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QUEST MEANS BUSINESS
UK Press Standards Report; News Corp Fallout; British Bank Cash Shortfall Fears; Fiscal Cliff Looms; US Stocks Rise; Euro, Pound Up, Yen Flat; Aviation Update; Business Traveler: Piecing Together the A380
Aired November 29, 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: Reckless, outrageous, inaccurate, and unfair. Tonight, the report from a British judge that says the press needs legal regulation.
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BRIAN LEVESON, HEAD OF LEVESON INQUIRY: This has damaged the public interest, caused real hardship and, on occasion, wreaked havoc.
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QUEST: Default averted for now. Argentina gets a three-month reprieve from a US appeals court.
And it's a capital idea. The Bank of England says UK banks need, oh, $50 billion.
I'm Richard Quest, I mean business.
Good evening. Britain's newspapers have been taken to task with a long-awaited report, which calls for radical new regulation of the press. The idea of the Leveson report -- this is the executive summary, and if this isn't enough for you, how about this? This is just volume one. There are four of them in all. There's actually hundreds and hundreds and hundreds of pages.
But the gist of it all, to stop the phone-hacking, the lack of respect for privacy and dignity, and the reckless disregard for accuracy exhibited by some newspapers. The head of the inquiry, Lord Justice Brian Leveson, said it was time to take on an industry that was wreaking havoc on the public. Join me over at the CNN super screen and you'll see more of what his lordship had to say.
This has been a touchstone, a seminal, a crucial turning point. Lord Leveson said a new independent regulator was needed, backed up in law, and able to find offenders. His final report described the abuses that have gone unchecked.
"There has been a recklessness in prioritizing sensational stories almost irrespective of the harm they may cause," he said. And his lordship goes on, he says, "Unfortunately, the virtue of persistence --" this is journalistic persistence "-- has sometimes been pursued to the point of vice."
As for apologies, just to put the boot in a bit more, "there is a cultural tendency within parts of the press vigorously to resist or dismiss complaints almost as a matter of course." His lordship.
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LEVESON: Unfortunately, as the evidence has shown beyond doubt, on too many occasions, those responsibilities, along with the editors' code of conduct, which the press wrote and promoted, have simply been ignored.
This has damaged the public interest, cause real hardship and, on occasion, wreaked havoc in the lives of innocent people.
(END VIDEO CLIP)
QUEST: In Parliament, the British prime minister, David Cameron, said he supports the idea of new regulation, and then went on to say changing the law could be a step too far.
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DAVID CAMERON, PRIME MINISTER OF BRITAIN: The issue of principle is that, for the first time, we were to cross the Rubicon of writing elements of press regulation into the law of the land. We should, I believe, be wary of an legislation that has the potential to infringe free speech and a free press.
CAMERON: In this House, which has been a bulwark of democracy for centuries, we should think very, very carefully before crossing this line.
(END VIDEO CLIP)
QUEST: Now, the British newspaper industry is worth around $8 billion. Stewart Purvis is a former journalist and -- actually, that's an understatement. A chief executive of independent television news, he's now a media professor at London City University. Stewart, very good to have you.
Everyone agrees the press in the UK went too far. So now, the question and the turning point here is going to be whether there will be legal reform or just self-regulatory reform?
STEWART PURVIS, PROFESSOR, CITY UNIVERSITY, LONDON: Absolutely. We've never actually had proper regulation before in Britain. What we had was an industry-run complaints body. Now, pretty much everyone agrees we need an independent self-regulator. No one's quite sure or agreed what that is, but that's the principle.
But the judge has said we need law to make it happen. The press will not like that idea, which is why I suspect David Cameron has said he doesn't like that idea, either.
QUEST: Right. Just to explain to viewers, effectively what's happened, you've got this complaints commission or -- you've got this --
PURVIS: Press Complaints Commission.
QUEST: Well, no, the new one.
PURVIS: Oh, the new one, yes.
QUEST: This independent body --
QUEST: -- which will stand there, but what Cameron -- what the judge says is he wants it buttressed.
QUEST: He wants it to be standing on the basis of law, not just on the shifting stands of its own volition.
PURVIS: Yes, the jargon is "statutory underpinning," as if you'd kind of underpin a house in case it might fall down. And the fact is that the British press has been here before, it's said it would do things to sort itself out and it didn't, so this time the judge is saying sorry, can't trust you, I suggest we have things in place that make sure you do it this time.
QUEST: Is it your view that the statutory underpinning, which has worked well in other countries that have strong democracies, is what is needed here?
