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QUEST MEANS BUSINESS
Financial Package for Ireland; GM's Comeback
Aired November 18, 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: Accepting the unacceptable. Ireland indicates it is willing to take help.
A driving force once more. GM is back on the stock market.
And tonight, on this program, the chief execs of Air France and Air Asia.
I'm Richard Quest. We have an hour together and I mean business.
Ireland today said it is ready to accept billions of dollars to bring it back from the brink. At least that seems to be the gesture from the finance minister who said Ireland will take the money from EU, IMF, and ECB, as a contingency. The money the government has declared it doesn't want and doesn't need. In the past 24 hours the rhetoric has begun to change, as officials from Europe and the IMF are now going through the books in Dublin. Jim Boulden is in the Irish capital tonight and he joins me now.
They say they will take the money as a contingency. This is really prevention not cure.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: It is prevention, because I guess they're hoping, Richard, that if this money is available, that maybe the markets will calm down and they won't actually need to use the money. Maybe that is what these discussions are about. How much money would be needed out there just in case Ireland would tap into it?
I think what is interesting today, you know we saw the streets of Dublin, a mix of reporters, a few protestors, some unknown faces from the IMF and the ECB, all doing this sort of delicate dance of people going in and out of buildings, discussions going on. Hearing little bits from the Ireland central bank governor, who actually gave us some very explicit conversation on the radio this morning, he was actually-because he's not a politician I think, was able to say, yeah, we're going to take this money eventually. What the prime minister, again, on television saying it is not a bailout, because you don't pay back a bailout. You know, and others are saying, well, you know, the IMF doesn't give money away. You've got to pay it back eventually. So maybe that is where we are right now; these kinds of discussions on that level.
And after that, Richard, then we'll see exactly what kind of penalties Ireland, of course, will have to pay. And that is what is worrying some people. Will Ireland have to pay too high of a price to take this money that they are not even saying, yet, that they want, Richard.
QUEST: Jim, the idea is that this is not a sovereign debt crisis. Ireland doesn't need money, it is not liquidity. This is about banking. So is the fear that when they start looking at the bank's books, they are going to find something nasty and smelly into it?
BOULDEN: Well, when people say that they are separate, that is the politicians. Everyone else I talked to say, they can't be separate, because the government, number one, has guaranteed all the money on the loans on the banks. They have taken over a lot of the property portfolios. The have effectively nationalized all the banks. And earlier today, Brian Lenihan, the finance minister, went before parliament. And he said, that basically everything that they have tried to do with the banks hasn't been enough yet. So I think that is another hint of what's coming. Let's hear that.
(BEGIN VIDEO CLIP)
BRIAN LENIHAN, FINANCE MINISTER, IRELAND: Market conditions have not normalized and significant pressures remain. This gives rise to concerns that further reforms and stabilization measures for the banking sector may be appropriate. On this basis the statement endorsed a short and focused consultation between the Irish authorities with the Commission, the European Central Bank, and the IMF, in order to determine the best way to provide any necessary support to address market risks, especially as regards the banking sector.
(END VIDEO CLIP)
BOULDEN: So, Richard, there he is trying to explain again to the other members of the parliament exactly what is going on here, but using language that maybe isn't as clear as some people want. The bottom line is, though, that people here aren't happy that the IMF has to come in. But many people I talked to say maybe this is just what we need to get things to rock bottom until we can start again. Hopefully they won't find those nasties, you were talking about though, Richard.
QUEST: Jim Boulden is in the Irish capitol, in Dublin, for us tonight. And will be there again tomorrow. Jim, many thanks.
The Celtic Tiger lost its teeth and now we need to consider how this once blooming economy has ended in tatters. Join me in the library and you'll see a review of exactly the sorry state of affairs.
Let's begin with property prices. Because this really was what it is all about. The housing bubble built on cheap loans. The prices, many multiples much higher than real values would have suggested. People were being lent money, the ghost villages are now there, and since the peak in 2006, prices on average down 36 percent. In many cases those falls are considerably larger and the properties are now on the banks' books. Many of the toxic assets, like loans, like for property, are in NAMA, which is the good-bad, bad bank split. NAMA, which is the first of its kind has take on board vast amounts of property, which it hopes, in the longer run will turn good, and then be able to be sold off. But it is the bailout which has cost $10s of billions; 30 percent of Ireland's GDP-budget deficit, has gone into rescuing the banks.
So, not surprisingly, tax revenues are down. The government has overspent, and even though the government says it has a plan to get the budget deficit down to from 12 percent to about 8 or 9 percent, the market is simply not convinced that it is credible. Because it believes those banks need more money.
Now, it might look different and bad, but Ireland is by no means about to go bust. Officials are not only concerned about funds drying up there, they are desperately to put out fires elsewhere in Europe before they got going. Countries much bigger than Ireland, like Greece, and perhaps Portugal and Spain, may be smoldering.
