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QUEST MEANS BUSINESS
Egypt Woes After Football Riots Claim 79 Lives; Sony Attempts to Recapture Cutting Edge; Facebook's Prospectus; Facebook's Books; The Benefits of Facebook to Businesses; Super Agents; US Markets Down Slightly; European Markets Rise; Unilever Expecting Gloomy Year
Aired February 2, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST: Cairo, Egypt tells the World Bank, "We need financial help."
From game-changer to big loser, the new boss of Sony says it's time to get back on top.
And as Facebook opens up to investors, we speak to its director of policies here in Europe.
I'm Max Foster, this is QUEST MEANS BUSINESS.
Hello to you. Wracked by grief, torn by protest, Egypt is going cap in hand, now, to the World Bank for $1 billion in aid.
These are the latest pictures coming into CNN of protests near Egypt's Interior Ministry. Reuters is reporting police fired teargas at thousands of demonstrators in Cairo. Anger at the country's military-led government is boiling over following deadly riots at a football stadium in Port Said.
The World Bank says it will now hold talks with Egypt's government after it received the request for a $1 billion loan. Egypt's borrowing costs surged to all-time highs after foreign investors dumped local assets during the revolution.
Egypt's stock market lost more than two percent today, the most it's fallen in six weeks. The numbers are a reaction to the human toll of Wednesday's football disaster. Riots left 79 people dead. We go live to CNN's Ben Wedeman, who's watching developments for us from the Egyptian capital.
Ben, first of all, the football riots and this application for a loan aren't linked, but it sets the background, doesn't it? Right now, there's a -- this is a country in trouble and the economy is very much playing into people's hands.
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, certainly, the Egyptian economy, Max, has really come to a screeching halt since the revolution occurred one year ago.
Within the last year, Egypt's foreign currency reserves have been halved from $36 billion to $18 billion, so Egypt desperately needs monetary support to keep the -- stop -- to support the Egyptian pound, because this country imports 50 percent of its foodstuffs, so it needs to import this food, but it needs to pay for it with hard currency.
And it's really heading toward a crisis that many Egyptians aren't really paying much attention to given all the protest in the street and the political instability, but it is a crisis that looms very close over the heads of the people of Egypt. Max?
FOSTER: This is -- you talk about the political instability there. That's something the World Bank's going to have to consider, isn't it? Because it's not going to hand over $1 billion to an authority they're not quite sure about.
WEDEMAN: Yes, that's the problem. And of course, Egypt is also negotiating with the International Monetary Fund for additional loan of $3.2 billion, and there are worries among those Egyptians who follow these things that there are strings attached, most specifically, a devaluation of the Egyptian pound.
And if the pound were to be devalued, of course, that would mean that the cost if living for ordinary Egyptians would increase dramatically, and that's the last thing this country needs, already wracked by political instability.
FOSTER: We're looking here at live pictures coming from Tahrir Square. Political instability really expressing itself there, and we saw what went on with the football riots last night. Do you think what we've seen in the last 24 hours is somehow symbolic of the situation that the Egyptian government finds itself handling right now?
WEDEMAN: Well, certainly the Egyptian government is faced by so many challenges, it doesn't seem to be able to deal with them all. On the one hand, it has the economic challenge, it has the political challenge of trying to, at least in its words, transfer power gradually from the military to a civilian government.
And then you have the whole other dimension of street politics, which sometimes calm down, but certainly in the aftermath of the massacre in Port Said, almost certain to increase. And of course, this sends shivers down the spines of anybody who's considering investing in Egypt. It scares tourists away.
Now, just the other day, we were at the Cairo Stock Market, where they were actually feeling rather optimistic because in January, the stock market rose by 20 percent, and they were cautiously optimistic, there, that the Egyptian economy was beginning to get on its feet again, that a certain level of stability was being reestablished.
And now, over the last 24 hours, it appears that -- those hopes have been shattered. Max?
FOSTER: And just talk to these pictures, if you would, Ben, that we've got from Tahrir Square. And if you combine that with what we -- what you were reporting on on the program last night, it does look like a country in chaos. But is that just the pictures?
WEDEMAN: Well, that's really just a couple streets off of Tahrir Square, so we shouldn't generalize it to the entire country. Fortunately, most of Egypt is actually peaceful this evening, but obviously, the eyes of the world, the eyes of the Egyptian media are very much on those streets leading to the Interior Ministry.
Now, what you're seeing are people who spent the day protesting against the military, the police, the government, accusing it of inadequate security in the case of Port Said, where they say the police basically stepped aside and let this bloodshed happen.
