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Search for GM's New CEO; Geithner: TARP Fund Winding Down

Aired December 2, 2009 - 14:00:00   ET


ADRIAN FINIGHAN, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: A surprise exit. Fritz Henderson is shown the door as General Motors looks for new direction.

And end to the bailouts. Tim Geithner says the TARP fund is winding down.

And the final push, the WTO calls for a speedy conclusion to the Doha round. We speak to the director, General Pascal Lamy.

Hello, I am Adrian Finighan, in for Richard Quest. This is QUEST MEANS BUSINESS.

A very good evening to you.

General Motors is searching for a new boss; it's third in less than a year. Just after we came off the air last night Fritz Henderson resigned, following what is being described as a hectic board meeting.

Fritz Henderson has been CEO since March. Not that long, remember, he took over from Rick Wagoner, and guided GM through bankruptcy. But there have been setbacks in efforts to reorganize GM. The Saturn brand, its sale fell through, so GM scrapped it. The Saab sale also fell through. Saab now has a month to find a new owner before GM closes it. And the HUMMER sale isn't finalized, Opel's stake, you remember that was taken off the table. GM now seeks European government help in that restructuring of its European operations.

Let's take you through the latest GM numbers. It lost $1.2 billion after emerging from bankruptcy between July 10 and September 30. Toyota and Ford, both in profit for that period, because of "Cash For Clunkers", the program in the States. GM is now starting to pay back $6.7 billion in loan money to the Treasury. That is $1 billion of which is due by the end of the year. The government, remember, has sunk some $50 billion into the company. It's ability to recoup that depends on selling stocks.

Well, the chairman of GM, Ed Whitacre, is taking over temporarily while the company searches for a new permanent CEO. Poppy Harlow from joins us now.

Poppy, what do we know about Mr. Whitacre?

POPPY HARLOW, CNN MONEY.COM: Well, what we do know that is clear about Ed Whitacre is that he is not an industry insider, Adrian, when we look at the car business. Not at all, this is a man that ran a giant U.S. telecom company. He ran AT&T. He came in recently to be the chairman of General Motors and now he sits at the helm of that company.

What is interesting and the question that remains is, does this many know the car business well enough to run General Motors, right now, as it tries to repay U.S. taxpayers.

The other big questions, of course, why the shake up at GM and why now? What we saw Fritz Henderson do, is we saw him guide General Motors through bankruptcy court, extremely quickly here in the United States. But then on the other side, as you mentioned, the sales of Saturn and Saab fell though. As did the proposed sale of Opel, GM's European brand. All under Fritz Henderson's leadership. That is a major issue. What we are hearing is that as Ed Whitacre takes over as the interim CEO, some people -most people arguing, they are looking outside the company for fresh blood to lead GM into the next year, and the challenges ahead for GM, Adrian.

FINIGHAN: You say tomato, I say tomato. We pronounce that name White-acre on this side of the Atlantic. But Whitacre it is.

HARLOW: I like your pronunciation a little better.

FINIGHAN: So what does GM do next? What is it looking for in its new leader?

HARLOW: Fresh blood, certainly, that is probably what we are going to see, according to all of the analysts I talked to. You look at Henderson, who ran GM for the last eight months. He was there for 25 years. He was a total insider. One analysts I spoke with said, the ouster of Henderson, not a surprise at all. They say an outsider is needed. No insider, they argue, can change culture. Also, what this analysts said was, what we see now is just how deeply flawed General Motors may have been before it went to Washington, for a bailout.

What we saw -- and this is a prime example, Adrian, of when it can work to bring in an outsider, is Ford Motor Company, here in the United States. They brought in Alan Mullaly, the former CEO of Boeing, to run Ford. In 2006, he turned around the company completely. Turns out Ford was the only one of the U.S. Big Three automakers that didn't need a bailout. Many credit an outsider for making that change at this historic U.S. automaker. We'll see if it can be the same as well for General Motors. A lot of questions outstanding. Some good reporting on CNN Money. I want to point to you to our latest article, put up there. Going through exactly what happened.

But still to be seen who will fill that top spot, it is Ed Whitacre for now, Adrian.

FINIGHAN: Yes, showing your CEO the door six months after he took the job. I should imagine can be a bit of a PR nightmare.

HARLOW: Right.

FINIGHAN: However, I suppose as far as investors are concerned they are tackling problems head on. Investors, perhaps, should have some confidence in the company?

HARLOW: Perhaps, Adrian, but I mean, how do you fill that top spot now, when whatever CEO comes in to run General Motors is going to have to be subject to these executive pay restrictions imposed by the Obama administration. The company remains $50 billion in the hole to U.S. taxpayers. How do you bring in someone in that status? A very, very risky job for anyone to take. That is why it is going to be so interesting to watch.

But this is seen, right now, another speed bump for General Motors as it still tries to re-emerge as a new GM, as a new publicly traded company. It is going to be something very interesting to watch. And across the board, everyone was shocked with this announcement -Adrian.

FINIGHAN: Yes, absolutely. Poppy, many thanks indeed. Poppy Harlow at, joining us live there from New York.

