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QUEST MEANS BUSINESS

James Murdoch Resigns; ECB Shores Up Banks; IAG Profits Soar; NASDAQ 3000; Interview with Nielsen CEO Jonathan Carson; Interview with MD Attorney General Douglas Gansler; Interview with GM Vice Chairman Stephen Girsky

Aired February 29, 2012 - 14:00:00   ET

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


RICHARD QUEST, HOST: He's the heir apparent no more. James Murdoch has quit the top job at News International.

Tough and getting tougher. IAG's chief executive, Willie Walsh, tells me the year ahead will be difficult.

And a new alliance. GM's vice chairman tells me about the partnership with Peugeot.

I'm Richard Quest mid-week, and I still mean business.

Good evening. They're clearing the air at News International quite literally. Rupert Murdoch's youngest son, James, has quit as head of News Corp's UK newspaper division, tarnished by a hacking scandal that happened on his watch, as the inquiry into British press ethics provides a constant drip of bad publicity.

He's the man once tipped to replace his father, and now, he's been sidelined, and Rupert Murdoch himself is taking more control. The line of succession at News Corp's headquarters is a little bit more complicated tonight. Maggie Lake is in New York watching the machinations of the Murdoch empire.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: That's right, Richard. And the issue of succession has never been a particularly easy one at News Corp, but you're right, it did get more complicated.

But you know, a lot of mixed reaction coming from New York, interestingly, on this issue of James Murdoch. Some people think that the scandal has absolutely damaged him and tarnished him to a point where he is not going to be able to ultimately take over News Corp longer term.

Another complicating factor is the fact that the man who is in position running News Corp right now on a day-to-day business who would step in should Rupert Murdoch step aside tomorrow unexpectedly is a man named Chase Carey, who investors really, really like.

But I spoke to one analyst who said you cannot ultimately rule out James Murdoch because the Murdoch family has so much control over this company still. If he moves to New York, gets involved with the TV business again, refocuses there, and that's where the real money is at News Corp, and does a good job, he may still stay on the short list.

The Murdochs aren't going to give it up that easily. So, James out for the moment. Certainly pushed back. But not completely off the list, according to people I talked to.

QUEST: Maggie, the rumor and some of the comments that we have seen suggesting that the newspaper divisions could in some shape or form be hived off, put into a separate entity, because it is the newspaper divisions that's the drag on the stock price. Because as you point --

LAKE: That --

QUEST: -- it's the television bit that's really making the money. Movies.

LAKE: That's right. And Richard, investors would love nothing more than to see that happen. They've been pushing for it for a long time, not only because of the hacking scandal, but because of the businesses in general. They're money-losing businesses. This is not where the revenue's coming from and where the future lies, if you talk to investors.

The problem is, nobody thinks Rupert Murdoch will let that happen. It's in his blood, he loves this part of the business and, in fact, the Murdoch family has sort of stood behind that.

So, as recent as yesterday, Chase Carey, who is a TV man, who people believe would -- doesn't have any emotional connection to the paper and would consider doing something like that to the publishing arm of News Corp said that "We're not going to do that. It's not going to happen under Murdoch."

If something were to change and Murdoch were to step back, then it's in play. Again, investors would love to see that, but for the moment, it doesn't look like it's going to happen, Richard.

The other question is, who would buy them and what would they pay for them, too? That's complicating things with this phone-hacking scandal so front and center.

QUEST: Maggie Lake, who is in New York tonight. Maggie, many thanks.

What's happened today completes the favorite son's fall from grace, and it all took just a few months. Here is the timeline. Nine years ago, he was the youngest chief executive on a FTSE 100 company when he joined BSkyB.

By 2007, he'd got the top job at New International, the part of News Corp, as we've been discussing, that is in charge of the UK newspaper division.

Four years later, and he had reached his peak. He's deputy chief operating officer at News Corp, the parent company, just like his brother, Lachlan, before him.

But then, everything changed last summer. The "News of the World" scandal imploded in the wake of the phone-hacking scandal. Murdoch and his father were summoned to give evidence in front of US lawmakers in parliament. Some believe that didn't go terribly well.

In September, he gave up his bonus and left the board of other News International papers, like the "Times." You're starting to see a sort of disintegration of the career of James Murdoch.

And now, he's quit as the executive chairman. So, one has to question the succession hopes and which way they would move forward.

It's the second time that Rupert Murdoch's heir apparent has had to quit a high-profile position inside the family business. CNN's Atika Shubert, now, takes a look at the Murdoch family tree.

(BEGIN VIDEOTAPE)

ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT: So, where does that leave Rupert Murdoch's dream of keeping his multibillion-dollar business in the family?

Well, remember, Rupert Murdoch is now in his 80s, still going strong, though. This photo is actually from when he personally came to London to launch the "Sun on Sunday" last weekend, a new start for News International, if you will, very hands-on.

But he is looking to the future, and James Murdoch was, until recently, the heir apparent. But News International's -- the scandal around it has really tarnished him, and he is now beating a retreat to television, specifically BskyB, where he's had a lot more success, and television is where the money is at in the Murdoch media empire. But will it be enough for him to rebuild his reputation?