So, what they're trying to do is get into the Interior Ministry. What they are going to do when they actually get there -- if they get there, it's hard to say -- but they're being opposed, of course, by riot police, by ordinary policemen, firing teargas, rubber bullets.
But these are streets that, over the last few months, have regularly been battlefields in this ongoing clash between revolutionaries on the street and the, I must say, much-hated Interior Ministry. Max?
FOSTER: OK, Ben Wedeman, thank you very much, indeed, for your reporting on that story.
Now, coming up on QUEST MEANS BUSINESS, we've got results from Sony and from Unilever, and Mark Zuckerberg leaves a message on Wall Street's wall. A look at the books of Facebook when we return.
FOSTER: Sony is expecting to lose almost $3 billion this accounting year. More than $2 billion melted away in the quarter which ended in December as the company faced severe disruption to supplies and a mercilessly strong yen.
Now, the task of turning things around now falls to Sony's new CEO, Kazuo Hirai. He told a press conference he's not afraid to make painful choices. As CNN's Kyung Lah reports, Sony needs to rediscover its cutting edge.
KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT (voice-over): The monkey, so struck by a new invention, stands still, listening to a Walkman. The year, 1987.
Sony's heyday, innovating consumer products people loved. The 80s were a long time ago.
Sony today: a new boss, trying to return the company to those original innovative roots. Welsh-born chief executive Howard Stringer symbolically handed over the reins in a news conference to Kazuo Hirai, executive deputy president, who revived Sony's PlayStation gaming business.
Stringer, Sony boss since 2005, failed to turn around the Japanese electronics giant.
HOWARD STRINGER, FORMER CEO, SONY: We are not shifting direction, but we are shifting gears. And when you shift gears, you can go faster. Because now, more than ever, it's time to bring about generational change.
LAH: "I have a very strong sense of crisis," says Hirai, referring to the competitive climate in the electronics industry. He adds, "We must swiftly create a unified Sony. Otherwise, we can't survive."
Sony's grim financial report underscored those serious words. The company announced for the full fiscal year ending in March, it expects to lose a stunning $2.9 billion. For the fourth year in a row, Sony says it will end the year in red.
Sony blames tough global conditions, like the Japanese tsunami that cut into production, Thailand's flooding, and the strong yen. But it's Sony's internal problems that are the biggest hurdle, say analysts.
"We don't know if Sony will turn around under Hirai or not," says Osamu Katayamua, "But Sony has no choice. Sony has to entrust him at this point."
LAH (on camera): At age 51, Hirai is a rather young CEO for a Japanese corporation, and he's an untested leader of a giant company. Analysts say he'll need youthful energy, for he steps into, arguably, the toughest job in Japan, Inc., turning around what's regarded as a corporate dinosaur.
Kyung Lah, CNN, Tokyo.
FOSTER: Staying with tech companies, the Facebook prospectus is out, and investors are looking forward to what could be one of Wall Street's biggest IPOs. Facebook hopes to raise over $5 billion, actually, less than many people expected. A lot less than some analysts were expecting.
Now, Facebook says it values its stock at $29.73 a share, but it doesn't say how many shares will be on offer. Still questions out there. Co-founder, CEO Mark Zuckerberg will retain an iron grip on the company, with nearly 57 percent of the voting shares. His 26 percent slice of the company would be worth $28 billion at a $100 billion valuation, making him America's fourth-richest man, still in his 20s.
And it means Facebook will not need to appoint a majority of independent directors or set up board committees to oversee compensation and other matters.
Now, also, now, on the public record, Facebook's 2011 net income, which was $1 billion from revenues of $3.71 billion. It was up 65 percent on the year before. The network has 845 million monthly users, of which 40 -- 443 million are daily users.
This isn't what Mark Zuckerberg intended for Facebook. The company's prospectus states that Facebook was not originally created to be a company, but it was built to accomplish a social mission to make the world more open and connected.
Now, the company says it's helping the economy in Europe, as well. Facebook asked Deloitte's to see exactly how many jobs it supports across the 27-member eurozone. The conclusion, 232,000. Facebook's director of policy in Europe, Richard Allan, sat down with Jim Boulden to explain the tech giant's benefits to business.
RICHARD ALLAN, DIRECTOR OF POLICY FOR EMEA, FACEBOOK: The first of those is traditional businesses, if you like, using the platform to reach new customers, engage with them better, gain more orders, and add more employees.
So, some people selling everything from cupcakes to clothing to machinery can use Facebook to get out there to that global audience.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Is this more than just hitting the "like" button?
ALLAN: Much more than hitting the "like" button. The "like" button's part of that, they can integrate that into their own websites. But they can also build a Facebook page and send status updates out to their customers every day. And they can get their customers to do their marketing for them, which is incredibly powerful.
