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QUEST MEANS BUSINESS
UK Recession Deepens; German Confidence Slips; Europe's Economic Gloom; Deutsche Bank Profit Warning; Humdrum Day on European Markets; Dow Snaps Four-Session Losing Streak; Soaring Profits for Spirit Airlines; Advertising Rules for Airline Fares in US; Euro Under Pressure; Olympics Strike Called Off; Getting Around the Games; IAAF Doping Charges; Greek Triple Jumper Suspended for Racist Tweets; Caterpillar's Record Earnings
Aired July 25, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's a case of a double-dip disappointment. Britain's economy gets a shock.
Here in Germany, confidence takes a knock. Businesses brace themselves for hard times.
And the Cat that's got the cream. I'll be talking to the chief exec.
I'm Richard Quest and live from Berlin tonight where, of course, I mean business.
Once country is the most powerful economic force in Europe, the other country is out of the eurozone. Good evening tonight from Berlin. Disappointment in Britain, pessimism in Germany. Two of Europe's economies are feeling the strain and, arguably, this is the biggest sign so far that contagion is spreading.
Tonight, we are live in Berlin, the strongest country in the eurozone, where weakness is now really starting to show. And also tonight, blame it on the weather, blame it on the Diamond Jubilee, just don't blame it on austerity. The UK economy is in far worse situation than was first thought, nine months into a double-deep recession -- make that a deep double-dip recession.
Output is sinking further and faster than was first thought, and the finance minister says that the spending cuts are not the culprit, they are the cure. Critics say austerity is what's really causing the problems for UK GDP, which contracted 0.7 percent quarter-on-quarter in the second quarter of this year. Economists have been predicting a fall of just 0.2.
Construction hardest hit, industrial production, service sector also weak. The opposition leader, Ed Miliband, says the figures mark the death knell for the coalition of Conservative and Liberal Democrats. The finance minister, the chancellor, George Osborne, well, he says the cuts will continue.
(BEGIN VIDEO CLIP)
GEORGE OSBORNE, UK FINANCE MINISTER: Well, we know the economy has deep-rooted problems, and today's disappointing figures are further confirmation of that. We've got to deal with the debts we built up in this country over many years. We've also got the debt crisis abroad, and I think the government has to have a relentless focus on the economy.
And the announcements we've been making on infrastructure, on getting lending to businesses, show we have that relentless focus.
(END VIDEO CLIP)
QUEST: So, that's the situation in the UK on one side of the Channel. Here in Germany, the economy is also un somewhat shaky ground. The tremors emanating from the eurozone crisis are getting stronger and stronger.
German business confidence has sunk to its lowest level since March of 2010. The Ifo Business Climate Index fell for a third consecutive month in July, 103.3, and that was 105 in June, which gives you an indication of the direction.
Earlier this week, Moody's cut the outlook for Germany's Triple-A credit rating to negative. It says it's looking more likely that Greece will exit the euro and Spain and Italy will need a bailout.
The scenario is looking a bit grim. Quentin Peel is the chief Germany correspondent for the "Financial Times," joins me here in Berlin. So, the wheels are well and truly coming off the wagon.
QUENTIN PEEL, CHIEF GERMANY CORRESPONDENT, "FINANCIAL TIMES": I don't think you'd put it that strong, actually. Germany is still an incredibly strong economy. It's slowing down, that's absolutely true, and business confidence has slipped a bit.
But Germany has been living, if you like, in a bubble of prosperity when the rest of the eurozone's been suffering, so it's not doing too badly.
QUEST: OK. So, factor in these two warnings, or the Ifo survey, we have the ZEW confidence survey. We've also now had Moody's warning. We need to understand, though, what is happening here and if it could get worse or is going to get worse.
PEEL: Well, I think that's what Moody's saying, and it's exactly, actually, what Angela Merkel has been saying, too, and that is Germany can't take the whole load of the eurozone on its own shoulders. So, if this knocks on, and not only Spain but Italy are affected, too, that is a huge burden that Germany would have to carry.
QUEST: Isn't that exactly the point? Germany is a slow, easy-as-it- goes way forward, not to rushing, not to move too far too fast, but time is not on their side at the moment in this crisis.
PEEL: Germany always thinks long. It is refusing to react to the --
QUEST: That's the problem, is it not?
PEEL: Well, you might say. But it might be the solution. Germany's absolutely adamant that you don't overact in situations like this. The answer for the eurozone, they say, are very long-term, very profound reforms, and it's going to take a while.
