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QUEST MEANS BUSINESS
Toyota Hits Another Bump on the Road; Greeks Press on With Austerity Plan
Aired February 3, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The gas pedal sticking, the brakes might not work, and Toyota hits another bump in the road.
Time for action: The EU warns Greece make real cuts or suffer the consequences.
And Queen Rania of Jordan tells this program it is time for change when it comes to corporate responsibility and education.
I'm Richard Quest. We have an hour together, and I mean business.
First it was the accelerator, now it is the brakes. Toyota is having to pedal ever faster to undo the damage. More than a hundreds reports have come in of brake problems relating to Toyota's Prius, the company's pride and joy.
And the nightmare for the company deepened in the United States with this warning from the U.S. Transportation secretary.
RAY LAHOOD, U.S. SECRETARY OF TRANSPORTATION: We need to fix the problem so people don't have to worry about disengaging the engine or slamming their brakes on, or putting it in neutral. And that is really our goal.
No, I agree, but I mean, there is-within the situation .
LAHOOD: My advice is, anybody owns one of these vehicles, stop driving it, taking it to the Toyota dealer, because they believe they have a fix for it.
(END VIDEO CLIP)
QUEST: Now, those comments, stop driving it. It had a dramatic reaction in the stock market. Toyota's shares fell sharply. But a little later Mr. LaHood said he misspoke when he advised people not to drive their Toyota.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm not going to suggest that they were intentionally misleading people. I think that we have got to get more of an explanation why they came to these different conclusions and why they would say one thing, one day, and then another thing to us privately, another day.
(END VIDEO CLIP)
QUEST: Now, of course, that wasn't Mr. LaHood, on his misspeaking. That was a member of the Congress probably talking about why Toyota said different things at different times.
We'll bring you Mr. LaHood's comment in a moment.
The importance of Mr. LaHood's comments was that they did have a serious effect on the stock price of Toyota, which fell some 5 percent. And now the trouble has spread well beyond the United States. First reports that Prius owners are having brake problems, they emerged in Japan, where the government has already ordered Toyota to investigate. Kyung Lah looks at the issue that drivers in Japan are reporting.
KYUNG LAH, CNN INT'L. CORRESPONDENT (voice over): The latest complaints with Toyota involve the model viewed as Toyota's future, the Prius. Toyota Motor Corporation telling CNN that it has received, quote, `dozens of notifications" from dealers in "North America and Japan" about the 2010 Prius, the latest generation of the popular hybrid. But these newly public complaints involve the brake, not the accelerator. And a model not involved in the automaker's current massive global recall. Toyota says the complaints center around when the car is on a "bumpy road or frozen surface". Drivers have complained that they "don't get the full braking feel as expected".
Apple co-founder, Steve Wozniak tells CNN that there is something wrong with his new Prius, though, it is not the brake.
STEVE WOZNIAK, CO-FOUNDER, APPLE: The car will start to accelerate in cruise control, you can hit the brake to stop it. You know, and maybe it is scary for the first time, for a couple of seconds, but once you know about it, it is not like I think it is life threatening.
LAH: Japan's government also says it has received 14 complaints about brake problems with the Prius, beginning in July of last year. In that case the brakes failed at a red light and the car rear-ended another vehicle. Two people had minor injuries.
These new complaints of the Prius come at a tough time for Toyota's management, facing questions about the quality of its cars. Investigators in the U.S. are looking into whether the problem with the gas pedal of certain models may actually be a problem with the car's electronics. Toyota's head of quality control denies that.
SHINICHI SASAKI, EXEC. VICE PRES., TOYOTA (through translator): For the electronics control unit we could not come across any case where we found that there was a malfunction in this control system.
He also stressed that even as Toyota competes with cheaper car makers from China, Korea, and India, it is building safe cars.
SASAKI (through translator): The basic performance of the car, drive, turn and stop, that quality is essential and can never be compromised.
LAH (on camera): None of the reports of the 2010 Prius involve any deaths, but this is yet another ding in Toyota's reputation. The automaker is preparing to announce its earnings forecast for the final quarter, which is expected to show just how big a price tag all these recalls and the bad publicity will cost Toyota. Kyung Lah, CNN, Tokyo.
QUEST: Toyota Europe has told CNN it has not received any reports of any problems with Prius on the European Continent. But it is becoming hard to pin down the scale of the entire problem. No Prius have been called in over the brake issue so far. But Toyota, in the U.S. has reported two separate problems. Now between gas pedal, that could jam, and accelerators that can get entangled, well, you may start to wonder just how many cars are involved. When you include cars that Toyota says it may recall in Europe, then you are looking 8 million vehicles, worldwide, of 13 different types, may have to come in for repairs. All at the company's expense.