PURVIS: I'm afraid -- after looking to all the evidence, I came to the conclusion yes, you did need what Hugh Grant, the actor, called a "dab of statue." Now, of course, the press says you can't just have a dab of statute. The moment you've got a statute, you've got a statute, and once you've got a statute, the politicians will come back for more. And of course, that's the quicken.
QUEST: They're right!
PURVIS: Yes. Well, let's -- the question is, who do we trust least? Do we trust the press to put their house in order, or do we trust politicians to actually do something without coming back for more later?
QUEST: How damning was all this? I mean, to Murdoch, in the sense that he's already closed the "News of the World." We already know a lot of the -- the accusations were what they were. So there was nothing terribly new about that. But did he actually say anything about -- not that you've plowed through all 500 pages --
PURVIS: Two thousand, actually.
QUEST: Two thousand, between lunchtime and now.
QUEST: I was giving you the abridged version.
PURVIS: Yes. Well, look. What did David Cameron want out of this? Why has he put himself through the embarrassment having his private texts to business leaders revealed? He wanted Leveson to say there was no deal between the British government and Rupert Murdoch, between British government and News Corp --
QUEST: Which he did say. He said it.
PURVIS: He said that, absolutely.
QUEST: He said it.
PURVIS: So, from Cameron's point of view, that's a big tick. OK, it was worth all the stress. What he's inherited now, though, is a plan that he doesn't like but his coalition partners do like, and it's going to be political mayhem for the next few weeks. So, he's paid a pretty big price for getting his -- relationship with Rupert Murdoch signed off by a judge.
QUEST: Stewart, good to see you, many thanks, indeed. As we carry on talking on this story, Rupert Murdoch, he may have got the sign off, but the UK newspaper arm says it will play its full part in regulating the new body or playing within the regulatory body.
This inquiry began, of course, with the News International, its "News of the World" tabloid, which hacked Milly Dowler's phone. The Leveson report says management systems of the paper failed, not that it's done much harm at News Corp since then. Look at the --
QUEST: Look at the share price since News Corp -- now admittedly, the share price has risen sharply, put on more than 40 percent, and they're up again today. A lot of that is because of the announcement by Murdoch that he is going to split the company into two, the profitable and very popular media versus the old publishing.
Maggie Lake is outside in New York on Sixth Avenue for us tonight. Maggie, they welcomed this report. They don't -- but in New York, will they really care two volumes about what a British judge is saying in London?
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Absolutely not, Richard. The only thing they cared about -- I mean, from a social perspective, yes, but from an investment perspective, absolutely not. The only thing they cared about was what you just mentioned earlier, and that was the separation.
And in a strange way, the sort of -- the conclusion or the sort of result of this all from an investment perspective is that this Leveson inquiry ended up being the best thing that could have happened to News Corp stock, because it forced Murdoch to do what he had resisted doing for years, and that is separate out that publishing unit.
Investors wanted him -- they were after him to do it. The stock traded at a Murdoch discount because he refused to let go of those properties. Since he was forced to do it, that stock has been on a tear, as you said, up something like 20 percent just from the late spring, early summer when that announcement was made.
And you're right, it's all about TV, it's all about film, that's where the focus is. And in terms of Murdoch himself, it's about the fact that Chase Carey really runs that company, a cable TV veteran, investors like him, so from that perspective, happy to close the chapter on the legal expenses. They're not really that concerned with the details of the Leveson report itself.
QUEST: Interesting. And as News Corp battles its way, there is this fundamental difference now, isn't there? You've just alluded to it -- between the old company, the Murdoch company that's all about publishing, and the new company that's about Fox, it's about all these other things.
LAKE: Yes, here's the problem, though. The Murdochs still control it. Depending on how you feel about Murdoch, that's either a problem or a good thing, because of the stock structure. So, there are two open questions still. They're not really affecting the stock, but it's the succession plan: who takes over? James Murdoch considered too toxic right now for that job.
But there is the sense that Murdoch would still like it to stay in the family, so what happens -- what happens on that front? That's unclear. That's OK right now, but eventually, investors want that addressed.
And also, there is still this one avenue of this, which is: does the US government go after them under the Foreign Corrupt Practices Act, the fact that there was bribing of officials. If that happens as this continues on the legal front in the UK, does News Corp still face a fine?
So, there are perhaps some expenses. But you do get the sense that the door is closing on this chapter and the focus really is on these -- growth properties here in the US.
