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QUEST MEANS BUSINESS

Renault Handed 'Suspended Disqualification' in 'Crashgate'; Dell Buys Perot Systems for $3.9 Billion; 'The World at Work' Takes Closer Look at Jobs

Aired September 21, 2009 - 14:00:00   ET

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RICHARD QUEST, CNN INTERNATIONAL ANCHOR: A narrow escape for Renault, the car-maker emerges from the "Crashgate" scandal virtually unscathed.

One Dell of a deal, the PC-maker buys Perot Systems, $4 billion.

And what is it about your job that's so special? A new series tonight: "The World at Work."

I'm Richard Quest, it's the start of a new week, and yes, I mean business.

Good evening. Formula 1 crashes into yet more scandal as Renault manages to avoid severe punishment, forcing (ph) a driver to crash at last year's grand prix in Singapore. The episode highlights a culture where winning is all, and never mind the consequences.

On tonight's program, we're looking at Formula 1, buffeted by economic downturn, searching (ph) for its soul.

So this is what they decided: A slap on the wrist for Renault. An indefinite ban for the former.

(AUDIO GAP)

QUEST: The French company's Formula 1 team gets a two-year ban, it admitted race-fixing. The penalty, suspended.

Jim Bittermann has the latest from Paris.

(BEGIN VIDEOTAPE)

JIM BITTERMANN, CNN INTERNATIONAL SENIOR EUROPEAN CORRESPONDENT: The World Motor Sport Council came down hardest on Flavio Briatore, the team manager, back when the accident occurred in Singapore last year. He has been kicked out of Formula 1 racing forever because of his role in the accident. He basically stepped down last weekend.

As well as Pat Symonds, who was the engineering director at the time of the crash, and he also resigned from Renault last week, basically because of their roles. He was given -- Symonds was given a five-year suspension from any further Formula 1 racing.

A lot of talk today about the fact that maybe Renault got off easy.

(AUDIO GAP)

BITTERMANN: . they probably should have been disqualified for their role in all of this. But in fact, because they investigated the whole situation within the company, Briatore basically was fired and Symonds was let go -- because of all of that or all of the internal investigations that had gone, they have been given a kind of two-year parole.

"Their disqualification," as the Council's release put it, "has been suspended." So for the next two yeas they'll be under the watch of the World Motor Sport Council to make sure that there are no further violations.

Nelson Piquet Jr., the driver involved in that crash, basically got off scot-free because he negotiated immunity in order to be the whistle- blower in all of this. And he can drive again if he can find a team that's willing to take him on.

Jim Bittermann, CNN, Paris.

(END VIDEOTAPE)

QUEST: Max Mosley, the president of the motor sport's governing body, the FIA, which came up with the ruling, clearly approves (ph), says it was the right one.

(BEGIN VIDEO CLIP)

MAX MOSLEY, PRESIDENT, FIA: The penalty that we've imposed is the harshest one we can impose, which is disqualification. That means complete exclusion from the sport.

However, because Renault have demonstrated that they .

(AUDIO GAP)

MOSLEY: . responsibility for what took place, that's to say Renault F1 even, the team didn't have. Still less, of course, does the company have any responsibility at all. It would wrong in the circumstances to impose an immediate penalty. It's a suspended penalty.

(END VIDEO CLIP)

QUEST: So that was Max Mosley, the head of the FIA. Max Mosley very much aware of the business impacts of what was happening with.

(AUDIO GAP)

QUEST: . apart from the one suffered by Nelson Piquet Jr. is probably to the tattered reputation of Formula 1 itself. It has been wracked by.

(20-MINUTE AUDIO GAP)

QUEST: . what else is new? Cheating in baseball, cheating in track and field, and cheating on Wall Street.

(AUDIO GAP)

(COMMERCIAL BREAK)

QUEST: Welcome back. QUEST MEANS BUSINESS this Monday.

The "World at Work," in every job.

(AUDIO GAP)

QUEST: . there is an element of.

(2.5-MINUTE AUDIO GAP)

QUEST: . page, our dear Facebook page, there you are, where you're going to see the very latest in the gossip, the importance, and assorted nonsense that we managed to talk about in the office when we're putting together QUEST MEANS BUSINESS.

And just QUEST MEANS BUSINESS on Facebook.

It's one of the hardest places to find a job in the United States. We'll find out how people in Detroit are coping with crisis times and an unemployment rate.