Pier Carlo Padoan is the chief economist at the OECD. He joined me on the line from Paris and I asked him why was it taking so long to get Ireland to take much needed money?
(BEGIN VIDEO CLIP)
PIER CARLO PADOAN, DEPUTY SECRETARY-GENERAL, OECD: Well, there is a so-called stigma problem by which if you ask for being cured by a doctor people think you are sick. That might be a mistake, but in that case of Ireland it is now time to take that pill.
QUEST: Is it time for Portugal and perhaps even Spain to indicate that if necessary they will take that pill, too.
PADOAN: Well, I think Portugal, and more so Spain, do not need that now, because there are in place a number of reforms and fiscal adjustments which puts them in a more favorable position vis-a-vis markets, as the recent sales of bonds have shown.
QUEST: But isn't that, with respect, your-isn't your answer exactly the sort of problem that creates when suddenly the market decides otherwise. You know, an ounce of prevention is better than a pound of cure, as they used to say.
PADOAN: Well, the problem is that policy must be ahead of markets now, because markets are looking for answers, they do not have the answers. So policy must be decisive and clear and credible in the medium term as in the short term. This is what markets are waiting for.
QUEST: We thought that policy was clear with Ireland. The markets decided differently. Are you confidence that the same won't befall Portugal.
PADOAN: I am confidence of that because markets are also beginning to understand the difference between Portugal and Ireland. They are both in crisis, they have problems, but those problems are different. Therefore they call for different solutions.
QUEST: Does the European structures come out of this with credit, the way in which they negotiate, they talk, they wait and only when it looks like the house is about to burn down do they call the fire brigade.
PADOAN: Well, the European structures have changed dramatically since the Greek crisis burst out. And I believe they will change even more. So I'm confident that Europe, at the end of the day will come out stronger.
QUEST: Let's talk about the latest OECD findings. I mean, we know there is growth, and we know that it is extremely lopsided towards emerging markets. G20 failed, surely, to deal with the imbalances question.
PADOAN: Well, I see the G20 results as a half full glass, frankly, because the process is difficult. The G20 have begun to set up a process, more could be done, but it needs to be done and I believe under the French presidency it will be done.
QUEST: What is the risk if it is not done, short term. Do we just muddle on through, or is there a ticking time bomb waiting to go off?
PADOAN: Well, there is a risk, which need not to be underestimated. Because if unilateral operations go forward, then the risk, the next step would be protectionist. Not just in trade but in more importantly in capital movements. And that would be a serious threat to the global economy, not just to parts of it.
QUEST: The sort of capital markets, the sort of movements, measures we've seen, both in Brazil, and Singapore, and countries in Asia. Can we live with them if it remains contained like that?
PADOAN: Well, they may have short-term merits to cope with excessive capital inflows, but in the longer term what we really need is to have more flexible exchange rates around the globe, including in China, and not just there. This is needed as part of a global strategy to address imbalances.
QUEST: Finally, sir, we had-what light is flashing at the moment for the European economy? Is it an amber light of warning? Or a bright red light of danger?
PADOAN: Well, it is half way, and I hope it is understood clearly that actions need to be taken, both by individual countries, including the ones we have mentioned earlier. And the European level with strong institutional cooperation between countries and bodies.
QUEST: The views there of the chief economists of the OECD. With the question of whether or not it is just a sniffle, or pneumonia.
Coming up, in just a moment.
(BEGIN VIDEO CLIP)
(WALL STREET BELL RINGS, ROARING ENGINES)
QUEST: General Motors roars back to the stock markets with fanfare.
QUEST: General Motors shares are up more than 5 percent on the company's first day back on the New York Stock Exchange. They are trading at nearly $2 higher, than the $33-per-share price set yesterday. CNN MONEY.com's Poppy Harlow tells us more about what is really a record breaking return.
Who would have thought, 18 months ago, GM, down, out, bust, and bailed out, and now back on the market.
POPPY HARLOW, CORRESPONDENT, CNNMONEY.COM: Yes, it was pretty much considered a dead company. The U.S. government coming in, Richard, as you know, bailing it out for $50 billion. The thought around this country was there is no way the taxpayers are going to get paid back for that. It is less than two years later, the IPO this morning, on the New York Stock Exchange.
A lot of excitement, I was down there on the floor. We interviewed the CEO Dan Akerson, the new CEO of General Motors. And, Richard, he is the fourth man to lead this company in less than two years. Let's hope he has what it takes to lead this company out of the mess that it has been in for decades now. Ringing the opening bell, there at the New York Stock Exchange. The new GM IPOing, the old GM IPOed all the way back in 1925. But the first question I asked him, and the most important, really, for U.S. taxpayers, is will you be able to pay back U.S. taxpayers in full, $50 billion? I asked him that. We went on for a broader conversation, take a listen to part of it.
