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Quest Means Business
Ford Turns Profit; CIT Files for Bankruptcy; Comeback for GDR Trabi?
Aired November 02, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ADRIAN FINIGHAN, CNN INTERNATIONAL ANCHOR: A huge turnaround, Ford is back in the black.
Brussels sets its sights on breaking up Britain's banks.
And the financial crisis is still claiming victims, CIT files for bankruptcy.
Hello, I'm Adrian Finighan, in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you. And very good evening. It has been a bumpy road, but now it seems that Ford is slowly turning a corner on nearly five years of losses. While its domestic rivals have succumbed to bankruptcy protection, Ford has been trying to fix its problems without a shred of government help. Is this just a short-term boost from the U.S. "Cash for Clunkers" scheme? Well, tonight, we'll look at the strength of Ford's recovery.
So back on track after years of burning through cash, Ford jumped to a surprise profit of less than a billion dollars in the third quarter, less that a billion dollars. It's thanks in part to a sales boost from the U.S. "Cash for Clunkers rebate program, and if you take a look at this graph, you can see why this was welcome news for investors. This is Ford's first quarterly profit in more than a year.
Well, let's put Ford's latest numbers into perspective. Susan Lisovicz is following the story closely. She joins us now live from New York.
So, Susan, a great quarter for Ford. Back in the black. But no guidance for 2010.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: No. In fact, the company said its 2011 where it sees solid profitability. You know, Ford has not had an annual profit since 2005. So as good as these numbers are, nearly a billion dollars, it still has bumps in the road, if you will. It's having some problems with the rank and file.
The company wants more concessions. And when the company -- any company starts making money, you know, the rank and file don't want to give back even more. But the simple truth is, is that Ford has emerged far ahead from its two competitors in Detroit, GM and Chrysler.
First of all, they filed for bankruptcy, that automatically puts Ford at an advantage because customers get skittish. Secondly, it was a big recipient, a big beneficiary of the "Cash for Clunkers" program. A lot of folks trading in their Ford Explorers for new fuel efficient Ford models such as the Ford Escape and the Ford Focus.
The F-150 is the most popular truck in America. And in fact, North America actually saw sales increase. And then let's just talk about cost- cutting. I mean, that has been happening for years now ahead of its two competitors. And that all of this together helped Ford record a profit for the third quarter -- Adrian.
FINIGHAN: Yes, Susan, markets took a dip when the "Cash for Clunkers" money ran out. That has affected consumer confidence, it would seem. What have Ford's results down today to the markets?
LISOVICZ: Well, you know, actually, the market opened a little wobbly and that was surprising for a couple of reasons. One is that, you know, we're coming off a terrible month. The S&P 500, the broadest of the three major averages, recorded its first loss in seven months. The worst week for the S&P 500 since April. So -- since May, excuse me.
So it was just a tough week, you'd think you'd want a little -- something a little more positive. What gave the market some lift was 30 minutes after the opening bell, we got a trio of economic reports, construction, pending home sales, and manufacturing, all good, all solid, that gave the market some positive momentum, couldn't hold it, and that's one of the things we're seeing now, Adrian, we've been seeing volatility and it seems like the path of least resistance is to the downside, check it out, with less than two hours to go in the session.
FINIGHAN: Susan, before you go, I just want to play a little bit of video here and ask you about -- ask you for your thoughts on President Obama, who was talking about the state of the economy today. Here's what he had to say about jobs.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We anticipate that we're going to continue to see some job losses in the weeks and months to come. As I said before, there is a -- always a lag of several months between businesses starting to make profits and investing again, and then actually rehiring again.
But I want to emphasize I am confident that having moved the economy on the right track, that if we apply some good common sense, and some -- and reinvigorate that sector of our economy on the right track. That if we apply some good common sense and some -- and reinvigorate that sector of our economy that is based on innovation and dynamism and entrepreneurship that there is no reason why we're not going to be able to not only create jobs but the kind of sustainable economic growth that everybody is looking for.