(AUDIO GAP)

(COMMERCIAL BREAK)

QUEST: I'm Richard Quest.

This is QUEST MEANS BUSINESS.

This is CNN.

President Obama (INAUDIBLE) a few hours ago, he spoke at the (INAUDIBLE) in Upstate New York. The president emphasized that to keep the U.S. Competitive (AUDIO GAP) jobs and a legion of unemployed workers.

(BEGIN VIDEOTAPE)

KEVIN RUDD, AUSTRALIAN PRIME MINISTER: National actions go so far, but the global actions that we've achieved through the G20 -- $5 trillion worth of stimulus injected into the economy when it was falling through the floor; $1 trillion worth of resourcing for the International Monetary Fund so that any other implosions in banks in Europe or wider implosions in the financial sectors of Eastern Europe wouldn't have a ricochet effect across the global economy; a moratorium on major outbreaks of protectionism; reforms of the financial regulations, the type we've just been speaking of.

These things are necessary to restore global economic stability and global growth and recovery.

Nationally, what we have sought to do in Australia is take early, decisive action in support of jobs and real economic growth; economic stimulus, as we've done with other countries, as well. But and as a result of that and a heavy emphasis, also, on infrastructure investment through that stimulus, we have managed to be the only economy across the OECD in the last 12 months to have generated positive growth; of the major advanced economies, the only one to stay out of recession so far; the second lowest unemployment; the lowest debt; the lowest deficit.

UNIDENTIFIED FEMALE: But unemployment is rising.

RUDD: Unen -- and I'll go on to unemployment. Unemployment -- for us all, is -- because it's a -- as the economists would describe, a lagging indicator, will continue to rise. Ours currently sits at 5.8 percent. It's been that way for a while. We are injecting large amounts of stimulus because we believe the maintenance of jobs and employment is critical, not just to human decency, but critical also in terms of the path to economic recovery. You've got to have these two things foremost in mind.

I think premature calls for the withdrawal of stimulus, which as you hear elsewhere around the world, I think are misplaced in terms of the challenges which still lie ahead.

But for Pittsburgh, I think there are two other challenges on this, as well. To begin among us all to discuss and to deliberate on and to agree on a framework for a coordinated withdrawal of these emergency measures, these emergency interventions, over time. And, secondly, how do we craft a long-term economic growth strategy which is sustainable for the world, no longer dependent on these massive financial imbalances, huge debt-driven consumption, on the one hand and out of surplus economies (ph) on the other.

We need a new, sustainable growth model for the future. Otherwise, we might be looking at the prospect of flat global growth for a while to come.

(END VIDEO TAPE)

QUEST: That's the Australian prime minister, Kevin Rudd.

President Obama says it may take years, perhaps decades, for industrial states to bounce back completely from the downturn.

Michigan is one of the states that's been hit hardest by the crisis in manufacturing. It now has the highest unemployment rate in the United States, 15.2 percent. The unemployment rate is expected to rise in the months ahead. One can only wonder how much of that 15.2 percent is actually under reported.

Poppy Harlow is in Detroit and joins me now -- and, Poppy, when we talk about Detroit, we naturally think of the -- of the car industry. But it has been decades of decline.

POPPY HARLOW, ANCHOR, CNNMONEY.COM: Yes.

QUEST: And I suspect that 15 percent under reports the real number.

HARLOW: Oh, Richard, you're exactly right. I mean that is a statistic, but here we've been reporting in Detroit for the past few months, looking at the faces of this city. It's more than an auto industry on its knees. It's a foreclosure crisis that's rampant. It's a lot of failures in the education system, a huge depletion of access to healthy food in this city.

There are a lot of things about this city that make people struggle. But the people of this city are so resilient. These people are dedicated to turning it around.

And when you look Detroit proper within the city limits, Richard, the unemployment rate is a staggering 29 percent. So we spent a long time here asking people honestly, how on Earth do you make it in Detroit?

Take a look at the what they told us.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: How do I survive in Detroit?

Education.

UNIDENTIFIED FEMALE: Wow! That's hard to say.

UNIDENTIFIED FEMALE: I don't know right now the answer to that question.

UNIDENTIFIED MALE: Go to school. Don't be like a -- a person like me out here selling drugs. My advice to them is, like I said, basically is just -- it's family. Right now, you have to stick together.