DAN AKERSON, CEO, GENERAL MOTORS: Sure, I'm hopeful. And I'm not saying it can't happen. I just don't know what the markets are going to do. And, huh, but I do think the company is well positioned, producing the best cars in the world. And we have got a strong balance sheet, and a good operating model. So things look good for General Motors, but gee, I don't know, if you could tell me what the markets is going to do in a couple of years, I might be able to make a prognostication.
HARLOW: It has been 16 months since the rescue, the bankruptcy of General Motors. Why is this right time to bring the new GM public?
AKERSON: Well, we think the economy is rebounded a bit, from a national perspective it is good. From an industry perspective it is the first time in a generation where there is a level playing field. Some of the transplants, if you will, came in before they didn't have health care costs, they had a different wage structure. All of that has been rationalized. So we think from an industry perspective it is good.
And we think, lastly, from a company perspective it is good. We have produced three quarters now of excessive earnings, of $5 to $6 billion, is what is projected in profits this year. So we feel the company is in a good place, and our products are great. And good time.
HARLOW: No doubt this company, the new GM, is healthier financially, you have paid down a lot of your debt. But at the core, Dan, what makes this GM stronger than the other one. What can give taxpayers, investors around the world, confidence in this new company.
AKERSON: Great question. We are-we are single, and laser in our mission and our vision. We want to design, build and sell the world's best vehicles. And we are getting rave reviews on great cars from Chevy to Buick, to Cadillac, and GMC. So, you know, the taxpayers are getting a bit of a benefit, a little bit of money paid back to them today. As you come on down and look at the cars, they are great, too. Maybe that is another big plus for them.
These are world-class cars with world-class designs and reliability, durability, and quality. It is a different GM.
HARLOW: Not that GM is public once again, what makes this company different operationally, and also will compensation change before you really had to answer to the government, the U.S. taxpayer own 60 percent of the company.
AKERSON: Well, we still have to answer to the government and, you know, we-huh, we're just going to have to-we're going to pay competitive rates, and we have got great people. And so I'm not concerned about that.
HARLOW: And you know, Richard, GM has paid back now $22 billion of that $50 billion it owes U.S. taxpayers, still a long way to go there. An interesting side note to this is, as you know, China is a more important market for GM now than the U.S. It has sold more cars there this year than in the United States. And a Chinese partner of GM, SAIC Motor Corp, bought a 1 percent stake, picking up more than 15 million shares, in this IPO. We are going to want to keep an eye on it. See if that stake goes even higher. Because they are a partner of GM, but they are also a competitor of GM as well.
QUEST: That's why I like your reports, you always manage to get to give us a little bit more. Poppy Harlow, in New York.
Investors might be buying the stock, but will the customers buy the cars. After so many got burned by GM's bankruptcy last time around, winning back public trust might be more difficult. CNN's Maggie Lake in New York.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT (voice over): We first visited classic car dealer Jim Collins in his field of dreams a year and a half ago, as GM prepared its descent into bankruptcy. A passionate booster for the GM brand, Collins believed the iconic carmaker would rise again.
JIM COLLINS, GREASED LIGHTNING CLASSIC CARS: I hear it every day. People come in and they'll see this car outside, and they say why don't they make a car close to that. I think they have the capabilities to make tremendous cars.
LAKE: 18 months later, Collins is still lovingly restoring vintage GM vehicles, but his take on the future of GM has changed dramatically.
(On camera): In the darkest days for GM, you were actually hopeful. You thought they had the ability to make a comeback. I would think that you would be jumping at the chance to buy in the IPO. Are you?
COLLINS: I still love GM. I mean, it is in my blood. But it is really the way they handled the bankruptcy that soured me on the company.
LAKE (voice over): Collins cannot forgive GM for forcing hundreds of dealers out of business, and for wiping out the entire value of old GM stock during restructuring. He, himself, was an investor and lost thousands of dollars.
COLLINS: I don't think it is a good buy. I think, first of all, if they did it to the stockholders once, maybe they'll hit a rocky road in the future and they'll say, hey, you know, we cleared the decks once. We gave it to the stockholders, let's do it again.
LAKE: Judging for the massive demand for shares in this record IPO, many on Wall Street disagree.
DAN VERU, PALISADE CAPITAL MANAGEMENT: Listen, their fate is in their own hands. If they continue to execute with new and innovative products that consumers want to buy, this company can easily achieve its old glory.
LAKE: Supporters know GM is not solidly profitable with a fraction of the debt of the old GM. Government ownership in the company has also been greatly reduced. And in a generational shift, analysts say young Americans appear more open to buying U.S. cars. Thanks, in part, to the buzz over vehicles like the soon-to-be released electric car from GM, the Chevy Volt. But perhaps the biggest story is in emerging markets like China.