(END VIDEO CLIP)
FINIGHAN: So the president, Susan, pointing out once again that although the economy may be showing signs of recovery, employment still a trouble spot. It's going to get worse before it gets better.
LISOVICZ: That is historically accurate. And unfortunately, this particular recession is worse than most of us have ever endured. And so I think the president is basically just preparing us that things may get worse, may feel worse, even though the economy is starting to turn.
There is a total disconnect. The GDP grew in the third quarter, but most of us don't feel any better. In fact, we may feel worse, more of us out of work, our paychecks aren't growing. So there are real problems. There is a real disconnect. And the president is basically I think articulating that.
FINIGHAN: All right. Susan, great to talk to you, as always, many thanks indeed. Susan Lisovicz, live in New York.
Well, that surprising news from Ford is just the start of what is expected to be a big week for the U.S. auto industry. On Tuesday, we'll be getting the latest reading on car sales for October. Industry-watchers say we could well see a solid month as automakers pulled out all the stops in offering incentives to lure buyers back into the showroom.
Many dealers suffered a sort of hangover in September after the success of the "Cash for Clunkers" program. And then on Wednesday, Fiat's chief executive, Sergio Marchionne, is due to lay out a five-year plan to turn around recently-acquired Chrysler. The Italian automaker has been working on plans to kick-start Chrysler's stalled products development since taking over in June.
But so far, of course, we've had few details. Now European stock markets have started the week on a solid footing. Mining and metals shares among the standout performers today. Let's take a look at the closing numbers. London's FTSE 100 added more than 1 percent today.
Rio Tinto and Xstrata both adding more than 4 percent by the close. The CAC 40 in Paris gained 0.8 percent. Automaker Peugeot leading the charge there. And in Frankfurt, the Xetra DAX added just over a quarter of 1 percent with Commerzbank among the best performers, despite a bigger- than-expected net loss of $1.6 billion for the third quarter.
Now they've hit rock bottom. They've been bailed out. And now they could be forced to break apart. Three of Britain's biggest banks are expected to be carved up in a bid to shake up retail banking and improve competition. What am I talking about? Well, take a look at this, the Royal Bank of Scotland, forced by the European Commission to sell more assets than it originally planned in exchange for public aid received during the economic meltdown.
These are the reports that say that it could well be forced to sell its investment arm and sell over 300 of its branches. RBS is, of course, 70 percent-owned by the taxpayer here in the U.K. The government stake in RBS could well rise to 84 percent. And in the last few hours, RBS has announced that it's going to cut 3,700 jobs in the U.K.
Of course, there is another bank we should talking about too, and that is the Lloyds Banking Group. Now Lloyds believes that it can survive without joining the government's asset protection scheme. The bank is expected to say that it's prepared to pay $4 billion to stay out of the state-run insurance scheme covering toxic assets.
It may well though sign up to a string of tough measures. And there are media reports today that say it plans to raise at least $22 billion in cash, plus $11 billion in what is called contingent capital. Lloyds, of course, owned 43.5 percent by the state right now.
The third bank, we told you all about it last week, Northern Rock. It received a new lease on life, if you remember, by winning clearance last week from E.U. regulators to be broken up. It will split off its toxic assets into a bad bank. It got $13 billion from the government in the U.K. to start lending. The bank, of course, nationalized last year.
And here is what has happened with the share price. Royal Bank of Scotland down 7.8 percent today, Lloyds Banking Group down 2.3 percent. Let's get all -- more on what all of that means now for the British banking sector. CNN's Jim Boulden is here.
We spent a couple of minutes going all of that. None of it, of course, set in stone, really. I mean, the proposal is for breaking up the banks at the moment. The chancellor, Alistair Darling, dropped some very hints about it at the weekend. When will we know for certain what is planned then?
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, it could come as early as tomorrow. Royal Bank of Scotland has its results out on Friday and says that it will definitely -- will definitely know a lot more before then, some talk tomorrow.