And one interesting end note, Richard. When I was talking to an analyst before, he said the other amazing thing about this is that Murdoch himself, Rupert, really seems to be back in it. You really thought when he was sitting there saying "this is the most humble day of my life" that his story was ending as well as the publishing.
Turns out that doesn't seem to be the case. They're making acquisitions again on the TV front. So, he seems to have rebounded right along with that stock, Richard.
QUEST: Maggie Lake, who is in New York for us tonight. While the press gets a dressing down, Britain's banks need a beefing up.
QUEST: Mervyn King has a serious warning for the UK lenders. We will explain in just a moment. QUEST MEANS BUSINESS. Good evening.
QUEST: Britain's four largest banks may need to raise up to $50 billion to protect themselves from future financial shocks. The Bank of England says they may be overestimating how much cash they can rely on in a crisis. Immediate attention is warranted. Jim Boulden, good grief.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: We're still here.
QUEST: We've had stress tests.
QUEST: We've had stress tests.
QUEST: We've had European stress tests. We've had Bank of England stress tests.
BOULDEN: And these banks actually are capitalized above the minimum that is legally required.
QUEST: Nine percent or eleven percent or whatever it is.
BOULDEN: Right. But what is -- what hasn't -- what isn't in the stress test is things that are happening uniquely to UK banks, one being this idea that they were charging customers for insurance when they weren't allowed to do that.
It's called PPI. You and I getting phone calls about this all the time. And the banks are having to pay billions of dollars back, and the theory is, or the worry is, they could have to be paying even more.
The other one is the libor. You're talking about Barclays Bank, for instance, and how much fines and things with libor. So, you add that up, and the worry is that HSBC, Barclays, and the two banks that were bailed out by the taxpayer, RBS and Lloyds, aren't taking it seriously enough.
QUEST: How's --
BOULDEN: And --
QUEST: Go on.
BOULDEN: Yes, I was going to say, so we could hear what Mervyn King, the outgoing head of the BOE, the Bank of England, has to say about this, because he lists things they need to do here.
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MERVYN KING, GOVERNOR, BANK OF ENGLAND: First, expected future credit losses may be understated. Second, costs arising from past conduct failures may not be fully recognized. And third, the risk weights used by banks in calculating their capital ratios may be too optimistic.
(END VIDEO CLIP)
BOULDEN: So, too optimistic, overstated. He's asking the banks to do this now before there's more regulations that the Bank of England gets next year --
BOULDEN: -- to force them to do it.
QUEST: Is there any indication that the banks will be on a capital raising measure because of this?
BOULDEN: No comment from the banks officially, but we do know that they need to probably sell assets, non-core assets, and it's very likely you will see banks like Lloyds and Barclays selling more non-core assets in order to do this.
QUEST: Jim Boulden, thank you.
There are 33 days to go -- 33 days -- until the US goes over the fiscal cliff. Let's look at the progress. And we will continue, by the way, to update you on the fiscal cliff each and every day. There is our cliff. There is our deadline.
There's been much -- there hasn't been much progress, according to the House speaker in the United States, John Boehner. He described the talks with treasury secretary, Tim Geithner, as "frank," but says no substantive progress had been made. He said the White House had failed to propose serious spending cuts.
Meanwhile, the president told Mr. Boehner they must raise rates on the wealthy to have a deal. 33 days to go.
And what is at risk if they don't manage it? The US recovery, which is gathering pace. The economy expanded at its fastest pace -- look at those numbers. This was a revision up, by the way. It's the fastest pace in nearly three years, and it's a quarterly growth of 2.7 percent compared to the same quarter.
Now, we'd known it was about 2 percent, but this was a dramatic, significantly higher than the original estimate. The Commerce Department says it was stronger inventory and export gains. Exports crucially, of course, because that could be at risk in the future that are behind the result. Factor in the cliff, add in the GDP --
QUEST: -- and take a look at the Dow. The market in New York up 49 points give or take. We're back over 13,000. It was those comments from John Boehner that limited the gains and lack of progress. The market is still betting on a deal. Jobless claims were down slightly, and that's the way the market is -- 50 points, now. It's going up even as we speak.
So, from equities to currencies and the Currency Conundrum. This week's -- or this day's: what recycled material -- I do like this one. What recycled material makes up 75 percent of US bank notes? Is it paper, compost, or cotton?
The euro is up, the yen is flat, the pound is higher. Those are the rates --
QUEST: -- this is the break.
