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QUEST MEANS BUSINESS

Italy's Northern League Agrees to Berlusconi's Controversial Austerity Measures; Japanese Camera Maker Embroiled in Multi-Million Intrigue

Aired October 25, 2011 - 14:00   ET

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


MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: The home front. Political struggles mount on the eve of the Eurozone summit.

Taking on Olympus. The former CEO tells CNN why he is in contact with the FBI.

And the brawn drain as the NBA looks set to cancel more games we look at the long-term fallout.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Now it is the night before European leaders are due to deliver their grand rescue plan and we are already seeing teething problems. It is not so much what his happening in Brussels as what is going on back at home really.

In Germany lawmakers insist on a full vote on crisis measures being negotiated in Brussels. And that is changes to the EFSF, bank recapitalization haircuts to Greek bond holders for example. The vote should go Merkel's way though. She is due to address lawmakers on Wednesday. But it is tight for her. The whole process could put the brakes on efforts to solve Europe's debt crisis all together.

Merkel is not the only Eurozone leader, though, facing political problems at home. In Italy Berlusconi's cabinet has failed to agree on emergency budget cutting measures including an increase in the retirement age. Now another emergency meeting is being planned for today. And they hope to pass measures by Wednesday. Italy's debt burden, by the way, is 127 percent of GDP. And Berlusconi is under great pressure from Eurozone leaders to act.

And there is a sign there maybe more delays once leaders get to the summit. Now reports say that the EU finance ministers meeting was canceled did worry the markets. The EU Commission tells CNN, though, a finance ministers meeting was never planned for tomorrow. Eurozone leaders will still hold their summit, as planned, and they are expected to agree on some sort of plan. A finance minister is expected to meet later in the week now, though.

Now, EU leaders want the Italian government to have a plan in place for Wednesday. It is a crucial economy, not just for Europe, but the world. But Mr. Berlusconi is still in talks with ministers tonight.

From our Rome bureau I am joined now by "Guardian" newspaper correspondent John Hooper.

Thanks so much for joining us, John. Just paint a picture of the struggle that Berlusconi is facing right now.

JOHN HOOPER, JOURNALIST: He has a big problem with his chief ally in the government, Umberto Bossi (ph), who is the leader of the Northern League, who is staunchly rejecting any idea of abolishing a kind of pension which is unique in Italy, whereby you get the money after so many years of working rather than according to your age. Something that can allow people to retire quite comfortably at the age of 58, 59, 60, and that is really the problem that he has now.

FOSTER: OK, I notice you lost your earpiece. Are you able to-I'll just let you put your earpiece back in. Technical problems galore.

I'm just wondering, you know, Berlusconi has got these problems and there is a political fight going on in Italy how easy is it for him? How easy is it going to be to resolve this by the time the meeting comes around tomorrow. Because it is vital, going ahead, but not just Italy, but Germany, and all these other countries, deal with their domestic problems before they go into this meeting?

HOOPER: Absolutely. The problem that we have is, I think, two fold. First of all, to persuade the European leaders that this package, which we are told he is going to take to the meeting, has got the full backing of the everybody in his government. And secondly to persuade them that these measures are real and will really be put in place, because this is a very, very weak government. And some people are saying that he could easily be out of office in January, so he's got a double problem of credibility.

FOSTER: OK, thank you very much joining us, Mr. Hooper.

I'm just going to bring in some breaking news that we have got in from Reuters. We are quoting Reuters here because we are getting reports that the Northern League has actually reached some sort of agreement with Berlusconi. So it is looking good for him at this point, but we'll confirm that for you later on in the show.

Now, Germany's chancellor, Angela Merkel, is also trying to persuade lawmakers to back her. She needs their full support to go to Brussels and to agree to the great Eurozone rescue plan. Without a mandate her hands will be tied.

CNN's Fred Pleitgen joins me now from Berlin.

Fred, Italy's one story, but Germany is quite another because Merkel needs authority going into this meeting. Has she got it?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, Merkel needs authority, Max. And also, of course, she is arguably the most important player at that Eurozone summit, simply because Germany is, of course, the largest Eurozone economy and at this point, also, one of the most robust Eurozone economies as well. So, yes, she does need full parliamentary support. And it is looking very much as though she is going to get that. However, it seems as though she is going to get that support mainly from the opposition parties. There are still a lot of people within her own party and indeed her own governing coalition who are not very fond at all of boosting the EFSF.

I spoke to one of those people today. This is a long-time ally of Angela Merkel, but someone who says he simply doesn't believe that these bailouts are going in the right direction. Let's listen to Wolfgang Bosbach, from Angela Merkel's party.

(BEGIN VIDEO CLIP)

WOLFGANG BOSBACH, GERMAN PARLIAMENTARY MEMBER (through translator): We are burdening the young generation with risks that I simply cannot support. You can do that if these measures would really solve the problem. But in the past month the opposite is happening. None of the expectations and promises have been kept. Things have not gotten better they have gotten worse. And in that situation it is strange that I would be called a renegade, simply for standing up for the ideals that my party has been preaching for years.