But, of course, as Toyota says time and again, where safety is at concern, then expense is not an issue. Jim Boulden, now, on the problems for Toyota and how Toyota is actually going to deal with them.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: You know, Richard, we thought we should look at this in context and show people what is happening. You know, Toyota has made so much news because of what is happening here. But we should-we wanted to start with showing you some of the other companies that have also had to recall cars.
This is the number of car companies that have recalled cars, just in December of 2009, in the U.S. We should make it very clear nothing to do with Toyota. But you see, Ford, GM, Volvo, Volkswagen, BMW, on and on. They all do recalls. They are very common. They don't make news. Why is Toyota different? Well, it is the sheer number of cars that Toyota has had to recall. Nothing like-none of these have had anything like that.
And, of course, second, and most important, are they reported deaths from the Toyota mishaps. It is about 19 or more deaths reported in the U.S. Now, this is coming from various lawsuits, some 15 lawsuits pending in the U.S. So that is coming from there. The U.S. government has confirmed five deaths from two accidents. Those happened late last year. So, that why you are seeing this hitting Toyota so much.
Now, what is going to happen to the bottom line at Toyota? Well, Deutsche Bank estimates more than $1 billion affect on Toyota. That is before we heard today that Toyota U.S. is going to give a check to its dealerships, up to $75,000 check, going right to them, Richard, because they want to make sure that, they say, customers are taken care of quickly.
QUEST: When we look at all these, the various costs, obviously the human toll is the single most important. But what about the reputational damage? This is a company that made its name selling reliability and "boringness" in many ways.
BOULDEN: And that is why this has become such a shock to people and why maybe it took Toyota longer than people thought it should to be able to make this announcement. We saw a-what, $30 billion wiped off the market cap of Toyota shares in the last two weeks, in Tokyo. That tells you that side of the reputation has been damaged.
QUEST: But coming back up here to these other ones.
QUEST: I can also add in Perrier with benzene, we can add in Tylenol, we can add in all sorts of product liability cases. What makes this unique, if it does?
BOULDEN: Well, because of the idea of the reliability. Toyota was big, it was boring, it was-it wanted to become the world's number one. And now that it is the world's number one automaker it has to-it is going to have these kinds of problems if it doesn't sort out what the Toyota said today was, maybe they weren't looking at how the parts fit together as well. Maybe they were realizing that they needed to have more stringent testing before they put these cars on the road. That came from Toyota today.
QUEST: Jim, many thanks. Jim Boulden, with that.
Toyota shares, they tumbled more than 5.5 percent in Japanese trading on Wednesday. The company's stock is now at its lowest point in more than two months. In New York, Toyota shares are traded in the form of ADRs. They took a dive after the comments from the Transportation secretary. That is how they are looking right now.
To the markets that are open, and doing business, at the moment. In New York, the Dow Jones industrials down 13.8, just down a .10 of a percent, or so, 10,283. We shouldn't be to concerned. Two days of healthy gains. Investors were concerned about the outlook for the labor market. The jobs report and Wall Street will be with us later in the hour.
You are up to date with the main news in the business world. Fionnuala Sweeney is at the CNN News Desk.
QUEST: In just a moment, after this very short break, we turn our attention to the Euro Zone, and Greece, which is about to get a taste of a Spartan life. The prime minister says he's pulling his beautiful country back from the brink. It won't be pretty. What did the European Commission say? Back in a moment.
QUEST: To Greece and the problems of their finances. The country's plan to clean up the economy has got the go ahead from the European Union. The Greek government in Athens is trying to bridge a massive short fall in its budget. The over spend was equal to 12.7 percent of GDP last year. It needs to come down to 3 percent by 2012.
This is how the Greeks say they intend to do it. It is an austerity plan that is of breathtaking range and depth. At its core to bring that deficit down, and we are talking about halving it within just a couple of years, public sector pay will be frozen. Fuel taxes will have to rise, the object of the exercise, to try and bridge that gap as best they can. But that alone won't be enough. That was part of the original plan on top of it they are also going to be cutting bonuses for civil servants. They will be cracking down on tax evasion. Now, these steps were all put in the budget. It is all designed to trim the shortfall by some 4 percent.
But frankly, the sheer size and scale of doing these will have such an effect on the Greek economy and the Greek people that the prime minister, Papandreou, went on Greek television to warn the Greek people that they face difficult painful times ahead. Now, the fear is, of course, that speculators in the markets are going to be attacking the Greek economy.
The one thing that could help protect Greece, is the protection of the European Union and through that the European Commission. These were the measure that were put before the commission today, the commission has said they heard, they liked, but perhaps there might need to be more.
