated it to two people that are planning a wedding, one party gets cold feet, and if you don't back out of that wedding, it usually ends terribly, you know, five years later with collateral damage.

I think that GM did the right thing, they never really wanted to sell Opel. It was just sort of a desperation move because their financial condition was so poor earlier this year. But I -- this is the ideal situation. They get to keep Opel.

There are certainly hurt parties. There is ramifications for making that very difficult decision. But I think it was the right one in the end for GM.

QUEST: We look at these numbers, I -- and there are three digits or there were facets (ph) were rammed down our throats during the course of the day. It made a loss of 1.2 billion in the quarter, it was (INAUDIBLE) positive of 3 billion in the quarter. And it's going to start paying. And it's going to start paying back government money.

Which of those is the most important?

LINDLAND: Well, they all have different levels of importance for different people. And I say that because paying -- repaying government money in the mind of the American taxpayer, is very important, just psychologically. It builds up some goodwill. It says we take this money very seriously, and we want to pay it back.

The $1.15 billion loss is not that great. We're a little disappointed actually. It's certainly better than what they've been doing. But the whole purpose of bankruptcy was to get them back on track towards profitability. So hopefully we'll see them continue to make some strides in that regard.

So there are different reasons for each point.

QUEST: But if you go -- if you -- help me understand, by drilling down, please, into the core business in terms of people liking the cars and wanting to buy them. Look, anybody will buy an automobile, if you're going to give him a whopping great big discount through a "Cash for Clunkers" program.

Strip that out, Rebecca, and what are we left with?

LINDLAND: Well, one of the things that GM has really struggled with is making products for domestically oriented buyers. If you wanted a Camry, you could just go get a Camry. You didn't need to buy a bad copy of a Camry that GM made for so many years.

So what we really want to see them doing, and as they're starting to do this, is bring back vehicles that people that are domestically oriented want to buy. We saw that to some extent with the Malibu. I think we're going to see it in 2012 with the new Impala. Obviously we see it with the Camaro as well.

So we are starting to see products that do appeal to people more and more from them.

QUEST: Take today, General Motors, I have a set of traffic lights in my studio here in London, would you say on the numbers that we've seen for General Motors, a red, an amber, or a green for the way the company is performing?

LINDLAND: I'm going to have to say amber. And I say that in comparison to Ford and to Chrysler. I think that Ford has the full green light going on. They've got great product. And obviously they've been able to really significantly improve their balance sheet.

Chrysler definitely has a red. We've got an awful lot of concern for them. They have a very weak product line-up coming out. So that's my take.

QUEST: Many thanks indeed. Come back again, please. Help us understand what is happening in the automobile...

LINDLAND: Thank you.

QUEST: ... industry. In Massachusetts, Rebecca Lindland joining us there.

Now, let us turn our attention -- we can get rid of the amber light. OK, it didn't light up until Christmas. Traders had a big buying spree in Europe. All of the major indices romped (ph) home. There were strong gains, a romp in -- London's FTSE hit a new high for the year, it's now back to where it was in early September of last year.

Mining stocks like Xstrata and Rio all added plenty to the points as metal prices rallied, the market was pleased with the latest set of retail sales numbers in the U.S. The Xetra DAX up 2 percent at the best of the day.

The news headlines now as you -- to bring you up-to-date, Max Foster at the CNN news desk.

MAX FOSTER, CNN INTERNATIONAL ANCHOR: Hi there, Richard. The United Nations nuclear watchdog wants Iran to clarify unanswered questions about its facility near Qom. A new report from the IAEA says Iran's delay in disclosing the site doesn't build confidence in Tehran. And the agency says it wants more information about the facility's purpose and how it fits into Iran's nuclear program as a whole.

U.S. President Barack Obama pushes for freedom of expression at a town hall meeting in Shanghai. The president was asked whether China should be allowed to use Twitter freely. In response, Mr. Obama said he didn't support censorship, saying: "I think that the more freely information flows, the stronger the society becomes."

Thousands of Italian farmers poured into the streets of Rome, calling for better prices and cheaper or greater support to develop new technologies. The demonstration comes as the U.N. Food and Agriculture Organization Summit gets under way in the Italian capital. Farmers, angry at falling agricultural prices have been protesting across Europe for weeks.