Let's show you what is happening on the markets on Wall Street right now. Investors fairly cautious it has to be said, after that shakeup at GM. Stocks are practically flat right now, the Dow Jones down 29 points. Struggling to add more to Tuesday's record games.

There were signs today that the U.S. job picture is improving. A U.S. employment report showed a loss of 169,000 private sector jobs last month. And that is more than expected, so why is that good news? Well, it marks the eighth straight month of slowing, the key word, "slowing" declines in job numbers.

Well, those numbers come on the eve of a job summit due to be hosted by President Obama. He'll join the CEOs of Google, Disney, and Boeing, at the event on Thursday. Union leaders and top economists are also on the guest list.

Let's bring in David Smick, global financial strategist, and author of "The World Is Curved: Hidden Dangers to the Global Economy." He joins us now live from Washington, D.C.

David, it is great to have you on the show. Thanks for being with us.


FINIGHAN: Let's start with those numbers we have been talking about. And the markets being jittery, as they have been all week, I suppose apart from yesterdays' record gains. Dubai World's problems this week, giving the markets yet another jolt. It showed just how precarious, I suppose, the global financial situation is. Now, you are a bit of a guru in these matters. Do you foresee any further bumps in the road ahead?

SMICK: Well, I don't know if I am a guru. But I see a lot of problems ahead. I mean, begin with the whole question of employment. I mean, you know we can have a little modest improvement here or there, but in the U.S. to get the unemployment rate from its current, roughly, 10 percent down to 5 percent, let's say in the next five years, which is not an unreasonable goal, we would have to produce 250,000 jobs a month, each month, for five years. We have never done that.

In fact, the average for the last 20 years is about 90,000 jobs per month. So, the U.S. economy is going to face this very, very severe headwind, regardless of job summits and all the rest in the form of unemployment. It is going to remain high and it is going to be very problematic for the consumer.

FINIGHAN: All right. So, unemployment, one particular issue. A the moment we have commodities rising, interest rates beginning to come off the bottom around the world, governments beginning to withdraw stimulus and - are we only partway through this crisis, is what I'm trying to say. Is it going to be a rough ride for much longer?

SMICK: You know, it is funny, we are getting a recovery, but it is so modest. I mean given the -the rule in economics is usually the harder you fall the higher you rise, and the quicker you rise. And normally you would expect 5, 6, and 7 percent growth, particularly in the U.S. given, what we have been through. Instead, we had a 2.8 percent third quarter. We'll probably have at best a three percent. I mean, we are just plowing stimulus into this economy and we are getting this rather tepid response.

What happens next year when this sugar rush of stimulus wears off? I mean, the forecasts are anywhere from 1.5 to 3, but all of the Obama, that forecast, are all based on a much higher growth rate. And I'm very worried about the situation going into next year. That we just, you know, this combined with the unemployment that the consumer looks at this mountain of debt, and says, who is going to pay for this? Who is going to be taxed? Who is going to see -we are going to see higher inflation. You know, perhaps three or four years from now. So they continue to hold back.

FINIGHAN: So, David, what do ordinary folks, people who read "The World Is Curved", what do they do? People with pensions, investments, mortgages, what do they need to do now to ride out the instability that we are talking about here?

SMICK: Well, I think that one thing is the I would mix the portfolio between extremely safe fixed income and then on the other side, your money manager, whoever you are investing in, should be highly nimble. Because I think we have never experienced this kind of situation ever before. I mean, what we have seen, when you really want to pare down what is happening in the global economy right now. We have seen in the last year, because of the huge efforts at bailing out and subsidizing the economy, the toxic waste problem has been shifted from the private sector now, to the public sector. And that is why we are starting to see sovereign debt defaults. So, when you see Greece is having huge problems. They are questions about Eastern Europe and the Baltics, the southern part of the Euro Zone. And, of course, the Dubai situation is a prime example. We may look back and see this was the beginning of a period of sovereign debt defaults.

So, a money manager today had better be very, very nimble. Somebody proposing a long - an equity fund that says, look, just ride it out. The risk right now, the chance for surprises is pretty remarkable.


SMICK: I mean, just to add one thing.


SMICK: You know the stock markets around the world are surprisingly complacent right now, you know, given all the risk out there. You talk to stock traders, they say the risks are enormous. But everyone is surprisingly complacent. And there is a reason. Because money is free. I mean, the interest rates are so low, it is practically a zero percent cost of money. And that is kind of created an illusion of calm. But I'm worried that that may not be a long-term strategy for economic success.

FINIGHAN: David, it has been great to talk to you. Thanks for being with us on QUEST MEANS BUSINESS.

David Smick, the author of the book, "The World is Curved". The book that President Clinton called one of the top three books on the global financial crisis.

Now, stocks here in Europe edged higher today, extending the strong gains that we saw on Tuesday. The latest U.S. jobs numbers helping to boost the mood on this side of the Atlantic.

Firmer metals prices also helped today. Miner's shares lifted London's FSTE 100 out of the red, despite losses in the banking sector today. In Paris, shares of luxury goods group, LVMH, gained nearly 3 percent. There were heavy losses for SAP. And for VW, limited gains over in Frankfurt.