(BEGIN VIDEO CLIP)
JOAQUIN ALMUNIA, EU ECONOMICS COMMISSIONER: We are endorsing the Greek program, we are giving confidence and supporting the Greek authorities to implement their own program. But at the same time, we know, in our analysis you will find, these arguments. We know that the implementation of this program is not easy. It is a difficult implementation. So, this deserves support, but at the same time we need to strengthen our instruments to monitor how the program is implemented, so as to avoid the slippages, to avoid that the objectives will not be reached.
(END VIDEO CLIP)
QUEST: Greece's commitment to frugal future, is helping to calm the market's nerves. We know this because the news lifted the price of Greek bonds. Investors are feeling more confident that it is safe to lend money to Greece because it seems less likely to go bust or to need a bail out. Or at least that is part of the story.
Now, the bonds, the bonds that were issued were issued-bonds are basically IOUs from the government, to investors. You lend your money to the country, or a company, and it agrees to pay it back at a fixed interest rate. I don't want to get too technical, as they are paying the price goes one way, the interest rate goes the other. They are inversely proportional.
Depending on which way they are going, at any given moment, you can work out whether or not people, investors, believe the bonds are going to be repaid, whether Greece is a good deal, or it is not. It is expressed as the yield, and here you see, quite clearly the bonds as a percentage of the bonds market price. So far, so good.
What happens actually in the markets themselves? The bond market attacks the Greek bonds, hoping to make a killing. I turned to Nick Gartside of Schroder's to try and understand this mentality of the bond trader, that attacks, hoping to make money.
NICK GARTSIDE, HEAD OF GLOBE FIXED INCOME, SCHRODERS: I think that the thing with Greece is that the economic situation there is poor, everybody knows it is poor. And what markets are testing is really the extent to which the Greek government will implement austerity measures. And what we have seen today is a firm commitment from the Greek government to do just that. And also some quite strong, I think, backing from Greece's European partners. I think the message there, is that the European Commission, will assist and help Greece to meet its target.
QUEST: Let's move away from the economics and talk about the speculation and the speculative bond trading. The so-called bond market vigilantes, that we know, and have heard of before. What is it that you hope is going to happen?
GARTSIDE: Well, I think, what a lot of speculators are hoping is that they can sell Greek debt, they can sell Portuguese debt and frankly, they can buy it back at much cheaper levels. What I think, at the moment, is that is unlikely. Because unlike 1992, when sterling was forced out of the ERM, Greece and Portugal are actually within the Euro Zone, and the Euro Zone have made it clear, that they are not going to let Greece and Portugal default.
QUEST: Right. So, in that scenario, the options open to speculators to beat on an individual curren-country, seem to be much more-uh, much more restricted. So, why then are they having a go? What is the scenario? How could it play out?
GARTSIDE: Well, I think they are having ago, because let's face it, what drives markets are things like animal spirits, fear, greed. And that is what is driving markets right now. And what markets continually do is probe, they test. And they are testing the extent that the Greek government to implement those measures and actually they are testing the degree of European backing that will come from Brussels.
QUEST: Since Greece is part of the Euro Zone, it can't leave the zone without absolute massive consternation. It would just-it would probably have to leave the European Union, in some-according to some analysis. It can default on the debt but there is not much other room, other a macro economic shift is there?
GARTSIDE: There isn't. There is one option open to Greece. And actually I was in Greece last week. And the one option open to Greece is to reform its economy. Greece doesn't have a choice. And I think Greece-
QUEST: OK, well, I'm going-I'm going interrupt you. If they don't reform their economy, if they continue this very high deficit spending, what would happen to Greek bonds in the market?
GARTSIDE: Well, Greek bonds would suffer in the market, in that scenario. And I think that scenario is very unlikely. The message from the Greek government, the message from the European Commission, is that Greece will get their house in order.
QUEST: If those bonds did sell off, forgive me, but I'm taking you to "Apocalypse Now", because this is what the markets are about, very often. If the bonds did sell off and Greece had to raise interest rates to attract people to buy their debt, is that the nightmare scenario that eventually leads to bailout or bust?
GARTSIDE: Well, it is. But I think that is probably an impossible scenario. Because remember Greece can't raise interest rates. Greece is a Euro Zone member. And in the Euro Zone the only person that can raise interest rates-well, the only body, is the ECB themselves.
QUEST: Right. But they can-but the market can demand a higher interest rate on the debt.
GARTSIDE: No, absolutely. And the market has done that. The sell off in Greek debt has been quite vicious. But think internationally, Greece now trades at wider levels in places like Sri Lanka, places like Lithuania. So, already the levels that Greek debt is trading at is fairly distressed relative to other countries.
QUEST: Finally, as a good bond market vigilante, you have got your binoculars on the next one, which is it? Portugal, Spain, Ireland?