VERU: More than half of the growth story of General Motors is outside the United States. And that is something that is going to be a very big lever that is going to make this a successful company.
LAKE: Despite these arguments, Jim Collins stands his ground.
COLLINS: They still have high legacy costs. They still have a battle with the other automakers. Ford didn't go through bankruptcy. Ford survived through good management and good cars. And what is their stock at? $18, $19, wherever it is? Why should I pay, you know, $32, almost double for General Motors?
LAKE: Keeping GM's past alive, but wary about its future. Even as GM's IPO surpasses expectations. Maggie Lake, CNN, Freehold, New Jersey.
QUEST: When we come back, QMB turns into "Q&A", in a week of a royal engagement.
QUEST: Time now for a little "Q&A" together in the CNN NEWSROOM, and around the world.
ALI VELSHI, CNN ANCHOR, CNN NEWSROOM : Hello, again, Richard.
We normally tackle the top stories of global finance, innovation and intrigue, today we are focusing on news of an upcoming royal wedding.
QUEST: Ah, I can feel your bosom swelling with pride at the royal nuptials, Ali. Prince William is officially engaged to Kate Middleton. It is a story that is burning up the airways and the Internet around the globe, not just her in London. But why is everyone so fascinated?
Ali, I went first last week, so it is your turn first; 60 seconds on the clock.
VELSHI: All right. Let me start by saying not everyone is fascinated by the royals, quote, "The fascination with the royals is largely a media- created illusion", end quote, reads a post on my Facebook page.
But I think the monarchy remains relevant, and not just to Brits, like Richard. Elizabeth II is obviously queen of the United Kingdom of Great Britain and Northern Ireland. She is also queen and head of state of 15 other independent sovereign nations, including Canada, Australia, and New Zealand. I like the idea of a head of state operating separately and independently from an elected government. Sure monarchies have created lots of trouble in the past. They have often acted as a unifying force for their politically, socially or religiously divided subjects, in times of strife. And they serve as remarkable good will ambassadors to the world. How much is that worth? Well that is up each country, although dodgy royal behavior doesn't help their dwindling cause.
Nepal, by the way, abolished is monarchy in 2008, but as we have seen in the last few years-
VELSHI: --we can't always count on elected officials to do the right thing, Richard.
QUEST: All right. Here we go.
VELSHI: I'll remove my hat out of respect.
QUEST: Well, more like out of humor. Here we go.
(DESK BELL CHIMES)
The monarchy and the voice, rule Britannia. It is enough to get any true Englishman's heart just swelling with pride. Yes, we have been fascinated by this royal event. But why? I think the reason is because you have to be born to be royal. You can't just join the club, unless you are married to it. You actually have to be born into it. But that is not all. While there is glamour, and yes, you get your face on a teapot, or a teacup. There is duty as well. Decades of duty in terms of the queen, who next year celebrates her diamond jubilee. Ultimately, though, being royal is all about having that little bit of extra that none of the rest of us can ever have. And that is what attracts us to this family.
And in the words of the famous constitutional writer, Badger Ho, remember what he said-
We must never let daylight into magic.
VELSHI: I didn't think music was allowed, and it can stop anytime now. Nicely done, Richard.
But now it is time to find out who knows what about something. Time to introduce the Voice.
THE VOICE: All right. My noble, knowledgeable knaves, this week we delve into all things royal. Last week Richard, you took the crown, winning the quiz. But Ali, old bean, keep a stiff upper lip. Given the topic, you've still got a chance, no matter how slim it may seem.
Gentlemen, gray matter at the ready. Here is your first question: What is the world's oldest continuous monarchy? A., Japan; B., England; C., Denmark; D., Monaco?
THE VOICE: Which is it, Ali?
VELSHI: I say it is Denmark.
THE VOICE: I say you are wrong.
QUEST: Well, the question is, is it the Chrysanthemum of Japan, or the England, or Monaco? I'm going to go-
THE VOICE: Richard Quest is correct, it is indeed Japan.
Japan's imperial dynasty is believed to have started in the 600 B.C., way to go.
Next question in queue: According to "Forbes" magazine, which The Voice has never read, but I do love "OK" magazine. Very saucy. According to "Forbes" magazine, which royal is the world's richest? A., Queen Elizabeth; B., Sultan of Brunei; C., King Adulyadej of Thailand; or D., King Abdullah of Saudi Arabia?
(DESK BELL CHIMES)
THE VOICE: Richard Quest.
QUEST: Well, I'm going to go with, Abdullah of Saudi Arabia.
THE VOICE: I'm going to go with, wrong. Ali?
VELSHI: Sultan of Brunei?
THE VOICE: Wrong! Richard Quest.