Basically it's very -- every bank has a different issue. Every bank has a different thing. But the bottom line is, the European Commission is telling European banks and governments you have got to do something now. They've gotten these bailouts. They've gotten -- you've got to start unwinding this.
And so the U.K. government is making very detailed negotiations with these banks with the European Commission. And we should hearing a lot more about it this week.
FINIGHAN: Yes, as far as RBS is concerned, the government is going to buy shares, more shares in the bank...
BOULDEN: Yes, increase it to something like 80 percent.
FINIGHAN: Right. And then it's going to force it sell off bits and bits so that it can buy back its own -- it's incredibly complicated. Presumably, like Northern Rock then, what happens with both Lloyds and RBS would have to go through E.C. approval.
BOULDEN: Yes, we're talking about, what three-four-year time period here. And Alistair Darling, as you said, he has said, we could get three new U.K. banks, new U.K. banks out of all of this because of these break- ups. But these are the other names coming in who already have some kind of financial assets in the U.K.
Could be U.S. Banc, could be Virgin -- Virgin Money, could be one of the High Street supermarkets coming in here and creating new banks. And it just means that there will be more opportunities and more diversity in the banking here in the U.K.
FINIGHAN: Lloyds, of course, says that it is hoping to avoid this altogether, to...
BOULDEN: Yes, it's expensive.
FINIGHAN: Yes, absolutely. But what is it about British banks? Why have they -- I mean, we talked about ING who, of course, split itself voluntarily. What is it about...
BOULDEN: Well, there is a big hint that the European Commission telling that this is a very good idea.
FINIGHAN: Yes. I suppose. But what is it about British banks? Why were they hit so hard by the financial crisis?
BOULDEN: Well, you can either say they were hit really, really hard, or you could say that the U.K. government is making steps first or second, if you look at ING. They got themselves into this whole complex of very sophisticated products. They got themselves really deeply into the U.K. market -- U.S. market. And then they had to come running for help with Northern Rock being the very first example.
And then the U.K. government, ahead of the G20 meeting this weekend, it looks like it's going to set out its stall of how it thinks that banks should be reorganized. And it's probably going to tell the other countries at this meeting, this is how we did it, maybe you should do it this way as well.
FINIGHAN: All right. Jim, many thanks indeed. It's like being at the office, really, isn't it? Jim and I sit opposite each other in the office. And we do it -- we've got a screen between us here. But this is how it is all day between Jim and I. We sit there gossiping.
Many thanks, indeed, Jim Boulden.
Now first half profits are up 80 percent at Ryanair. And it has got big plans to expand. But CEO Michael O'Leary is sending a sharp warning to Boeing over the cost of aircraft. O'Leary says that Ryanair may not be able to continue with its growth plans unless it strikes a favorable deal with the plane-maker.
Ryanair is currently in negotiations to buy 200 planes from the U.S. company. But O'Leary is threatening to end the relationship and hand the money saved to shareholders instead.
(BEGIN VIDEO CLIP)
MICHAEL O'LEARY, CEO, RYANAIR: If we can conclude those successfully with Boeing, then I think you'll see another large aircraft order. And we keep growing strongly into the period out to 2016. If we can't finish those discussions by the end of this year, then we'll cancel any further orders with Boeing. And I think we'll stop growing by about 2012 and start returning some of the cash and some of the profits to shareholders.
(END VIDEO CLIP)
FINIGHAN: And there could well be misery for airline passengers traveling in and out of the U.K. over Christmas. Three thousand British Airways staff held a mass meeting at a racecourse this Monday. They've decided to start voting on strike action by next week. And we'll know the results of that ballot by mid-December. The workers union is unhappy about cost-cutting plans, including job losses and pay freezes.
Right. Let's get you up to date with what else is making news around the world right now. Max Foster joins us live in the London newsroom.
MAX FOSTER, CNN INTERNATIONAL CORRESPONDENT: Hi, Adrian.