GARTSIDE: All three of those are at risk. And that is the other reason we have got this aggressive European response. Because what you will see, if it goes much further with Greece, that domino effect, on precisely those three countries.
QUEST: A bond market vigilante. On the Athens stock market investors quickly lost enthusiasm for that cost-cutting plan, mainly because of the huge difficulty that there will be implementing it. The benchmark index ended the day, nearly 2 percent lower. In the past four months it has shed 30 percent of its value.
The pattern across Europe was similar. Worries surfaced about debt problems in Portugal, when all was said and done, London was off 0.5 percent. Frankfurt and Paris also put an abrupt end to their three-day rally. The banks, the mines, they were all lower, as indeed, were the pharmas, pharmaceuticals that is. Roche lost ground in Zurich after disappointing results. In Stockholm Electrolux plunged 12 percent. Poor results, the market is not in a forgiving mood.
In a moment, the investment which never looses it's value. Her Majesty Queen Rania, of Jordan, will explain why a good education is priceless.
QUEST: Education campaigners say 72 million children of primary school age are being denied the chance to learn because there are no schools for them. Pretty basic stuff, you might say. The lack of that opportunity will cast a shadow over their lives and that affects everything from their health to their wealth, and of course, the prospects of the countries where they live.
Queen Rania of Jordan is a campaigner for children's rights. And she represents UNICEF as their eminent advocate for children. So imagine my surprise last week, when I was in Davos, at the World's Economic Forum, and in my bedroom I found this box. It says at the front of it. It says, "A call to action from Queen Rania of Jordan." And inside the box pads, chocolates, badges, pens, pencils all with a message from the Queen of Jordan.
Her Majesty was at the World Economic Forum to talk about this campaign. Later she told me people's minds are turning toward education as a way to boost the economy. And importantly, even more so, now the immediate financial crisis is over.
RANIA AL ABDULLAH, QUEEN OF JORDAN: Well, I do feel that, you know, last year I think people were really in sort of crisis mode. It was still the financial crisis, it was still very new in people's minds. People, I think, felt a little bit defeated.
This year I felt that people were more having reflections (ph) over the crisis, or thinking more, how can we fix things? How can we move forward? How can reassess and redesign things. So we are talking more about a global redesign atmosphere.
QUEST: Within that global redesign, what I have noticed is that the agenda has gotten wider. We can no longer compartmentalize business, government, NGOs, social work. What do you think?
QUEEN RANIA: Absolutely. I think this kind of silo thinking is obsolete now. It doesn't apply to our world. It is all about linkages between the different sectors and having comprehensive solutions. So, more and more the business environment is realizing that they need to have more cohesion in the way they do business; more linkages with the public, with the private sector, etc cetera. And one of the things that the West is very good at, is trying create those public/private partnerships. And bringing them to bear on many different issues. So, increasingly CEOs are realizing that they can be generators of social profit, not just financial profit.
QUEST: Now that brings me to the point, though, Ma'am. As somebody who comes to this from the other side, from the social side, rather than the shareholder side, do you worry that companies pay lip service to this idea, but in the final fruition never actually stump up with the goods?
QUEEN RANIA: The successful companies are the ones who really buy in to it and make it part of their business model, not just a side note to their business plan.
QUEEN RANIA: You know, because there is empirical evidence that has really proven the case, the business case, for doing this. So you really can do well by doing good. Companies who have adopted sustainability, corporate social responsibility, and all those kinds of values, within their day-to-day business, have actually generated more profit, have a healthier atmosphere within their companies, a much healthier corporate culture. So, there is a business case for doing this, not just a moral one.
QUEST: When a company comes to you, or you have talked with a company, and they start espousing the values, do you go with a certain amount of skepticism and cynicism? Do you want to see that they mean what they say, before you put your name to it?
QUEEN RANIA: Absolutely. But there is now reporting that can be-that can really clarify how much cost to it, a company is in its social endeavors. I think there are some companies there that think this is just a about PR.
QUEEN RANIA: There are a lot of companies out there that also really believe in it and that are working on the ground, that have demonstrated great results and have really a lot of benefits to society.
QUEST: Now, I found this in my bedroom, "A Call To Action" So, tell me what I've got in here?
QUEEN RANIA: Well, what this is about, you know, I really believe that education is one of the most important issues that we can tackle. Because if you look at all the world's problems, from poverty, to hunger, disease, terrorism, climate change, not one of these problems can't be helped, if not totally resolved through education. But the problem with education is that people don't see it as an emergency. It is something- because the benefits are reaped in the long-term, people don't prioritize it. We need $16 billion to get the children of the developing world into primary school. And that amount may sound like a lot but it is half of what the U.S. spends shopping, online shopping in the last holiday season. It is what the U.S. spent on candy in 2008.