BOULDEN: That's one of the interesting things, here, and I think I read you're going to give some free advertising to small businesses, and one of the points of this study was that small businesses can use your platform, they don't have to build your platform.
ALLAN: Yes, I mean --
BOULDEN: Or a platform like it.
ALLAN: Exactly. Also, we've understood, technology used to be a huge hurdle for small businesses. They just couldn't afford to build their own websites. They can now set up a Facebook page for free and start to build a community.
If you're a small business with a local service, even a few hundred fans on your Facebook page, people are then going to get updates every day on special offers or new products, those few hundred fans can really make a huge difference to the way your business grows.
BOULDEN: You also said in here that technology sells, that you can claim -- or that they connected to Facebook certainly, no, people aren't buying an iPhone because they can get onto Facebook, or is that what you're saying?
ALLAN: People absolutely are taking up technology to access the services that they can get through it. People don't buy a broadband connection just to have it sitting there exchanging bits and bites. They buy it because they want to access services.
And we're very confident that Facebook is one of the most compelling services that does indeed drive people to sign up to broadband, to buy a smart phone, to sign up to mobile internet. And all of that generates huge revenue for telecoms companies here in Europe.
BOULDEN: But that would be Facebook, that would also be your competitors, Twitter, that would be something that Google pages, as well.
ALLAN: Absolutely. I think all the major internet services help to drive demand for broadband. When you turn a broadband connection on, you get hundreds of euros worth of value through that connection because of the services we provide.
BOULDEN: One of the interesting things about technology companies like yours is that it has a big imprint, but not necessarily a lot of employees. And the employee impact in this narrow study is really just Ireland, because that's where your headquarters are for Europe.
ALLAN: Yes, Ireland is the biggest employee base. We have around 600 people across Europe, but the vast majority of those are in Dublin, where we've chosen to place our multilingual, multinational headquarters very successfully.
And -- but as well as the people Facebook employs, there's an increasing number of people who are employed in what we call the app economy, and that's people building applications and services on top of Facebook.
So, those could be services like music services, like Spotify. They could be gaming services. Zinger is very well known from the United States, were lots of smaller but still very successful European Zingers that are growing up around the Facebook platform.
BOULDEN: I noticed that some of the -- you're very big in Germany and Italy, when you take it all in, almost as big in Italy as in Germany, though the economy is quite bigger in Germany. Why do you think that is?
ALLAN: The Italian result was, in some sense, surprising to us, that we made such a huge contribution. But again, if you understand Italy, I think there are two key factors.
The first is that they have a very large small business economy. Small businesses drive the Italian economy, and they've really adapted to Facebook. They've set up pages, they've put "like" buttons on almost faster than anyone else.
And the second factor is, Italians love technology. If you look at the mobile phone penetration rates, Italy has one of the highest in Europe. So, people are jumping onto Facebook and businesses are jumping onto Facebook, and that does create this additional economic value.
FOSTER: There you go. Well, when we come back, as Super Bowl Sunday looms, forget Jerry Maguire. A look at the real sports agents who say their lives are a far cry from "show me the money" Hollywood.
FOSTER: Now, Madonna's headlining the halftime show, the adverts cost more than some films, and many millions of people are gearing up to shout at TV screens in sitting rooms and sports bars all over the world this Sunday.
It must be the Super Bowl, America's annual football bash. CNN's Maggie Lake has been taking a closer look at the Super Agents behind the players who make it onto the field. She's with us live from our New York bureau. It's not all as we imagine from those Hollywood movies, I gather.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: No, that's right Max. But certainly football fever's on. I don't have my jersey on yet, but I was given a tasty little treat on the way here to the studio --
LAKE: I don't know if you can make it out, a football field with the 50-yard line on it. So, it's in full swing, and we've got a few days to go.
But listen, the stakes are very high in this game. We know all about the sort of businesses who pouring money into it. The stakes are very high for the players and also the money men behind them. Have a look.
LAKE (voice-over): While these men prepare to battle for the Super Bowl title --
EUGENE LEE, SPORTS AGENT: We were able to negotiate an agreement with --
LAKE: These men are busy looking for ways to help them cash in.
(CASH REGISTER BELL)
LEE: Hello, this is Eugene.
LAKE: Eugene Lee is one of the circle of agents who represent professional athletes, a group made famous by the movie "Jerry Maguire."
TOM CRUISE AS JERRY MAGUIRE, "JERRY MAGUIRE": Help me! Help me, Rod. Help me help you.