Then, there's Lachlan Murdoch. Now, Lachlan was actually the front- runner for many years. He's the older son, but in 2005, he actually left the Murdoch media empire to start his own businesses in Australia. So, he seems at this point to be an unlikely candidate.

Then, there is Elizabeth Murdoch. She has her own production company that was recently bought by News Corp, an indication, some say, that she may be groomed for more responsibility, but no evidence that she is directly next in line.

But those who watch the Murdoch family and the Murdoch business say, well, each of them may have their own areas of expertise, really, there's only one man who can manage it all, and that's Rupert Murdoch himself.

(END VIDEOTAPE)

QUEST: Now, joining me to talk about it is Peter Jukes, author of the book "Bad Press: The Fall of the House of Murdoch." Today's development, how serious is it? Not -- obviously, for James Murdoch, it's pretty serious, but in terms of the grip that the Murdochs have?

PETER JUKES, AUTHOR, "BAD PRESS: THE FALL OF THE HOUSE OF MURDOCH": Well, as soon as you get towards the family, you're getting closer to Rupert. You are, now, the firewalls are going.

The information is, you've got to remember, it's not just the corporate governance, the problems with -- that are internally in boardroom politics. There are investigations ongoing, both in Parliament and three criminal investigations. The parliamentary committee will report soon about James's appearance in front of them.

QUEST: Can we read anything into the fact that he has resigned today about what's likely to come either in terms of litigation or in criminal act -- prosecutions, or anything at all that -- that has led him to resign?

JUKES: Think about it. This is a very strange time to resign if there is no problem. So, it's bad publicity at the moment he launched -- Rupert launched the "Sun on Sunday." It would indicate to me that they know there are things coming up the pipeline.

So, we already information that at a senior level at News International, nine times, while criminal and civil litigation's ongoing, were deleted nine times. How far up did that cover-up go? We don't know. But it could have gone a long way up at News International.

And so, that impinges on the problem of -- I think it's very strange to have a capitalized company at $550 billion that's third largest media conglomerate in the world, which is basically run like a family empire. The shareholders don't like it.

QUEST: Right, but this -- we've always been told, if you buy into the News Corp, you're buying -- I remember one quote. If you buy into News Corp, investors know they're buying Murdoch.

JUKES: Murdoch discount.

QUEST: You're not buying into some, for example, to prove that we're not sort of one-sided here, Time-Warner, with its vast --

JUKES: Exactly.

QUEST: -- differential.

JUKES: Which is the bigger and -- but family controlled.

QUEST: Right.

JUKES: But there have been moments in Murdoch's career, and he's a brilliant self-inventor, amazing entrepreneur, if you like, where he has overreached. Classically, with debt in 1990. And there are various times where it's been very precarious. I don't know if he can reinvent himself again.

QUEST: Right.

JUKES: We all believe, now, the superhuman power. But you look how big the company's got, the level of investment by other investors. Will they and other members of the board allow this -- him pinning his colors to the mast of the British newspapers. That's what he did with the "Sun on Sunday."

QUEST: Finally, do you get the feeling that Rupert Murdoch still -- I mean, he's 80-odd. Has he still got the control? We saw the pictures with the "Sun on Sunday," but one was left wondering how much real force of power he has.

JUKES: Well, if you mean on personal terms, this has clearly revitalized him, as various things have done over the years. Whether it's this last hurrah, one has to wonder, and how much energy he has, really.

Because we have -- this is an unprecedented crisis for News International, and now News Corp. Because Sue Akers on Monday directly was speaking to FCPA violations, talking about a network of corrupted officials.

QUEST: Many thanks for joining us.

JUKES: Thank you.

QUEST: Coming up next, we turn our attention to Greece, which approves more wage and pension cuts, and unions again take to the streets. We'll be talking to the Greek deputy prime minister.

(RINGS BELL)

QUEST: QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Mario Draghi, the president of the European Central Bank, has opened the floodgates of the bank once again and poured money in vast quantities into the market. For the second time in three months, he's released billions of euros to avert a credit crunch and shore up the banks against stress and credit crunches in the zone.

Look at this. LTRO, longer-term refinancing operation, and it's 2.0 - - 2.0 had more money involved, slightly larger loans than last time, with $712.5 billion worth of loans. It's three-year money at a rate of just about 1 percent.

But the most important thing of all is it was unlimited funds. Basically, you got all you applied for if you had the necessary and required collateral in return.

So, whilst there are over 500 banks last time, this time, 800 institutions took loans as against 532 last time, an extraordinarily large number, not only of banks, but corporations with banking licenses also got involved and took money. And they were encouraged to do so by the ECB.

And we're seeing in the market an effect of the way in which this flooding of liquidity takes the strain out. Banks basically can borrow from the ECB, don't have to worry about market rates long-term, and so we're seeing things like the Italian ten-year bond now down at 5.3 percent, well down the 7 percent that was causing such a critical level just a year ago.