QUEST: $16 billion.
QUEEN RANIA: So there is no excuse for us not to be shoring up that money. And when you increase education, maternal mortality goes down, child death goes down, HIV-AIDS goes down. You know, if you want to deal with issues of terrorism and radicalization, what better way to do it than through a quality education. So, I really wanted to highlight this issue here and I thought, you know, instead of giving a gadget or something-these are serious folk here.
QUEEN RANIA: So, I wanted something kind of fun to grab their attention.
QUEST: You given-you've given me something I can take me sandwiches to work in.
QUEEN RANIA: Yes, I thought if you were hungry, there is a snack in there. And there is a lot of information in there about education, why it is so important for us to really prioritize it.
QUEST: Her Majesty was right, there was indeed, a snack, in the box, chocolate chip. Queen Rania of Jordan.
When we come back in a moment, Toyota's flagship model under fire. U.S. Transportation secretary seems to be doing the damage control.
It has been a long line of knocks for the world's top car maker. You'll need an update. We'll give it to you after the break.
QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
Our top story tonight, the world's best-selling hybrid car, the latest Toyota model to face questions over its safety. The Japanese government has ordered Toyota to investigate reports of great problems from Prius owners. That model was not one of the eight that Toyota originally recalled to fix sticky accelerator pedals.
In the U.S., where the gas pedal problem came to light, the Transportation secretary has backtracked after earlier comments in which he advised Toyota customers not to drive their cars. Mr. Ray LaHood now said he misspoke and clarified the position.
(BEGIN VIDEO CLIP)
RAY LAHOOD, U.S. TRANSPORTATION SECRETARY: If you own one of these cars, take it to the dealer. If you're in doubt, take it to the dealer and have them fix it. If it's one of the ones that needs to be fixed -- or at least have them look at it. And so what I said in there was obviously a misstatement. I -- I'm -- what I meant to say and what I thought I said was if you own one of these cars or if you're in doubt, take it to the dealer and they're going to fix it.
(END VIDEO CLIP)
QUEST: The U.S. Transportation secretary.
But his original comments drove Toyota's New York traded shares sharply down. They're roughly off by around 5 percent.
If you were with us earlier in the program, we talked about how other companies have had to recall faulty or unsafe products and how they've dealt with such calamities. In 2007, the toy maker, Mattel, recalled more than 20 million toys that had been manufactured in China.
I asked the company's international president, Bryan Stockton, if those incidents had had any lasting effect on the business.
BRYAN STOCKTON, PRESIDENT, MATTEL INTERNATIONAL: Well, I think it should breathe a lot more confidence in consumers that the toy industry, and Mattel, as well, as a -- the leading brand in the industry. We've all worked very hard to make toys even safer than they were. We, quite frankly, Richard, learned a lot from the recall in 2007. We thought we had a world class safety system and we found some ways to improve it.
But more importantly, one of the things that we worked very hard on was communicating with consumers openly and frequently about what happened, why it happened, what we are going to do to prevent it and what they need to do.
And as a result of that, frankly, in 2007, we had one of our best Christmas seadons -- seasons ever.
QUEST: Yes, I mean, I know the analogy is a really bad one, because the products are so very different. But we can stretch it to the almost breaking point if we look at what you did, for example, in '07 with -- with toys and you look at Toyota and their problems at the moment with motorcars.
One can draw certain parallels, though, with manufactured items when there is a defect or a quality problem, can't we?
STOCKTON: Well, one of the things that every company, I'm sure, deals with is integrity. And that's the number one value that we have at Mattel. And we felt it was very important to be transparent, be honest and communicate frequently. I can tell you that I spent a lot of them, including on CNN, trying to make sure that everyone understood what -- what needed to happen.
So it was a big event for us. And again, we think consumers forgave us for the mistake that we made and went ahead and bought Mattel toys.
(END VIDEO TAPE)
QUEST: And, indeed, according to the president of the international division, Barbie, who is more than 50 years old, is having her best year yet. And, apparently, she's looking at another career. Apparently, news anchoring is on the list.
A pair of well known media names are proving sometimes it's better to go it alone. After the break, we'll size up the pros and cons of being single in today's media landscape.
QUEST: Welcome back.
It's been a good week for stocks in the United States. The Dow gained 230 points on Monday and Tuesday alone. But no such luck today. S
Stephanie Elam will be in New York at the Exchange in a moment to bring us up to date with that.
We need to, though, turn to some corporate news that has been taking place -- two companies that used to live together that have now gone their own separate ways. I've got be a little bit careful here, because one of them is my employer.
Time Warner and AOL are both turning a profit after ending partnerships late last year.
Maggie Lake is in New York now -- now, Ms. Lake, be careful. Time Warner, parent company of this network, payer of my mortgage, let us be a little bit careful before we start delving too far into daddy's results.