World leaders are congratulating Afghanistan's president on his reelection. Hamid Karzai was declared the winner after rival Abdullah Abdullah quit the race. The runoff was supposed to be held on Saturday, but Abdullah said he didn't think the vote will be free and fair. Mr. Karzai now prove he can form a government seen as legitimate.
Next door in Pakistan, suicide bombers have unleashed two new attacks. This explosion in Rawalpindi killed at least 35 people outside a bank. Police state they were waiting to pick up their monthly checks. Two other suicide bombers targeted a check point in Lahore, police say the militant blew themselves up, militants blew themselves up whilst their vehicle was being inspected. At least 17 police and civilians were wounded.
Britain and Russia are talking about ways to improve relations. David Miliband is the first British foreign secretary to visit Moscow in five years. But a dispute over the fateful poisoning of Alexander Litvinenko in London remains an obstacle. Foreign Minister Sergei Lavrov dismissed a new call for extradition of the prime suspect, former KGB officer Andrey Lugovoy.
Britain's high court is being asked to decide whether a hospital can take a 1-year-old baby off life support. The boy's rare genetic condition prevents him from breathing on his own. His mother sides with doctors who said the child is suffering and should be removed from a ventilator. The father wants the court to stop that happening.
Those are the headlines, Adrian. Back to you.
FINIGHAN: Many thanks, Max. We'll see you again a little later. Now one of the largest lenders to small businesses in the U.S. could use a helping hand of its own. As CIT goes into bankruptcy. We'll take a look at how thousands of family operations could be affected by one of the biggest corporate collapses in history.
(COMMERCIAL BREAK)
FINIGHAN: Now long-troubled U.S. lender CIT has filed for bankruptcy protection in a move that could have long-term effects on the thousands of small- and medium-sized businesses that rely on the company for funding. For more on what that means, let's check in with cnnmoney.com's Poppy Harlow, who joins us live from New York.
And, Poppy, a lot of people, at least on this side of the Atlantic, may not ever even have heard of CIT. What can you tell us about the company?
POPPY HARLOW, CNNMONEY.COM: Well, you know, Adrian, that doesn't surprise me, a lot of folks on this side of the Atlantic, across the pond, haven't either. I mean, this is a major, major lender to small- and medium-sized U.S. businesses. It has filed for Chapter 11, for reorganization, not a liquidation, but it is bankruptcy for CIT.
This is the fifth-largest bankruptcy in U.S. history. People had been expecting this for a few months, trying to raise money, trying to convert some of their debt. But that is just not what happened with CIT.
Here is an idea of how big it is, they have 1 million customers, that is in terms of businesses across 30 different industries around the world. And they say 90 million employees work at the businesses that rely on CIT for their loans.
Here is a prime example in the United States. Dunkin' Donuts, this coffee franchise, expanded greatly over the last few years. They went to CIT to get the loans to fund the commercial real estate for those franchises. That is just one example. What we do hear from CIT is despite this reorganization, they say, Adrian, it's going to be business as usual.
They say they're going to continue to lend. But I should note here, small businesses have had a hard time getting loans over the last year from CIT as it has been struggling, so their lending has already decreased substantially. It's going to be interesting to see if it really is as they say, business as usual at CIT.
But certainly a big story breaking on Sunday night. Folks on Wall Street talking about it today -- Adrian.
FINIGHAN: Yes, absolutely. The fifth-largest U.S. bankruptcy. As you say, it's a big story. There is a lot of talk in the newsroom today. And people are saying -- some people actually said that this may well be a good thing. Why on earth would they say that?
HARLOW: You know, I do. I think that's an argument that has credence because you look at this and you look at the U.S. government saying, no, we're not going to bail you out again, this is a company that got a $2.3 billion bailout through TARP. They went back in July to ask the U.S. government for more money. They were rejected.
Some people say the fact that the U.S. government has the faith in the capitalist system, that this company can go into bankruptcy, reorganize, and it's suspected, emerge successfully, that's a good sign.