Julian Callow is with me, the managing director and chief European economist at Barclays capital. Good to see you.

JULIAN CALLOW, MANAGING DIRECTOR, BARCLAYS CAPITAL: Yes.

QUEST: What did you make -- all -- for the last three or four weeks, we have seen numbers bouncing around --

CALLOW: Yes, yes.

QUEST: -- anywhere between $300 to a trillion.

CALLOW: Yes, yes. That's why -- frankly, nobody could make that kind of estimate with much accuracy. What we've got, the key thing is, I think, the 800 banks that are participating. I think the ECB president earlier this month was actually saying that he really wanted banks to come in and access the finance.

What he's been particularly concerned about, Mr. Draghi, is that some of the smaller banks in Europe, particularly in Southern Europe, may not be able to roll over some of their debt and access liquidity, and that could, then, create a credit crunch --

QUEST: Right.

CALLOW: -- across Southern Europe.

QUEST: So, 800 banks, as against 532.

CALLOW: Yes.

QUEST: A lot of these people who did apply were commercial organizations with banking licenses and the like. But where -- where do you expect -- what do you expect them to do with this money?

CALLOW: OK, well, if we look at what happened in January, the Spanish banks bought 23 billion euros of government debt. In fact, they bought the same amount in December, as well.

That's a lot. That's about half of this year's total gross financing requirement for the Spanish sovereign government. The Italian banks bought about 20 billion euros, as well, of government debt in the months of January.

So, you can already see how this measure has led the banks to buy more government --

(AUDIO GAP)

QUEST: Do you expect to see a large percentage of the money lent today being used for the same purposes?

CALLOW: I think --

(CROSSTALK)

QUEST: Or --

CALLOW: Yes?

QUEST: Would it be --

(AUDIO GAP)

QUEST: -- be even though it's only getting half a percent, as much of it of the last lot is?

CALLOW: Look, it is going to -- it is going to end up back at the ECB, but at the same time, the carry trait can still happen here. And I think you are going to see that carry trait happening.

You know it's simply the nature of banking sector reserves is it is a closed system. I think of it like a central heating system. So, it circulates around, right? But in doing the circulating, it can actually have an impact on financial markets.

QUEST: Draghi's LTRO has been the one thing that everybody says has taken the heat out -- the sting out of the --

CALLOW: Yes.

QUEST: -- the market at the moment.

CALLOW: Absolutely.

QUEST: Would you expect another three-year LTRO, or is this it?

CALLOW: It probably is it, but if we get another, it will be because things are worsening again. The hope is that this creates a big breathing space, it provides a lot of cover for all these other reforms to happen.

The reforms in Greece, which they're working on very hard this week. Reforms in Italy, reforms in Spain, reforms in Portugal. And --

QUEST: But you're a lot more comfortable, now, about the situation than you have been --

(CROSSTALK)

CALLOW: It gives us --

QUEST: -- when we talked before?

CALLOW: -- a lot of perspective. Yes. Absolutely, yes. No, I think it's a great move, and the numbers speak for themselves. And I think the ECB's being very clear there's no stigma attached to this, and that's why so many banks have been participating.

QUEST: It's all mystery money. Many thanks, indeed, for joining us, Julian Callow.

In a moment, we will see how IAG is traveling one year into the merger between British Airways and Iberia. One is doing very well, the other not so. Which of the companies is which, BA or IB?

(RINGS BELL)

QUEST: In a moment.

(COMMERCIAL BREAK)

QUEST: One year into the merger between British Airways and Spain's Iberia and the new IAG is proving profitable. The company that was created through the merger reported an operating profit of $653 million.

Now, look. On revenues of 16 billion euros, that is margins in the low digits, 3 to 4 percent, and it would embarrass any other company and make them blush in the face of investors. But for an airline, and considering it's more than double up the year before, it's not a bad result.

The BA and Iberia companies themselves find the two airlines in very different results. For instance, BA's operating profit was $800 million, boosted by strong demand for trans-Atlantic travel. I rounded it up, $4 million between friends.

Iberia, though, recorded a loss of $82 million. It was hurt by the eurozone crisis and strong competition. Two airlines in the same group.

I spoke to IAG's Willie Walsh, who told me that overall, he's pleased with the results, despite the contrary fortunes of his two airlines.

(BEGIN VIDEOTAPE)

WILLIE WALSH, CEO, IAG: We set out the results of the individual operating companies so that people could understand that they're actually in different places at the moment.

And it just shows that the airline industry is quite a different industry globally. In one part of the world, you're seeing strong growth. But the industry itself faces fuel cost challenges.

But in Iberia, you've got a weak Spanish economy, predominantly a euro denomination business, so the eurozone is clearly impacting. And then, they've got some legacy labor issues that we need to tackle.

QUEST: Of the two carriers, which requires more love, care, and attention at the moment, do you think?

WALSH: I love them both. But no, Iberia needs more work done on it. And it is structural. Some of the issues we've faced in British Airways have yet to be addressed in Iberia, and that's because the labor legislation is different in the different countries, the environment is different.