QUEST: Oh, uh, then, I mean, it can't be the Queen of England, so it must be Thailand?
THE VOICE: Correct.
The Kind Adulyadej family fortune is estimated at around $30 billion. Two for Richard Quest.
OK, final question: Reputations will be celebrated or sullied based upon who gets this one right or wrong. So no pressure.
According to the Recording Industry Association of America, which artists sold the most albums? And please do take notice of how our cracker jack graphics team has ph so cleverly crow-barred royalty into each choice below.
So, who sold the most albums? A., Queen; B., Prince; C., Elvis, the King; D., Michael Jackson, the King of Pop?
VELSHI: What an excellent question, Voice. I'm going to go for it.
THE VOICE: Ali?
VELSHI: Michael Jackson.
THE VOICE: Wrong!
VELSHI: He's going to win! He's going to win!
QUEST: No, well, it could be, oh-
VELSHI: Say it. You know what you are going to say. You know, just do it.
QUEST: I'm going to say, is it Prince or is it Elvis All right. Let's go with Elvis.
THE VOICE: It is Elvis.
THE VOICE: Elvis' album sales are said to be more than a billion. Michael Jackson brings up the rear, close behind it, number two.
Our winner this week, Richard Quest takes the crown, while Ali is handed the scepter of defeat. Till next week gentlemen, when question time returns.
VELSHI: Thank you, Voice.
QUEST: All right.
VELSHI: Good to see you.
QUEST: That will do it for this week.
Remember, we are each here each week, Thursdays on QUEST MEANS BUSINESS, 19:00G.
VELSHI: And in the CNN NEWSROOM, 2:00 p.m. Eastern.
Keep the topics coming on our blogs, CNN.com/qmb and CNN.com/Ali.
Tell us what you want us to argue about each week.
And, Richard, you have a great one.
I'll see you next week.
QUEST: Have a good one, Ali.
See you then.
Whoa, that was tough.
Now, in the headlines for all the wrong reasons, the man in charge of turning around G.M.'s fortunes should be celebrating its record IPO. Instead, he's paying -- well, he's paying civil penalties. Steven Rattner's kickback charges, income.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And here, the news always comes first.
So sources close to the investigation into a suspicious bag in Namibia says no explosives were found. Luggage handlers found the bag moments before it was put on a plane bound for Munich. Sources close to the investigation say the bag contained a clock with wiring attached.
With Haiti caught up in the grip of a cholera outbreak, violent anti- UN protests have now broken out in the capital. Chaos reigns in one city over claims that U.N. peacekeepers were responsible for the outbreak. Six people were injured by gunfire. Cholera has claimed more than 1,100 lives so far, according to the Haitian Health Ministry.
The Nobel committee says six countries are refusing to attend the ceremony that will honor the winner of the Peace Prize. Russia, Kazakhstan, Cuba, Morocco and Iraq are declining the invitation. China has said from the beginning that it opposes the prize for the Chinese dissident, Liu Xiaobo.
It dominated the headlines for more than two months and today, all 33 of the rescued Chilean miners are back in the spotlight, as they have arrived in Los Angeles. Along with five of their rescuers, they are special guests of CNN. They will attend the CNN Hero's All Start Tribute that will air next week.
Now, General Motors had a record breaking IPO today. It wasn't such a good day for the man who President Obama put in charge of turning the car industry around. He was the man you heard on this program last night, the former car czar, Steven Rattner. He talked elegantly and eloquently about how he'd turned the industry around.
But today, he agreed to a hefty payment in connection with a kickback case.
Felicia Taylor is in New York.
This is bizarre.
Tell us more about it.
FELICIA TAYLOR, CNN CORRESPONDENT: Well, you know, another day, it's certainly a different story. And talk about raining on somebody's paraded. Just when he is sort of relishing in the fact that G.M. is -- is back up and running and the IPO has been very successful come these charges and now a settlement.
The charges have been floating around for -- for quite some time. This is something that we've been hearing about. But today, the settlement comes -- $6.2 million is what he's going to pay to settle with the SEC. It's $3.2 million in restitution and another $3 million as a penalty.
What it does is settle the charges that he paid kickbacks to win business the New York State Pension Fund for his investment management firm, which was called Quadrangle. That is now defunct. It doesn't exist anymore.
Certainly, when I spoke to him the other day, I took the opportunity to ask him to defend his stance.
Here's what he had to say.
(BEGIN VIDEO CLIP)
STEVEN RATTNER, FORMER U.S. "CAR CZAR": Well, what you read was a -- a potential settlement that would involve some limitations on my securities activities for two years. And I can't comment on the specifics, because these are all still in the rumor stage.
I would just say, again, that like in anything, there's a -- a point in which you want to settle and move on with your life and there's a point at which you say this is just wrong and I'm going to fight it. And where this will come down in that regard, time will tell.