QUEST: So, Business Traveler and the update. A double hope -- a double helping of update this week. These are the crowded skies over Europe earlier today. There's plenty going on up there, and there have been developments on the ground, too.
Let's start with the decision of a French appeal court. It goes back to the Concord crash of the last century. A French appeal court has now cleared Continental Airlines of criminal responsibility for the crash in 2000.
Continental -- which of course is now part of United -- has appealed at being charged and convicted of involuntary manslaughter, which of course also involved one of their mechanics.
Interesting to note, the civil liability remains, which means that the question of did a piece fall off Continental's plane and cause the crash has still not been fully determined by the French courts.
In -- in Spain, Iberia's pilots and cabin crew have -- I beg -- the ground and cabin crew are planning six days of strikes next month. The unions say around the clock strikes will be held on the 14th, then from 17th to the 21st of the month.
You know all the reasons why. This is largely because the restructuring plan being put in place by Iberia's senior management, led by International Airlines Group and Willie Walsh, to try and cut capacities, stem losses, all of which is now leading the unions and the workforce of Iberia to threaten this industrial action. Iberia's chairman says that the airline can no longer continue as it has been.
Now, Iberia is part of IAG, International Airlines Group, which of course includes British Airways. In CNN's Business Traveler, we've been following the production of the A380, the super jumbo, the world's largest passenger jet. Today, Ayesha Durgahee sees pieces of BA's first A380 being put together.
AYESHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT (voice-over): The final assembly line is vast. The sections are taken into hangers so big, they dwarf this behemoth of the skies. Just a glimpse of the silhouette of one of the 1500 engineers who work here is enough to refresh your memory of the size and scale of the A380.
The first stage is the structural assembly, where the sections are fitted, including the landing gear. Each part requires precision and patience.
DURGAHEE (on camera): It takes 13,000 rivets to join the three sections of the fuselage together, and 4,000 rivets alone to attach the wings to the body.
DURGAHEE (voice-over): And the easiest way to identify who the planes belong to is by looking at the tail fins that have already been painted in the airline livery. An Air France and Emirates A380 have reached the next stage, where the avionics and onboard equipment are installed and the engines fitted.
BA's first A380 has made it outside in one piece, ready for pressure and fuel testing. Each airline has its own build manager to inspect and support every stage of the assembly.
JAMES LEWIS, A380 BUILD MANAGER, BRITISH AIRWAYS: We're looking at all the looming, all the ducting. It's very detailed in some places, and also it's a general walk-around, using the eye, a torch, if you need to.
DURGAHEE: James Lewis started as a maintenance engineer with BA 25 years ago.
LEWIS: To see an aircraft start as composite buildings blocks then slow turn into an aircraft, it's a fascinating experience. It's a great leap forward. This aircraft talked a lot more to the engineers. It'll let us know when we can -- we need to do some maintenance. The fact that we can interact with this aircraft in great new ways is fantastic.
DURGAHEE: And it's the fleet of the A380 test aircraft, like this one, that's intended to make sure every inch of the super jumbo is fit to fly. From the performance of the engines to the onboard systems, all meticulously checked and analyzed by a chap known as one of the experimental test pilots that works across the Airbus fleet.
FRANK CHAPMAN, EXPERIMENTAL TEST PILOT, AIRBUS: This is the primary deck for our flight systems instrumentation. We have cameras dotted around the aircraft to give us an idea of what the flight control services and what the -- in this particular case, what the undercarriage is doing.
Particularly in the early state of flights, where we haven't really used the undercarriage very much, we want to make sure that the doors are coming up, everything's working in sequence, and so we can monitor that directly here.
Some of the flights are fairly short, and we might stay in the local area between here and the Pyrenees for about an hour. We may even run the aircraft for several hours, particularly cooling at altitude, of course, where we're flying -- we want to cool the ducting for the lavatories, for example. We might want to make sure they don't freeze during a 15-hour flight.
DURGAHEE: After the fuel testing is complete, the plane will fly to Hamburg to be painted and fitted with the cabin interiors. This whole process takes eight months, from final assembly until the keys are handed over and delivered.
Ayesha Durgahee, CNN, at the Airbus headquarters, Toulouse.
QUEST: The Airbus A380. Coming up next, a reprieve for Argentina, 11 years after the country defaulted, creditors are still knocking at the door, and a US court has given them a bye, in a moment.
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.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Critics of Egypt's president is accusing him of trying to fast-track the constitution. A special assembly dominated by Islamists has been voting on a final draft all day. We're hearing they're only halfway through. Mohammed Morsi said courts cannot overrule his decisions until a new constitution is in place and that decree has triggered protests and clashes.