Now, let's get you up to date with what else is making news right now, around the world. Fionnuala Sweeney joins us live from the London newsroom.

FIONNUALA SWEENEY, CNN INT'L. NEWS ANCHOR: Adrian, U.S. President Barack Obama's strategy for Afghanistan earned some jeers from lawmakers on Capital Hill. Critics are questioning the president's plan to start a troop withdrawal in July 2011. Republican Senator John McCain says the blueprint is inconsistent. He argues the U.S. can't have a winning strategy and an arbitrary date for withdrawal at the same time.

In a statement posted on his web site, Tiger Woods apologized for what he called "transgressions". The golf star wrote, "I have not been true to my values and the behavior my family deserves." The comments come on the same day a gossip magazine published a story alleging Woods had a long affair with a cocktail waitress.

Five British sailors held by Iran for a week have now arrived at a Dubai yacht club. They were let go after Iran determined their racing yacht had drifted into its waters by accidentally. The sailors were on their way to a race in Dubai and may have had a problem with their yacht's propeller.

Chechen militants have apparently claimed responsibility for the bombing of a high-speed Russian train last Friday. The claim was posted on a rebel web site on behalf of Chechnya's separatist leader. At least 26 people were killed in the explosion. If confirmed, this would be the first militant attack outside the north Caucuses in five years.

And those are the headlines. We'll have more on "WORLD ONE" at 8:30 p.m. London time. Adrian, back to you in the studio.

FINIGHAN: Fionnuala, many thanks.

Now, after the credit crunch crisis, $700 billions worth of taxpayer money went to propping up financial institutions. But are governments managing our investments properly? The World Economic Forum has some suggestions. We'll tell you about them when we come back.


FINIGHAN: Now in the aftermath of the global economic crisis, some governments are struggling with their roles as shareholders in this new world order; $700 billion of taxpayer money has been invested in financial institutions. And after a year of research, the World Economic Forum published a paper containing key advice for governments managing these investments.

Among them, aim for a rapid exit, while protecting investment value. Restrict government influence to board-level issues. And raise transparency beyond public disclosure of financial performance.

Well, for more on how governments should be managing their investments, I'm joining now from New York by Max Von Bismarck, director and head of investors at the World Economic Forum.

Max, thanks for being with us on QUEST MEANS BUSINESS. I have a feeling, you know, that shareholder governments will look at the report and the advice within it and say, ah, yes, sound and timely advice. If only it were that easy.

MAX, VON BISMARCK, DIRECTOR, WEF: First of all, let me say it is a pleasure to be here, Adrian.

And let me start by pointing out why we think this is such an important issue. If you look back at the past months we have seen an unprecedented level of intervention by governments and central banks to save the system. Today we believe one of the key issues is how do we deal with the consequences of these rescue operations. And in the debate around government exit a lot of focus has been on the ordinary tools of government, namely, regulation, fiscal and monetary policy. And it there has been relatively little attention to the extraordinary tools that governments have employed.

And as you mentioned, over the past time of the crisis, over $700 billion of taxpayer money have been injected in some of the most complex and largest financial institutions around the globe. And these direct ownership positions also come with unique challenges. So, that is the reason why the World Economic Forum, with many of its stakeholders, particularly looking at this issue.

FINIGHAN: Yes, you say it is stakeholders. This isn't something that you just decided to come up with. You have been working at this for a year and you have involved some of the world's best minds in compiling this report, haven't you?

VON BISMARCK: That is right, Adrian. So, the paper really is the result of a year-long cooperation of the World Economic Forum, with the consulting company, Oliver Wyman, but also involving more than 150 leaders from academia, from public policy, from business. And also guided by a steering committee of many prominent experts from the business community, but also academia, like someone like Howard Davies, the head of the London School of Economics, or -who has been the previous head of the FSA, or someone like the chairman of the Singapore Investment Corporation, Doctor Tan.

FINIGHAN: As I said, this is all very sound and timely advice that the suggestions that you have made in the report, one of which, as we said was restricting government influence on owned institutions to board-level issues. I can imagine that - I mean, that is all well and good to - you know it is something to live up to, but keeping politics out of the boardroom is perhaps easier said than done, when you have one eye on the ballot box.

VON BISMARCK: I think it is going to be quite complicated and that is exactly why we are trying to make these suggestions in basically three different sets of proposals. The first one, the foundational ones, how do you contextualize and understand the issue. And in particular, separate the discussion from other forms of crisis intervention. We think that is going to be helpful. Secondly, for governments to clearly define and communicate their objectives as shareholders.

And then, in terms of the structural recommendations, or proposals, that are kind of the guiding principles to make sure that on the one hand, governments set up independent government processes and on the other hand restrict their influence to board-level issues.

And as you say, that is only going to be possible as an extreme amount of transparency so governments can be held accountable in the long run, by the taxpayer, in managing these large sums of taxpayer money in an appropriate way.

FINIGHAN: Max, time is tight. We have a lot to squeeze on the show tonight. We will leave it there. Thanks so much for being with us. That is Max Von Bismarck from the World Economic Forum.