The Czech Republic is marking the 20th anniversary of the Velvet Revolution, which peacefully toppled the communist regime in the former Czechoslovakia. In the main square, people stopped to look at exhibition of photographs showing the 1989 uprising, concerts and rallies are planned for this week. And the students are expected to re-enact the famous protest march which helped bring an end to 40 years of communist rule.

Those are the headlines. Just a reminder to join Fionnuala as she hosts "WORLD ONE" live from Prague all this week. It's all part of CNN's "Autumn of Change," 20:30 in London, 21:30 in Central Europe right here on CNN.

For now, though, Richard, it's back to you.

QUEST: Max Foster, at the news desk.

When we come back in just a moment, there has been a power-shift in Formula One. Mercedes moves in on the champions. As the German switches teams, a checkbook deal has been done and yet they'll still be supplying engines to other teams as well. It's all very complicated. I'll try and explain in a minute.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: There is a new company in the driving seat on the Formula One grid. The German car-maker Mercedes-Benz is taking over the Brawn racing team together with the Abu Dhabi investment fund Aabar, it is buying 75 percent of Brawn. The name will change to Mercedes Grand Prix. It's a 75 percent stake now.

Brawn, of course, bagged both the F1 driver's world title and the constructor's championships this year. The car was driven by Jensen Button. This is the interesting thing, and you've got to -- if you're not actually into Formula One, you may sort of start to lose the plot of it at this point, the car is already being powered by a Mercedes engine. But apparently they like the company so much they bought it.

Mercedes also supplies engines to Brawn's rival team, McLaren, which is the home of the 2008 world champion Lewis Hamilton. Are you confused?

(RINGS BELL)

You will be. McLaren will go on using Mercedes engines for the next few seasons. But Mercedes won't have an ownership stake in the team. So, this is the way it stands: Mercedes now with Brawn, still providing engines for both Brawn and McLaren, but no ownership stake. It was complicated. I asked Alex Thompson (sic) to explain why.

(BEGIN VIDEOTAPE)

ALEX THOMAS, CNN INTERNATIONAL SPORTS CORRESPONDENT: I think the German manufacturer have been very impressed with what Ross Brawn and his fledgling team essentially have done with very little money. After Honda pulled out of F1 December 2008, they didn't there was even going to be a team to make the first race of the F1 season.

As it was, Ross Brawn got given some money by Honda, they knew it was going to cost a lot to wind up the company anyway, and they did wonders. They won the constructor's title, they won the driver's title, and Mercedes are looking at all the money they're paying McLaren, and think, we can give less money to this chap, and he might win us more.

So from that point of view, I think it's a sensible business decision.

QUEST: But Mercedes supply engines to both teams at the moment anyway.

THOMAS: Absolutely. And it has been one of F1's little quirks down the years, essentially mechanics in garages fiddling with engines with their spanner. It's a little bit more sophisticated these days, but interesting to see how the two Mercedes engines will cope with different teams.

QUEST: So Mercedes, what is in it for them? I mean, they're already -- and I don't mean the commercial side of selling an engine, but what is in it for them? Why do they really want to be part of it?

THOMAS: Well, there is a bit of a nationalistic angle to this, because already there is talk that Nick Heidfeld -- sorry, Nico Rosberg, who signed as one of their drivers next season, German. Nick Heidfeld could be next. A double German driving team for a Mercedes team. It won't be Brawn GP, it will be Mercedes GP, that will be something they like.

McLaren, on the other hand, could now have a dream British duo of Lewis Hamilton and Jensen Button, the last two world champions.

QUEST: Finally, this Abu Dhabi connection, which, to my way of thinking, whenever we start talking about Grand Prix, it always gets very murky.

THOMAS: Well, Abu Dhabi were a fantastic new venue for the F1 circuit this season.

QUEST: Yes, it was.

THOMAS: Everyone was wowed by the facilities there. This Abu Dhabi investment group are the main single shareholder in Daimler, the parent company of Mercedes Benz, so why not invest in the sport that you've got the best circuit for?

QUEST: Is this a big deal?