MAGGIE LAKE, CNN CORRESPONDENT: Yes. And -- and, actually, nothing really to worry about, Richard, because it's a pretty good looking set of numbers for Time Warner, indeed. Sales were up, profits were up and they're raising their dividend. So good headlines all around.
And the strength really coming from the TV division, naturally, but also really film. They had a couple of really good releases. And, of course, as you know, with media companies, that really filters through to the bottom line.
"The Blind Side" really notable. You'll see it was all over the Oscar nominations. Sandra Bullock the -- up for best actress and it's up for best picture. That really helped, as did "Sherlock Holmes." As I said, TV division good.
But as we've been talking about with Wall Street, it's all about expectations. So we're not really seeing it filter through to the stock today because News Corp, a competitor, actually surprised more on the up side. Time Warner's results were good, but they were pretty much expected. News Corp's were a bit more of a surprise.
And if you look at that shot right there, that really tells the story. A lot of the good news already priced in for Time Warner. It's had a really good run except for this little dip down here. But it's still up much, much off its lows following that spin-off of both the cable and AOL.
QUEST: You see, that share price rise is very much a factor of the content-focused strategy of the chief exec, Jeff Bewkes. But if we look at the -- the bit that was flogged off AOL, now, you know, I mean how -- how did they perform on their own?
LAKE: Well, this is, again, all about expectations, because if you look at the stock price, you'd think, hey, you know, divorce is looking good for them. Their stock price is up about 2.5 percent today, newly public again. And, indeed, their results -- they -- they turned a profit and that was better than expected.
But once you look underneath that headline, Richard, I've got to say that the other figures there are pretty daunting and troubling. Look at this -- subscription revenue down 28 percent; ales -- ad sales revenue down 8 percent; search revenue down 18 percent.
This is still around -- a turnaround story that's very much at the beginning, if it happens at all. There's a lot of skepticism out there. Their chief technology officer left at the beginning of the month. So they've got a long, long way to go.
And interestingly, Richard, there aren't a lot of analysts that are even following this right now. So AOL really, really has its work cut out for it. A lot of people still believe it's going to be gobbled up or something by someone else or it's got to find a strategy going forward.
So, again, the stock price up, but a much tougher tale there for AOL.
QUEST: The -- the way in which Time Warner not only divested itself of Warner Cable, AOL, the music division, all of it -- the books, all the various other bits and bobs to focus as a content strategy, is the jury out on that policy yet?
LAKE: You know, Richard, yes. I -- I think it is, although, you know, I think the idea that refocusing across corporations, across the corporate landscape, investors are responding positively to that.
LAKE: Think about G.E. It's not just in media. And that is getting a positive response.
LAKE: So in -- in that -- in that sense, there is already an answer. In terms of Time Warner and the content focus, you know, media has so many challenges. I think there's some question marks out there.
QUEST: Maggie Lake, I think we got away with it. I think we both may still have jobs for tomorrow.
Maggie Lake in New York.
Let's go to another part of New York and bring in Stephanie Elam for the markets -- Stephanie, we have managed to do no damage so far. The market seems to be a little bit grumbly.
What's going on?
STEPHANIE ELAM, CNN CORRESPONDENT: Yes, you're right, Richard. It's pretty much a lackluster kind of a day. The market really hasn't been able to pick up much momentum here. The maro -- major averages are doing what I like to call the flat line dance. They basically go up a little bit, go down a little bit, not a lot of movement, just dancing around that flat line.
Part of the reason for this is the disappointing economic readings that we've gotten, including two that are related to the jobs front. On one hand, we've got companies -- it's a payroll firm, ADP, saying that they see losses of 22,000 private sector jobs last month. That's the smallest decline in almost a year.
But, before we get too excited about that, a separate report from Challenger Gray & Christmas says employers announced more than 70,000 planned job cuts in January and that would be the most in five months.
All of this has investors not quite sure what to expect come Friday. That's the big day, when we get the big jobs report from the government.
Additionally, there's yet another report today showing that the service sector did not grow as quickly as expected last month.
Richard, I also must point out that over Monday and Tuesday, we gained about 230 points for those two days combined. So it's not too much of a surprise to see a bit of a pullback right now.
QUEST: All right. The flat line down.
QUEST: I can only imagine which (INAUDIBLE)...
ELAM: They do a lot of that lately.
QUEST: Yes. Well, I can't -- I can only imagine what bit you have to shake. But hopefully by Christmas, we might have a demonstration.
All right, Stephanie Elam, who is in New York and -- I suppose if we, if we offer enough, somebody -- some tier viewer will give us an example of the flat line dance.