So, this is an opportunity for us. Some people will look at it and say you've got a big challenge there. I look at it and say there's big opportunity for us.

QUEST: Let's talk about fuel. The numbers are truly staggering. More than 32 percent increase in fuel, and there's a percentage of your revenues, it's also risen from 26 to 30 percent as costs. So, this is a serious factor for you, now, isn't it? But nothing you can do, other than a bit of hedging.

WALSH: Yes. And hedging just postpones the inevitable. It gives you a bit of time to adjust. And that's the way we look at it. If you can use your hedging to get time to tackle other aspects of the cost space where you can control things. But other than buying yourself some time, there's nothing, really, that you can do.

QUEST: The route development. BMI, you expect this to clear within the next few months, one would imagine.

WALSH: Yes, we remain optimistic. We're answering all of the questions that the commission have asked, and we believe we've got a very strong case to acquire BMI.

QUEST: And will you keep the brand? Have you made a decision yet on that?

WALSH: It's unlikely that we will. In the short term, it will be retained. But the decision we've taken since first announcing it is that the best thing for us to do is to integrate BMI into British Airways, so the brand will largely disappear, probably within 9 months to 12 months.

We may retain it as a brand that we could use within the group at a later stage, but realistically, no, it's not going to exist.

QUEST: Right, so good-bye BMI, hello new routes. And where are they going to be? They are the emerging markets.

WALSH: They are the emerging markets. It's into Asia, where we see strong growth requirements in the UK not properly connected. So, additional destinations in China. We don't fly to Korea, Indonesia, Vietnam. So, these are growth economies.

I don't use the word "emerging economies," because they've emerged and they're very strong and they're growing, and we need to get the right sort of connectivity there.

QUEST: There was a comment in your results about the Olympics. Now, obviously, it's a good thing for Britain at one level, but you are actually warning that they Olympics in London may have a detrimental effect on the business --

WALSH: In the short term.

QUEST: -- in the short term.

WALSH: And we put it in our trading outlook, which is one of the first places people go to see, and we deliberately put it there. And I think there were two reasons.

One, people probably misunderstand that the Olympics isn't a big bonus for the airline industry. Because what it does is it disrupts the normal pattern of travel. So, you get a lot of business travelers who will postpone or reschedule to avoid during business during that period.

So, the history, if you talk to other airlines, is that it's generally neutral at best and, in most cases, it's been a slight negative. And that's why we put it there, because I think there were some people who felt this was going to be a big bonus to the airline. In the short-term, it's not.

Long-term, I think it's fantastic that London's hosting the Olympic Games. I think it's great for the city of London, I think it's great for the UK economy, and that's why we're proud to be a partner of the 2012 Olympic and Paralympic Games.

(END VIDEOTAPE)

QUEST: Willie Walsh, the chief executive of IAG.

In a moment, from strength to -- form strength to strength, I beg your pardon. We look at why the US recovery is even better than we first thought.

And the world's most valuable company. How Apple is now worth more than Poland's annual GDP. You can do anything with statistics if you look closely enough.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.

In the past hour, we have learned that the Spanish journalist, Javier Espinosa, is out of Syria. Multiple sources report that he has escaped Homs and is now safe in Lebanon. Meanwhile, Syrian activists say helicopter gunships are firing on Baba Amr neighborhood here on -- seen on Tuesday. And they described the shelling as the worst they've seen so far.

North Korea has agreed to a moratorium on activities in its Yongbyon nuclear site in exchange for food aid. As part of the deal, Pyongyang is agreeing to allow UN nuclear inspectors back into the country. Washington has described the progress as "important if limited."

Seven people are dead after storms and tornadoes swept through the US midwest. Five people died in Illinois after a twister swept through the town of Harrisburg, destroying homes. Two more were killed in Missouri. More severe weather is expected in the coming hours.

The crippled cruise ship the Costa Allegra is set to arrive at a port in the Seychelles on Thursday morning. The ship has been without power for almost three days. But its hundreds of passengers may not get much time to rest. There are few hotel rooms available at the port, and most passengers will have to board planes back to Europe.

Davy Jones, the lead -- Davy Jones, the lead singer of the 60s band the Monkees has died. The British-born singer is thought to have suffered a heart attack at his home in Florida. Jones was the lead voice on hits like "Daydream Believer" and "I'm a Believer." Davy Jones was 66.

(MUSIC)

QUEST: The world's biggest economy is recovering and it's happening faster than first thought. The U.S. Commerce Department says GDP in Q4, a lot of jargon there, but this graph really shows the point we're making. In the fourth quarter, GDP, on an annualized basis, was up by 3 percent, stronger than the initial estimate of 2.8 percent.

And what you see, if you look at 2011, is the fastest growth since the second quarter of the previous year.

So we've gone from -- in fact, the whole of 2011 is a story of get it -- the growth getting faster and faster, .4, 1.3, 1.8, all the way up to 3 percent.