QUEST: And while that's happening, Greece can sail off into the yonder. Glug, glug, glug, down it goes. Spain will need more of a bailout possibly potentially, and Italy, who knows what?
PEEL: Well --
QUEST: That's the scenario.
PEEL: That's the scenario, and clearly, I think people are very unhappy about what's happening in Greece, here. They're putting a very brave face on what's happening in Spain. They say the Spaniards are doing the right things. And so, they're living in hope.
QUEST: Let's -- I know you're here in Germany, but you keep a close watch on the UK from the FT. These GDP numbers, I mean, your eyebrow says it all.
PEEL: They're dreadful. They're absolutely dreadful.
QUEST: Is austerity the reason?
PEEL: Austerity's clearly part of it, I think. It's the way austerity has worked. But there are other elements, like the construction sector has come to a standstill now, thanks he's done all the Olympic job. So, that was a bit of a hit they've taken, as well.
But I think looking at Britain from here, there's an awful degree of schadenfreude, or there's a degree of saying, "We told you so." Your economy is not just suffering from the eurozone. Your economy has real problems. You've been relying on all these finance houses, all the banking sector, and that's exactly where the problem lies.
QUEST: Quentin, many thanks, indeed, for joining us. We appreciate it. Thank you very much, indeed.
Now, Deutsche Bank has warned second quarter earnings will fall short of analysts' expectations. It says the weak euro has inflated its cost in dollars and in sterling. Quarterly net income is now expected to fall 40 percent to $850 million. Deutsche Bank's full earnings report is due out at the end of July.
Deutsche Bank was the worst performer on Frankfurt's XETRA DAX, falling more than 4 percent. The broader markets were much more humdrum. Car makers were some of the biggest movers in Germany, Mercedes-Benz parent company, Daimler, soared more than 4 percent after announcing lower profits but higher sales.
In Paris, Peugeot fell 2.5 percent after declaring an $800 million half-year loss. Holdings gained 8.6 on the FTSE.
So, I ain't got my bell. Well, you can't really get it into the overhead compartment anymore. The Dow is trying to snap a four-session losing streak. It's holding onto some early gains. Alison's in New York. Don't touch anything, but what's happening?
ALISON KOSIK, CNN CORRESPONDENT: You know what? Stocks have come back, Richard, just in the past half hour or so. You're seeing this very strong bounce-back. And part of it is just light volume. You've got a lot of traders who are really just driving the session, and they're making up for stocks that have been oversold in the past several sessions.
Also, you're seeing hopes very high that the Fed could step in after the "Wall Street Journal" said that the Federal Reserve is moving closer to taking action to stimulate the economy.
And then one more thing that could be driving stock higher: earnings came in better than expected overall today, especially when you look at earnings for Caterpillar and Boeing. Both reported second quarter earnings that beat Wall Street estimates. Both raised their full-year outlook.
And as you know, outlooks are just as important as the earnings. They're more forward looking, they're an indicator of how the company thinks the economy is going to do. With Caterpillar, we saw higher sales of bulldozers and mining trucks.
And the good news for Boeing, the jet maker says it's ramping up production to meet demand for both commercial and military planes. And Boeing shares right now are up almost 3 percent. Richard?
And we're going to have more after this.
QUEST: Now to the airline industry, and Spirit Airline's profits, one of the low-cost carriers in the United States, have soared in Q2 as a result of accelerating fees and rising passenger numbers. The low-cost carrier's net income, $34.6 million, double more than what it made this time last year. Average ticket prices fell, revenues from extras increased by 42 percent. The airline flew more people.
You've got to love that ancillary revenue. Well, Ben Baldanza is the chief executive of Spirit, joins me now live from CNN in Miami. From Berlin to Miami, Ben, when we look at the performance of the airline, your airline has never backward at coming forward at removing a dollar from someone's pocket for something else. But somehow, your customers don't seem to mind.
BEN BALDANZA, CEO, SPIRIT AIRLINES: Well, the reason our customers love Spirit, and why we're becoming more and more popular, is because we have the lowest fares in all the markets we serve.
And even after you add all the extras that customers choose to buy, the total price they pay on Spirit is in every case lower than their next best option on another airline. So, the customers like low fares, that's why they love Spirit.
QUEST: Right. Now, one of the real reasons we're talking to you tonight, besides always good to have you on QUEST MEANS BUSINESS, is what you faced in the US is happening in Europe as well. Spirit, along with Southwest and others has challenged -- you've lost a challenge on US advertising rules.
The US law requires you to prominently display total ticket prices instead of flagging a small fare without taxes and fees. Airlines can give separate breakdowns, but it must be in smaller size than the total cost.