Egypt Air is suspending all flights to the Syrian capital, Damascus, because of the deteriorating security situation around the airport. The road to Damascus International Airport has been shut down.
Palestinians are celebrating a potentially historic day at the United Nations. In about an hour, the U.N. General Assembly will vote on whether or not to grant Palestinians non-member observer status. If the bid goes forward, Palestinians will be free to join U.N. agencies and pursue membership in any of the International Criminal Court.
Britain's newspapers need a new independent regulator, according to a report by the Leveson inquiry, which recommended a new press watchdog backed up by law with the ability to issue fines. It was a major inquiry following last year's phone hacking scandal. The British prime minister, David Cameron, says he's opposed to changing the law because it could damage press freedoms.
(END VIDEO CLIP)
QUEST: Argentina has won some breathing room in its death repayment battle before it has to pay defaulted bonds. A U.S. appeals court has put a hold on a ruling which ordered Argentina to pay more than $1 billion into an escrow account.
It was meant to compensate the bond holders who had refused to swap their old debt after Argentina defaulted in 2002. The roots to the problem stretch back to a crisis at the turn of the century. Isa Soares has looked at how it all unfolded.
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ISA SOARES, CNN CORRESPONDENT (voice-over): 2001: Argentina defaults on its debt.
Eleven years on and old memories are coming back to haunt.
Last week, U.S. Judge Thomas Griesa ordered Argentina to pay $1.3 billion to hedge funds that refused to accept restructuring on its debt. Argentina was furious, accusing the judge of judicial colonialism.
UNIDENTIFIED MALE (through translator): This seems like the return to the era before the Drago Doctrine, when a country was invaded for its debts. The only thing missing now is for Judge Griesa to send in the 5th Fleet.
SOARES (voice-over): Holdout creditors didn't send a warship. Instead, one seized Argentina's vessel Libertad in Ghana. Still, President Cristina Fernandez de Kirchner didn't flinch.
CRISTINA FERNANDEZ DE KIRCHNER, PRESIDENT OF Argentina (through translator): They say it's our ship, Libertad, in an African port, claim that they are going to pressure us or store it our country. (Inaudible) while on precedent they can keep the ship. No one will take our liberty or sovereignty and our dignity.
SOARES (voice-over): To get to the heart of this dispute, you have to go back to 2001, when Argentina defaulted the IMF stepped in with $8 billion, leading to a strong recovery.
Since then, Argentina's restructured its debt twice, in 2005 and 2010. Ninety-three percent of creditors agreed to receive new bonds for the defaulted ones. But two hedge funds, Eliot Associates and Aurelius Capital, didn't want any part of the restructuring. All along they have wanted to be repaid in full.
And to the courts and Judge Griesa's order for Argentina to pay the holdouts by December 15th. But a U.S. court granted a stay on Griesa's ruling while Argentina's appeal is heard, giving the country a bit of breathing room. The two sides now face a February court date -- Isa Soares, CNN, London.
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QUEST: Roque Fernandez was Argentina's economy minister from '96 to '99 before the debt crisis came to a head. Before that, he was head of the central bank. He joins me now from Buenos Aires.
Let's have a straightforward yes or a no: is it your view that Argentina should pay on the defaulted bonds as the judge has ordered?
ROQUE FERNANDEZ, FORMER ARGENTINIAN ECONOMY MINISTER: I think Argentina should obey the judge decision. I think that the court of appeal has given that possibility to open a new bond exchange and I consider that the 7 percent of the debt that this -- in the hands of the holdout (inaudible) paid attention. So I think that we cannot close negotiation.
QUEST: Right. This has the potential for not only once again creating instability for Argentina's bonds and debt, but also putting the country on a diplomatic dispute with the U.S. court, doesn't it?
FERNANDEZ: Yes, but I think that we are not going through that road. I think that the government has announced that Argentina will open a new exchange for bond holders that didn't entered in the last bond exchange. So I think that we have plenty of time to the end of December to make a new offer and to present an offer so there is going to be also a participation of the holdouts. And the bond holders that accept this change. So there is a period of negotiation for three months that we hope that we can reach an agreement.
QUEST: Right. If all else fails and the -- I mean, we always hope for an agreement. But if there is no agreement, and the judge's ruling stands, and the appeal court lifts the stay, Argentina is going to have to pay the $1.3 billion.