The Fed chairman, Ben Bernanke, says that we can expect similar growth numbers for this year.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: After minimal gains in the first half of last year, real GDP increased at a 2.25 percent annual rate in the second half. The limited information available for 2012 is consistent with growth proceeding in coming quarters at a pace close to or somewhat above the pace that was registered during the second half of last year.

(END VIDEO TAPE)

QUEST: Ken Rogoff is the professor of public policy and economics at Harvard.

He joins us now.

Ken, it's hard to argue with those results, we have seen a classic recovery. I mean it's a bit late and it -- it should have happened maybe two years ago, but that building up of steam is now there.

KEN ROGOFF, PROFESSOR OF PUBLIC POLICY & ECONOMICS, HARVARD: Richard, I don't know. We're certainly seeing a stabilization and you don't have to be as worried about a recession around the corner.

But Ben Bernanke just said 2.25 growth is what they're expecting. That's well below trends, still.

The unemployment numbers are good. The U.S. is stabilizing compared to Europe. But it's still a long road ahead. I -- it's not a classic recovery where we'd be just zooming up at twice that, you know, all -- almost more.

But I think it's a long road ahead still, a lot of debt, a lot of unemployment, a few years to go.

QUEST: OK, so in the numbers, as I looked at them, yes, there's a large percentage that is inventory buildup and perhaps, to some extent, final demand is weak within those numbers.

So I'm wondering, what do you think has to happen, if anything, bearing in mind deleveraging will continue, to help it speed up?

ROGOFF: Well, I actually think the, at least temporary stabilization of things in Europe has been helpful, because that was making everyone nervous, businesses nervous. I think that will boost U.S. growth.

But I think this is just, you know, something that will happen organically. We'll see the employment numbers in a couple of days. That's been looking much better. But still, you know, years to go to get back to anywhere kind of a reasonable unemployment report.

You know, there are people who say the Fed could do more, the government could do more. But they're already running pretty aggressive policies. I think you sort of have to sit and wait at some point.

QUEST: So to -- to take the metaphor, is it basically a cake that's had the ingredients mixed and now we really do just have to let it bake and it may be painfully slow watching it rise?

(LAUGHTER)

ROGOFF: Well, that's a very pleasant metaphor, so why don't we stick with it, Richard?

I might have said a hospital pace in convalescing after a heart attack, gradually getting better, starting to be able to walk around, but still not ready to run in a marathon.

QUEST: OK. The election and, as we move forward through 2012, and it really does become a -- a dominant theme, with promises that cannot be delivered or will be delivered or -- or may be delivered, in that environment, does there -- is there any chance of realistic fiscal reform at all in 2012?

ROGOFF: Hard to imagine fiscal reform. We might see fiscal stimulus spending. But the big decision are so far apart. What the Republicans want to do, which is basically keep tax rates low, what the Democrats what to do, which is have much higher taxes on the rich. They're so opposed and the Republicans, of course, control Congress, the Democrats control the presidency.

They're at a stalemate. And I don't think we'll see it broken until 2013. And that, of course, depends on how the elections go.

QUEST: Finally, just one thought on Europe. As you know, today, we had, in Europe, the LTRO, half a -- half a trillion went out the door, 800 banks.

Does that tell you things are getting better, things are getting worse or is it just one factor into a very mudded scenario?

ROGOFF: Well, it's a big factor. There's no question that the ECB, you can loosely say, has been printing money. And it's felt very good in Europe. It's definitely been calming markets. It will work for a long time, maybe even a few years, maybe less, maybe more. But it doesn't solve the fundamental problems. I mean you don't need an advanced degree in economics to know printing money does not solve your problems.

So they've definitely calmed things down. It's a bridge, but a bridge to what, we don't know.

QUEST: I think I'll stick with my baking analogy for the moment. It probably sounds tastier.

(LAUGHTER)

QUEST: Ken Rogoff joining us from Harvard.

ROGOFF: Indeed.

QUEST: Many thanks, indeed, this evening.

In another sign of the U.S. recovery, the NASDAQ touched the 3000 mark today for the first time since December, 2000. Now, one major push there was Apple.

Earlier today, Apple's market cap passed more than half a trillion dollars, $500 billion, half a trillion.

Felicia Taylor is at the NASDAQ and joins us now.

It's a lot of money. It's a valuable company. And some say, I'm not -- I'm not getting involved in who they might be, but some say it's out of all proportion to the reality.

FELICIA TAYLOR, CNN CORRESPONDENT: And that's exactly right, because you take a look at the -- at Apple, it's actually trading at 15 times earnings. You can take a look at what has been the 52 week chart. And it's definitely been on a trajectory of higher, but not necessarily based on its value.

You've got to compare these companies to things like Exxon Mobil, which is also worth about $400 billion. So you put Apple next to that and you can kind of make that comparison.

So, although Apple is up -- well, almost 1.5 percent today, it's not likely to stay in that kind of a -- a place. It's going to trade back and forth off of that, but nec -- necessarily not near that half a trillion dollar mark, which is quite significant.

Stocks like this do stay in that area, but not for very long -- Richard.

QUEST: Felicia Taylor at the NASDAQ.

Many thanks, indeed.