Now, the US Court of Appeals has rejected the argument that it violated your right to engage in commercial and political speech. So, the reason I want to ask you about this is not necessarily the minutiae of US law, but it does come down to the point, with so many taxes and so many fees from governments, isn't it right that we know what's what?
BALDANZA: It is right the customers know what's what, and one of the reasons that we argued against this law -- and let me state that we've been compliant with this misguided regulation since it was put in place in January. And so, there's no near-term effect on the company as a result of losing this ruling.
But the reason that we're fighting it is we think that it is very bad for consumers. It blends airline prices and government taxes into one number for consumers, so they actually lose transparency. They don't know what they're paying to the airline and what goes to the government.
We like a world where you know what you're paying the airline and what you're paying the government. We'll add those together for you long before you ever have to pay. But we think that this is a step back for consumers.
QUEST: OK. If we look at the airline industry at the moment in the United States, we saw Delta today with a loss on its hedging -- fuel hedging, even before its bought an oil refinery. We've seen US airlines having to -- in some difficulty.
Do you expect, for example, American to consolidate with US Airways? Do you expect more consolidation?
BALDANZA: Well, consolidation started a number of years ago and has happened multiple times since the US airline industry was deregulated back in 1978, a long time ago.
But I think what you see American, in their bankruptcy now, and US Airways, maybe making -- trying to make a merger happen there is part of a trend that started several years ago when Delta and Northwest teamed up, Continental and United teamed up, Southwest and Air Tran teamed up.
And the result of that has been generally a more stable US airline industry, less totally capacity, which has created the ability to stabilize pricing somewhat. So overall, it's been good for the economics of the business, so if there's a little more, I don't think that would be bad for the industry.
QUEST: And will you be in the market to buy, to be bought, to consolidate, or are you happy sitting on your hands?
BALDANZA: Well, we have a very dynamic growth plan at Spirit, and we can grow the airline, we believe by 15 to 20 percent per year for the next number of years while maintaining industry-leading margins.
So, at this point, we're not really interested in any kind of merger, certainly as a buyer of anything. We've got a lot of native growth within the airline right now, so there's no reason to buy someone else's problems.
QUEST: Now, buy a couple of big planes, the expensive ones, and fly over here. I'll buy you dinner. All right, many thanks, Ben. Good to have you on the program tonight, live to us from Spirit -- from Miami this evening.
Now, to tonight's Currency Conundrum. And it comes to you from, of course, from Germany. Before the euro, Germany used the mark. Our question to you is as follows: what did most German states use before the mark? Was it the guld, the vereinsthaler, or the schilling? Those are the questions. The guld, the vereinsthaler, or the schilling? The later -- the answer later in the program.
These are the rates, you can see the way in which the various economic numbers have affected the currencies tonight, the euro once again under pressure. Those are the rates, this is the break.
QUEST: After all the hype, the Olympic Games are underway. While the Opening Ceremony hasn't taken place, where the actual Games themselves -- the sport has begun. Women's football kicked off in Cardiff and in Coventry.
And while they were kicking off, one thing isn't going to kick off: a strike planned by British border guards will no longer be affecting fans arriving in the UK tomorrow on Thursday.
Unions have called off the strike saying the government gave into demands. The government says -- ha! -- it hasn't made any concessions. A hundred thousand people are arriving at Heathrow each day in the build-up to the Games.
Here's one point: admittedly I was leaving Heathrow this morning, not arriving, but even so, I have to say the terminal was extremely quiet, T1, and it was actually performing remarkably efficient.
In London, when I left this morning, it was after 6:00 AM, and the new Olympic route network, the Olympic lanes, had come into operation. These special Olympic lanes come into force, they are for athletes, dignitaries, and media. They are now in operation in the UK.
There are, however, more peaceful modes of transport to get you to the Games. Jim Boulden has taken to them like a duck to water.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): London's canals near the Olympic Park are now shut off to the public, closely guarded by the military around the clock.
Except, that is, for the customers of Water Chariots. Nearly four years ago, Peter Coleman had the vision of using canal boats to whisk ticket-holders right to the stadium. He was awarded the exclusive rights to ply the River Lea.
PETER COLEMAN, WATER CHARIOTS: Once we got the Olympics, and we started to think -- see things happening with the Olympic Park, it suddenly became clear to me that the water in the River Thames has got to be the way to get to the Games.
BOULDEN: Passengers will start at jetties north or south of the restricted area, starting at around $70 round-trip, and they'll bypass the crowded roads and busy train stations and be dropped off within meters of the park.