(END VIDEO CLIP)

PLEITGEN: So that is what we hear from a lot of the skeptics about all this, is that they don't really feel that what is being debated right now is going to be a long-term solution. Of course, we are basically talking about two matters here. One of them, as you mentioned, will be the write down that banks will probably have to face on Greek bonds, where some people are talking about up to 60 percent. But the other thing are these leveraging instruments to try to boost the EFSF.

And I do actually have-it's quite windy here, right now, but I'll show it to you anyway. The draft that German parliamentarians got about what the German government wants to do, about how these leveraging instruments are supposed to look like. There really isn't very much. It is only four pages and one of the things that parliamentarians are complaining about is that this is all very vague. They are not really getting enough information to make a competent vote, Max.

FOSTER: OK, Fred, so the domestic politics partly dealt with-or how does this change her hand as she goes into the meetings. What is she going to compromise on? What isn't she going to compromise on?

Well, it certainly would change her hand going into the meetings a great deal. I mean, if the German parliamentary vote were to fall through, tomorrow, at noon, when it is supposed to take place, you would essentially go to the Eurozone summit with nothing. And not being able to say anything there, to sort of make any sort of compromises there.

What the Germans do want to do is first of all they want that pretty big haircut to be taken by the banks and other investors who hold Eurozone bonds. That has always been one of the big disagreements between France and Germany. Where at the beginning, of course, it was said that private investors would take about a 21 percent haircut, now we are talking about 50 to even 60 percent. The French were always very much against that, because their banks do hold a lot of Greek debt.

It seems as though the Germans will probably win on that point. The other point is the leveraging systems where it still seems as though there are some negotiations that are still being made there, hence all the information that the German parliamentarians are getting from Angel Merkel is still fairly vague. But it seems as though, on a lot of the key points, the Germans are, at least for the most part, getting their way, Max.

FOSTER: OK, Fred, thank you very much. It really is right up to the wire isn't it?

Now each day we have been keeping a close eye on the hurdles, h ere they are, the euro leader have to clear before Wednesday's summit. Now the summit is in sight. See what we did there? And already the landscape is changing. Let's see how the hurdles have moved, though, since yesterday.

The EFSF arguably the biggest hurdle, as Fred mentioned, it is a German proposal and that is the one where the EFSF can be used as a form of debt insurance. And it would see a SPIV, or a special purpose investment vehicle, set up to attract foreign investments.

The other hurdle? How are we doing there? It is Greece, of course, in the middle, not responding to me today. The debate is over how much of that debt will have to be written down. Reuters is quoting an EU official saying that hard numbers are unlikely on Wednesday. So they are struggling with that hurdle. The banks, well, the markets are concerned that an ECOFIN meeting won't happen tomorrow, after the main one.

According to "The Wall Street Journal," the Dutch finance minister says they have already agreed on bank recapitalization, though. So there is no need for that meeting.

And the summit, there it is, it is planned for Wednesday, of course, and speculation remains over whether this will be the big bang of the damp squib. Certainly a lot of markets and economists really want this to be a point where things start changing; the politicians pull their act together.

Now traders were clearly worried by the hiccups we are seeing in the run up to the summit. They are concerned that Wednesday's meeting won't deliver the goods. That is a detailed comprehensive plan to solve the debt crisis, really. And financial stocks are among the worst hit shares out there today. The euro is fairly flat to traders seeming-seeming perturbed, really, when it emerged that a European finance ministers won't be meeting on Wednesday. But it is recovering its losses to trade close to a six-week high at $1.39.

Now investigators could be putting camera maker Olympus under the lens. We'll hear from the company's ousted CEO next, about mysterious consultancy fees amounting to almost two years' worth of profits.

(COMMERCIAL BREAK)

FOSTER: The former Olympus CEO Michael Woodford says he's in contact with the FBI over a mysterious payouts within the company. Woodford was fired by the board earlier this month. He says the move came after he asked questions about $687 million in consultancy fees in connection with a $2 billion takeover. The Japanese camera maker doesn't deny the fees were paid, but it does deny any wrongdoing. Olympus also apologizes for any concern to shareholders and to customers.

Michael Woodford spoke to our Charles Hodson earlier. He says there was more to this firing than simply stepping out of line with the company's management.

(BEGIN VIDEOTAPE)

MICHAEL WOODFORD, FORMER CEO, OLYMPUS: It has nothing to do with that. Olympus has paid, according to Thompson Reuters, the largest-ever fees to any M&A in the history of capitalism. It was three times what was paid with RBS bought AMB Amro. And that was a $70 billion euro transaction, 50 more times than the (UNINTELLIGIBLE). Olympus has paid nearly three quarters of a billion dollars, and we don't know what for. And it is being paid to parties we can't identify in the Cayman Islands.

CHARLES HODSON, CNN BUSINESS CORRESPONDENT: Why do you think it was paid?

WOODFORD: I can't speculate.

HODSON: Well, you must have a jolly good idea, otherwise you wouldn't make this kind of a fuss, would you?

WOODFORD: The concern I have, and I have been advised that there are links behind this to potentially organized crime, what is clear is it is inexplicable. And Mr. Kikukawa, Mr. Mari and the board haven't answered. We have been nearly three quarters of a billion dollars to unknown parties in the Cayman Islands. Come on, Charles, please.