Google is changing the way it handles digital footprints and it's causing outrage amongst privacy advocates. We'll look at why, next.

(COMMERCIAL BREAK)

QUEST: At this year's Mobile World Congress in Barcelona, phones are just the beginning. Companies from Aces to ZTE are showing off their latest tablets. It's a market with plenty of potential.

Cisco says the number of mobile connected tablets tripled last year, to 34 million. The tab -- the tablet, of course, is the prime example of something you don't realize you need until you actually, perhaps, get one.

And at the World Congress, Nielsen's chief executive, Jonathan Carson, told Jim Boulden that spotting gaps in the market like that is the key to innovation.

(BEGIN VIDEOTAPE)

JONATHAN CARSON, CEO, NIELSEN: Consumers are adopting these new technologies...

JIM BOULDEN, CNN CORRESPONDENT: Yes.

CARSON: -- at incredible rates. And so the are companies that produce those products are very driven to introduce new innovations into the market quicker.

BOULDEN: But when I look around here and I see some of the innovations, I wonder, do I want those?

Am I demanding them or are the companies giving me stuff that I'm not sure yet I'm going to want?

Or are they playing catch-up to what I need?

CARSON: That's absolutely the key to success. I think we've seen tremendous innovation at virtually any booth that you stop at. But the key is to make that innovation matter to the lives of consumers. And that's where the real difficulty is.

BOULDEN: I see a Nokia 41 pixel camera. I see a Samsung phone that has a projector. Maybe some people want those, maybe they don't. But it's showing the technology is there.

CARSON: Right. And -- and the technology, by and large, is there. We're at a time of unprecedented innovation. But for consumers to actually figure out how to incorporate those technologies and those innovations into their lives, when they're being introduced at such a rapid pace, is quite difficult.

BOULDEN: And I'm sure what you think about a lot is price point, because I can have the best phone in the world, but I'm not going to pay for it.

CARSON: Yes, there's -- this kind of a dual thing happening right now, both with consumers and with -- with these companies. You see, at the high end, this incredible pace of innovation, with new features, new functionality being introduced into the marketplace. And at the same time, you see lower priced versions of those devices, especially smartphones, being introduced by the device manufacturers, as well.

BOULDEN: So that means more people, in 2012, will be able to have a smartphone?

CARSON: Yes. We see this as a tipping point for massive action.

BOULDEN: OK.

CARSON: In the U.S. market, we're at about 50 percent penetration of smartphones. And in certain demographic segments, it's almost everybody. So ages 25 to 34 in the US...

BOULDEN: They're only going to buy smartphones (INAUDIBLE)?

CARSON: Four out of every five...

BOULDEN: OK.

CARSON: -- five mobile devices...

BOULDEN: Yes.

CARSON: -- sold in the U.S., to that age group, are smartphones. In developing markets, as well...

BOULDEN: Yes.

CARSON: -- we see media capable phones, which may be not traditional smartphones, but media capable phones in many markets are now almost half of device purchases.

BOULDEN: And what's extraordinary to me is the -- the -- when you look around here, it's not just a competition in the hardware. Obviously, we're sitting here at Samsung, having someone drawing us. But it's about Android behind it and Windows phones with Nokia. It's about Apple's iPhone, which isn't here. It's cutthroat right now, really cutthroat.

Are they all going to survive?

CARSON: When tablets were first introduced into the market in a big way a couple of years ago, there was thinking that there could be a category killer, maybe people won't need a smartphone anymore, because they'll carry the tablet with them. Maybe they won't need a laptop anymore.

BOULDEN: Yes.

CARSON: And what we've actually seen is it's much more of a portfolio approach that consumers take. So there's a tremendous amount of cross- ownership. Almost everybody that owns a tablet also owns a smartphone.

BOULDEN: Right.

CARSON: And a lot of tablet owners also own an eReader. So they go after -- consumers use the different devices for very specific use cases and will own multiple devices.

BOULDEN: So from what I'm hearing Republican you, is that there is room for a lot of players, because we do want multiple devices?

CARSON: Yes, absolutely. The are the different device types have different use cases for consumers. And the key for the companies producing these devices is to find those killer apps that are going to make a new category of device really matter to consumers.

(END VIDEO TAPE)

QUEST: Jim Boulden there. And I actually thought that was a rather splendid looking caricature that was being drawn of Jim. We'll try and get a full frame version of that for us to enjoy tomorrow.

When we come back, General Motors and the French company, Peugeot, they have an alliance and it raises questions, an alliance to what, in a moment.

(COMMERCIAL BREAK)

QUEST: Google's new privacy policy is hours from taking effect. From March the 1st, Google will combine user information from all of its tools and sites and it will all combine into a single profile. You will have seen the warning, or at least the advisory about this, when you log onto Google in some shape or form.

It means the information collected when you use Tube -- YouTube, Google Maps and Google searches will no longer be stored separately. It will be filed under a single profile.

Privacy advocates say the new policy means intrusion and 30 states -- 30 U.S. states attorney general are speaking out about the changes.