THOMAS: I think it's just another sign that F1 is changing and maybe they're just trying to trim those budgets a little bit in the global economic recession. And I think Mercedes think Brawn is the man to bring them success with less money.

(END VIDEOTAPE)

QUEST: That was, of course, Alex Thomas, joining me earlier to talk about this interesting move in Formula One.

Now if you think the cars go fast in Formula One, we've got something going a jolly sight faster in just about eight minutes from now. This is the space shuttle in Florida where it is getting ready for liftoff. It takes off in just eight minutes for the International Space Station. You will see the takeoff live on this program.

(COMMERCIAL BREAK)

QUEST: Welcome back, the 2010 South Africa FIFA World Cup is on the horizon. And the final preparations are being made by the country to receive hundreds of thousands of fans and visitors in a country that already receives millions of visitors as part of a core infrastructure of tourism.

But the World Cup, the stadia are virtually complete and being tested. There are the hotels that are ready. The resorts, of course, many of the various fans will have to travel many miles on match day to see them.

The infrastructure costs for the World Cup come to some $1.8 billion at current exchange rates. A lot of that money was done improve airports, a fraction of it, about $400 million of it went on things like roads and infrastructure and the transport system.

But of course, merely 700 million of it went on the stadia itself, including the extraordinary, magnificent stadia which looks like a clay pot right in Johannesburg itself.

All in all, there will be 50,000 rooms accommodating visitors in South Africa. The country says it has enough rooms, it has been outsourced to another group called Match. The question, of course, is the terms under which Match got the rooms and whether or not there will be enough if, indeed, people -- many more fans decide to turn up at the last moment.

But this is a really big issue, especially since the chief of police has recently said in South Africa that there would be virtually a zero tolerance towards violent crime. That has been interpreted by some as suggesting a shoot-to-kill policy denied by the government.

But it, of course, hasn't stopped a shoot-to-kill policy after a 3- year-old child died earlier this month. On average roughly 50 people are killed every day in South Africa. Forty-one thousand extra police have been hired for the actual World Cup itself.

I put the concerns not only of infrastructure, but also of security to the minister of tourism. And he assured me both economically and in terms of security, South Africa was ready.

(BEGIN VIDEOTAPE)

MARTHINUS VAN SCHALKWYK, SOUTH AFRICAN MINISTER OF TOURISM: We have absolutely no reason to adjust downwards our expectation for the 2010 soccer World Cup. For those two months, June and July 2010, we still expect 450,000 foreign tourists. And for the year as a whole, just over 10 million. So for us that's good news.

QUEST: The problem, of course, for those months is that they may well soak up pent demand that would have come for the rest of the year. So you can expect a very quiet lead-up, and a very quiet follow-on.

VAN SCHALKWYK: We factored in the displacement factor. But we are quite convinced that we will see healthy growth based on what we had this year, just over 9.5 million. Now a few years ago when we said 10 million international visitors in 2010, people said impossible. We are doing well, we are outpacing all our direct competitors so there will be a little bit of a displacement factor.

But all in all, it will be good growth for 2010, laying a good foundation for 2011.

QUEST: As we look at the way in which this year has played out, high spenders from Europe and Australia and the U.S. not as many, or at least more pressure. But has the intra-African tourism trade managed to pick up much of that slack?

VAN SCHALKWYK: Yes. That's one of the interesting phenomenons. We've always underestimated the African market. In South Africa the American tourists, up until now, were always our biggest spenders per capita. But suddenly they've been replaced by the Angolan tourists. So it's good for us to understand that right on our doorstep we have a massive market. Yes, there is poverty in Africa, but also many people, millions of people who can't afford to travel and to spend.

But that doesn't, of course, take away the importance of the America and the European tourists.

QUEST: Are you -- well, you'll obviously tell me that you're confident everything is going to go well in 2010, but there are three components, aren't there, to this. There are the stadia. There are the hotels. And there is the transportation infrastructure between them all.

Now the stadia, we believe, is well and truly where it should be. The hotels, you still haven't got enough of. And the infrastructure for transporting people around, there is still a question mark.

VAN SCHALKWYK: We have enough hotels and accommodation in the country, and it is exactly the same as it is with every World Cup. You might not have enough rooms in a city where the match is being played. But the challenge is to get people there on the day of the match and back.