BOULDEN (on camera): So many of London's landmarks are just right next to the water, but London doesn't have a great track record when it comes to using its water, its rivers, and its canals for public transport. Water Chariots wants to change all that.
BOULDEN (voice-over): Coleman invited us out on the Usain Boat. Yes, that's the name. He'll use 30 boats during the Games, some are smaller and faster for customers playing closer to $150. Coleman prefers, though, to go slowly, to take in the cleaned-up canals.
COLEMAN: This structure we're going under now has just been put up, a beautiful bridge. It's pretty, it's attractive, it's in keeping.
BOULDEN: When London was awarded the Games seven years ago, the canals were heavily polluted. From the canal boats today, it's clear one legacy promise is being fulfilled: regeneration, from the wildlife to the luxury apartment buildings with balconies overlooking the Olympic Stadium. British waterways has also repaired the locks, some first built in the mid 18th century.
BILL DOUGHTY, WATER CHARIOTS: Yes, the Olympic Park itself was actually built using the waterways as a method of transporting waste and importing materials to actually build the park.
BOULDEN: Doughty is a former banker. He's put in part of the $5 million invested to kickstart Water Chariots. They plan to continue to rent boats to people who want to see the Olympic Park after the Games, whether for weddings, parties, or just taking in the transformation the Games have brought east of the city.
Jim Boulden, CNN, London.
QUEST: Some Olympic athletes may already be on their way home. The IAAF says nine athletes from various countries have been sanctioned for doping in addition to the Moroccan distance runner Mariem Alaoui Selsouli, who has already been suspended and will miss the Games.
Meanwhile, the Greek triple jumper Voula Papachristou has been suspended from the Olympic team after she posted an offensive tweet about African immigrants. Papachristou has apologized for the tweet saying she doesn't believe in racial discrimination.
Time for us to take a break. When we return, in this earnings season, there are those companies that are just performing at a high rate of knocks. We'll be talking to the chief executive of one of them, the CEO of Caterpillar joins me live. An Q25, who's gold? After the break, QUEST MEANS BUSINESS, live from Berlin.
QUEST: Hello, I'm Richard Quest, live in Berlin. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
Rebel fighters are gearing up for battle in Syria's largest city, Aleppo. The government is pulling some 2,000 troops and tanks from Idlib and deploying them to Aleppo. A Free Syrian Army official says rebel leaders have ordered their fighters to attack the government reinforcements as they move on the city.
The latest UN estimates show that nearly 120,000 Syrians have fled their country because of the crisis. Turkey has accepted the largest number, some 43,000. The UN High Commissioner for Refugees, Antonio Guterres, told CNN he's very grateful to all Syria's neighbors for keeping their borders open.
North Korea's new leader is married. That's what North Korean television is reporting. It says the mystery woman on Kim Jong-un's left is his wife. Her name is Ri Sol-ju. Mr. Kim's father was also married, but his wife rarely appeared in public. Analysts say Kim Jong-un may be trying to convey a more open and friendly image.
Flags are flying at half-staff across the West African nation of Ghana following the sudden death of the president. The government says John Atta Mills died on Tuesday hours after falling ill. The vice president, John Dramani Mahama has been sworn in to take his place. He called Tuesday "the saddest day in our nation's history."
Nine Olympic athletes from six different countries have just been suspended for doping. One of them won a bronze medal in women's track and field at the Beijing Games. Authorities say six of the athletes in question were caught by the use of a new method of testing.
Caterpillar shares are gaining more than 1.5 percent in New York. The market is being begrudging, all things considered, particularly after record earnings smashed analysts' expectations for Caterpillar. You know Caterpillar, the large earth-moving equipment.
The company made a net profit of around $1.7 billion in Q2, but here's the strong king number. It's up 67 percent from the same period last year. Caterpillar's now raised its full-year forecast and says 12 will be a record year for the company.
Douglas Oberhelman is Caterpillar's chief exec. He joins us now from Peoria, Illinois, where the company has its headquarters.
Mr. Oberhelman, good to have you on the program. And the core issue I need to understand, first of all, we've got so many companies, we've seen them over the last couple of days, even the GEs of this world, these big- ticket item companies, who are suffering because of global economic problems.
So what have you done -- why is Caterpillar, which is the biggest of the capital expenditure, why have you turned this `round?
DOUGLAS OBERHELMAN, CEO, CATERPILLAR: Well, hello, Richard, and good to be with you. I think there's a couple things that I would credit. First of all, a tremendous global footprint and a broad product in service lineup as well, in areas that the world needs, infrastructure, mining, oil and gas, all of -- electric power, all the things that we supply where some markets are still very hot; some aren't so hot.