Let's turn to the weather forecast. Snow is falling in Leeds, which is in Northern England. There isn't much in Germany. I'm going to Budapest this weekend, so, frankly, the only thing I care about is what the weather is like in Hungary.
GUILLERMO ARDUINO, CNN METEOROLOGIST: OK. I'm going to care about Hungary only, then. I think this weekend, Richard, you will get some snow, probably on Saturday, because the models are suggesting that you will get some snow. It will be a dissent -- decent snowfall, but probably for Friday we'll be fine and then on Sunday it will not be that snowy. But it's going to get there.
Now, one low here; another system rising here to the east; and the other one arriving into Britain. I'm going to delve into Britain right now. So here we have it. Snow in Northern Ireland; snow in Leeds, in Northern England, like you say; and then the new system that is coming here, bringing some showers to the area.
I see that there's rain in London, Heathrow. Not surprised. But I have to report on it.
Well, let's see, also, Poland, not so much snow in the next two days.
Germany, not so much snow in the next two days, either.
The Alpine Region is where we get it. And here we go. This is the Czech Republic. So here to -- this is Austria, Slovakia and Hungary. Here -- here we are.
So this is what we may see, maybe up to four centimeters of snow there in Hungary.
Let's see now, more specifically, to the Alpine Region and Austria here, parts of France and Italy, too, the Alpine Area, with more snow. In this case we're talking about like almost half a meter. It's in the higher elevations, of course.
And then we see the overall perspective in here.
I was checking out, looking for reports of snow in Germany. Nuremberg is one and Hahn is the other one. Leeds the only city in Britain reporting snow. Birmingham, mistakenly, I said that it was snowing and it was actually raining. It was my -- my bad. I -- I switched the columns in my mind.
So we are going to see the chance of snow there in Munich, Frankfurt, in Zurich, Vienna. We see the cold air in London, so the computer is saying hey, maybe snow showers at the airport. And Berlin, the snow is going to come back.
It doesn't look nice at all, especially here in Portugal. I'm sure that golfers know what I'm talking about when I talk about Algarve, Faro, you know, the southern sections, Quarteta (ph), also, Loueil (ph), all those teeny tiny towns there in Southern Portugal seeing some rain and winds now. We have a low pressure center going there. Temperature-wise, this is what we may expect -- we can expect in the next days. You see, min -- in the next day, minus three for Kiev and eight in London -- Richard.
QUEST: Many thanks, Guillermo Arduino.
ARDUINO: Thank you.
QUEST: The World Weather Center.
And we'll expect an update on Budapest before the week is out.
So, to say (INAUDIBLE), the atmosphere is tense in Nigeria. It may be one of the world's major oil producers, but people there are desperately short of fuel. Understandably, it's creating anger. One can understand it.
As Christian Purefoy reports, the situation is also growing volatile.
(BEGIN VIDEO TAPE)
CHRISTIAN PUREFOY, CNN CORRESPONDENT: Nigerians have been waiting in petrol cues across the country for over a month now. And in the heat and the noise and the smoke, they're getting frustrated and angry. And just to give a snapshot of why they're getting angry, this particular petrol station belongs to the Nigerian National Petroleum Corporation. And outside, you have open sewers, crumbling streets and now, people sleeping overnight in their cars, waiting for petrol.
And to put it in perspective, Nigeria is the fifth largest oil exporter to America.
(voice-over): Adding to the fuel shortage woes -- blamed on government mismanagement -- in the heartlands of Nigeria's oil producing region, the Niger Delta, the region's largest militant group, MEND, the Movement for the Emancipation of the Niger Delta, ended their cease-fire, calling for an all out onslaught against oil installations because of what they say is government failure to develop the region.
It's a threat they've made in the past and failed to carry out. The decline of MEND's influence brings with it concerns of a rise in new, less predictable criminal groups.
(on camera): And that unrest is spreading across the rest of the country. We've had clashes between Christians and Muslims leaving hundreds dead in the north and also protests against an absent Yar'Adua. Nigeria's president has been absent from the country for over two months now, leaving because of a heart condition. But that is all anyone has heard or seen of him since.
(voice-over): It's all leaving Nigeria in a heightened state of tension and a government so concerned about the deteriorating situation, that as CNN left the petrol station, we were stopped and questioned by the state security service.
Christian Purefoy, CNN, Lagos, Nigeria.
(END VIDEO TAPE)
QUEST: Now, the price tags might still make your eyes water. The profits, perhaps, less so. In a moment, the recession and how it's changed the game for the producers of luxury goods and who's moving with the times.
QUEST MEANS BUSINESS.
We're back in a moment.
QUEST: This program, we've been talking about the effect on a company of having a brand that might be damaged in some corporate fashion. In the world of luxury brands, having a big name is no longer enough. In 2009, some of the icons of the fashion world bit the dust. Many of the ones that survived are rethinking their strategy.