What I should note is that it's contrary to what it is talked about that the U.S. government may do with GMAC. GMAC is a huge auto financier in this country. The government owns 35 percent of GMAC and they have asked, it is reported, reportedly, for another bailout. They may get another bailout.
The difference here, if GMAC gets a bailout and CIT does not, that is an indication that the Obama administration is saying GMAC and the way that props up the auto industry is more critical than CIT is to the overall financial system. That's going to be really interesting to keep an eye on. But a lot of folks are outraged over this, the fact that $2.3 billion in government bailout money to CIT, Adrian, will not be paid back.
The Treasury has said it is -- if there is any payback, it will be very, very minimal. So you're looking at the U.S. government now with its first loss under the TARP program, which will be about $2.3 billion. So folks are weighing in. It's one of our top stories on CNNMoney. You can go there and weigh in as well.
Should the Obama administration have stepped in and bailed out this company? For a second time they chose not to, so we will be following this story, certainly a big one on this Monday -- Adrian.
FINIGHAN: Absolutely. Poppy, many thanks, indeed. Poppy Harlow at cnnmoney.com.
Now here's a question: What has four wheels, 25 horsepower, and millions of memories? As part of our autumn of change, remembering the events of 20 years ago. We take a ride in the iconic Trabi, the pride of East Germany's auto industry. Buckle up, we'll be right back.
(COMMERCIAL BREAK)
FINIGHAN: Now here on CNN, we're marking the 20th anniversary of the fall of the Berlin Wall. It, of course, symbolized the downfall of communism in Europe and the end of the Cold War. Germany's economy is now the biggest in Europe. It has got a very strong auto sector, with the likes of BMW and Volkswagen and Mercedes Benz.
But do you remember the Trabant? The iconic communist vehicle is now, would you believe, making something of a comeback. And CNN's Fred Pleitgen joins us now live from Berlin to tell us more.
Hey, Fred.
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Hi, Adrian.
Yes, you know, I never pass by a chance to drive in a Trabant. It's such a weird kind of vehicle to ride in. You know, it's really hard to get in in the first place, especially if you're as tall as I am. But it is really something that -- something like a blast from the past, just takes you way back 20 years and you know how this care became such a symbol of German unification.
We're going to show you that care in the report coming up. But also, look at the other car we're going to show you, because that's something not many people have seen out of East Germany. Take a look.
(BEGIN VIDEOTAPE)
PLEITGEN (voice-over): The Trabant was the pride of communist East Germany's auto industry. A little over 3 million were built starting in 1957. A car for the people, unless you're as tall as Rico.
(on camera): Can you show me how to get in?
RICO HEINZIG, TRABI-SAFARI: Here, like a ballerina.
PLEITGEN (voice-over): We're riding Rico Heinzig, who offers Trabant tours through Berlin. With its 25-horsepower engine, the socialist midget only does about 60 miles an hour, and yet, everyone wanted one, because they didn't have a choice.
HEINZIG: We don't get a new car if you want this. You must wait 10 years for this car. It's very crazy, unbelievable. And so if you had this car, you stayed with him until you died.
PLEITGEN: And if you wanted variety, no problem, there was gray version, light blue, and the green version. What more could you ask for?
But even under communism, some pushed the boundary. This is Melkus RS 1000, known as the communist Ferrari. Only 101 were built between 1969 and 1979. It's completely different than driving today's cars. You're sitting only 5.5 inches above the road. You're almost laying in the car. You feel like you're driving a race car says Sepp Melkus, grandson of the car's designer.
And now, 20 years after the fall of communism, the Melkus family is trying to revive the brand, building the RS 1000 in a garage workshop. And they just came out with a successor, the Melkus RS 2000, with a lightweight chassis, and 270 horsepower.
And the Trabant? Production has long ended, but only a few months ago, German toy car-maker Herpa showed off this prototype of an electric- powered Trabant.
"We took a look at how popular a car is, and how popular brands are, and the Trabant simply stood out," says the company's CEO.