HODSON: No, OK. I take your point on that. Do you expect that the regulators will get involved? Do you think that they will come to some kind of conclusion about what really went on?

WOODFORD: I mean, it is all in the public now. I pass my correspondence to the world's media, the SFO, and now I'm in communication with the FBI. This can't be hidden. This can't be put back in the box. This won't go away until Mr. Kikukawa answers in specific and definitive terms for what and to whom, three quarters of a billion dollars, $687 million.

HODSON: OK. But in terms of your own position, you had worked for the company for 28 years?

WOODFORD: 30 years.

HODSON: 30 years, in fact. For 30 years, I mean, didn't you-were you surprised that this went on?

WOODFORD: Totally shocked. And I'm still traumatized by it. I just found it incredulous.

HODSON: Do you think that this is in some case, at test case; in some sense a test case for Japanese corporate governance?

WOODFORD: I mean, I love Japan. And I don't you will have-this will be common. I don't you will have Japanese corporations on the Nikkei making payments of $687 million to unknown parties, for advice which is impossible to seem to substantiate.

What raises an issue is how Japan treats with this. It is not ambiguous. It is not subtle. It is explicit; $687 million to unknown parties in the Cayman Islands. You can't eliminate if there is any related parties. Accounts of the U.K. company from which the moneys arose, were qualified. But on consolidation, on the consolidated accounts, in 2009 and 2010, there was no note at all. And you can't say it is not immaterial. The amount was more than the profits of the whole corporation.

(END VIDEOTAPE)

FOSTER: Well, Bloomberg News says Olympus made a statement on its internal Web site, saying the company was considering legal action against Woodford, who the statement said, used his position to leak company secrets by questioning the fee and that he aims to ruin Olympus' credibility.

Meanwhile, we are getting more details now about the shareholders revolt a News Corp. We're hearing that more than a third of them voted against re-electing James and Lachlan Murdoch to the board at last week's annual shareholder meeting in Los Angeles; 14 percent also voted against their father, Rupert, from continuing as chairman.

Many angry at their failure to contain the phone hacking scandal that erupted this year. Here is what one group had to say at the meeting.

(BEGIN VIDEO CLIP)

STEPHEN MAYNE, DIR., AUSTRALIAN SHAREHOLDERS' ASSOC.: Poor governance, we have a gerrymander, where 70 percent of the shares don't get a vote. And you have the longest serving CEO. It is time to get on the governance high road. It is time to actually embrace good governance. The returns haven't been there.

(END VIDEO CLIP)

FOSTER: Now, because of the way the power is divided up amongst News Corp shareholders the Murdoch family's opponents never really had a chance to get rid of them. The Murdoch family and their close allies have voting rights and many other holders simply don't. Here we see 47 percent of all the votes cast are held by the Murdoch family or its staunch allies; 40 percent are in Murdoch hands.

And the other main shareholder, 7 percent held by the Saudi Prince Al- Waleed Bin Talal, and he is still loyal to the Murdochs. So Murdochs have all the authority on their side, really. The rest of the shareholders are here, 53 percent of them. That is the other shareholders who, basically, not all of them have the voting rights so they are not as powerful even though they have shares as well.

Crucially it is the Murdoch side that owns most of the voting shares. Well, we could take out those pro Murdoch stakes and we get a much different picture. Basically, if it wasn't for the Murdoch family's controlling share, James and Lachlan might have been voted off the board.

Now Michael Wolff says he says he doesn't expect James or Lachlan to be around by the time of next year's AGM. He has written a biography of Rupert Murdoch and earlier I asked him if he was surprised at the extent of the reaction against his two sons.

(BEGIN VIDEO CLIP)

MICHAEL WOLFF, FOUNDER, NEWSER.COM: Not in the least. I think that we have seen this, uh, this pressure mounting on the Murdochs-all people named Murdoch-for certainly since the summer. This company, this board, this family, are up against it, I think you might accurately say. They are feeling-they are feeling pressure from all quarters, from the media, from shareholders, politicians. And they are feeling pressure in three countries, in the U.K., Australia, and in the U.S.

FOSTER: Rupert Murdoch did point out that he acknowledged the seriousness of the phone hacking scandal, for example. But he thinks the attack from shareholders, some shareholders, is unfair. What is your view on that? Because he has made a huge effort to try to make amends for this phone hacking.

WOLFF: Well, I'm not sure that-I-I think one of the messages, here, is that he hasn't made enough efforts. And perhaps there are no efforts that he can make to actually fix this problem. And I think part of the message here is that the problem is the Murdoch family. And in specifically, the problem is of governance structure, in this company, that lets the Murdoch family run News Corporation as though it is a private company. As though they own it in its entirety, which they do not. And as we know it is not a private company, it is a public company.

FOSTER: So, how do you think the Murdochs will react to this? Because it was a humiliation; many people are saying, but actually you don't have to react in any way, because they have control of the company. The sons don't have to leave the board if the family doesn't think that is correct.