FERNANDEZ: I don't know what the government is going to do in that case. But I think that as a consequence of opening the negotiation, maybe some new alternatives are feasible.
And I think that the possibility of the bond holders or the holdouts to accept a similar offer that will respect the pari passu is going to be much more profitable that it was in the past, because if we consider the appreciation of the bonds that are going to be offered for this change, not they are going to be getting from 50 cents to 60 cents per dollar that is significantly higher than (inaudible) about 25 percent to 30 percent.
So I think that this is a good opportunity to produce an offer that is going to be around the normal situation that other countries have been able to restructure.
QUEST: Mr. Fernandez, we thank you for joining us from Buenos Aires, a good example, of course, from the bond holders if you wait long enough you will eventually get more than you were originally going to.
We'll have a check of the weather in just a moment.
QUEST: Time for the answer to today's "Currency Conundrum." Here are the dollar bills. What waste product makes up 75 percent of these U.S. bank notes? The answer is --
(BEGIN VIDEO CLIP)
QUEST (voice-over): C, cotton. They are fibers that have been removed during the textile manufacturing process for clothes and things like jeans and the like. It makes great paper. Denim remnants made up a significant portion of that.
(END VIDEO CLIP)
QUEST: So I am here today, which tells you one important fact: I didn't win the U.S. Powerball lottery last night. So you may be wondering who did. And you probably guessed it wasn't me. So this is the moment the numbers were drawn.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: (Inaudible) to look. Take a look at tonight's numbers. First up --
QUEST (voice-over): The $588 million, they will be shared between two tickets at least. We still don't know if they were bought for syndicates or individuals. We know one was a $10 Quick Pick from a store in Arizona. The other was in Dearborn, Missouri -- Michigan -- about 50 kilometers north of Kansas City -- Dearborn, Missouri.
Well, I say good luck to both of them. I hope you're both very happy with your $558 million or whatever, which would have been in my bank account, not yours.
Jenny Harrison's at the World Weather Center. Since you're at work, Jenny, you didn't win, either.
JENNY HARRISON, CNN METEOROLOGIST: We won $4 and that was over (inaudible) -- $4. And that was 50 people and $100. We got $4 back. It was good returns (inaudible).
I'm glad I gave you such a good laugh.
Anyway, I'm going to -- here, this'll wipe the smile off your face. Look at the weather conditions across in Europe. Now of course in the U.K., things still not great (inaudible) clearing up after the flooding. And we've seen a few coastal showers but it really is about what is going on across central Europe.
And in fact, the last few hours in particular, Germany, you are seeing everything, snow, heavy snow, sleet, ice, rain, even some heavier cells which could actually be thunderstorms, even with some lightning in there. And this is why we're seeing so much snow. This is showing you the temperature trend for the next couple of days, so temperatures well below average.
I mean, just look at all this blue, right the way down across Spain, the western end of the Med, right now it feels like -10 in Oslo, just 2 in London and Paris, because that wind is really very cold.
And have a look at some of these snow totals, my goodness, Stoetten in Germany, 28 centimeters in just one day, 8 in Zurich, which doesn't sound like much, does it, compared to 28, but even that is notable, and 15 already in Moscow. We have some pictures to show you of the snow in Germany. And as I say, very, very deep.
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HARRISON (voice-over): And it came down fast and furious, and it is not done just yet, so you can see here, it looks great, of course, the snow does when you're not going anywhere, not doing anything. But very dangerous conditions, (inaudible) as well, we've got some pictures there and similar sort of story.
You can see the machine, actually, just off that picture, trying to actually clear all that snow. As for what is going to happen next, I've run out of time, but, Richard, more snow across central Europe but that is not the concern it's going to be across into western Russia. So I'll talk about that tomorrow. It's not going away (inaudible).
QUEST: And I'm off to Switzerland tomorrow morning on assignment.
Right. Thank you, Jenny.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. I thank you for your time and attention. And as always, whatever you're up to in the hours ahead, I do hope it's profitable.
MARKETPLACE EUROPE is next.
NINA DOS SANTOS, CNN HOST: Hello and welcome to MARKETPLACE EUROPE. I'm Nina dos Santos in London. Well, the Eurozone is back to where it was three years ago, just to say it's in a recession. The fallout from the crisis is intensified and now even Germany's strong economy, which had kept the bloc in the black, is also contracting.
On this week's program, we'll find out whether this is a (inaudible) future growth will come from.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): Coming up, why this successful retailer is making her first baby steps outside the U.K., onto the High Street in Dublin. And the president of Hertz International tells Jim Boulden how he's revving up the revenues.