But overall, we're doing pretty well. As you said, it's a record quarter. We're celebrating out here in Peoria, Illinois, actually. Record top-line in the quarter of all quarters in history, record profit per share, record outlook for 2012. We're pretty happy about all that.
QUEST: OK. But other companies are warning that the slowdown in Europe, the slowdown in the United States is having a disproportionate effect on their results. So is this quarter the sort of reinventory of people getting rid of olden (ph) machinery, but actually you are going to suffer further down the pipe (sic)?
OBERHELMAN: We mentioned some degree of optimism for 2013. I think the rough spot the world is in today is primarily caused by tightening of or lack of loosening and stimulus a year ago in places like Brazil, China, Europe was not loosening and had monetary policy like they do today.
Today, all of the economies, all the central banks are providing liquidity to the markets. We'll see that come to us over the next 6-12 months. That's why I'm somewhat optimistic about 2013. It's going to be very anemic growth, but it should be recovery. I think that's what we're growing into.
Furthermore, a lot of our markets are still very strong. Our backlog is still up from a year ago. We're doing very well with that. And we're really working hard inside our four walls to control our operations. We had record profit pull-through, record efficiencies. Our safety numbers, our quality numbers, all of the metrics we watch are improving and at very high levels.
So the company is really functioning on all 20 cylinders, in the case of our largest engine.
QUEST: In that environment -- all right, you know. I'm going to be the typical skeptic, cynic, whatever you want to call it. And I look for the fly in the ointment. And not only am I going to look for the fly in the ointment, I'm going to ask you to tell me what the fly in the ointment is, Douglas.
OBERHELMAN: Well, the fly in the ointment's pretty easy. And I don't know what it is, but it will come from some macro event, if it comes at all. I really think that most of the economies and most of the governments, the monetary authorities are doing the right things today generally.
The problem are the politics, whether it's the politics in Europe, the politics here. There's a lot of talk by politicians wanting to implode our economy with this fiscal cliff at the end of the year. That can't happen.
Europe, if something strange happens there, if something gets out of control, that could lead to a series of events. I can't identify any of those today or which one it might be, but I'm pretty sure if something would come, that's where it would come from.
The rest of the planet looks pretty good in terms of direction. It's not strong. It's a very slow growth. It should be a lot better than it is. But right now, that's what we're trying to watch and monitor as closely as possible.
QUEST: And you, sir, are the perfect example of what we have been talking about on this program, running a company that's performing well, that is at the whim of these external factors. Do you have confidence in governments and central banks to actually manage in the next year or so to get us out of this mess?
OBERHELMAN: I'm an optimist, Richard, and what I'm trying to do -- and we are really doing pretty well here at Caterpillar, is managing within our four walls. We are doing that as best as we can, and we're trying to influence those things that we can influence outside.
So I spend a lot of time with political leadership. I spend a lot of time on those kind of subjects to try and influence a good outcome for all of us. And then there are little storm clouds out there that nobody knows when it's going to rain, and we're watching those every single day.
Who knows where that will lead us? But if we do what we do best, which is run our company the best we can, we'll be prepared for whatever comes. And I think we are.
QUEST: Good to talk to you as always. Douglas Oberhelman, the chief executive of Caterpillar with some wise thoughts on what's happening. And Douglas, wanted you to know we've given Caterpillar on our Q25 five out of five, which gives it an automatic gold.
We're thinking, of course, the Olympics theme. And I'm Berlin. And as you can see, there's no -- there's no prop, there's no gold for me to drop down. So Melissa (ph) is doing duty in London. Give us a wave. Good evening, Melissa (ph).
Maggie Lake is in New York and, Maggie, when we look at the Caterpillar results -- and we're going to go these results quite quickly, Caterpillar is simply performing well and deserves its gold.
MAGGIE LAKE, CNN CORRESPONDENT: Absolutely deserves the gold, and positive comments coming from the CEO, Richard, which is really the -- one of the first times we've heard someone be bold enough to say I'm optimistic.
QUEST: All right. That is optimistic. Drop -- it's been dropped.
Boeing is our next Q25 tonight. Boeing got five out of five, Maggie, earnings growth, yes, yes, yes, all of it and positive guidance. From my point of view, Boeing has responded well with the 737 Max. But, Maggie, I'm worried about Boeing ramp-up on the 737 and on the 787, and I still think there's problem. But so I'm going for -- I don't know about you, but I go for a grudging gold on Boeing, Maggie.