WOLFF: I think one of the things that it is likely to happen here is that the individual members of this family, who are at issue, make the decision. I-you know, that they-that they have to step down. They have to-have to offer the company and the rest of their family, essentially, their-they have to offer to fall on their sword, and I expect that will happen.

FOSTER: But disapproval was really expressed, really, about Lachlan and James, it wasn't about Rupert. So, how long do you give the sons, in their current roles?

WOLFF: Well, I certainly don't give them until the next annual meeting. I think that this is-this is on the, on the agenda now, and it is on the agenda for everyone within this company of what to do with the Murdoch family.

(END VIDEOTAPE)

FOSTER: Well, there is no love lost in the business world as we have been hearing there. But it even happens when your business is a dating Web site. Sean Cornwall is trying to reach perfect harmony with adverts. Your appointment with "The Boss" is next.

(COMMERCIAL BREAK)

FOSTER: That time again. It is time for "The Boss". Over the past few weeks we have been following Sean Cornwall. He is from the dating Web site, eHarmony. It has been a popular site in the U.S., but translating the language of love into new markets has proven more difficult. Now he has chose a agency to help create the killer ad. But will it be a match made in heaven? This is your appointment with "The Boss".

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Previously on "The Boss", cracking the code of love. Sean Cornwall looks for creative ways to gain new consumers in a tough market.

SEAN CORNWALL, EHARMONY: This is the first time that we are using (UNINTELLIGIBLE) creative agencies to produce TV spots. That is a big step for us as a company. It is a big step for us as an international business.

UNIDENTIFIED MALE: Sean Cornwall is visiting the agency that will be creating eHarmony's new U.K. adverts, Kamarama.

NICOLA MENDELSOHN, EXECUTIVE CHAIRMAN, KAMARAMA: Terrific to see you again. And as you know, everyone here is incredibly excited about the journey that we are about to go on.

UNIDENTIFIED MALE: As the head of international for eHarmony, Sean is familiar with the company's work. But this is the first time he's meeting Nicola, its executive chairman.

I thought it would be useful following the conversation, just to recap a little bit about our approach. And especially, the approach we take in terms of the strategic direction, if that sounds good?

UNIDENTIFIED MALE: For Sean today is about exactly that. Making sure Kamarama's vision is aligned with eHarmony's brand.

I think that it is very important that Kamarama bring in new thinking. Approaches from a different way, take our brand and change it in ways that they see best, and they apply their own experience, their insights, their creativity, to this challenge. But equally, I want to make sure today that Nicola and Kamarama, really understand the essence and ethos of the eHarmony brand.

UNIDENTIFIED MALE: There is nothing more important for Sean than being on message. But one mighty question remains: How can Kamarama turn eHarmony's big American brand into a global one?

UNIDENTIFIED FEMALE: Here, you know, we don't do dreams as big as the Americans do. You know, the American dream is very much part of the culture. Whereas here, I think, you know, the category is more established here. And I think you need to be earlier on in the start of the journey for people, too. Because actually they might look at a couple and go, well, I can't see myself at that point, therefore it is all too hard for me. Therefore, I'm not going to choose eHarmony.

UNIDENTIFIED MALE: Kamarama has plenty of experience taking big brands into local markets, with campaigns for Nintendo.

UNIDENTIFIED FEMALE: Using games definitely encourages children to learn.

UNIDENTIFIED MALE: And Costa Coffee. Now Nicola has some thoughts on how to tackle eHarmony.

MENDELSOHN: The way the market developed it pushed you further and further in the U.K. towards the happy ever-after, almost Disneyesque, rarefied thing, which I don't think is very attractive in the U.K. at the moment. And I think if we can move eHarmony along the spectrum a little bit, from further away from the happily ever after and just a bit, not into casual dating, but more towards that part of the marketplace. So we can start to say to people-

CORNWALL: Well, I disagree slightly, there. I don't think we need to necessarily move it down that spectrum very much. I think it is actually just about redefining what we mean by a long-term serious relationship. And not talk about it in terms of marriage. Because I think if we move too far down that spectrum and just become, hey, we're the place to have a good date, or the place to have several good dates, we actually, loose what makes us different and special.

(BEGIN AD CLIP)

UNIDENTIFIED MALE: How do you describe that? I mean it was-

UNIDENTIFIED FEMALE: Magic.

UNIDENTIFIED FEMALE: Magical.

(END AD CLIP)

CORNWALL: There are certain things that we'll always be about. We'll always be about serious relationships. We'll always be about finding a special someone. We're not going to be about the casual hook up. We're not going to be about, you know, a one-nigh stand. That is not what eHarmony is about. There are certain things which are fundamental to the brand. And which will never change.

UNIDENTIFIED MALE: Sean says he is happy adapt the eHarmony formula, but it will never change the DNA of his business. For this boss that is just a step too far.

CORNWALL: If there is one thing that I would like to see in this campaign, is the lightness of touch. It is something which is not quite so onerous and heavy on consumers. I think eHarmony has sometimes tended in its messaging to be overly serious. And we have got a little bit ahead of ourselves when talking to the end user. And I think we need to step it back and remember the premise that dating is fun.

UNIDENTIFIED MALE: Next week on "The Boss".