MICHEL TARIDE, PRESIDENT, HERTZ INTERNATIONAL: You can see even though I have a preassigned car, I can pick up what I want.
JIM BOULDEN, CNN CORRESPONDENT: So if I don't want the Kashkari --
TARIDE: Which you had booked, indeed.
BOULDEN: -- I might go for the Aston Martin. How's that?
I think that would be the better decision you ever made.
(END VIDEO CLIP)
DOS SANTOS: (Inaudible) successful retail business requires vision, patience and also risk-taking. These are qualities that Laura Tenison has in abundance. After almost 20 years of running her mother-and-baby range, she's now making a calculated step into a fragile new market. Here's Isa Soares from Dublin.
(BEGIN VIDEO CLIP)
ISA SOARES, CNN CORRESPONDENT (voice-over): Zips, buttons and bows, it looks easy enough. But growing a business at a time of great economic crisis is anything but child's play.
LAURA TENISON, FOUNDER AND CEO, JOJO MAMAN BEBE: We have been looking at Ireland as an area to expand into for the past 10 years. And we've finally taken the leap.
SOARES (voice-over): But the founder and CEO of children's wear company JoJo Maman Bebe didn't plunge headfirst into Dublin. Laura Tenison planned it meticulously.
TENISON: When you grow a business organically, reinvesting in the way that I have, you're used to being extremely cautious about how you finance your expansion. We model everything out, and we don't launch into a new market until we know we can afford it.
SOARES (voice-over): This has been her philosophy throughout. For some 20 years, she has grown her retail and online business with prudence and pragmatism.
TENISON: I designed these little leggings with feet, which have now become a sort of household norm, and many other people have made them as well.
SOARES (voice-over): This is Laura's (inaudible) shop, her first outside of the U.K. and (inaudible) location is vital. She's had her eyes on this shop for some four years, and she pursued it (inaudible) for her it's important to be surrounded by independent chains and small stores.
On Dublin's trendy Wicklow Street, she's putting Ireland's still- bruised economy to the test.
TENISON: Coming to Dublin in an economic crisis as we undoubtedly are is of course a little bit risky. But the reality is we've analyzed our competition here. And we found that there is an enormous gap in the market in Ireland for an up-market brand with middle-market prices.
SOARES (voice-over): Success here is not guaranteed, of course. Still, this doesn't scare her. Laura has seen her fair share of economic downturns.
TENISON: Over the 20 years that I've been in business, yes, we launched in 1993 in a recession in Great Britain. We then found that our products were particularly popular in Japan. We had the devaluation of the yen and the depression in Japan.
We lost overnight about 15 percent of our market, actually making the company virtually insolvent. It was a time when I had to decide was I going to close the business down and, in fact, I decided to re-mortgage my house and put everything I had to support the business.
SOARES (voice-over): With a credit crunch soon afterwards pulled the rug from under her feet, with a freeze on bank lending, she was forced to rethink her business.
TENISON: We decided that we had to take borrowing and out of the equation and we brought in a third party investor with a minority stake, and a limited amount of power to change the way that we wanted to work. I now don't own the entire company, but I do have a company which is extremely robust and finally secure.
SOARES (voice-over): Despite it all, her business grew fivefold in the first three years. Today, it has a turnover of more than $50 million. And with the children's wear market expected to grow by 6 percent in Britain over the next four years, her gamble seems to have paid off.
TENISON: What I learned from having an early crisis in my sort of business career was that you really had to be extremely cautious about overextending yourself. I do think that it's possible to grow small businesses organically with very little capital. I think people need to go back to a post-war level of frugality and they need to knuckle down, work hard and reinvest.
SOARES (voice-over): Today, she faces new challenges at home and abroad.
TENISON: The vast majority of our products are made in the Far East, but we do make a little bit in Europe and in recent years we've found that the cost of transport has become so high that it really offsets the saving that we can make in the Far East.
Prices in China are rising. We make a lot of products out of cotton, and cotton prices have been fluctuating. Thankfully, at the moment, they've stabilized, which is great, because we can actually forecast prices for the next 12-18 months.
SOARES (voice-over): One problem averted for the time being, the others she'll face head-on, as she always has.
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DOS SANTOS: Isa Soares there on the High Street in Dublin.
Well, coming up after the break, we'll speak with the man in the driving seat of Hertz International, the world's largest vehicle rental company.