Maryland's Douglas Gansler is one of them.

And the attorney general joins us now from Washington.

Attorney General Gansler, what is it you want Google to do?

I mean your letter raises all these issues and it's been signed by -- by very weighty man and women such as yourselves.

But what do you want them to do?

DOUGLAS GANSLER, MARYLAND ATTORNEY GENERAL: Well, the reason why I wrote the letter and then I had 35 other attorneys general sign on is because there was a lot of concern expressed by consumers about this new privacy. Most -- most consumers don't know today that Google actually combs through and harvests the information from your personal Gmail accounts, much less your YouTube or your Google searches. And now they're going to take it all and make these very rich, very deep personal identification categories about you.

Now, what they will say is when they do that so we can better target our ads and better get information to you...

QUEST: Right. But...

GANSLER: But certainly people would say, look, I don't want you listening to my phone calls and then sending mail to my house...

QUEST: Is it...

GANSLER: -- it's really no different.

QUEST: Right. The -- the truth here is it's not what they're doing is so bad, it's that Google has become ubiquitous in our lives and, therefore, we have to treat them -- or you have to treat them more like a monopoly and, therefore, rules and restrictions.

Would that be a fair assessment?

GANSLER: It's -- it's exactly a fair assessment. Anyone who uses the Internet, it's almost impossible to avoid the Google ecosystem, if you will.

QUEST: Right.

GANSLER: And so what they're doing here is saying we're going to do this to you, you have no...

QUEST: Right.

GANSLER: -- you're not -- you can't opt in, much less even opt out of that. You have to submit to this, our new privacy policy, whether you like it or not. They don't tell us how they're going to protect the data from hackers and identity thieves.

QUEST: All right...

GANSLER: They don't tell to whom they're going to sell it.

QUEST: You have powers as attorneys general and that is more than just writing even stern and strong letters.

So I ask you straight up, when are you going to use your powers against something like Google?

GANSLER: Well, it's just started -- their -- their policy is supposed to go into effect tomorrow. And we're hoping to hear from the CEO before that and get -- have a sit-down meeting. We've actually -- the technology has gone very fast, much faster than the laws in the United States. And we've actually been able to work with technology companies to get them to understand that there are lines between where privacy begins and their business interests end. And were trying to figure out where we can draw that line in this case and hopefully give consumers a choice.

QUEST: Right.

GANSLER: Of course, the other problem with this is that you were just talking about in your -- one of your previous segments is the smartphones. Androids are about 50 percent of the smartphone market in the United States. They're Google powered.

QUEST: OK.

GANSLER: If you bought these Androids without knowing the privacy policy, now you have no ability to opt out of it.

QUEST: So when I see the list of states -- California, Maryland, New York, some of the largest states in the union, should Google be worried tonight that the machinery of law, albeit slowly, but it inexorably moving against it?

GANSLER: I think they should, because it's not just attorneys general. And we just finished a deal a couple of weeks ago with the five major banks in the United States as a first step on -- on what they were doing that cost $26 billion. And obviously tobacco and other cases show, when we get together -- and you just mentioned not only do we have all the big states -- Texas, Illinois included -- it's -- it's bipartisan. We have Republicans, we have Democrats. Privacy is a concern to everybody.

And where we draw that line. Maybe what they're doing is appropriate. Maybe people want it. But we need to have that discussion...

QUEST: All right.

GANSLER: -- and make sure people have an ability to opt out of this intrusion of their privacy.

QUEST: Attorney General Gansler from Maryland, many thanks for joining us and putting the...

GANSLER: Thank you.

QUEST: -- the case so clearly.

We thank you for that.

Now, General Motors is taking a 7 percent stake in Peugeot Citroen. It's the alliance which will make GM Peugeot's largest shareholder behind the Peugeot family itself.

GM says by sharing parts and materials for their cars, they'll save around $2 billion over five years. But you'll be well aware that GM has its own European division, Opel and Vauxhall, which are in deep financial trouble and trading badly.

I spoke to GM's vice chairman, Stephen Girsky, shortly we became -- shortly before we went on air.

And I asked him what was the advantage of this deal with Peugeot?

(BEGIN VIDEOTAPE)

STEPHEN GIRSKY, VICE CHAIRMAN, G.M.: Well, we think there's big savings here. We estimate $2 billion, with the initial phase of programs, Richard.

But let's be clear, we are not combining companies, we are not merging companies. We have agreed to work on products, on modules, on technologies, as well as set up a purchasing JV.

So we view this as incremental tools to the toolkit to help both companies improve their profitability in Europe.

QUEST: Well, it is a bit more than that, isn't it, because you are taking a stake in Peugeot. So to that extent, you're not just innocent bystanders. You have a -- you will have a vested interest in the performance of the other car company.

GIRSKY: Certainly. We view this as a long-term, strategic alliance. And we're going to have a number of programs going with Peugeot. We think it's important for them to be financially healthy. They need to raise capital. Their view is they need to raise capital to support the programs they want to do with us.

We wanted to be supportive of their capital raise and that's why we're investing along with them.