UNIDENTIFIED FEMALE: Oh, no!

UNIDENTIFIED MALE: She missed out on the prize in 2010, but will Sarah Curran walk away the winner this time around? That is next week on "The Boss".

(END VIDEOTAPE)

FOSTER: I just want to recap for you some really important news that we have had this hour out of Italy. Media reports from Italy are saying that the Northern League has reached a deal with Prime Minister Berlusconi on those crucial pension reforms; the big sticking point in Italy right now. This has been a controversial political issue in Italy. Vital to success at Wednesday's all important EU summit. There are all sort of domestic issues behind this summit, across Europe. We will continue to bring you the latest on the situation throughout the hour, though. QUEST MEANS BUSINESS will be back in just a moment.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster.

More QUEST MEANS BUSINESS in just a moment.

But first, your news headlines.

Three generations of a family were pulled from the rubble of Turkey's massive earthquake after being trapped for more than two days. The youngest member, a 14-day-old baby, born three weeks premature, is now a symbol of hope for those with missing loved ones.

Aftershocks like the 5.7 quake that hit earlier today are keeping survivors on edge.

Libyan officials say the bodies of Libyan leader Moammar Gadhafi and one of his sons have been buried at a secret location in the desert -- secret because the National Transitional Council doesn't want any sort of shrine or memorial popping up on the grave site. The bodies have been on public dispay -- display for days at a -- a cold storage unit in Misrata.

Official results from Tunisia's election are expected soon. So far, preliminary returns appear to show the moderate Islamist party, Al Nahda, in the lead. Tunisia was the first country of the Arab spring to hold an election and international observers are calling the vote a victory for the Tunisian people.

And an update now on the political stand-off in Italy. According to media reports, the Northern League has reached an agreement with Silvio Berlusconi over economic reforms. But the Italian prime minister remains a, quote, "pessimist." Mr. Berlusconi us under pressure from other leaders in the EU to get Italy's debts under control as they prepare to meet again on Wednesday on the Eurozone debt crisis.

In less than 24 hours, the leaders of Europe will hold crucial talks on how to stabilize the continent. Solutions to the problem -- solutions to problems with bank stability, bailout funds and austerity measures will all need to be found.

CNN's Nina dos Santos is in Brussels, where the summit will kick off tomorrow.

She's been looking at one of the key talking points, which is possible changes to the EU treaty, no less.

(BEGIN VIDEOTAPE)

NINA DOS SANTOS, CNN CORRESPONDENT (voice-over): These are the first few pages of the Lisbon Treaty, which governs the European Union. At a time of unprecedented crisis, some senior officials in the bloc are advocating ripping up some of these rules altogether.

HERMAN VAN ROMPUY, EUROPEAN COUNCIL PRESIDENT: The most important thing is to strengthen economic convergence. And if we need treaty changes in a limited way, we -- it is not a taboo.

DOS SANTOS: As the heads of government of the 27 nations within the European Union converge upon Brussels for one final shot to solve the Eurozone crisis once and for all, well, some members are questioning whether this so-called grand bargain really is a good deal after all. (INAUDIBLE).

DAVID CAMERON, BRITAIN PRIME MINISTER: As I've always said, treaty change, in the future, may well present a good opportunity for Britain. The last treaty change, which we haven't even put through parliament, but the last treaty change, which was to create the European stability mechanism, gave us the opportunity in Britain to get out of the bailout funds for the Eurozone.

DOS SANTOS: At the heart of the debate, how to stop some countries that use the euro from spending money like water.

BENEDICTA MARZINOTTO, BRUEGEL: What I see happening at that moment is this emergence of a divide between the Eurozone and the non-Eurozone. So I see a two speed Europe emerging, whether it's the Eurozone being faster or the other group even being faster, I'm -- I'm not sure. But even changes in the governance structure point in that direction.

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: When we designed the common currency, we made very important decisions, namely in terms of monetary union with an independent central bank, for instance. But the reality is that we are not yet an economic union. We need to advance in a more integrated way of coordinating our policies.

DOS SANTOS: If the recover falters and the fate of the euro hangs in the balance, well, Europe's leaders are trying to present a united front. The irony is, though, they've never appeared more divided.

(END VIDEO TAPE)

FOSTER: And nina will, of course, be at the summit for us tomorrow bringing you all those crucial developments for you throughout the day.

Europe's leaders face huge international pressure to get this one right.

In the U.S., a Treasury official has been telling lawmakers that problems in Europe threaten the entire global economy.

Charles Collyns says the crisis is already damaging growth in the US.

(BEGIN VIDEO CLIP)

CHARLES COLLYNS, U.S. ASSISTANT TREASURY SECRETARY: We have substantial trade and investment ties with Europe and European stability matters greatly for American exporters and for American jobs. Already, the crisis has slowed growth significantly in Europe and around the world, as increased uncertainty has reduced risk appetite, undermined business and consumer confidence and reduced household wealth. These developments clearly pose very serious down side risks to the outlook for the U.S. economy and job creation.

(END VIDEO CLIP)

FOSTER: U.S. traders are showing their concern about events in Europe. They're really, you know, apprehensive, really, about what's going to happen tomorrow. So that's the main talking point.