UNIDENTIFIED MALE: How do I survive in Detroit?

UNIDENTIFIED MALE: (INAUDIBLE) you've just got to do what you've got to do to survive in Detroit now.

UNIDENTIFIED FEMALE: Like it's going to, you know, get better. You know, you have to pull yourself up by the bootstraps and just keep going. That's in any city.

UNIDENTIFIED MALE: Well, like I said, a lot of people down here, they're tough, tough people.

UNIDENTIFIED FEMALE: Family, friends.

UNIDENTIFIED MALE: We're resilient.

UNIDENTIFIED FEMALE: Upbeat attitude.

UNIDENTIFIED MALE: Because you're just making -- you've just got to keep your hopes up. It means just keep your chin up.

UNIDENTIFIED FEMALE: People are down and out, but there's always somebody there to help them.

UNIDENTIFIED MALE: Things will turn around. You have to know that things will turn around (INAUDIBLE).

UNIDENTIFIED FEMALE: Not (INAUDIBLE). Like -- like I said, sometimes you've got to keep a positive mind frame and just look for -- for tomorrow, look for tomorrow. Tomorrow is a whole another day (INAUDIBLE) sunshine.

(END VIDEO CLIP)

HARLOW: Well, tomorrow is a whole another day, but the -- the struggles, Richard, facing Detroit in this economy are huge. The school system may have to file for bankruptcy in a matter of weeks. The city is facing a multi-million dollar budget shortfall. And it's just unbelievable what's happening in this city. It's all come together.

It's really, I think, ground zero for the U.S. Recession -- Richard.

QUEST: All right. Poppy Harlow, we thank you for joining us.

Poppy Harlow joining us from Detroit.

And we will be staying with the people of Detroit over the coming months to see how things are progressing. It's a year long project. It's a project that's involving CNNMoney.com. You can come up with our reports online, where we'll be adding stories, videos and photographs -- CNN.com/detroit. Our reporters and others staying in houses in Detroit to keep you informed on that.

Investment for amateurs -- is safety in numbers the best strategy?

What kind of people envoy -- enjoy -- what kind of people join investment clubs?

Are they merely the old and the elderly?

How do they do?

What do they actually make any money?

The Biz Clinic is open in just a moment.

(COMMERCIAL BREAK)

QUEST: Welcome back.

At QUEST MEANS BUSINESS, we like to take the mystery out of finance and investing. We'll bust the jargon for you and show you how ordinary people get on with running portfolios. It's the Biz Clinic. And this week it's Colleen McEdwards, who takes a look at how a group of (INAUDIBLE) are pooling their interests in an investment club.

(BEGIN VIDEOTAPE)

COLLEEN MCEDWARDS, CNN CORRESPONDENT (voice-over): Past the food aisles, down the storage hall to the room on the right, a tight-knight group of investors was the worst market most have ever seen.

LARRY RENO, INVESTOR: The treasurer, Nesta (ph).

MCEDWARDS: Sixty-two-year-old Larry Reno started Mutual Investors of Atlanta more than 25 years ago with three friends and $100 each. The group meets once a month to catch up and fess up.

RENO: I was supposed to purchase Amedisis, Aflac and PetMed and just frankly forgot. When the checks finally cleared the account to go back in and purchase the PetMeds.

MCEDWARDS: But even with the occasional oops, Reno says his club is ahead of major mutual funds in this brutal financial crisis.

RENO: We have -- we have beat the results...

UNIDENTIFIED FEMALE: Of the Vanguard.

RENO: ...of the Vanguard 500 Fund.

UNIDENTIFIED FEMALE: Yes.

RENO: It had lost about 3.4 percent and our loss is only about 2.5 percent, so.

MCEDWARDS: The club's portfolio is worth about $100,000 right now. Flo Duke has been with the club 11 years and keeps track of the books.

FLO DUKE, INVESTOR: So instead of me depositing one-on-one, I would deposit $100.01.

MCEDWARDS: Club members deposit money every month. That money buys them shares in the club's stock portfolio, much like investing in the mutual fund.

(on camera): At the lowest point, Larry, how much were you guys down in your portfolio?

RENO: Around $40,000.

MCEDWARDS: $40,000 down?

DUKE: Which is only about 20 percent.

MCEDWARDS: Twenty percent.