LAKE: Richard, you're the one who says I give everyone a hard time. I mean, Boeing's report in this environment look good. They're weathering the cuts in defense spending here in the U.S. Maybe a challenge going forward, but they're weathering it. And they're benefiting from everyone wanting fuel-efficient jets. It's a gold.
QUEST: It's all right. It's Melissa (ph), give us a twirl and drop the gold.
From gold to Ford, Maggie, Maggie, Maggie, what happened to Ford? The holdout, the star, the -- after the bailouts, the misery, what happened?
LAKE: Yes, it brings a tear to the eye. And you're right. This is the thing. It's Alan Mulally, right, it's Ford that outperformed that was the lead in the comeback of the car industry. Europe is what happened. So much worse there, so much faster deterioration than they thought. They lost $1 billion.
But that's not the only thing here, Richard. North America held up well. It's not just Europe, though; there also was softness in Latin America and they lost money in Asia. It is an area where they lag. But we were speaking to -- Ali Velshi, our colleague, was speaking to the CFO of Ford before, who says we understand the problem in Asia and we're fixing it. Have a listen.
(BEGIN VIDEO CLIP)
BOB SHANKS, CFO, FORD: It's a tremendous growth market. It's already the largest part of the global automotive industry. Our share there is low and it's, you know, it's low relative to any other place that we participate in the world.
The good news is that many of the consumers coming into the marketplace are first-time buyers. And so we have an equal and fair opportunity to capture those consumers as any other players --
(END VIDEO CLIP)
LAKE: That's very interesting, first-time buyers. But you know, (inaudible) long-term potential, Richard, but right now, zero out of five. This one is an automatic red.
QUEST: It's an automatic red and Melissa (ph), with aplomb and panache, give us a red.
Apple, we had a really good debate on this today. It was two out of five. The headline number, you know, because of high expectations for Apple, Maggie, we had a good debate on it.
LAKE: We did, and we really disagreed. For once, strangely, you and I came on the same page on this, Richard. It was some of the producers who work with us that were -- that disagreed. Listen, quarter on quarter, disappointing. They were concerned, the people who were voting for a red were concerned about the competition.
There's a lot more competition out there for Apple now. And maybe the shine's off. And in fact, another analyst I heard today say, hey, Sony used to be Apple. I mean, that's enough to make you quake in your boots. But I think it should get a gold. I think it's a positive for the new iPhone.
iPhone's mentioned every 11 seconds on Twitter. That is absolutely unbelievable. And iPad sales almost doubled from that time a year ago. Businesses are adopting them. That's a really good story line. So I think it deserves a gold.
QUEST: Well, I thought it deserved a gold, a grudging gold. (Inaudible) was. Tom, our producer, who's probably younger than Maggie and myself, well, he is, actually, maybe he knows better. He wanted a -- he wanted a red. He lost. He'll soon grow out of it.
PepsiCo, let's be brief with PepsiCo. It's two out of five, two out of five for PepsiCo. The company, you know, you never -- I like PepsiCo.
LAKE: Yes, you know, we -- it gets a grudging gold mostly because they're holding up well in a terrible environment and they stood by their forecast when a lot of their rivals were actually downgrading it. So for that reason, they're investing in China. We give it a grudging gold, I think.
QUEST: Grudging gold. Finally, just to prove today, we've had a complete spectrum from the consumer products to the major capital projects, to the really big capital projects, now to the farmers and to the health care products, Eli Lilly, Maggie, and their performance. It was another one for debate, Maggie.
LAKE: Yes, it certainly was. And you know, David Brant (ph) was saying that there's some things that were positive. They actually raised their full year guidance, which is true. I go for red on this. They're losing their patents. They say things are going to get better in 2014.
We don't give golds based on wishful thinking. Get some drugs approved in the pipeline, tell us when they're coming to market and then I'll be impressed. Until then, I think it's wishful thinking. I don't like this one. I say red.
QUEST: She's a really hard woman. We joke about. Yes, it's a red. Eli Lilly, all drug companies have the same problem (inaudible) the pipeline. Thank you, Maggie. Melissa (ph), your last moment, give us a twirl and do the necessary.
There you have the Q25. When we come back, QUEST MEANS BUSINESS, we are here live in Berlin.
QUEST: Well, you and I may think we do quite a lot of business travel, but I tell you, we are amateurs in the business travel world compared to the renowned concert pianist Lang Lang, who may well be the ultimate frequent flyer to challenge us all. He spent just 20 nights a year in his own bed last year.