(END VIDEO CLIP)
TAYLOR: So, obviously, in the last 48 hours, they had been trying to come to some sort of a settlement. At the time that I spoke to him on Monday, that clearly hadn't happened yet. But he -- he was quite clear that he hadn't actually officially been accused of anything publicly.
And, again, he chose to -- to defend his opinion of what could have -- might have gone wrong.
(BEGIN VIDEO CLIP)
RATTNER: I have, for 35 years in the working world in three different carriers, tried to conduct myself with honesty and integrity. And until now -- and hopefully never again -- no one has ever questioned my honesty and integrity. They can like me or not like me. They can agree or not agree with what I say or do, but I have never before had my honesty and integrity questioned. And -- and I will resolve this in whatever manner seems appropriate. But I'm not going to resolve it in a way that I just don't feel is appropriate, given all the facts and circumstances.
(END VIDEO CLIP)
TAYLOR: Now, this is far from over. He will be barred from the securities industry for two years. However, the New York attorney general, Cuomo, is also looking to sue him, not once, twice, but three times on different charges related to the same matter, looking for at least $26 million and to bar him for life from the securities industry.
So, part one is done, but this is clearly a story that's going to continue -- Richard.
QUEST: Felicia, fundamentally and, you know, me -- I'm going to ask you a question, and feel free to say that it's an improper question for an answer you can't give.
But is this is -- is this a technical fault by the man, that he's just got caught up in something?
Or is there something nasty and smelly going on under there?
TAYLOR: You know what, it's not an unfair question and it's -- it's a good question. And it's -- you know, the devil is in the details in this one, a little bit, because it's a question of what kind of evidence is there, really, to prove any kind of wrongdoing.
Everybody, you know, plays on relationships and friendships in business dealings.
The question is, is did the individual parties in question actually come to meetings and go through the normal process to actually solicit deals and funds into an investment management operation?
The other part of this is that there are certain New York State officials that have already plead guilty and will be facing charges coming up in December.
So this is a -- a little bit more intricate than just involving Mr. Rattner himself. So, again, like I said, the devil is in the details...
TAYLOR: We don't know what kind of correspondence is in evidence right now. But clearly, there is something to be accused of, because he's willing to settle. He didn't accept the $20 million but he was willing to -- to come half way or -- or a third of the way and take a $6 million settlement to, in his words, be done with it.
But it's not over.
TAYLOR: The New York attorney general -- Governor-Elect Cuomo is certainly on his heels.
QUEST: We'll talk more about it.
Felicia, many thanks, indeed, in New York tonight.
As the aviation industry recovers, the airlines are looking to spread their wings -- pardon the pun. The chief execs of Air France and AirAsia on this program next on their expansion plans.
QUEST MEANS BUSINESS.
QUEST: As the aviation industry recovery continues, Air France-KLM is branching out. The company's chief exec has said that Air France will add up to four new routes to China by the end of the year. It's also looking for new partners in emerging markets like India and the Middle East. And Air France is emerging from a prolonged aviation downturn. It's return to profit in the second quarter, earning nearly $400 million.
The chief executive of Air France-KLM, Pierre-Henri Gourgeon says it's been a satisfying quarter and investors seem to agree. Shares gained more than 5.5 percent in Paris.
I asked the chief what was behind the profits -- was it more passengers or passengers paying more?
(BEGIN VIDEO CLIP)
PIERRE-HENRI GOURGEON, CEO, AIR FRANCE-KLM: Passengers are not paying more. It's even less in front class, on long haul, and in rear class maybe a bit more. But globally, the reason of the result is more recovery for the -- of demand. We have a significant increase in load factor, in passenger activity, a very strong increase in load factor in the cargo activity.
QUEST: You hope to see yields return and restore and passengers, particularly in premium cabins, paying more, and you're not seeing that yet?
GOURGEON: Not yet, but we -- we are comfortable with the situation. I mean I do not speak of it whether or not we will are -- we will recover exactly the same level of revenue per available seat kilometer in front class. If it is not the case rapidly, we can adjust our fleet, for example, the mix within front class and the economy class. It's just a matter of deciding which kind of aircraft and which arrangement in your aircraft which we'll use in the fleet.
QUEST: Do you still stand by your comments -- your very critical comments -- against the Gulf carriers, when you effectively said they were endangering European hubs?
GOURGEON: Yes. Yes. I mean we have to say something about that. We are in a business, of course. And our business is to connect Europe and the rest of the world, as much Asia as North America or South America.
Now, we are all working on the level playing field, more or less, between European -- or between European and U.S. carriers. And we say on a level playing field.
Now, you see all of a sudden one airline -- one airline who said 58 A380s is not enough, give me a bunch or 32 more that will make a round number of 90. Ninety is more than twice the total of the...