QUEST: And to those who say, well, surely, the attention should be on fixing Opel, which made a thumping great big loss last year, and dealing -- fixing your existing European operations, rather than complicating the scenario with more and different adventurers, what would you say?

GIRSKY: Let's be clear, we are working on fixing Opel and Vauxhall and our existing operations. We're spending a lot of time working with our constituents up and down the value chain, revenue side, cost side, to lower the break even point.

Materials is a big piece of the cost equation. Setting up a joint venture purchasing will help reduce our material costs. Setting up a commercial arrangement out -- around logistics will help with our logistics costs.

Again, we are working on our own to improve the profitability of Opel- Vauxhall. But we think this alliance will provide incremental tools to help us.

QUEST: Long-term, long into the future, do you see a -- a merging of either GM-Peugeot, Opel-Peugeot?

Do you see any long-term goal in that regard?

GIRSKY: I wouldn't want to speculate on any of that, Richard. But I would say this. We have a lot of flexibility built into this. We're going to start with a handful of programs. If it works, we will have the option to add more programs to it and add more services to this. If it doesn't work, we could pull back. We could stay where we are.

But the idea is to get these programs and initiatives launched, get our $2 billion in savings and then see where we go from there.

(END VIDEO TAPE)

QUEST: A fascinating deal, GM and Peugeot. And one of the most interesting things about this deal will be how it looks in, say, five years time, will there be a merging of the divisions?

Twee now.

And Jenny Harrison joins us from the World Weather Center -- Jenny, we -- I know you're starting with storms and tornadoes in the US. And the one thing that has always struck me is however fascinated we are by tornadoes, the deadly nature of them is quite remarkable.

JENNY HARRISON, ATS METEOROLOGIST: Yes, you know what, Richard, if a tornado is heading your way, we talk about taking cover. You get into a basement, you get into an interior room.

But you know what, there is very little you really can do. It's not even like a hurricane, where you can really prepare for that. You get very little warning, sometimes, with these storms, as well. These tornadoes, of course, are spawned by these really strong severe thunderstorms and they are continuing right now.

So these storms and the damage began on Tuesday and still they continue. There's just been a line of thunderstorms working its way eastward for the last few hours. You can see the red boxes. Those are tornado watches that are in place and stretch all the way down, you can see here, to Northern Mississippi, Northern Alabama, all the way up toward Iowa, as well.

And right now, in fact, Nashville in Tennessee is seeing some very severe thunderstorms go through. This is the damage in the last 24 hours. We know that at least eight people have died, six in Southern Illinois and two in Missouri.

We've got some aerial pictures to show you, first of all. In fact, I think this is actually Kansas, because that was another state that was so very, very badly hit.

And, again, with these tornadoes, you can have one house completely destroyed like this and then across the street, you could have a house literally untouched. That is the strength, the power of the storm, but, also, that is just how focused the damage can be, the storm system itself.

Reports of about a meter wide path of destruction. No word yet on the actual length of this.

And then we've got other pictures to show you, I believe, of -- this is, I think -- it's not saying to me here, but I think this is actually Harrisburg. And this is in Southern Illinois. And you can see, again, a very similar sort of story. And Southern Illinois is where six people did actually die.

Come back to me and I can show you, this is actually Google, as it was zooming in, to show you.

But this is the actual town, a town of about 10,000 people.

Now, there's more damage. It really is widespread. As I said, we've got Kansas -- this is Harveyville. And this is very much the picture across this entire region. We've just got these pockets where these tornadoes and certainly these very strong winds came through. Evansville there in Indiana.

This is what's been going on and is still going on. We've got this very intense storm system to the north, very, very cold air, strong winds. These are conditions, along with very heavy amounts of snow.

Then, to the south of that, we've got this very mild and very humid air coming up from the south. And it's the clash of these two very different air masses which are producing these strong thunderstorms.

Warnings in place Wednesday, as we go into Thursday. And just to show you, it's beginning to get to that time of year, Richard, where the number of tornadoes, the frequency of tornadoes goes up extremely rapidly, as you can see there.

So we'll continue to monitor these storms in the coming hours.

QUEST: We thank you, Jenny Harrison.

More on that in the hours ahead.

When we come back in just a moment, it's a Profitable Moment on the ECB.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment is four letters long and, of course, it's extremely profitable for the banks involved -- LTRO -- the Longer-Term Refinancing Operation from the ECB -- all you can eat money, the cheap loans that Mario Draghi is offering to banks in the Euro system.

There's no stigma for borrowing large sums, so many arrived and borrowed more money this time around. It's a sign that they feel they can borrow incompetence. And you can bet your last euro they wouldn't be so eager for a full scale nationalization instead.

There are no, or at least few conditions and the banks are using money as they please.

And that brings us to the final and most important point about the LTRO. It is the speed of the operation.

While Brussels argues about the size and strength of firewalls and bailouts and plans of this, that and the other, the ECB has printed and pumped more than a trillion dollars in a mere matter of months.

It may not be the lender of last resort, as some would wish. It's the only show in town.

And that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

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

END