LAKE: In "Jerry Maguire," both agent and player eventually hit a big payday. In real life, it's not that easy.
LEE: "Jerry Maguire" romanticized what the industry's about. The industry is about a lot of hard work. It's a very competitive, cutthroat industry, and you see every year hundreds of aspiring agents enter the field, and then within a year or two, you see the same hundred agents leave the field.
There is tremendous competition for the top talent, to sign the top players.
LAKE: But Eugene and his lean and mean five-person team are trying to tackle the competition. They currently represent 11 professional football players, offering the personal touch that they say clients don't get at a large agency.
Clients that include two players on opposing sides of this year's Super Bowl, New York Giants' corner back Brian Witherspoon and New England Patriots' safety Sergio Brown. Brown will be on the field for the opening kickoff of this year's big game.
LEE: If he does his thing on Sunday, there will be many opportunities that will follow. As an agent, not only are you responsible for negotiating the contract and his compensation on the field, but you're also responsible for taking opportunities and taking his success on the field and using that as a platform to other opportunities off the field.
LAKE: That includes commercials. Brown already has practice doing an ad for his alma mater, Notre Dame, where he shows off his signature back flip.
SERGIO BROWN, SAFETY, NEW ENGLAND PATRIOTS: Thank you, Monogram Club.
LAKE: And this commercial may just be the beginning.
LEE: Disney sent out a contract just in case he becomes the MVP of the Super Bowl, Sergio would agree to be filmed immediately after the game. So -- and I sent him the contract, and he's like, "Wow, can this work?"
And I said, "Yes, this is legitimate. This is from Disney."
LAKE: Disney may be calling, but real life rarely follows a Hollywood script.
CUBA GOODING, JR. AS ROD TIDWELL, "JERRY MAGUIRE": Show me the money.
LAKE (on camera): Have any of them actually tired these lines on you?
LEE: No. I mean, nobody has ever said "Show me the money."
LEE: Well, hopefully some day we'll be in a position where we can celebrate and joke around and say that phrase.
LAKE (voice-over): That day may come soon. Lee will be at the Super Bowl in person ready to root on his super clients.
LAKE: Max, I love that he was joking that the players, because he takes some of these young an up and coming players, maybe diamonds in the rough that the others haven't discovered. A lot of them weren't even born, probably, when "Jerry Maguire" first came out, so he's spared all the repeat of the line.
But it's a great story, because in a way, both Lee and the player, Sergio Brown, are underdogs going into this.
But that's what we love about these games, isn't it? The same with the big matches with your European football, that on that platform with everyone watching, these young players make a mark, and it really can make them. Really can make their career. And the same with the agents behind them.
So, it'll be fun to watch on Sunday to see if Sergio does get that big play.
FOSTER: Yes, Maggie, thank you very much, indeed, for that. It's amazing. People around the world don't watch American football all that much, but they all seem to watch the Super Bowl.
US markets, now, let's have a look at how they're faring, because -- they were down. They are still down, actually, but only very slightly, 0.06 percent the Dow, the big board.
We're going to have a look at the Euro markets, as well, because sliding Unilever shares limited the gains on London's FTSE 100. Even news that mining giant Xstrata and its commodities trader Glencore are in merger talks didn't provide much of a boost, there, but FTSE closed up 0.1 percent, so hardly moved.
Other major European markets finished more strongly, with both Frankfurt and Paris near six month highs, actually, at the moment. It's not all that gloomy.
When we come back, an interview with the CEO of Mattel.
FOSTER: Welcome back, I'm Max Foster, you're watching QUEST MEANS BUSINESS. Here are the headlines.
Clashes in Cairo's Tahrir Square have left 250 people injured, 25 of them critically, according to the country's health minister. Protests have been escalating since nightfall, it's over Wednesday's football stadium riot in which 79 people have died. Many blame Egypt's military government for deteriorating security conditions.
In Hama, Syria, protesters are dumping red paint on streets and buildings. They're marking the 30th anniversary of an uprising and massacre that claimed at least 10,000 lives.
Meanwhile, the UN Security Council will soon resume its debate on a draft resolution to stop the current violence in Syria, but we're told the resolution has been watered down.
Rescuers are scouring the waters off Papua New Guinea after a passenger ferry sank. No word on what caused the ship to go down. We're told around 350 people were onboard. Australian officials say more than 200 passengers have been rescued so far.
Britain's Prince William has arrived in the Falkland Islands, the territory that Argentina calls the Malvinas. He's there on a military deployment that Britain says is routine, but Argentina calls it, quote, "a provocation." Argentina claims the islands and fought and lost a war with Britain over them 30 years ago.