I understand that there are four more reports to come out dealing with elements of the financial crisis, Max. So perhaps you can come back and talk to us about those when they are published.

Now, up next on QUEST MEANS BUSINESS, a live market update from New York. Plus tough questions for Ben Bernanke. He faces lawmakers this Thursday, trying to secure a second term as head of the Fed.


FINIGHAN: U.S. Treasury Secretary Timothy Geithner says that he wants to bring an end to the governments $700 billion financial bailout program. Appearing before the Senate Agriculture Committee, Geithner admitted that the surprise of the man in charge of the bailout program is also among those wishing to bring it to a close.


TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: It may surprise you to hear me say this, but nothing would make me happier than to end this as quickly as possible. And we are actually close to the point where I think we can wind down this program. Stop making new commitments and put it out of existence. We are close to that point. We are not quite there yet.


FINIGHAN: Well, many U.S. lawmakers have been pushing for an end for the politically unpopular program with some even calling for Geithner's resignation. So, what do the markets make of that particular development.

Let's find out. Susan Lisovicz is with us on Wall Street. No, you are not. You are actually - I can't keep track of you these days. One day you are in the bureau, the next you are in the studio. Hello, you.


FINIGHAN: Absolutely. Close to Wall Street, it is Susan Lisovicz.

LISOVICZ: Hello, Adrian.

FINIGHAN: How are you?

LISOVICZ: I'm fine.

You know the markets are a little undecided as to how they are feeling today. Of course, we are coming off some very nice gains to start out the month of December. The Dow registering triple-digit gains, a fresh 14- month high, pretty close to that for the two other major averages. We have some things that you would think would spur on the bulls. We do have a couple of labor reports which show some improvement there.

And then, at the top of the hour, so this just hot off the presses, something called the "Beige Book", which is literally a beige book from the Federal Reserve. More importantly surveys economic conditions in 12 different regions in the United States. And one of the most optimistic "Beige Books" we have seen, Adrian, in the last few years.

The Fed, basically, saying that economic conditions have improved modestly since the last report. Breaking it down further it says manufacturing sector is steady to improving, that most regions saw some pick up in home sales. That consumer spending has picked up moderately. And the Fed also saying that retailers only very recently have become more optimistic about the holiday sales outlook. Residential real estate is picking up, commercial real estate is still weak.

Overall, you know, the fact is things are getting better, according to the Fed, although just modestly so, Adrian.

FINIGHAN: We talked a lot, Susan, in the first few minutes of our show tonight about unemployment in the States. We have a pair of unemployment reports out today. The economy is improving there, according to the "Beige Book". What about the employment situation?

LISOVICZ: Well, the employment situation is still pretty dark. I mean, let's face it, 10.2 unemployment rate. Highest in 26 years, is not good. But what we are seeing, and these two reports bore that out today, is that the losses are steadily declining. The ADP national employment report showed a loss of 169,000 jobs last month. That is the eight straight month of declines. And when you think about it earlier this year, this year, you were seeing more than 700,000 job cuts in one month. October, by the way, its cuts were revised lower, as well. So, we had the ADP private sector jobs report. And we also had a different report on planned layoffs from Challenger, Gray and Christmas. And that was at a level that we hadn't seen in two years, the lowest level that we had seen in two years.

So this, maybe, is a good omen for the more important report, the most important labor report we get this month and that from the government, because it is all inclusive, it has private sector, it has government jobs. And we are expecting to see, yes, losses, but again, dramatically lower from what we have seen earlier this year.

FINIGHAN: Susan, many thanks. Tell me, it is raining there in New York, today? Please make me feel better. No?

LISOVICZ: It is supposed to rain. It is supposed to rain here and unfortunately, tonight we have the lighting of the famous Rockefeller Christmas Tree, the Rockefeller Center Christmas Tree. So, I think a lot of folks are going to bring umbrellas as well as the coats and -scarves.

FINIGHAN: They are going to get wet.

All right. Susan many thanks indeed. I tell you it is so wet here in London, I'm thinking about building an ark.

U.S. Federal Reserve Chairman Ben Bernanke will take the hot seat on Capitol Hill this Thursday. Not only have they published the "Beige Book" today, he will be facing a Senate confirmation hearing later this week to determine whether he will serve a second five-year term. Now his job performance is currently the subject of heated debate right across the states. Our Maggie Lake has more now on the pressures facing the Fed boss.


MAGGIE LAKE, CNN INT'L. CORRESPONDENT (voice over): From public protest, to outrage on Capitol Hill.

REP. DENNIS KUCINICH, (D) OHIO: We had better look twice before we consider giving the Federal Reserve any more power.

LAKE: Ben Bernanke's Fed is on the firing line as anger grows over Wall Street bailouts, bonuses, and massive stimulus spending.

The Senate is expected to confirm Bernanke for a second term, but it probably won't be pretty.

UNIDENTIFIED MALE: Ben Bernanke is the symbol of voters' anger at the financial system. So, the senators will use that opportunity to say they share that anger. You will probably see more senators vote against his reconfirmation than any other Fed chairman in history.