GOURGEON: -- of the three big international airlines, Lufthansa, which is an air -- an aircraft.
What are they going to do with that?
Where will the operate those aircraft?
And then they come to our government, they come to other European governments and the European Union, they come to Canada, they come everywhere and they say we want traffic rights.
QUEST: The A380, now I know your 380s do not have Rolls-Royce engines. You have the Alliance GP700 engines. But Emirates has said they are worried about contagion. They are worried about a lack of confidence in the aircraft.
Are you concerned that your 380s -- A380s -- will be tainted, as, indeed, the aircraft will be tainted by what's happening now?
GOURGEON: It's an incident mainly and a problem and a concern for Rolls-Royce. And Rolls-Royce is addressing it with all the motivation and they already bring in the solution. It will not have any effect on the aircraft, I am sure. Rolls-Royce will overcome it. And, of course, of the aircraft which are not equipped, it is, as usual.
The A380 is a very good aircraft, a very efficient aircraft. Passengers want to get on board.
(END VIDEO TAPE)
QUEST: Pierre-Henri Gourgeon of Air France, talking to me now.
Soon, Air France will have extra competition. Next year, the low cost Malaysian airline, AirAsia X, is adding a route between Paris Orly and Kuala Lumpur, building on its own successful move into the U.K. market. AirAsia's chief exec, Tony Fernandes, says after dipping the toe into the low cost long haul market in Europe, he's now putting his whole foot in it.
Has he cracked this market?
TONY FERNANDES, CEO, AIRASIA: Well, I think that the main thing is the huge connectivity that we provide passengers when they arrive in Kuala Lumpur. And I think there's been the big crack, that 80 percent of the passengers that fly on AirAsia X are now using AirAsia to fly to Barly (ph), Phuket, Hanoi, Singapore, Bangkok, Siamret (ph).
And, obviously, people from those countries are also flying into Kuala Lumpur to fly onto London and our other ARA direct destinations. And I think there's been a big flip on other low cost long haul models.
QUEST: You've done it very gently, haven't you?
London came on and if you look at other airline models, it's a rush to grow as fast as possible. But you've established this quite some time before you dipped your toe.
So how long are you going to give it with Paris before you add Frankfurt, Rome, Madrid and all the rest of them?
FERNANDES: I think the key for us is development of fleet. And we certainly, all those markets you mentioned are markets we want to go to. The key is we don't think the 340 is the optimal aircraft. We really want to get stuck in with the 350, which is due in 2013.
In the interim period, we're looking at an advanced model of the 330- 200 with Airbus. It's really getting that fleet right for us to crack Europe big time. But the experience in London, the tremendous response we're getting from Paris has certainly excited us about a much deeper penetration into Europe.
QUEST: So, when we spoke at the launch of AirAsia X, you were very keen to keep it standalone, at arm's length, in case the whole thing went rather badly wrong.
Now, you said -- because it was -- it was at the same time of -- as Oasis and all those other airlines. But your tone now, Tony, is very different. You're talking about expansion.
FERNANDES: Yes. I mean I -- I -- I still believe very clearly that the models should be separated. AirAsia, the publicly listed company, will continue doing the short haul model, four hours, and putting all our capital into A320s and dominating that space in Asia.
AirAsia X, separately funded, soon to be listed, will be our long haul model -- not to four hours, will be AirAsia, four hours and above will be AirAsia X.
I think the dipping of the toe has gone into putting our whole foot into the lake. We see a very successful model emerging. And we think separately funded, publicly listed, we have a huge opportunity to really grow a completely new market, which I'm sure others will follow us.
QUEST: We need to talk...
FERNANDES: This is an evolutionary step, I think.
QUEST: Sorry, we -- we need to talk about Lotus racing and the excellent season that you had. And now, of course, because your team, which -- of which CNN is one of the sponsors, beat Richard Branson's team, Virgin Racing, Sir Richard is going to be doing what, Tony?
FERNANDES: He will be -- I had the -- the joy and pleasure of presenting him with a flight attendant badge and a flight attendant uniform on AirAsia. He can have a choice of flying Paris, London -- Paris-Kuala Lumpur or London-Kuala Lumpur. But I think we settled last time on London- KL. He will be a cabin crew. He will dress up as a stewardess and he will do all the duties that a normal AirAsia cabin crew does.
(END VIDEO TAPE)
QUEST: And we will be on board to see that happen.
The U.S. markets are having a very strong session. The Dow is up nearly 200 points.
The bailout of G.M. was highly criticized by many on the right in the U.S., particularly those in the so-called Tea Party.
I'll tell you more about an interesting article if you can watch, in just a moment.