Bitter cold temperatures across Europe have killed at least 160 people in recent days, according to the AFP news agency, 65 of those deaths have been in Ukraine alone, according to emergency officials there. Now, the overnight low in Kiev on Thursday was minus 25 degrees Celsius. At least 22 countries have issued cold snow warnings.
Now, Unilever is expecting a gloomy year ahead. The maker of Dove soap and Magnum ice cream posted a $5.6 billion profit, which was almost unchanged from the year before, despite efforts to hike prices and cut costs.
CEO Paul Polman pointed the finger at slow growth in emerging markets, which account for more than half of its business, and he said Unilever had struggled to pass on higher raw material costs to cash-strapped consumers. Now the results were in line with expectations, but stocks still slipped 4 percent in London.
Unilever boss Paul Polman says the company faced a number of external challenges in the last 12 months. He spoke to CNN's Jim Boulden about them, and Jim started by asking just how tough 2011 was.
(BEGIN VIDEO CLIP)
PAUL POLMAN, CEO, UNILEVER: We think given the challenge in 2011 we've had, worst on the unit per cost (ph) front, the geopolitical and competitive fronts, we think that these results are -- show that we're well on track, making this a very competitive company.
JIM BOULDEN, CNN BUSINESS 360 CORRESPONDENT: Some analysts wanted to see you selling more actual products. They said you missed that key number, that key metric.
POLMAN: Well, we don't miss anything. You know, Europe, we're not managing the business with expectations on the market. We're managing the business in reality with the consumers.
And what you see is that obviously as the prices have gone up a little bit, because of the heavy input costs, that the volume component has slowed down. We've always said that. We really ended up the year with a total volume growth of 1.6 percent. And I think given what the global markets are, that's pretty good.
BOULDEN: I see. Obviously emerging markets have been a very key area for you last couple of years, but even some of those are softening now.
POLMAN: I've always said, even last year, that the emerging markets would slow down. Obviously partly because what's happening in this part of the world, but also because of some of the interventions taken there.
And you're well familiar with Indias or the Chinas or Brazil that really didn't have growth in the last quarter. This point that our emerging market growth was 111/2 percent last year, we're outgrowing those markets.
BOULDEN: And 2012, you're being quite cautious about the outlook for this year.
POLMAN: I wouldn't call it cautious. I would call it realistic. I think one of the things that made 2011 a good year for us, and the share price ended up being an all-time high at the end of the year, certainly outperforming our sector, was that we were pretty early trying to be realistic and it turned out to be true on the input costs, on the competitive environment, and that allows us to make the right plans.
In Europe, we acquired a Sara Lee business, gave us products in -- products like Radox (ph) here and different price points. So we became more competitive as the consumer got under pressure. We continued to invest in our business aggressively in factories, 25 factories, advertising expenditure up, product quality up significantly, new brand launches.
We've made some acquisitions like Kalina (ph) in Russia. So we take care of the current business, but then also prepare for the future. And what I'm most pleased about is we're ending 2011 much stronger than we started it. Despite the good results, we're well prepared for the challenges of 2012.
BOULDEN: The challenges of 2012, a company your size, so big, what can we learn about the economy and consumers' view of the economy from what you sell?
POLMAN: Yes. Well, consumer confidence, obviously, is unfortunately not moving up, and the European situation is a little bit of a stalemate. And we plan for a long and slow recovery, unfortunately. So I think, first of all, that the austerity challenge, how do we do with less? We've clearly lived above our means in Europe and how do we deal with that and take decisive action?
And that is taking a long time at the European level. But at the same time, it's also increasingly apparent to everybody that we need to get growth back. Whilst recall the crisis of the euro, it probably is more a crisis of overall competitiveness that we've lost in Europe.
BOULDEN: Are you annoyed as some CEOs of the politicians in Europe and how long this is taking?
POLMAN: Well, a certain level of impatience is always good with respect. And but I think there is a certain level of frustration indeed that the decisions have taken this whole year.
And in hindsight, we can explain everything, but the way that the Greek crisis was handled for 3 percent of Europe was really at the end of the day a crisis of confidence, of our institutions and political leaders willing to make the tough decisions. And some of them have taken that to heart. I hope that we will now rise to the challenge and deal firm with the short-term crisis.
(END VIDEO CLIP)
FOSTER: Now after the break as Russia's gas supply warns it may not be able to meet demand, we asked the head of one of Russia's biggest banks if he thinks the economy will run out of gas as well.
FOSTER: Vladimir Putin will win -- will win -- will possibly be reelected president of Russia with a landslide victory, according to the head of Russian bank VTB. Now Andrei Kostin also says he's optimistic about the global economy, whatever happens in the Eurozone.