But the Dow Industrials down 1.2 percent currently.

A couple of interesting corporate stories.

Netflix down 35 percent. It lost 800,000 subscribers, would you believe, in just one quarter.

3M's shares are also down.

Much more from Wall Street, though, coming up on QUEST MEANS BUSINESS.

Now, America loss is Europe's gain -- or at least it might be for basketball fans. With no end in sight to the NBA lockout, will the players look for an Ali-Oop across the Atlantic?

(COMMERCIAL BREAK)

FOSTER: The NBA is reportedly ready to announce that another two weeks of games are going to be on the scrap heap. Players are still locked out of the league thanks to a pay dispute with the team owners. The first two weeks of the season had already been canceled, but the players aren't sitting and waiting around. In fact, there could be a brawn drain going on from the U.S. over to us in Europe.

We're going to have some good players, aren't we -- Pedro?

PEDRO PINTO, CNN CORRESPONDENT: Well, that -- that is true. You know, that historically, obviously, the NBA is the top league in the world. A lot of these guys aren't playing in the States, so they're coming over to Europe.

Let me tell you about a couple of high profile players that have already made the move to various European leagues, starting with Tony Parker and -- let's start with Serge Ibaka, just signed today with Real Madrid, the Spanish giant. He signed a two month contract. A lot of these players have been waiting around for this walkout to come to an end. It's close to 120 days now, the walkout. It started in July. They're not getting any action in the States. They're heading over to Europe.

I told you about Tony Parker. He's a three time NBA champion. He signed for ASVEL Villeurbanne of the French League. And it's, curiously, a team he actually has a part stake in. So he's a part owner of that team.

The big name everybody is talking about and has been all summer long, none other than Kobe Bryant. He's in talks with Virtus Bologna of the Italian Serie A. They were talking about, about a 10 game contract worth $3 million. That's still on the table. Kobe has been at some meetings the owners, trying to sort this out. If that doesn't happen in the next few days, we could see a deal confirmed for Kobe Bryant. And that would be a huge, huge coup for European basketball.

FOSTER: I mean they're businesspeople, these, aren't they?

They're good at negotiations.

So how much is this about sort of playing around or how far apart are they in reality?

PINTO: Max, it's been incredible. If you ask the -- the league commissioner, David Stern, he says they're a gulf apart. And -- and what that means is basically the old collective bargaining agreement, you had a split of the league revenue of 57 percent for the players, 43 for the owners.

Let's take a look at what they're negotiating right now. And it's all about owners versus players. The total revenue that they're bargaining for is $4 billion per year. The owners want a 50-50 split. They say let's do it straight down the middle. The players won't go lower than 43 percent.

Why is each percentage so important?

Because each one is worth about $100 million per year. If they're going to sign a collective bargaining agreement, let's say, of 10 years, that means that's about $1 billion that's at stake. That's why these small numbers -- it seems like small numbers in percentage, but it's worth so much money.

And I'm really scared they're going to scrap the whole season. Back in '99, they had a lockout. They played a reduced season, 50 games. They might lose the whole season. And it's a horrible decision from a sporting point of view, also from a financial point of view. They lost $200 million by scrapping the first two weeks. If the next two weeks in the season are scrapped, that's another $200 million down the drain.

FOSTER: And it's not a -- a global sport. But it's of huge interest in certain countries and regions, right?

So people are going to be upset about this.

PINTO: I'm upset about it.

(LAUGHTER)

PINTO: I'm a huge NBA fan.

FOSTER: Yes.

PINTO: I talk to people. I get Tweets from people practically every day, asking me what's going on, when can we see these guys back in action in the States.

The last season was a banner year for the -- for the NBA, one of the best since Jordan retired from the league. I think it's -- it's a very worrying sign that they keep on negotiating. And they have -- they've had some sessions when they're in a room for 20 hours and they can't find a deal. They've got a federal mediator that's come in to try to help, to get both sides together. And they still can't get a deal (INAUDIBLE)...

FOSTER: There's a movie in it, as well, I reckon.

PINTO: There could be.

FOSTER: Coming up.

PINTO: There could be.

FOSTER: OK.

Pedro, thank you very much, indeed.

We're going to get a sense of the weather now, though, with Guillermo -- because, Guillermo, there's been these record breaking storms in some parts of Europe, which people want to talk about as well.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, and I -- I think that Iberia is going to see some more storms now popping up, and, at the same time, temperatures keep going down. You see half of the map in here is covered with clouds and rain, anywhere from Italy into Great Britain, Germany, France and Spain.

So let's dissect them all. Let's see the observations. For instance, in Dublin, in Ireland, we saw in 24 hours more than what we usually see in the month of October. We're not happy about that.

And then, in Marseilles, in the south of France, in here, since Saturday, we saw the same thing, almost as much as what we see in one month.

The reason?

These two systems going through. An unrelenting low pressure center here in the northwest, dumping all the rain. A new system that is arriving in Britain. It's going to bring typical Ireland weather into Portugal and Spain, well, in fact, this area here, you know, Galicia, in northwest Spain, has very similar characteristics of Ireland. And the origins are the same. They are Celts. So we are going to get Celtic weather.