And last Sunday, he carried the Olympic torch in London. Weeks before that, he was in Rome for a workshop. In a fortnight, he'll be in New York. With such peripatetic lifestyle, we were lucky that Ayesha Durgahee caught him in London.
(BEGIN VIDEO CLIP)
AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): He's the rock star of classical music, a concert pianist who is both playful and passionate.
Lang Lang is the pride of China, traveling the world, representing his country since he was 13. This child prodigy, just turned 30, is the ultimate road warrior.
LANG LANG, CONCERT PIANIST: Hi, Ayesha, welcome to (inaudible).
DURGAHEE: Nice to see you.
LANG: You, too.
DURGAHEE (voice-over): Here in London, I met Lang Lang just a few hours before a performance.
DURGAHEE: So then, last year, how many days did you actually spend in your own bed?
LANG: Around 20 days.
DURGAHEE: Twenty days?
DURGAHEE (voice-over): This music maestro gave me a sneak peek into his traveling life.
DURGAHEE (voice-over): For someone who lives out of a suitcase, his main travel essential is the piano. He tries to have on in every hotel room he stays in.
LANG: You know, you play a song --
LANG: -- and then you will just feel great, you know and --
LANG: -- you forget about those hectic schedule. You forget about, you know, goes through the customs, you know, waiting in the line, you know, everything's calm.
DURGAHEE (voice-over): Last year, Lang Lang performed in 100 cities and stayed in 100 hotels. From one concert hall to the next, crossing continents, city to city, his mother is always there for support and to keep him in order.
DURGAHEE: Someone said you're very neat. (Inaudible).
LANG: My mom helps me every time. And I am a really bad packer.
DURGAHEE: You don't have a method of your -- to your packing?
LANG: I do. My --
DURGAHEE: What is it?
LANG: My method is just put everything there.
LANG: In the beginning, my father helped me until (inaudible) he just said he can't always fly and he doesn't feel good. And also we have the same problem. My father doesn't like to pack.
LANG: You know, he hates packing.
DURGAHEE: (Inaudible) carry it on the road with you.
LANG: So I travel myself for three years. I felt kind of lonely, because you don't have a family traveling with you and it's kind of -- party's over. You know, it's a little empty. You have friends over, but still not like family.
DURGAHEE (voice-over): Whether it's classical or contemporary, Lang Lang is (inaudible) performer, even when playing the most basic tunes with a hopeless beginner.
LANG: (Inaudible) version.
Yes! High five! Yes.
(END VIDEO CLIP)
QUEST: In the old days, they'd call that tickling the old ivories. Now it's a concert pianist. Lang Lang with Ayesha.
So to the weather. Last night we told you about the most serious fires taking place in Spain and the deaths from that. Jenny Harrison's at the World Weather Center for us this evening, hopefully with some more better news. But I fear maybe not.
JENNY HARRISON, CNN METEOROLOGIST: Well, it's just we've got some new video in, actually, Richard, a few more details, of course, emerging from those fires, as you say they were talking about this time yesterday. The conditions very hot, very dry, as we know. Also there have been some very, very strong winds across this entire region. This is just an example of literally what has been left in the wake of this fire.
But let's have a look at the video, because it is just terrifying to see there are literally dozens of tourists here, just scrambling down this very, very dangerous, rocky hillside. And it's thought that the actual fire was started by a cigarette that was tossed from a car, and it (inaudible) so very quickly that the officials really didn't have time to shut down the thoroughfare. And so there were hundreds of people, about 150 were actually trapped, which is why they're running from their vehicles and down this rocky terrain.
And as I say, the winds -- and I mentioned this yesterday -- the winds actually (inaudible) on Monday they couldn't get the air support up there. And they're know as the Tramontana winds, very cold north, northeasterly winds that are typical in Catalonia this time of year. Now the winds, of course, have since died down.
But as I say, is that whole northeastern region. So there are still fires across much of this area and this is a particular little town that we're actually talking about. But so the winds have actually eased and also there's a little bit more humidity in the actual air as well. But there's certainly plenty of that across central Europe.
This system, very slow moving, pushing into the southeast. So we could, again, just run the risk of some fairly severe thunderstorms. We've got some warnings in place with those strong wind gusts, maybe some large hail and always, of course, can't rule out the possibility of a tornado. And then we need to talk about the weather conditions for the Olympics.
Well ,you can see, last few hours across the U.K. there are very few parting showers across northern areas of England. The far outer reaches of Scotland, but of course, there are right now those football matches taking place. So women's football matches. And these are the conditions that really throughout the day and of course there's more matches taking place in the evening hours.