It's still a biog hit, though, right?

DUKE: It was a big hit, but it's not as big as the big mutual funds that you see out there. They're -- there's are right at like a 40 percent hit.

MCEDWARDS: Still, though, did anybody's spouses say come on, what are you doing?

RENO: Oh...

DUKE: Get out of here.

RENO: Every month, my wife. Every month.

MCEDWARDS (voice-over): But they stuck to their strategy -- buy solid companies, dump losing stocks and don't look back. Most members are amateurs, but a couple of veterans, like Sy Lynch (ph) have worked in the investment business.

SY LYNCH: My compound annual rate of return is 17.3 percent. All of that's to be compared with our projected growth rate of 11.1 percent.

MCEDWARDS: Guidance from a pro and the safety of a group is how these folks keep sleeping at night.

UNIDENTIFIED MALE: Let's not paint it -- let's not buy into the painting.

MCEDWARDS: At this national convention of investment clubs, people have come from all over the U.S. and as far away as Japan, even South Africa. Some are already club members. Others are shopping around for one to join.

Sy Lynch gives them a pep talk and his optimism strikes a chord.

LYNCH: If you look at any given year, it's going to be up 30, down 20 and you just never know. And if you can weather the downturns, you make it back on the up turns.

UNIDENTIFIED FEMALE: I think this is a great opportunity to learn more about investments and also the market is very volatile. However, there's a great opportunity for investors and I would like to capture that opportunity.

UNIDENTIFIED FEMALE: I'm not looking for the big scores. The first thing, it's the beginning. I guess maybe later on you think about the big, but I'm not thinking about that. I'm just thinking about growing my money.

MCEDWARDS: Participation in U.S. Investment clubs went down in this crisis, just like the markets. But as stocks pick up, so has confidence. The Atlanta club's top three holdings are WellPoint, a U.S. Health insurance company; Amedisys, another health-related firm; and Oracle.

The group has been boldly buying tech, reaping rewards from the recent run-up on NASDAQ.

(on camera): How do you feel about the market now?

I mean do you guys all feel like the worst is over at this point or...

UNIDENTIFIED MALE: I think we still have a ways to go, but we'll endure it. This club is strong. Nobody's sure how the market is going to run, but I think we're going to be fine.

MCEDWARDS (voice-over): Safety in numbers -- a strategy for tough times and maybe for the next bull market.

Colleen McEdwards, CNN, Lake City, Georgia.

(END VIDEO TAPE)

QUEST: And now to the weather forecast, if you're traveling around and need to know what the forecast his this Monday night.

Guillermo is at the CNN World Weather Center.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Richard, I was checking out London and I see you had some misty conditions before, right?

It's not bad. And I'm going to show you why and, also, I'm going to tell you that things are turning a little bit cooler because September 21st -- or 22nd, in this case -- it's taking on a -- it's happening on the 22nd of this exact time. Days are getting shorter and are getting longer in the Southern Hemisphere, because we're transitioning into warmer conditions in the south and cooler in the north.

But I think it's fine. At 6:00 in the morning, you've got some misty conditions. That's about it. The rain stays in the north. Along with that, we are going to see some winds. I'll tell you the details. But London looking OK. So we don't see significant change. It's going to be a little bit choppy here in the English Channel. Improving, though, on into Scandinavia is where we see a change. It's still raining in Italy, you see?

It is getting better, though. But we are still getting the moisture from here, so there is flooding concern in the area, like in the United States in the South -- actually, we got a flood like in Australia and also in the Philippines.

Let me show you the winds in Amsterdam; also, rain showers in Dublin. Barcelona with some windy conditions. Probably some delays over there. It's the same low pressure center. Copenhagen with the winds and all the way up into the Gulf of Bosnia (ph).

So the moisture here, in this case, after days of dry conditions in the Philippines coming back because of this stationary front that we have in the area -- five to 10 centimeters. We are going to see delays (INAUDIBLE) in Sydney and all over the south, in Adelaide, particularly, we'll see some rough weather. Taipei getting some more moisture.

So you see the winds over here in South Australia and into New Zealand, as well. But the rain coming back into Adelaide, along with this front that is going to spread. This is one of many that are going to come to the area. It's going to spread the rain all over into Victoria, into Victoria, into Tasmania and New South Wales. But remember, this is an area that was affected by severe drought. So this is welcome, but it's going to bring about some problems.