As it was in Germany, if there was a game in Hamburg, people had to be transported in and out of that city. So it is exactly the same in South Africa and we will be able to deal with that.

QUEST: The question of crime -- and it never goes away, it seems to sometimes get worse, the reports of an intensified police activity from the head of police, which basically in any other language is a shoot-to-kill policy. Is that the policy?

VAN SCHALKWYK: No, it's not. We believe that we must deal with crime within a legal framework with checks and balances. And we've been accused, rightly or wrongly, over the past few years, of being too soft on crime. And since the new administration took over earlier this year. We said we need to be tough on crime. There is nothing wrong with that.

But it's also very important that our police understand it must be within a legal framework that can never use force indiscriminately and it must always be with checks and balances.

QUEST: So when you do get reports of young children being killed, or what seems to be heavy-handed police activity, it, in one fell swoop, does away with a percentage of the millions that you spend to try and promote the country.

VAN SCHALKWYK: When that kind of thing happens, it is tragic. And it happens in all countries. And my heart, and I think all of us in government, really go out to those parents, to that family. I don't -- none of us still know exactly what happened. Basically we're waiting for the official outcome.

But that is why force can never be used indiscriminately, it must be used responsibly, wisely by policemen and -women. But very often they have to take that split-second decision. And they need good training so that they can understand these kinds of things may happen, and it can never be defended. It is tragic when it happens.

So it's not a shoot-to-kill policy, but it is a tough-on-crime policy.

(END VIDEOTAPE)

QUEST: The tourism minister of South Africa.

Let us now take you direct to Florida and listen in to NASA.

(LIVE FEED OF SPACE SHUTTLE LAUNCH)

QUEST: So Atlantis lifts off from Kennedy Space Center, taking a variety of parts and large parts of installations to the Space Station. The shat -- the shuttle, of course, is the largest vehicle that will be able to contain -- take anything up to the Space Station and not have that many more flights left in its remaining life span.

We will bring us up to date with, of course, how the launch continues into its orbit and onto the Space Station.

QUEST MEANS BUSINESS will be right back.

(COMMERCIAL BREAK)

QUEST: Good evening.

I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN.

Interesting start to the week.

The space shuttle Atlantis took off just moments ago from the Kennedy Space Center in Florida.

(LIVE FEED OF SPACE SHUTTLE LAUNCH)

QUEST: The shuttle is now powering its way toward the International Space Station. Six astronauts are on board, along with large spare parts that will be used to help extend the International Space Station's life. We've seen the separation of the solid rocket boosters and the external tank is still connected, but there we -- we'll be following large -- and it we'll be, obviously, following this as it makes its way up to the Space Station.

Now, the markets are open and doing business in New York. They are also rising, perhaps with not the same impressive speed as the Space Shuttle. But look at that -- up 1.5 percent, 156 points, 10426.

And one reason was retail sales news, which was better than expected.

Stephanie Elam is at the New York Stock Exchange and joins me now.

If I gave you a ticket to go up on the Space Shuttle, would you go?

STEPHANIE ELAM, CNN CORRESPONDENT: No, I have no interest whatsoever at all, Richard.

QUEST: Oh, well, there we are.

ELAM: Yes.

QUEST: It's nice to see the pioneering spirit is -- is alive and well at the New York Stock Exchange.

Why are you...

ELAM: Everybody has their own challenge.

QUEST: (INAUDIBLE).

ELAM: Everyone has their own thing.

QUEST: Up 156.

Why?

ELAM: Well, you know, it's true, we've had the blue chips actually have a nice rally here, finishing higher for seven of the last eight sessions. It's as if investors are really growing more confident in the ongoing economic recovery. And that's leading to these larger green arrows today.

Stocks surged out of the starting gate and they haven't looked back.

Part of the reason here, energy shares. They're jumping thanks to the weakened U.S. dollar. ExxonMobil and Chevron -- both of those stocks are up more than 2 percent at this time.

Along the with soft dollar, another big factor boosting the market recently is signs that policymakers around the world will keep economic stimulus supports in place. That's something that Ben Bernanke, the Fed chief, has spoken about in his speech today. So that's also helping out -- Richard.