DOS SANTOS: Hello and welcome back to MARKETPLACE EUROPE.
Well, the global car rental market is big business. Here in the U.K., for instance, it buys almost half of all new cars sold annually. But with car rentals being closely linked to airline traffic and also hotel bookings, it's a sector that's had a bumpy ride during the downturn.
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DOS SANTOS (voice-over): (Inaudible) in Chicago in 1918, Hertz is now the world's largest vehicle renting organization. Operating from 8,500 locations, a cost of 150 countries, Hertz employs 32,000 people and handles around 30 million reservations a year.
TARIDE: The most challenging times were in 2008 and 2009 and I would tell you, Jim, even before 2008 already we were focusing on our costs and efficiency. And the way we did it was really to look at our processes. And it's kind of amazing to think that in less than four years we've taken out about 25 percent of our costs.
BOULDEN: How much has technology play into that? I would think a lot, but give me some examples of the technology changes you've had to make.
TARIDE: What you can see here, for example, these rental kiosks, you know, where you can have (inaudible) of both the technology but also the service, because you have a mind behind the screen here, who can serve you, helps us a lot because of course, we can manage the queue much better. We can variableize (ph) our costs and we don't have this fixed cost of brick- and-mortars all the time.
BOULDEN: What about the business side, the business sector? I would have thought most of your rentals are not for leisure but they're actually long leases and companies?
TARIDE: Well, it's essentially 50-50, if you will, and business and leisure. It's also 50-50 airport and off-airport. So it's a good balance, and there is always a segment which works better than another one. So we can -- we can spread the risk.
BOULDEN: You've also got into car clubs, which has become very popular here in the U.K.
TARIDE: We are, in fact, the only global car club company today, both in the U.S., in five European countries. We just opened Sydney in Australia. So that's a -- that's (inaudible). I wouldn't tell you this is a huge part of our (inaudible) today, but it's growing extremely fast.
BOULDEN: What about prestige cars? I see that -- and there's an Aston Martin here on the forecourt. Is there a lot of revenue to be made in there, because you can charge a lot more per day?
TARIDE: We charge a lot more per day, that's for sure. I mean, just a cut of the asset is indeed significant, as you know, Jim. I mean, the -- in today's world, the luxury segment, the really high hand (ph) is still very popular.
I mean, all these -- and I would tell you, of course, we attract a lot of foreign customers coming from Asia, coming from the Middle East, coming from Russia, but also some European run these type of cars. So, yes, it's fast growth.
BOULDEN: (Inaudible) other evolutions is that Hertz is doing more franchising. Will we see a lot more of that in Europe? Do you see that happening elsewhere as well?
TARIDE: Internationally, about 40 percent of our revenues are going to franchise countries. So a whole country franchise. Yes, we are looking at doing more and more of that. And the reason, the rationale behind it, it's a good model for both the franchise partner and ourselves. For us, it's essentially about providing top-class services, management tools and, of course, the great Hertz brand.
But -- and it's less capital intensive for us. And of course, for the partner, and they have captive customer base and they can share the cost. So they can grow, actually, faster than we grow ourselves because they have those synergies.
BOULDEN: Let's talk about the equipment sector, because that's not the side people think of when they think of Hertz. Unless you're in that business. What is it that you're renting to these big corporations?
TARIDE: So we're renting Equipe (ph) or we're (inaudible) equipment. We're a generalist, but we (inaudible) equipment for construction, for road work and for industries like generators. Renting is a competency of ours and once you know how to rent, how to buy, run, sell, manage assets effectively, and you do this with great people and service, then, yes, you can almost rent anything indeed.
BOULDEN: Back here in Europe, I mean, we're still not out of the Eurozone mess. How does it look from the business side?
TARIDE: I personally believe this situation in Europe is something which is going to last a few years. So of course, the question for companies like ourselves is how can we grow profitability? In fact, ancillary growth in a changing environment?
Certainly the value segment, so the lower end, people who become more and more price conscious we've got to address. It's a big and growing market and the recent acquisition of Dollar/Thrifty, of course, is great news for us and I think, also, great news for the consumer.
Now we're going to be a serious player both mid-year and lower end. And so those are like two new brands, which are going to be on the market, which were not there before. From a consumer standpoint, this brand will coexist and even compete.
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DOS SANTOS: Hertz's Michel Taride, speaking with Jim Boulden there.
Well, that's it for this edition of MARKETPLACE EUROPE. Do join us again next week if you can. But in the meantime, thanks for watching and goodbye.