QUEST: Now, I was telling you about the U.S. markets. And this is how the Dow Jones looked. This is -- this is a gaper, two bells, I think. Up 180 points, 11188. And a lot of that is because of General Motors, which is up 5 percent. But the mere fact the company is back in business as a stock on Wall Street, with its multi-billion -- the largest IPO in history, that's given a real boost to the Dow Jones, up nearly 11200.
Now, that bailout of G.M., as I was saying, was highly criticized by many on the right in the United States, especially those in the so-called Tea Party. Now, those who supported the bailout are saying told you so. The money was well worth it.
This is a thoughtful article that says the Tea Party bet on the wrong horse. I posted this article for you to read. You can read it at Facebook.com/cnnquest. See if you agree.
Did -- did the -- the bailout -- was it worth it or was it really, philosophically, inappropriate?
Now, the boards glowed with Irish green as shares made strong gains in Europe. It wasn't just because of the possibility of a bailout in Dublin. A clutch of encouraging corporate results and positive news on the U.S. economy. As I was saying, G.M. was a big factor in all of that.
This is the -- well, that's not -- that was -- that's the American markets. And now we move on, of course, to European markets, where the FTSE was up 1.3, the DAX nearly 2 percent and the CAC-40 again, nearly 2 percent.
You're up to date with the markets.
Let's turn our attention to the weather.
The annual pilgrimage to Mecca has neared an end on Thursday. The unusual weather patterns was the talk of the event -- rainfall.
Pedram is with us at the World Weather Center.
PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, Richard.
The rainfall there an unusual circumstance for them, because we're talking about the Arabian Peninsula and just, you know, pick your choice out here. Looking at the Arabian Peninsula, very little moisture to work with. But one complex of storms managed to develop. And, again, put the loop here in motion for you in the last 24 hours. It comes right off the Red Sea and look where it pops up -- over several million people producing moderate to, at times, heavy rainfall for a few hours out there, causing some problems for the folks, of course, headed out for the any purgal -- plig -- well, pilgrimage out there, 2.8 million people staying in tents. And the rainfall there, again, all tapered off fairly rapidly after it began falling.
But take a look at the some of the photographs coming out at Mina, Saudi Arabia -- thunderstorms, they had them. And, of course, with the folks outside, that becomes a problem. And the rainfall, it is unusual, but you've got to keep in mind December, January, February are the wettest months. And it starts off the rainy season here, the middle portion of November. And you can see the water about ankle deep out there.
And, again, the 2.8 million folks staying in the tents in the area by Mina out there, this is what it looks like. Fortunately, the reports right now, no extensive problems. Just a lot of mud to deal with. And the rainfall has all tapered off, 23 degrees right now. And the humidity, a little balmy for them, up to 72 percent out there. But the winds are on the calm side.
But it's very intriguing to see one storm pop up and over the Holy City as of the last few hours. But again, everything all done with. And any rainfall for them is good news. And you can take a look there. Would have severe to moderate drought, especially out toward Syria, Jordanian, areas within Israel and also around Egypt and, also, say, Libya getting very, very dry conditions. So, certainly any rainfall is going to help.
How about some rainfall across Europe?
No thanks to that for some folks. They've had a storm system one after another rolling through. Another one beginning to backtrack or what we call retrograde, as it pushes back out to the northwest. But some showers in the forecast there. But the travel delays right now are looking moderate, if anything. A few showers around London tomorrow morning, lingering on into the afternoon hours. But nothing really extensive.
And you're going to see some problems around Dublin. Breezy conditions, yes. So a bumpy ride out there. You're going to have a number of delays. But again, the storm system begins to gradually pull away. Another one pushes into the Bay of Biscay. But overall, the weather going to improve here into the weekend, with light showers and perhaps some cloudy skies for the weekend, at least for around as recently as within, say, London and Madrid, into Barcelona, going to see a few showers out there, as well -- Richard.
QUEST: All right, many thanks, Pedram...
QUEST: -- at the World Weather Center.
And in just a second or two, I'll have a Profitable Moment.
QUEST: Tonight's Profitable Moment.
Why would everyone want Ireland to take bailout money when the country doesn't need it?
Surely bailouts are for the bankrupt, not those who are just short of a bit ready here and now. The reason is the European leaders are desperate to avoid contagion from Ireland into other peripheral countries, like Portugal and Spain. And putting the bailout in place, like they're looking at, at the moment in Dublin, would take the pressure off.
The game of charades is now being played fully between Dublin and Brussels. But it won't last long. The situation is too serious.
Dublin is now admitting it will have to put in place some form of financing agreement with E.U. partners, whether they take the money or not, if only because if they don't do it now, it may be too late.
Playing chicken with the market can have disastrous results. And that's what they're looking at in Dublin tonight.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London, thanking you for your time and attention.
Whatever you're up to in the hours ahead, I do hope it's profitable.
"WORLD ONE" starts now.