LAKE: Some senators are already blasting Bernanke.

SEN. BERNIE SANDERS, (I) VERMONT: Why didn't he do anything to prevent us from sinking into this disaster, the Wall Street caused, and which he was a part of. No, I will not vote for Bernanke to stay on as chairman.

LAKE: Even Senator Chris Dodd, the chairman of Thursday's hearing, is non-committal.

UNIDENTIFIED MALE: Is that a foregone conclusion that he will be confirmed, do you think?

CHRIS DODD, (D-CT) CHRM., BANKING, HOUSING, URBAN AFFAIRS CMTE.: Not necessarily. Not necessarily.

LAKE: So winning another term may be the easy part for Bernanke. If some in Congress have their way, big Ben's job description will soon get a whole lot smaller. Even as the Obama administration seeks to increase Fed powers, congressional critics are moving to slash its role significantly.

Senator Dodd backs a bill ending most Fed oversight of big banks. Congressman Ron Paul wants Congress to audit Fed policymaking. Bernanke calls these serious challenges to Fed independence that would politicize the central bank.

BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BANK: If we were to raise interest rates at a meeting and someone in the Congress didn't like that and said I want the JAO to audit that decision, wouldn't that be viewed as an interference ?

REP. RON PAUL, (R-TX), FINANCIAL SERVICES CMTE.: I wouldn't think so. This is just reviewing it. This idea that it would be political, because we know what happened afterwards, just doesn't seem to add up.

LAKE: In an op-ed in "The Washington Post" Bernanke argues the Dodd and Paul measures would, quote, "seriously impair the prospects for economic and financial stability in the U.S."

But some say the Fed has only itself to blame for this lack of confidence.

UNIDENTIFIED MALE: It is supposed to explain how they use those powers, to the public, and to the Congress. And I think there is a lot of people up on Capitol Hill who feel that the Federal Reserve didn't explain it actions; left them in the dark. And they are angry about that.

LAKE: In a July Gallup poll only 30 percent of Americans said the Fed is dong a good job, a lower approval rating than even the IRS. Fed watchers say the central bank is trying to fix its PR problem. It even has new consumer friendly ads running in movie theaters this holiday season.

ANNOUNCER: Here are some tips you can trust from the Federal Reserve.

LAKE: Still, analysts say some roll back of Fed power appears likely. Maggie Lake, CNN, New York.


FINIGHAN: Now, is time nearly up for the Doha Trade Rounds?

For eight years, the clock has been ticking and there's been little progress.

WTO chief, Pascal Lamy, will tell us what's happening next, right after the break.


FINIGHAN: Welcome back.

Live from CNN London, this is QUEST MEANS BUSINESS.

In for Richard Quest, I am Adrian Finighan.

Now, trade ministers are wrapping up a three day summit in Geneva. They're calling for a speedy conclusion to the Doha Trade Round. It's been rumbling on for eight long years. Several ministers want a big political push early in 2010 to complete the negotiations on trade liberalization.

Also on the table, regional trade agreements, aid for trade and countries' negotiations to join the WTO.

Let's get a view from the very top.

We're joined now live from Geneva by Pascal Lamy, director general of the World Trade Organization.

Monsieur Lamy, thanks for being with us on QUEST MEANS BUSINESS.

So you warned yesterday, sir, that time was running out for the conclusion of a -- of a trade liberalization pact and that concrete actions were vital to seal the Doha deal.

Do you seriously believe that the 2010 deadline can be met?

PASCAL LAMY, DIRECTOR GENERAL, WTO: Yes, I believe it's doable and I believe that this ministerial conference in Geneva has helped us gathering political energy to do this. I mean in -- in financial terms, I would say before the conference, analysts would sell the Doha Rounds. I think they've now moved to a hold position.

But we have to accelerate to move them to a buy.

FINIGHAN: Political leaders are practically unanimous that they want to meet this -- this 2010 deadline. I mean for someone in your position, it must be incredibly frustrating at the apparent lack of action.

Why do you think that they're dragging their feet if, as they say, the political will is there?

LAMY: Well, I think political leaders see how important, notably for developing countries, concluding this negotiation is in this time of economic crisis. It's the way for developing countries to exit the crisis sooner.

Now, of course, this is a detailed negotiations about tariff lines and rules and anti-dumping and fishery subsidies and environmental conservatives. So it's very complex. And we need to translate this political energy into the nitty-gritty of the negotiation.

I believe -- I believe these days here in Geneva has been very helpful in authorizing ministers to engage not openly, but bilaterally, on a big number of these issues.

FINIGHAN: I -- I just want to get your view, as the man at the sharp end, one of -- one of my jobs as -- as a business and financial journalist is to explain to people the importance of -- of things like the WTO and the Doha Trade Round. And when -- when you try to engage people's interests, you can see, almost, their eyes glazing over. It's been rumbling on for eight long years. Perhaps you'd take a moment for us, as -- as the man in charge, to explain why this is so important.