Richard caught up with him in Davos and asked him for his view of the global economy and the banking system.
(BEGIN VIDEO CLIP)
ANDREI KOSTIN, PRESIDENT, VTB BANK: I was a bit encouraged what I've heard here from my colleagues from the United States and Europe. It seems that such vital issue as banking capital has been resolved. At least most of the American banks and seems quite a number of European banks are solved this problem. And they don't further need further capital.
QUEST: Because we were coming very close, weren't we, for a second time to a credit crunch?
KOSTIN: Yes, yes, we did, but it looks now that everybody's now busy with specific decisions, with specific work. We are not at dismay now. Everybody seems to be working on specific steps. And both politicians and the business, they became quite closer to each other. They understand better each other. They hear each other much, much better than they did two years ago even a las (ph) Davos.
QUEST: You sound optimistic.
QUEST: Is that because in Russia and in your area, things are looking a lot better? I mean, let's face it, the growth in emerging markets is where the action is.
KOSTIN: Yes. I mean, Russia, you know, deep last year and more than 4 percent GDP growth, which is very important nowadays, that our budget had a surplus, so 0.8 percent. And we look for another successful year this year.
QUEST: All right, but how much of a risk is there, if over the new few weeks and months, they don't solve the Eurozone crisis? Because the IMF did downgrade, which along with everybody else, so there is a potential risk out there.
KOSTIN: Europe has no right not to resolve this issue, because, I mean, you might if Europe, that's what they've been building for the last 60 years, probably, or so. And to come back, I think, would be disastrous for Europe.
QUEST: The elections that will take place this year in Russia, the disturbances that we have seen and the opposition that we have seen, is it your feeling that this is grassroots and widened, or do you believe that Prime Minister Putin, as he undoubtedly become President Putin, will deal with this satisfactorily?
KOSTIN: Of course, I'm quite sure that Mr. Putin will have a landslide victory in March elections. And then it very much depends upon him, actually. What we saw now is very limited, of course, manifestations. But definitely there's some kind of growing satisfaction (ph), particularly along the -- what we call Budoflas (ph), which doubled in Russia during the Putin's tenure in power.
And but I think Mr. Putin is still very much in command and that's up to him now, whether he can move the center further and to satisfy (ph) demands of his crowd or not.
QUEST: Is he getting the message through? The perception that -- you travel extensively, more than most of us do. And the perception outside, looking back in, is that it is an autocratic system where now we're heading towards, where Mr. Putin is -- where they are basically going to railroad him back into office.
KOSTIN: It's not quite true, because Mr. Putin has a vast support of the Russian population. And it's all independent public opinion polls show that after being 12 years in power, he's -- still enjoys about 50 percent of support of the Russian people, which is unique for any leader.
(END VIDEO CLIP)
FOSTER: Well, snow expected in Davos at this time of year, but there's snow in some parts of Europe where you wouldn't expect it, certainly not in the quantities we're seeing right now. Jenny Harrison is watching that Siberian chill crossing the continent for us.
JENNY HARRISON, METEOROLOGIST: Yes, well, in Spain, though, (inaudible) this is a problem of course. You saw the snow come in about a week ago, and then since then, we've had these bitterly cold temperatures, as this air just coming down from the north, really blasting across the region, so keeping all of that snow in place. There's more on the way, and to the southeast of Europe. But let's have a look again at these overnight lows.
So this was Wednesday night into Thursday morning, -23 in Kiev, -21 in Bucharest. And look at the averages. So way below the average, it is going to get better as we head into the weekend, still below average, but a lot better (inaudible) just lately, -25 right now in Kiev.
London's dipped down to -2. Then you factor in the wind. It feels like -32 Celsius in Kiev. At Paracelsus, -12; -18 in Munich, -8 in London. And so it goes on and has been, as I say, for several days. But look at this, Saturday and Sunday in Moscow, now the average is -5. That's the daytime high. But we are seeing an improvement. The winds are going to change directions.
Now is there a low pressure coming in. That will feed the winds up from a milder area across this particular region of Europe, and the overnight lows in particular much improved as we head into the latter part of the weekend. And the same for Kiev. So -27 the overnight low Friday into Saturday. Sunday into Monday, hopefully, about -10.
So that, as I say, is a lot better. But this is what's going on. There's that high. And it just literally sort of nudged a bit northward. So it's allowing these systems to come in across the south, bringing with it some more, again, the heavy snow on top of what we've already got. But as I say, it does mean that the temperature's slightly improving across that particular region of Europe.