QUEST: The General Motors results -- and, which I throw my hands up and say I couldn't quite work out whether they were good, bad or indifferent. All I could work out is that the taxpayers are getting their money back.

But the market has given a strong, if you like, sums (ph) up to some extent.

But what's behind that?

ELAM: Yes, well, I think part of what we're seeing here with G.M. is that the numbers are moving in the right direction. Sure, $1.2 billion is still a huge number for a loss, but it was practically double that at the beginning of this year, when they were about to file for bankruptcy.

So, obviously, things are moving in the right direction. The fact that they want to pay back money is a good thing. Also, they actually made more than $3 billion that they made past what they spent. Before that, they were burning through about $10 billion in cash every month -- every quarter.

So there are signs here that G.M. is starting to work in the right direction. Paying back part of the government money is also a move in that direction.

But at this point, it shows that G.M. still has work to do, but things are getting better. Keep in mind, too, that auto sale last month were also pretty strong and that actually helped out retail sales here...

QUEST: All right...

ELAM: ...really lifting that number. And I think that's part of it, as well.

QUEST: Stephanie, many thanks, indeed.

We're going to take you back to the Space Shuttle.

Have a look at this picture. It looks like the separation of a -- of part of is has just taken place. Fascinating pictures coming to us now from the Shuttle.

(LIVE FEED OF SPACE SHUTTLE LAUNCH)

QUEST: The external fuel tank has just separated, as the Shuttle now enters orbit. Fascinating. I can never get enough of these pictures, I always think.

When we come back in a moment, the good, the bad and, yes, the ugly -- and for all the financial advisers, can you tell them apart?

We'll tell you how.

(COMMERCIAL BREAK)

QUEST: Welcome back to The Biz Clinic, where a year ago, you could still walk into the offices of Bernard Madoff and hand over your savings. You wouldn't have seen them again, of course. And yet Madoff's firm was promising enticing guaranteed returns. He had an impeccable reputation. As we know, the whole rotten enterprise was about to collapse. Billions of dollars over investors' money was lost.

In today's Biz Clinic, Andrew Stevens asks how you can tell an honest money man from a Madoff.

(BEGIN VIDEOTAPE)

ANDREW STEVENS, CNN CORRESPONDENT (voice-over): His name will be forever synonymous with fraud. Bernard Madoff committed investor fraud to an extent never seen before in the United States. Convicted of all 11 charges against him, Madoff was sentenced to 150 years in prison. The White House says this was meant to send a strong message to those who are bending the rules on the financial markets.

(on camera): Now, this is probably the most extreme example of breach of trust by a financial adviser, but it's certainly not the only one.

In the past year, the number of complaints filed against financial advisers in the U.S. has jumped 60 percent. In the U.K., there was a 5 percent rise in overall complaints to the regulatory watchdog. And in Hong Kong, a 29 percent jump.

So, let's take a closer look at these complaints.

The common issue is trust, or, more accurately, the lack of. Breach of fiduciary duty was the top complaint in the United States. This is when a financial professional does not perform in your best interests. It includes acts of insider trading and conflicts of interest.

So, what can you do to protect yourself and your investments?

Well, finding a qualified adviser is key.

So I spoke to John Gannon of FINRA, Wall Street's watchdog. Now, FINRA is the authority, along with the SEC, that writes the rules for financial professionals in the United States.

I asked him his advice on choosing the right person to manage your money.

JOHN GANNON, FINRA: Number one is to make sure they're doing business with a licensed professional, I mean because if you are not doing business with somebody that's licensed in your country -- and I emphasize in your country -- you are looking at potential fraud.

Secondly is to really make sure that the investment professional shares your financial objectives and goals. While your friend or co-worker may recommend somebody for you, if their financial goals are different than yours, that relationship is probably not going to work.

And, third, you really should understand how any financial professional is being paid.

Are they energy commissions?

Are they energy fees?

How else are they getting paid?

Are they getting paid from the -- the product distributor?

STEVENS: Do you think that advice is pretty universal or are there other areas that investors should think about in other jurisdictions?

GANNON: Well, in other jurisdictions, one thing that we've actually written a couple of investor alerts about is you really have to focus on is somebody licensed to do business in your country?