LAMY: Well, it's -- it's extremely important to strengthen the world trading system. We've seen that during this crisis we've been able to contain protectionism because of the existence of rules, of commitments, of disciplines. We need to reinforce these disciplines, the latest version of which now that it's from 1995.

So we need to update the rule book, adjust it to the new realities of the economies today and, first and foremost, make sure that emerging countries, developing countries can keep growing through more international trade. A simple number -- the amount of duties -- customs duties collected worldwide today is in the order of magnitude of $250 billion.

If what's on the table was to be the conclusion, this would be reduced to $125 billion -- half of existing customs duties today would disappear, which would be a big benefit in the pocket of consumers.

FINIGHAN: Thank you.

So you -- you explain it very, very well.

Thank you for that.

And -- and you're satisfied, then, that -- that despite 2010 being less than a month away now, that you can knock heads together and that -- that we can get some sort of satisfactory agreement?

LAMY: Well, I'm more in the midwifing game than in the knocking heads together, especially because, you know, a few of these are quite large -- quite big. But I remain of the view that this is doable provided -- provided they all accept that we have to enter into the end game, which means final flexibilities on what remains to be done.

FINIGHAN: Sir, it's been a joy to have you on QUEST MEANS BUSINESS.

Thank you very much, indeed, for your time.

LAMY: Thank you.

FINIGHAN: And -- and good luck with it, that said.

The director general of the World Trade Organization, Pascal Lamy there, joining us live from Geneva.

Now, keeping track of Dubai's debt crisis, an economic adviser to President Obama says the emirate needs to show greater transparency. We'll give you the details in a couple of moments.


FINIGHAN: The battered stock markets in the United Arab Emirates got a respite today, but only because they're closed for a national holiday.

But what about Dubai World, the state-controlled investment firm?

What happens next in the debt repayment saga?

John Defterios, anchor of "MARKETPLACE MIDDLE EAST," is with us again tonight -- John, every day this week, you and I have discussed the flurry of announcements and we've worked through them all.

What happens next?

JOHN DEFTERIOS, HOST, "MARKETPLACE MIDDLE EAST": Well, I think this is the second phase. It's not the sexy phase, because this is where the hard part begins, Adrian, to be very candid.

Advisers are talking to their clients, the -- the advisers that are in Dubai right now are talking to the Dubai companies. You have bank committees being formed in -- in Europe and in the UAE right now. And probably, most importantly you have royal to royal discussions. The royals are talking to see how they can work this out, how to put a lid on this, how they -- to see if they can sit around a table and -- and see eye to eye on where to go next.

We understand the bank committee is going to meet next week. It's going to consist of four U.K. banks who have the greatest exposure and two UAE banks. And we'll see how it evolves from there.

But, again, this is not going to be like here's the big news today, this is the big next step. It's going to be like let's negotiate, how do we get through it?

FINIGHAN: Yes. Yes, I mean after that restructuring announcement, I mean, that's not the most (INAUDIBLE) thing to do, is it?


FINIGHAN: I mean it's -- it's going to be a long, drawn out process.

DEFTERIOS: And it's $26 billion, at least, as a first crack. And I think that the other thing that's important to address, Adrian, is that, you know, this first nonpayment is not the only nonpayment. We're going to enter 2013 with another one due in January. So it's essentially that the bank committee sits down and reaches agreement before the end of the year.

FINIGHAN: You've been speaking to Laura Tyson today, who's an economist.

What -- what -- I mean a well known economist.

DEFTERIOS: Yes, of course.

FINIGHAN: We've had her on the show several times. I mean...


FINIGHAN: ...and her opinion always counts.

What -- what did she have to say?

DEFTERIOS: Well, I -- I wanted to talk to her for "MARKETPLACE MIDDLE EAST" this week in the sense of global governance. And she brought up some very interesting points.

Number one, I was making the comparison to Japan in the 1980s and the cadets who, in these cross shareholdings, it gets quite complicated in Dubai, because Dubai is a shareholder to its lenders. So a number of those banks I talked about before that are on the committee, Dubai Inc., the broader arm of Dubai, in a sense, have stakes in those companies.

And that was OK before -- before Dubai was such a big giant player on the global scene. They were the fourth trading zone with Asia, Europe, the United States and now Dubai at the center of it. And it was an example where Laura Tyson said they need to accelerate transparency.

Let's take a listen.


LAURA TYSON, WHITE HOUSE ECONOMIC ADVISER: I think the analogy is important in the following sense. We do have this growth of entities which are state owned, but are they state guaranteed?

And I think that one of the issues for Dubai is can -- they hope they can make a distinction between the government of Dubai remaining creditworthy and having the trust of the world and separating Dubai World as a non-guaranteed entity. I don't know if that's possible.


FINIGHAN: I don't think (INAUDIBLE) is it?

DEFTERIOS: Well, it's very interesting. So she's saying, basically, at the start of the week, you had the department of finance in Dubai basically saying here's Dubai World and let's set it apart because it is a commercial entity. And she's saying if you take a step back, actually, it's not, because there was an implicit understanding, very much like Fannie Mae and Freddie Mac, which was a much, much bigger scale. You know, we're talking about $5 trillion of mortgage-backed securities in America.