Now, look at what's going on in Italy and in the Balkan Peninsula, with the tail end of the other system. The change is coming here, too. And this is up to Wednesday. This is the beginning of a very rainy season, months to come, with a lot of rain.

You see the storms there in France popping up. Maybe Paris is, for the time being, OK. But then we are going to get some -- some more rain showers.

This is the overlook -- the overall look at Europe. We see a little bit of a lull in terms of the conditions in Turkey, not in the east, where we heavy the efforts, the rescue efforts going on because of the earthquake in Van. And the temperatures continue to be quite cold. We're below average and we get to freezing point at night. Many people exposed. Many people still under the rubble.

Let's see that -- that temperature trend. Britain is the only area where I see that it's going to remain cold. Needless to say, Scandinavia, as well. Eighteen in Madrid, the high for Wednesday. Ten in Bucharest and seven in Kiev.

What is this that I have behind me?

A hurricane. A hurricane coming into Cancun, the Yucatan Peninsula and Plaza del Carmen. We're lucky that we have some Web cams to show you.

So here's one. That's Cancun.

Taylor (ph), let's show the other one.

Plaza del Carmen, that's nearby. And we are going to see -- we see now clouds, mostly. We don't see much going on, because the system is quite compact and it's all restricted to the center of the system. So you see we are going to eventually get those bands into Cancun. Things are going to change.

Bad luck if you went on vacation or are going vacation in the next days into Cancun. This is soon to be a Category 3 when it makes landfall into the Yucatan Peninsula.

So the weather is going to change very fast and we are going to see a lot of bad weather conditions in here.

Soon, we think it's going to move into Florida, as well. So we'll have to see what happens -- Max.

FOSTER: OK, Guillermo.

Thank you very much.

ARDUINO: You're welcome.

FOSTER: We're keeping you busy.

Thanks for that.

Now, profits are up and production is set to follow -- next, we'll look at BP's post-spill recovery and we'll hear from CEO, Bob Dudley, about focusing on the future.

(COMMERCIAL BREAK)

FOSTER: Eighteen months after the Gulf of Mexico oil disaster, BP says it's reached a turning point. In the third quarter, BP's replacement cost profit jumped 178 percent, to $5.1 billion. Measuring profit by replacement costs moves up fluctuations caused by oil price changes. It's a standard, really, for the oil industry.

The CEO, Bob Dudley, says operations are -- are regaining momentum and production is returning in Angola, the North Sea and the Gulf of Mexico. Dudley says this past year has been unprecedented in its challenges.

And we're going to take a look now at why.

April the 20th, 2010, the Deepwater Horizon rig explodes. Eleven workers are killed. So that was how it all started.

And then we go to 20 -- the 7th of July, 2010. And Tony Hayward announced that his -- he's going to resign. Bob Dudley takes over in October.

February the 1st, 2011, an annual loss is posted by BP of almost $5 billion, as it puts aside $40 billion to compensation. It was BP's first annual loss in 20 years.

Now, May the 17th, the same year, BP's arctic ambitions were really -- had -- suffering a huge setback. Russia's Rosneft pulled out of that big BP deal. And the share swap announcing an exploration deal that had been agreed in January this year was all over. The parties failed to come to terms in buying out BP's existing Russian partners in TNK-BP.

As well as poisoning the surrounding environment, the Deepwater Horizon spill was a major black mark on BP's public image and finances.

CNN's Felicia Taylor did speak to the CEO, Bob Dudley, about how the company is recovering from such a massive blow.

(BEGIN VIDEOTAPE)

FELICIA TAYLOR, CNN CORRESPONDENT (voice-over): The Gulf of Mexico oil spill was the worst in U.S. history, spewing nearly five million barrels of oil into the ocean. The catastrophic spill left British energy giant, BP, with a tarnished reputation and an aftermath that it is still recovering from.

But CEO Bob Dudley says the company has finally turned the corner and BP has met the challenge.

BOB DUDLEY, CEO, BP: I think the most challenge is turning the company upside down and looking at safety and risk management and bringing it back into the heart of the company and then making some really tough decisions to take down assets and then having people focus on developing new standards for drilling. Very, very hard work across the company.

And, of course, with that comes the need to make sure everyone remains completely focused and dedicated. And that's coming through now, finally, October 2011 is a turning point for the company.

TAYLOR: So where is the growth, though, for BP?

I mean, obviously we -- we know that you lost the -- the deal with Rosneft to -- to Chevron.

Where is the growth now, in the emerging markets going to be for BP?

DUDLEY: Well, we will focus on -- on India and Brazil. We have big projects in Angola going forward, Azerbaijan. We're exploring or going to be exploring more in Namibia in the next year.

But in Russia itself, we have a very, very big business, a very large business with the TNK-BP joint venture. And it performs extremely well. It always has. "The Wall Street Journal" this week described it as a squabble rock band that rolls down the road delivering hits. And I think that's -- that's the way I'd describe that -- that business. It's a good business for us.

TAYLOR: Do you think you're going to be able to make up the shortfall in terms of output that you lost from the Gulf of Mexico with some of these deals?