Look at these totals of snow expected the next 48 hours, 73 centimeters of snow in Sarajevo. And so this coming in from an area of low pressure, 43 centimeters in Belgrade. Max --
FOSTER: I meant to ask you, (inaudible) Jenny, because I know, it's not often the case, but there's actually a business angle, right, to the naming of these storms. I'm baffled (ph) by this, BMW sponsoring a storm or something, you'd better explain it.
HARRISON: Yes, well, typically, all the time in Europe -- in fact, since 1954, storm systems have been named, particularly low pressure systems, I think we (inaudible) out where it came from, to keep a track on the progress of the storm in the same way we talking named storms in the Atlantic and the same in the Pacific, and so that they were able to start to do that.
So basically there was a storm system, an area of high pressure that you can also have named with chosen names, chosen (inaudible). You can actually choose to name these storms yourself. You can't, of course, pick the storm system or the area of high or low pressure, really, is what we're talking about.
So BMW chose to name an area of high pressure Cooper, and this is the one now, pretty much associated with this deadly cold weather across Europe. However, that is not actually the name of this area of high pressure, because it was soon overtaken by Desus (ph).
So this is the one, but I think the association certainly is that Cooper is this storm system. It's all part and parcel of the BMW marketing campaign. And as I say, anybody can do this. It costs $199 for -- euros, I beg your pardon, 199 euros for an area of low pressure. Female names in an even year, high pressure 299 euros.
And they go in alphabetical order. But as I say, you can do that. Anybody can do that if, indeed, that is what you want to do, and as I say, Germany in particular, and let's just end on this, Max. Can you believe it? Look at this. This is actually a river in Berlin, completely frozen. It just looks a bit of crazy paving.
FOSTER: It's causing chaos, but there are some sunny pictures coming out. Thank you so much for that and your business lesson. That's completely bizarre, but (inaudible) thank you very much, Jenny.
That is QUEST MEANS BUSINESS. I'm Max Foster in London. MARKETPLACE EUROPE is up next for you.
QUEST: This is MARKETPLACE EUROPE. I'm Richard Quest at a Deutsche Post DHL hub in Germany. Successful business is all about logistics, getting that bit right is a crucial part of making a profit. On this week's program, we meet a company that is at the heart of doing business in Europe.
This week, I talked to the chief executive of Deutsche Post DHL, Dr. Frank Appel has been heading the company since 2008.
And Juliet Mann meets Simon Vincent, president of Hilton Hotels for Europe. He explains why his company's expanding, despite the precarious economic climate.
Deutsche Post DHL is a giant in its own right, with more than 275,000 employees and resources in many countries around the world. It's the facilitator of the smooth running of thousands of other businesses through its supply chain and logistics divisions.
DR. FRANK APPEL, CEO, DEUTSCHE POST DHL: What we do here is we demonstrate to our customers somehow, you know, how our global network or express delivery works with all the flying we have. You see here from Leipzig, our major avenue here, how we fly to the Middle East, to the other regions. You can move around the world.
We are fortunately very much engaged in trading. And even if you have an economy slowdown, most of the European economies are still managing by domestic demand. Freighting (ph) continued, even in countries like Spain and Greece. And so we don't expect a massive impact, even in our business.
QUEST: Logistics are at the heart of every successful company. The Hilton Hotel group is still optimistic about growth in Europe, despite the current turmoil. Juliet Mann spoke to Simon Vincent, the president of Hilton Hotels Europe, and wanted to know whether the optimism was, frankly, misplaced.
JULIET MANN, CNN REPORTER (voice-over): With the city of London on its doorstep and a postcard-perfect view, this hotel was the pride of a small family-owned hotel chain, who sold out to Hilton Worldwide. It's a crowded, competitive market, where the big players win hands down, with marketing, loyalty schemes and, in short, selling hotel space.
Hilton Worldwide snapped this up and rebranded the group all as part of a grander expansion scheme, because in these tricky economic times, it's the multinationals who are able to cash in on a good reputation.
SIMON VINCENT, PRESIDENT, HILTON HOTELS EUROPE: Consolidation is something that will happen in our industry, and driven, to some extent, by the economic circumstances that we're in. Good projects and strong brands always get harnessing.
And I think the great thing about the Hilton Worldwide portfolio is that, you know, people can see that we are an established hotel company. We have strong brands. We have very capable people working in the business, and that brings credibility. That brings confidence and that's - - and particularly in these times it's important for investors.
MANN (voice-over): Hilton Worldwide is expanding fast, with a particular focus on Europe. The plan is to dramatically increase its presence in the region with 110 new hotels that will create 8,500 jobs.