But there was an implicit understanding that, in fact, it was a government entity and that's why the -- probably, the banks lent to it, thinking that it was covered by the government itself. And now we know it's not and we know it's $26 billion.

But there's another side to this. She was, in a sense, congratulating Dubai for what it's built over the last 10 years and it has that lead as a financial services hub and it has that position as a trade hub. You and I were talking about that.

But the next big stage is because they did grow, you have to accelerate this concept of, you know, what is true transparency. And perhaps this is the reason Dubai was caught flat-footed.

That's the second point she addressed in the interview.


TYSON: One of the things that is true is that its governance institutions and its transparency have not developed to the same extent as its global reputation. I think that one of the things this absolutely underscores is the need for transparency and for governance structures which really fit the global kinds of institutions they have been building.


DEFTERIOS: So that's not a message that goes over very well, as you know, because Sheikh Mohammed bin Rashid al-Maktoum in a little bit sensitive to that issue, saying that the global media has blown it out of proportion. But she's sitting in California. She's a respected, you know, professor and an adviser to the White House, speaking in the professor's role here, saying that, look, in the big picture of things, if you want to be that fourth trading zone, in fact, you have to accelerate this process of transparency and what is government owned and what is not.

FINIGHAN: And we can see that full interview on "MARKETPLACE MIDDLE EAST" on -- on Friday.

I mean every -- every night we've said you're going to draw this all together for us on -- on...


FINIGHAN: ...on Friday's program -- on Friday's show. But -- but everyday something different happens. I mean you must have to sort of, you know, throw -- throw your plans out and then start again.

DEFTERIOS: Well, I like to cook...


DEFTERIOS: it's like a recipe that keeps on changing. So don't follow the recipe line by line.


All right, "MARKETPLACE MIDDLE EAST" with John Friday night here on CNN...


FINIGHAN: ...19:45 hours GMT.

Well, the fallout from Dubai World's debt crisis is rippling through the sports world, would you believe?

Questions surround now the future of The Race to Dubai, a lucrative golf tournament. It's bankrolled by Nakheel, the property arm of Dubai World. Now, Nakheel is in urgent need of restructuring.

CNN's "LIVING GOLF" presenter Justin Armsden has been speaking to the chief executive of the European Tour.


JUSTIN ARMSDEN, HOST, "LIVING GOLF" (voice-over): The company funding the tour's lucrative Road to Dubai is part of Dubai World, which last week shocked creditors by announcing it wants to postpone repaying billions of dollars of debt.

European Tour CEO George O'Grady has told CNN's "LIVING GOLF" that he's sure the Dubai World subsidy, Nakheel, will keep its side of the five year deal.

GEORGE O'GRADY, EUROPEAN TOUR CEO: It is an agreement. It's work in progress and we are continuing. There's no -- there's nothing that has to be decided. And we've got it. We're going forward.

ARMSDEN: This year's race, the first ever, was one two weeks ago by England's Lee Westwood at the Dubai World Championship. He says events held in the Middle East are making the European Tour stronger.

LEE WESTWOOD, WORLD NO. 4: Rarely do we play a weak golf event now, you know. They're all big events. I think it works well that we're all coming together in one final showpiece. I think you have good, strong quality fields. The golf courses are getting better every year.

ARMSDEN: And three times major winner Padraig Harrington firmly believes the Tour has to continue to develop into the Middle East and Asia.

PADRAIG HARRINGTON, WORLD NO. 5: Well, if we're sitting here in the Middle East playing our year end -- year's season ending tournament, it ain't in Europe. We ain't the European Tour. We're -- you know, we're a world tour and that -- you know, at the end of the day we have to, as players, we've got to realize that, that, you know, to take the best events and we're going to have today, as we do in the Middle East. These are great events and we're going to have to play in Asia.

ARMSDEN: George O'Grady says that he's expecting to meet representatives of the troubled Nakheel this week.

Justin Armsden, CNN, London.


FINIGHAN: All right, let's get a weather forecast and find out what it's doing in your part of the world.

Guillermo is with us at the CNN International Weather Center.

No offense, my friend, but I don't want to listen unless it's good news.


FINIGHAN: It isn't going to stop raining here.

All right, I will.

I'll see you.



Well, in the meantime, I'll fill up some time. But we had snow in Leeds yesterday. You were saying Christmassy or Christmas like conditions are going on here in Britain. And we actually saw that and we saw the snow in Leeds. And now we have some warnings for the south of England, where we may see some flooding, in fact.

But the snow may stay in Scotland in the higher elevations. It's all because of this new system that actually is going to bring temperatures lower. And that's what you don't want to hear, but it's going to happen.

In the meantime, we have another section that is getting bad weather in the south. I'll tell you about that. But look at this, what's going on right now with all the severe storms actually popping up in England.

Now it's a turn for the south, because before we didn't have that. We had most of the problems in the north or the central parts. Now, the rain is in the south.

Paris with winds, Amsterdam with winds. As you see, London is going to see some rain. Then we have the winds coming back in here. Britain is going to be windy. London, it's going to be rainy, especially Thursday and Saturday. Friday is going to be a little bit better.