And you can see that for the most part it should be dry. We've got sort of mix of sunny skies to partly cloudy to more cloud up into the north in Glasgow. Right now in London, 25 degrees Celsius, still a very pleasant evening, as indeed it is, of course, across in Berlin now as well. But warmer for you in Berlin, actually, Richard.
And this is the radar, the satellite showing both combined over the next couple of days, taking us up to the evening hours on the morning hours on Friday.
So there is a chance of some rain showers on Friday, right now it looks as if it could be the afternoon hours, Richard, of course, the actual opening ceremony begins 9:00 pm local time. So hopefully the rain will come and go and not interfere with Friday evening.
QUEST: I'm just pondering, Jenny, you've had -- just pondering that all. By the way, they are reveling, Jenny Harrison at the Weather Center - - they are reveling in the magnificent weather here in Berlin, having had a few weeks of appalling weather, like we've had in the U.K. afterwards.
And when I come back after the break. we'll talk about the cracks in confidence in Europe's economic capital, and you'll hear from some of the people on the street about why really it's all about the weather. QUEST MEANS BUSINESS in Berlin after the break.
QUEST: In Berlin, it is often difficult to find a German in the summer. There's no shortage of tourists, as I discovered today.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The Friedrichstrasse station is a major interchange here in Berlin. One thing you quickly discover on a hot, sunny day in summer is that there aren't too many Germans around in Berlin.
And those that are don't necessarily want to stop and chitchat about the economy. However, there are plenty of European tourists here mixed up amongst the few Germans who remain, and they do have views on what's happening.
UNIDENTIFIED MALE: No, I'm not (inaudible). I notice that as we were coming up, I study business metametics (ph) and I thought about two years ago this will happen.
UNIDENTIFIED MALE: I'm pretty worried at the moment.
UNIDENTIFIED MALE: I don't worry about the German economy. I worry about the whole system, about the world economy.
UNIDENTIFIED MALE: I am actually very worried about it. But in Germany, especially Berlin, it's -- it doesn't seem like there's actually anything going on. The Germans -- it just doesn't seem like anything's going on. You hear about this poverty in Spain, all these things happening in Italy. But in Germany, it just seems the economy's booming and everything's fine.
So it's a little bit strange.
QUEST: And the Germans, do they seem concerned about it?
UNIDENTIFIED MALE: Difficult to tell. I mean, look around. Everyone looks pretty happy, to be honest. I don't think you see the effects on the streets on a daily basis. So it's tough to say, to be honest.
QUEST: Coming from Bulgaria, you have a different view.
UNIDENTIFIED MALE: Not really. I actually share his opinion.
QUEST: Which is.?
UNIDENTIFIED MALE: Which is obviously the crisis will probably continue and (inaudible) good.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Tonight's "Currency Conundrum," before the German mark, which currency did the German states use? The answer is B, which is, as you -- the vereinsthaler. I think I've got that wrong.
Tonight's "Profitable Moment," temperatures are rising across Europe. The weather is absolutely glorious. It's hot in Berlin. It's turning the debt-ridden continent into a pressure cooker in more ways than one.
Because as the temperature goes up, the economic climate is getting ever more stormy (ph). We had results of that today in the U.K.; we're seeing it here in Germany, too. And frankly, unless policymakers get their act together soon, it'll be more than a pressure cooker. Things are likely to explode, at least economically.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in Berlin. Whatever you're up to in the hours ahead, I hope it's profitable.
We've got electronic.
QUEST (voice-over): The headlines this evening, rebel fighters are gearing up for battle in Syria's largest city, Aleppo. The government is pulling some 2,000 troops and tanks from Idlib and deploying them to Aleppo. A Free Syrian Army official says rebel leaders have ordered their fighters to attack the government reinforcements as they move on the city.
North Korea's new leader is married, according to state television. Reports say the mystery woman on Kim Jong-un's left is his wife. Her name is Ri Sol-ju. Mr. Kim's father was also married. His wife rarely appeared in public. Analysts believe Kim Jong-un may be trying to convey a more open and friendly image.
Nine Olympic athletes from six different countries have been suspended for doping. One of them won a bronze medal at the women's track and field in Beijing. Authorities say six of the athletes were caught by a new method.
The worst drought to hit the U.S. in 50 years is hitting the price of meat. The Department of Agriculture is predicting beef and veal will rise by 4 percent this year. High temperatures and dry weather have already caused a spike in corn, wheat and soybeans.
You are up to date with the news headlines. This is CNN. Now from Berlin to New York live and "AMANPOUR."