DUDLEY: Well, we've announced a significant development program last year. So our footprint around the world is smaller. It's already more focused. We've divested $26 billion worth of assets already. We've announced going to $45 with this -- this announcement this morning.

So we'll have a smaller footprint. We're not chasing barrels and production for the sake of barrels and production. We're going to pursue value. And we'll do that through portfolio management and bringing on high margin, higher margin barrels of oil.

TAYLOR: The Gulf of Mexico was expensive. I think some $40 billion is what it's cost BP. So it hasn't exactly been cheap.

How were you able to absorb that?

DUDLEY: Well, we made commitment after the accident that we would not step behind any of the legal barriers. And we -- we shouldered the cost of cleaning up the beaches. We -- at one point, we had 48,000 people working along the Gulf Coast. We've paid more than $7.5 billion in claims to governments and small businesses and individuals.

It's just real commitment. And we've -- we're big enough to be able to shoulder that by selling some assets. And now, we're working very hard cleaning up the beaches around the Gulf Coast. And we're putting in place new ways of operating in the Gulf of Mexico. There's new voluntary safety standards that I think people want to see.

So step by step by step, you come back from something of that magnitude not overnight. You know, I -- I think we've turned the corner now.

TAYLOR: So the fallout has -- is no longer going to be felt on the balance sheet?

DUDLEY: Well, you -- well, of course. We've -- we've -- we've taken on these -- these obligations in the US. There are trials ahead. We've settled the big settlement with our lease owners in the Macondo well, which is Mitsui and Anadarko. We've got a trial that will come up in February. We have put money aside for that. We would welcome settlements, but not at any cost. So we're preparing to go into that litigation.

So there will be some uncertainty. But I think BP is -- is back on its feet again. And the performance of the rest of the business around the world is doing extremely well right now.

TAYLOR: And are you still forecasting $90 to $100 a barrel oil?

DUDLEY: I think that's right. Yes, I mean forecasting the barrels of oil, they're very, very volatile. But if you look out to 2030, the world will need 40 percent more energy. It will need all forms of energy. And we see an increasing demand for oil and gas going forward, as well as renewables and other forms of energy.

So for planning purposes, you'll see many people doing that now.

(END VIDEO TAPE)

FOSTER: The boss of BP.

Now, it wasn't the only company to release its earnings today. In Switzerland, UBS reported a 39 percent drop in their income, to around $1.2 billion. Profits were hit by a $2.3 billion rogue trading scandal, but still topped analysts' estimates.

Deutsche Bank made a net profit of $1 billion in the third quarter. That was double analysts' expectations and a big swing from the $1.7 billion loss in the same period last year.

Netflix's Q3 net profit jumped 63 percent, to $62 million. That beat estimates, but investors are focusing on plunging subscriber numbers. Shares are currently down more than 30 percent, as traders digest a loss of 800,000 customers, would you believe, just in one quarter, the last quarter.

Now, it is the stuff that dreams are made of -- we're talking Boeing's new 787. It's all aboard the Dreamliner, after this break.

(COMMERCIAL BREAK)

FOSTER: They've been flying through plane spotters' dreams for years now. Now, Boeing's 787 Dreamliner is finally ready to make its first passenger flight. And it's on Wednesday.

Andrew Stevens got a sneak peak at what could be a game-changer in the world of aviation.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE:

UNIDENTIFIED FEMALE: (INAUDIBLE). Welcome to the (INAUDIBLE).

ANDREW STEVENS, CNN INTERNATIONAL CORRESPONDENT: Thank you very much. Bye-bye.

I'm on my way to Tokyo to be part of a slice of aviation history. I'm on the first ever commercial flight of the Boeing 787, the Dreamliner, and Japan's ANA has the distinction of being the launch customer. And their first passenger flight is going to be from Tokyo down to Hong Kong.

And while I'm heading up to meet it, our Tokyo team have been getting a look at the last minute checks.

(voice-over): The 787 actually arrived in Japan late last month, but apart from some familiarization flights across the country it's been tucked away inside a hanger at the city airport, away from prying eyes.

On Tuesday, it flew to Tokyo's main international airport at Narita and is now standing at the departure gates. Final checks are underway, while the media have allowed one last look before the maiden passenger flight.

A huge amount is riding on Wednesday's flight. For Boeing, it's the realization of a strategy to create a whole new generation of aircraft, made not from aluminum but composites, a sort of high tech plastic, which the plane maker says will make flying more pleasant for the passenger and more profitable for the airline.

But it's a project that is also three years over deadline and way over budget.

But it's now finally here. And the 250 passengers, including me, who file on board on Wednesday will be the first to get a chance to see whether this really is what the future of flying looks like.

Andrew Stevens, CNN.

(END VIDEO TAPE)

FOSTER: Now, of course, we couldn't keep Richard away from the studio on such a big day for the aviation industry. He'll be back for the day tomorrow for more on that landmark flight, as well as the rest of the day's business news, on a monumental day, of course, for the Eurozone, as well.

That is QUEST MEANS BUSINESS.

I'll be back the day after.

I'm Max Foster in London.

END