You see how the low actually stays here in the North Sea, and that is going to affect, also, the Low Countries and northern parts of France.

But apart from that, especially in Germany, Denmark, things appear to be fine. It's going to be improving in the northeastern parts of Europe. But look at this -- Greece and Italy. That's the low that is bringing the bad weather. So we have the alerts, actually, for the Balkan Peninsula. Turkey is going to see some bad weather and the were -- the temperatures are going to go down.

We are approaching, actually, the winter, officially. So it's going to happen. But in the meantime, this is the area we're looking at very closely, the Aegean Sea again bringing floods and severe weather.

Stay with us.

After the break, more QUEST MEANS BUSINESS with Adrian Finighan.


FINIGHAN: Now, it's been another tough year for the airline industry, no more so than for one of the Middle East's oldest carriers, Gulf Air. The Bahraini airline is projected to make a loss of more than half a billion dollars for 2009. And last week, it announced a restructuring plan that involves job cuts, route cuts and the sale of some of its aircraft.

Now, the company hopes thanks to these tough measures, to return to profitability by 2012.

And earlier today, I spoke with Gulf Air's new chief executive, Samer Majali, who took over in July, about his turnaround plans.


FINIGHAN: How do you make Gulf Air relevant, though, in this day and age, given that there are several other big carriers operating out of what is, geographically, quite a small area.

SAMER MAJALI, CHIEF EXECUTIVE, GULF AIR: Well, this is -- this is a real challenge, in terms of, obviously, huge competition. And our three larger cousins around us compete in a big way with getting passengers in and out of the region, plus transporting large amounts of passengers between Europe through a point in -- in the Middle East into the Far East and to Australia.

And Gulf Air had to, with limited resources, the need is there to -- to, number one, make it a sustainable business and so it's not a burden on the Bahrainian economy and continue to provide access.

What we're doing, actually, is -- is to recast our network strategy and principle, move away from competing directly with these carriers and explore points in the region which are under served at the moment...


How long before you -- you're back in the black, before you've turned it around?

MAJALI: Well, we hope that, obviously, the restructuring takes time. There's a lot of inertia. It's a large airline. We have a lot of future commitments that we need to deal with. But we estimate that the move toward being a sis -- commercially, a sustainable business, should take about three years.


MAJALI: And that's -- that's the target for us to get there.

FINIGHAN: Well, I wish you the very -- the very best with it.

As -- as Gulf Air embarks upon this, this restructuring, of course, there's -- there's some other restructuring going on across in -- in Dubai. I don't know whether you've noticed this week.

How can -- you how can you fail to have noticed?

I would just like to get your thoughts on -- on what has happened this week in -- in Dubai and the -- and the market reaction that we saw to -- to -- to Dubai World's problems.

MAJALI: Sure. I mean Dubai -- Dubai is -- obviously, what happened to Dubai is basically what happened to the financial sector on a global basis. Dubai has a heavy concentration on real estate development and a very aggressive program of real estate development. Obviously, it got hit by the -- the effects of the global recession in general, and specifically in the real estate business in particular.

And I think this is really what -- what underlies the importance of what happens in Bahrain. Bahrain is a -- is a -- obviously has a very conservative financial sector, a very longstanding sector and a lot of experience in this and has been far less affected by what went on in Dubai. And this also underscores what we are trying to do in Gulf Air in -- in actually moving all of the businesses into being commercially sustainable businesses rather than businesses that, in their own right, are not sustainable, but contribute to the -- to the bigger picture.


FINIGHAN: Samer Majali. And if there's anyone who is up to the challenge of reinvigorating Gulf Air, it's Samer Majali.

Now, he used to be the chief executive, of course, of Royal Jordanian, a very capable CEO.

Now, when we return, an update on the market numbers from both the U.S. and Europe.

We'll be right back.

Stay with us.


FINIGHAN: Let's take a quick look at what's happening on Wall Street right now.

The Dow Jones down about a 1/4 of 1 percent. A pretty choppy day's trading. The Dow Jones 26 points lower. After the shake-up at G.M., I think people are pretty cautious there, struggling to be hanging onto Tuesday's record gains, of course, when the Dow Jones hit its highest level in 14 months.

And we have some employment figures out showing that the U.S. jobs picture is improving. That heartens markets, particularly in Europe, where stocks ended higher, extending the strong gains that we saw here on Tuesday.

And further, metals prices also helped stocks here in London. Mining shares lifting London's FTSE 100 out of the red, despite losses today in the banking sector.

In Paris, shares in luxury goods group LDMH were up nearly 3 percent today.

Heavy losses, though, for SAP over in Frankfurt. And V.W. As well, limiting gains on the Frankfurt Exchange today.

That will just about do it for the midweek edition of QUEST MEANS BUSINESS.

We've shoehorned a line to tonight's program. I think I need to lie down.

What is it Richard would say if he were here?

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

Yes. I'm Adrian Finighan in London.

Christiane Amanpour is next up on CNN, right after we get an update of the headlines from the I Desk.