There are a number of instances around the world where people will be cold called from outside of their country by a professional who will make them believe that they are, in fact, licensed, when they're not. They will go so far as setting up fake regulatory Web sites and doing things like to lend credibility to their institution when, in fact, they are not a licensed organization at all.

STEVENS: Do you have any specific examples, if you like, of these -- these fake sites?

GANNON: Yes. One example is the Hong Kong Financial Trading Authority, which is an entity that -- that doesn't exist. The real regulator in Hong Kong is the Hong Kong Securities and Futures Commission. The whole purpose of that is to add credibility to that organization so you'll do business with them.

STEVENS: What can investors do once they're up and running, if you like, to -- to protect their investments, to make sure they're on top of things?

GANNON: One of the most important things they can do is to make sure that they continue to look over the shoulder of their investment professional. Where we see the worst problems occur is where somebody just hands over their money to an investment professional and walks away, isn't looking at their monthly statements, isn't looking at confirmations of any transaction that has occurred.

That's when you see cases of just repeated unauthorized trading and other problems like that.

(END VIDEO TAPE)

QUEST: Andrew Stevens with the Biz Clinic. And a fascinating aspect, of course, of the financial adviser.

The weather forecast now. In large parts of Europe -- I'm not doing Guillermo's job for him, but I'm telling you, if this -- you don't need a - - you don't need to be a man of meteorological matters to know that there's large parts of Europe where, over the weekend, it was jolly and pleasant.

GUILLERMO ARDUINO, CNN METEOROLOGIST: It is the time to go to the south, though. I think tomorrow, Richard, it's going to be OK for you. Wednesday is the problem, because tonight is going to be fine. It's going to be clear. You will not see rain mostly in London.

But then Wednesday is when we get rain and the winds.

Now, we have jet streams here. And to the south, conditions are fine and warmer. Let's see the bad news -- I always have to be the one delivering the bad news. The rain continues in here, but you have one day to prepare.

Also, winds in coming -- are coming back. It's not going to be that terrible. They are not terribly strong right now. So we have a low here trailing across Scotland and then we spread here these areas with some clouds.

Nice in the Mediterranean Sea; also not that cold at all. Well, let's see, these are the winds right now, especially the darker the colors are is where we see the more -- more intense winds. They are going to pick up. You also see, 30 at the airport right now, not in the city. Twenty in Schleswig here in Northern Germany. And that is going to increase in the next two days, because we have -- we get another system that is bringing the winds. And that is the Wednesday factor.

You see the colors get darker in Ireland, Northern Ireland; then in Wales. Not nice, especially in Scotland here and Northern Ireland. You see to see where the rain is. To the south, looking fine. That's why tonight it's going to be OK.

Tuesday, partly cloudy, maybe, in London. That's not bad. And then the systems come back.

Well, let me see some other areas. Eleven in Bucharest; 15 in Vienna. Look at Madrid, 21; Rome, 21; 19, Athens.

That's why they live down there, because it's much nicer. But we're going to see winds in Amsterdam, Paris, London, Dublin, especially toward Wednesday, with those winds; Frankfurt, too.

Then it gets better for other places, for a little bit -- Vienna, Rome, Milano, Berlin and Barcelona, Madrid, looking fine.

Well, also, you know what we've been following the stories in China, with the snow and also the clouds there in the area and the cold air. This is what is going on. It's a massive area. We were talking about 200,000 hectares of damage because of the snow. Look, the orange represents the snow there. Beijing, it's going to be cold again. And we are departing from average, actually going down like by 5 degrees or so. It should be 11. And we are at 5 or 4 degrees. It's going to be sunny, but look at the morning hours, in the negative. So it's going to be really, really bad and get ready for that.

In the meantime, I'll tell you about Hong Kong, because Tuesday it's going to be chilly; Wednesday, too; but on -- on Thursday, things come back.

Richard will be back after the break.

Don't leave CNN.

We have more for you.

(COMMERCIAL BREAK)

QUEST: It's another milestone in the fall of communism in Europe -- our coverage of the autumn of change now continues in the former Czechoslovakia.

It was November the 17th in 1989. It brought a violent crackdown on student demonstrations. It also led to the start of the Velvet Revolution. By November the 27th, the protests had spiraled into a nationwide general strike that led to the peaceful disintegration of the communist government.