VINCENT: My big growth markets are the U.K., Turkey, Russia and Poland. Turkey, particularly, is very strong for us. You know, we have 19 hotels in the pipeline there and we are currently operating about 11 hotels there. We've seen strong growth in Turkey.
I think Poland's done very well through the economic downturn. It's one of the few economies that didn't go into recession in Europe. And we're seeing good growth. It's got a good manufacturing base, and there's good infrastructure investment going on. And it's a very attractive market for businesses to invest in.
MANN: What are the countries, where are the cities where it's been a little bit more challenging that you would have liked?
VINCENT: Certainly we've seen some headwinds in southern Europe. If you look at Spain, if you look at Portugal, if you look at Greece, it's been challenging. You know, our business has suffered along with -- along with the macroeconomic environment, which has been pretty challenging. But, you know, for every country that we're finding a challenge in, we're seeing growth opportunities everywhere.
MANN (voice-over): For now, Hilton says its plans represent good news in challenging times by consolidating its existing core customer base plus seizing opportunity in Europe's emerging markets, the hotel group hopes to lure business and leisure travelers in and out of the downturn.
QUEST: While Simon Vincent's guests are sleeping in their beds, these letters are moving across the Deutsche Post network in Germany, more than 2 million letters go through these sorting machines in Rhineland.
When we come back after the break, the chief executive of Deutsche Post DHL on the future of the European economy.
QUEST: Welcome back to MARKETPLACE EUROPE at the Deutsche Post DHL Innovation Center, here they can simulate hot, humid conditions and often give you a rocky ride. It's a bit like the current economic conditions.
So what does the chief executive, Frank Appel, make of the latest economic situation in the Eurozone?
APPEL: I can't tell you what will happen, and I'm a little bit more cautious about predictability of the future. I think we lost completely the predictability of the future, very different from the past. Nobody can tell you what will happen in the next 12 months. It's very difficult to argue. So therefore you have to think how you can prepare a company for the uncertain.
QUEST: How is that different for a chief exec in terms of preparing for such uncertainty at the moment?
APPEL: I think you have to give your people, first of all, because at the end of the day, a service company is nothing more than the employees who serve the customers.
What we tried to achieve in the last year is we gave -- tried to give them a long-term perspective, what the company's contribution to this planet is, so that the people are excited that they are working for a company which want to make a contribution to this planet, and to their customers; and, secondly, create maximum flexibility on the short-term.
And to create that, you need the right management in place at the end of the day.
QUEST: But does it come down to preparing for individual scenarios, Greece going bust, the Eurozone collapsing, the -- whatever it might be?
APPEL: I think scenario planning is, you know, some scenario planning is always good. But if you do too much and think an Excel spreadsheet will tell you what will happen in the future, it will only distract from what is really important, to be ready to take action if they come, because you know, we know certain things only ever happen.
And then you need the right mindsets to change the behavior, to be flexible. And that has something to do with your readiness to learn and to correct mistakes that you might have taken before.
QUEST: Here at Deutsche Post DHL, is there a secret file sitting buried in the vault of your safe -- assuming you have a safe -- saying if the Eurozone collapses this is what we're going to do?
APPEL: No. But the solution to that sits somewhere in the brain of my top 10 -- top management team. And, you know, it's -- you know, you cannot write down something that you can't prepare for this and very unlikely event that this really happens, which I don't believe will happen.
But if it happens, you can't prepare for that, then you really have to see what will happen. The good news and for our industry is even if the euro would not be around, and just for the sake of the argument, somebody still has to deliver letters. Somebody has to deliver parcels, and somebody has to deliver still or transport the containers around the world.
QUEST: You are in the enviable position. You can shift resources. Global company, vast reach, huge number of assets. Tell me why should the marketplace of Europe still be so attractive?
APPEL: I think Europe has a great education level still. You know, I like the culture as well. I'm a -- I'm a convinced European, you know, and when I'm traveling around, I'm always happy to come back to Europe. It's a -- it's a great place.
We have achieved a lot. I think the social welfare system is better than in most other places, in most parts of Europe. I think that's an achievement, a cultural achievement. The democracies are very stable, that's an achievement as well.
And I think we are -- have well educated people with a lot of innovative power, and we don't have -- we don't have to be shy and think others are smarter or better than we are. We have all the power we need to grow our regions, well, as long as we accept that there might be some hardship at the beginning.
And that is more the challenge. We have to do some difficult things at the beginning, but then the future is probably very, very exciting for Europe, too.
(END VIDEO CLIP)
QUEST: And that's MARKETPLACE EUROPE for this week. I'm Richard Quest in Germany. Whatever market you're in, I hope it's profitable. I'll see you next week.