So I'll tell you later and throughout the night what's going on.

We are going to take a break right now.

When we come back, more QUEST MEANS BUSINESS.

Stay with us.

(COMMERCIAL BREAK)

QUEST: Zimbabwe's economy may be in better shape today than it was a year ago, when mismanagement and hyper inflation reduced the country to chaos. Recent government measures have benefited only a few.

Nkepile Mabuse meets ordinary Zimbabweans. They are struggling to make ends meet.

(BEGIN VIDEOTAPE)

NKEPILE MABUSE, CNN CORRESPONDENT: Since Zimbabwe got rid of its worthless currency, the zim dollar, in February this year, opting to use multiple foreign bills, such as the U.S. Dollar, the South African rand and even the euro, food and other basic goods are back on the country's once empty store shelves.

But some things are still pretty expensive here. For example, this baby body wash costs about five times more than it does in South Africa at the moment. And, of course, if you don't have access to foreign cash, you simply can't shop. And because the country doesn't have its own currency, getting change for what you buy is often a bit tricky.

Hello.

How are you?

UNIDENTIFIED MALE: How are you doing?

MABUSE: I'm OK. Thank you.

Oh, you don't have change?

UNIDENTIFIED MALE: We don't have coins.

MABUSE: OK.

UNIDENTIFIED MALE: (INAUDIBLE) vouchers.

MABUSE: For vouchers?

OK.

UNIDENTIFIED MALE: And then you can come back and use them again.

MABUSE: Oh, I can come back and buy something else with 47 cents?

UNIDENTIFIED MALE: Yes, with 47 cents.

MABUSE: OK.

UNIDENTIFIED MALE: (INAUDIBLE) coins, then you can redeem your coins (INAUDIBLE).

MABUSE: OK. All right. Great.

(voice-over): My shortfall was minimal, but in Zimbabwe, the smaller the shop, the bigger the amount you end up being owed.

(on camera): OK. Thank you so much.

UNIDENTIFIED MALE: OK.

MABUSE: You may be wondering how people living in a country whose economy is on its knees get their hands on foreign currencies. Well, the estimated 13 percent who are employed are paid in U.S. Dollars. Others rely on relatives who have left the country to send them money. Some have had to sell whatever they've got, whether it be chickens or cows, to get money. And the rest of the population, well, it's practically stuck.

(voice-over): In rural Zimbabwe, chickens have become a popular form of currency. They are valued at just under $4 each and some parents use them to pay school fees.

Headmaster Nonkululelo Ndlovu says he does not encourage the practice, but desperate parents have no alternative.

NONKULULELO NDLOVU, HEADMASTER: When the parents bring a chicken to save or to offer as the school (INAUDIBLE) the teachers sometimes but it. So if they agree on the price, the teacher will (INAUDIBLE) pay the fees and then if there is any change, they will give the parent the change.

MABUSE: The situation, though, is unsustainable and a debate is already raging around when Zimbabwe will have its own currency again. The country's finance minister, Tendai Biti, has threatened to resign of the zim dollar is returned prematurely. He wants the economy to recover first.

The Reservan (ph) government, now, on the other hand, wants the zim dollar back in circulation for the sake of sovereignty. Ordinary Zimbabweans say they are better off without it.

UNIDENTIFIED MALE: The U.S. dollar is allowing our business to grow and I think we want to continue that. And our economy is starting to improve. With the introduction of the U.S. dollar, we've seen prices reach a stable and things are now affordable.

MABUSE (on camera): Economic recovery is an uphill battle. Zimbabwe needed at least $1 billion U.S. To resuscitate industries, but it has only been able to raise half of that money. Besides, the global economic downturn, many donor countries have adopted a wait and see attitude toward Darwa's (ph) new coalition government. But production has gone up from 5 percent in February to between 20 and 30 percent. Until the country key sectors of mining, agriculture and manufacturing are brought back to life, Zimbabwe will continue struggling to get back on its feet again.

Nkepile Mabuse, CNN, Harare, Zimbabwe.

(END VIDEO TAPE)

QUEST: And, of course, our coverage of Africa is a crucial part of QUEST MEANS BUSINESS in all its different variables.

When we come back in a moment, a final thought -- a Profitable Moment.

(COMMERCIAL BREAK)

(AUDIO GAP)

END

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