Twenty years on, the two states that once made up Czechoslovakia have undergone an economic transformation.

But as Phil Black reports from Prague, not everyone welcomes those changes.

(BEGIN VIDEOTAPE)

PHIL BLACK, CNN CORRESPONDENT: (voice-over): Under communism, the Czech economy was built on manufacturing and industry -- building things and selling them to other countries. That's still true today. The country's transition from a centralized economy to the free market has been shaky at times, but it's broadly viewed as a success.

Some here have tasted great success, like Spenyet Fralik (ph).

(on camera): How many hospital beds do you normally make every year?

SPENYET FRALIK: Every year, approximately 40,000 to 45,000.

BLACK (voice-over): Fralik started his business in his garage in 1990, just after the Velvet Revolution. He is now Europe's biggest manufacturer of hospital beds, exporting to 75 countries.

Fralik says, "The time after the revolution was great for starting a business, because workers were enthusiastic, flexible and cheap."

Twenty years on, he says he competes internationally because labor costs are still relatively low and the Czech Republic is well placed, with good infrastructure for transporting goods west.

This is a business that is still growing, despite the recession, unlike the Czech car industry. Cars are described as the economic pillar of this country. It's estimated the industry makes up around 10 percent of gross domestic product.

Skoda, the Czech Republic's biggest company, is responsible for 4 percent of GDP alone and a big chunk of the country's exports. But the recession has hit the car industry hard and it's not about to improve.

RADEK SPICAR, SKODA AUTO: Unfortunately not. We don't think that 2010 will be much better.

BLACK: The Czech economy is so dependent on exports, some economists believe there is almost nothing a government can do to stimulate domestic growth and soften the recession. And Czech manufacturers have another problem -- the voluntarily of their currency, the koruna. Skoda says it lost around $35 million last year just because of currency fluctuations.

SPICAR: We are one of the few countries within the European Union which are not members of the eurozone. So it's very easy for the financial markets to speculate on the Czech koruna.

BLACK: High government debt means the Czech Republic is still years from qualifying to adopt the euro.

(on camera): Across the country, there is also evidence that capitalism and democracy has left people behind. This is the Poldi Steel Works. Thirty minutes drive outside of Prague, it used to employ 20,000 people. Much of the site is closed down -- abandoned and falling apart. And less than 5,000 people have jobs here.

(voice-over): After communism, lots of privatizations went badly. This was one of them and the local community is still suffering because of it.

These young men are melting the insulation of stolen cable so they can sell the metal for scrap. "It's bad here. There's no work," Edom (ph) tells me. "If you don't steal something, you've got nothing."

Chenyak (ph) is too young to remember communism, but he says he and many others believe things were better then.

For many, the fall of communism has brought great economic opportunity. Others are still struggling to escape its legacy.

Phil Black, CNN, Prague.

(END VIDEO TAPE)

QUEST: What a marvelous reminder of the nature of economic reform and change and how there are always two sides to that particular coin.

The markets are up. The Space Shuttle is also high, as well. 148 on the Dow, 1.4 -- Europe had a good session. The DAX gained nearly 2 percent in Frankfurt. All perhaps on the back of results from General Motors and also some more impressive retail sale numbers in the United States, up 1.4 percent. That was all to the good.

You're up to date with the markets.

I'll give you a Profitable Moment when I come back in just a moment.

(COMMERCIAL BREAK)

QUEST: Finally tonight's Profitable Moment.

We reported General Motors has a huge amount of cash on hand -- $42 billion. The company generated $3 billion in the last quarter. It still managed to make a loss, though. And so going bankrupt and getting a massive bailout did do wonders for the balance sheet.

General Motors is a long way from becoming a success, no matter how much cash it has in the bank. After all, there are $50 billion owed to the government of the United States and Canada.

And, of course, the German government is very angry over G.M.'s backtracking on Opel.

All of this tells us there is still much work to be done.

The real point will ultimately be not whether it pays back government loans this year, next year or the year after, but whether it can build cars people want to buy and whether it can do so without government handouts and in open competition.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I do hope it's profitable.

Christiane is after the headlines from the I Desk.

END