What's gone wrong?
Is all that glitters not gold?
Max Foster is with us.
MAX FOSTER, CNN CORRESPONDENT: Richard, it's been a torrid couple of years, hasn't it, for the luxury brands?
For obvious reasons, really. You know, you -- if people are cutting back, they're going to cut back on the luxury brands. So they're having to redefine themselves now and they're really looking to do that this year. And it's about convincing people that you should invest in that brand.
MARY-ADAIR MACAIRE, CEO, PRINGLE: If you have a great story to tell, this is the time to tell it.
FOSTER (voice-over): And the new ad campaign from Scottish brand, Pringle, is aiming to do just that. CEO Mary-Adair Macaire joined from Chanel two weeks before Lehman Brothers collapsed. She doesn't deny it's tough, but when the market goes bad, she says the 195-year-old Pringle has history to fall back on.
MACAIRE: It came up with the idea of knitwear to begin with. It invented the twin set (ph). It invented the argyle.
FOSTER (on camera): So you have to go back to that and resell that, in a way.
MACAIRE: It's -- it's -- it's -- in a way, I'm -- I'm trying to peel away that layer where the company became a ghost brand.
FOSTER (voice-over): Pringle, she says, has true authenticity. These one off jumpers, often made by women working from home in Scotland. And get this -- they'll repair them at no extra cost.
Throughout the luxury sector, brands are rethinking their strategy. 2009 saw French icon, Christian Lacroix, file for bankruptcy and British brand Louella followed suit. Prada is battling debts of more than a billion dollars and may go public by 2012.
(on camera): It's all about judging what the luxury shopper wants before they even realize it themselves. And this is where a lot of those luxury shoppers hang out. It is London's Old Bond Street.
UNIDENTIFIED FEMALE: I've just been looking for something that's a better quality and will last longer and something that's probably more classical.
UNIDENTIFIED FEMALE: Something that says craftsmanship, tradition and it will last long and not go out of fashion.
FOSTER: Enter Louis Vuitton. Their new ad campaign, dubbed "savoir faire," shows you just how much work goes into your luxury purchase, down to the five intricate folds on the corner of a leather wallet.
TIM GADOFFRE, CEO, MARIVAL: The luxury brands are all working hard at taking the fashion element out of their brand positioning. If we look at what Louis Vuitton and Malta (ph) have just done with their prince hats (ph), that makes it very clear that they're going back to core values of craftsmanship, artisan, quality and introducing a sort of notion of -- of time is value in the execution of their advertising.
FOSTER: The global luxury sector lost an estimated 8 percent last year, according to consulting firm, Bain & Company. For many brands, this year is about shaking off that checkered past and finding a place for some old favorites.
(END VIDEO TAPE)
FOSTER: There you go, Richard. It's really just about offering something that people want, really, isn't it?
People don't want something that will be thrown away next year. They have to be convinced that actually this may last more than a season. And that wasn't the case at all.
QUEST: If we accept that the traditional luxury brands have always provided a quality product, but then started to trade on their name per se, what happens next?
FOSTER: Well, that was exactly the problem, I think. You know, you have a luxury brand working across perfume, across clothes, across watches, across all -- everything. And what they're doing -- and Louis Vuitton is a classic example...
FOSTER: ...they're splitting the fashion away from the craft products...
QUEST: But it's still got to be quality, because only a fool in this day and age buys something because it's got a label on it.
FOSTER: But it's all about the branding and making sure the quality comes through and showing, actually, this is a quality product, it will last, it's fantastic and it's not just for one season. It's quite tough, but it's just traditional business, I guess.
QUEST: Real -- realism, a touch of realism?
QUEST: All right.
Max Foster, many thanks, indeed.
We'll have more from luxury.
When I come back in just a moment or three, a Profitable Moment.
QUEST: Finally, tonight's Profitable Moment.
Corporations spend a fortune building brands and protecting their names. They search long and hard to make sure the image it portrays is at one with the product they produce. You just heard us talk about that in Luxury Week.
They have elevated branding from an art to a science and beyond.
So for Toyota, the recall of eight million cars is nothing short of a calamity. A company whose product was based on reputation and reliability has found that its integrity is now the issue.
When did they know something was wrong and when did they begin to recall quickly enough?
Devastating questions when safety is involved.
All is not lost. Branding and public relations experts all pretty much agree, if Toyota is perceived as being honest and up front about this problem, the public will forgive them.
What will cause troubles?
It is only the stench of hypocrisy and deceit that will ultimately drive the buyers to other cars.
And this is QUEST MEANS BUSINESS for this midweek edition of the program.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"AMANPOUR" is after the news headlines.