But with electric cars even from major manufacturers still struggling for market share, it seems less than certain that the Trabant will really be able to mount a comeback. Odds are the pride of the Socialist car industry will remain a piece of history, like the regime that guaranteed its success.
(END VIDEOTAPE)
PLEITGEN: Yes, so, Adrian, there are not many people who actually believe that these communist cars are going to be able to mount some sort of miraculous comeback, but you never know. You know, maybe for some niche markets this is something that people will want to buy.
And I can tell you that there are actually still a lot of Trabants on the road. And people are doing the strangest things with them. I interviewed one guy who actually turned a Trabant into a boat and is now sailing around with it on a river somewhere in eastern Germany. So there are still lovers of these vehicles out there.
And they're made of plastic, so they can swim -- Adrian.
FINIGHAN: You say that you never resisted the opportunity to get into one, even though it's a bit difficult with you being so tall. I mean, how do you feel about them? Did you ever own one?
PLEITGEN: I never owned one, you know, I was thinking about buying one. And shortly after unification they were really cheap, you could get them for a couple of hundred bucks. But you know, now there are new emissions standards and they don't meet the emissions standards. So there's always trouble, there is trouble getting parts. So it's never something that, you know, I really followed through on.
But they certainly are an icon. And there are still a lot of people who want to own this car just to have that piece of history -- Adrian.
FINIGHAN: All right. Fred, great to talk to you, many thanks, indeed, Fred Pleitgen, in a very wet Berlin. I guess Fred, you're having the weather that we had in Britain yesterday. We'll get a forecast for you from Jennie in the next 30 minutes or so.
Of course, next Monday marks 20 years since the collapse of the Berlin Wall, and we'll be bringing you special coverage all this week in our "Autumn of Change" series. And we'll be bringing you a series of stories on Germany's development in the years after reunification.
Now the wheels are coming off Formula One's tire contract. The supplier, Bridgestone, is pulling out after 13 years. The Japanese company won't renew its contract at the end of the 2010 season. The company says that it wants to redirect its resources by concentrating on new technology. Bridgestone says that the financial crisis was not a major part of its decision.
Well, Bridgestone's decision comes just a day after the last race of this Formula One season. Abu Dhabi hosted the motor sport for the first time. It was an incredibly lavish event at the new $250 million circuit. CNN's Justin Armsden was there.
(BEGIN VIDEOTAPE)
JUSTIN ARMSDEN, CNN INTERNATIONAL CORRESPONDENT: Another Formula One season comes to an end after the race at the spectacular Yas Marina. It didn't bring with it a fight for the drivers' championship, but nevertheless, it didn't fail to disappoint the 50,000 spectators that lined the circuit.
SEBASTIAN VETTEL, WINNER, ABU DHABI GRAND PRIX: All in all, you know, great place, amazing what they have done here in that short period of time. So obviously, you know, winning the race, one and two for RBR racing, I think it can't be much better.
JENSON BUTTON, THIRD PLACE, ABU DHABI GRAND PRIX: And today for me has been a bonus after winning the championship in Brazil. And I've really enjoyed driving this weekend a car that has been very competitive. So I need to thank everyone at Braun and Mercedes Benz for all their hard work.
You know, after Brazil it would have been easy to say, right, let's just enjoy ourselves and not concentrate on Abu Dhabi, but we did and we've come away with a podium, which is a nice way to end the year. And everyone should be very, very proud of themselves.
VETTEL: To sum up the season, it's up and down, I think the second half we have been very strong, as you mentioned, fourth, one, two, for RBR racing. So congratulations to the team, I mean, they have been pushing a lot, working a lot back in the factory. And as we can see, the car is getting quicker.
It's a shame now the season ends.
ARMSDEN: The drivers and their teams will be taking a well-earned rest for the next few months. But they'll be gearing up for the very first race of next season, from Bahrain where four more teams will join the Formula One circuit.
Justin Armsden, CNN, Abu Dhabi.
(END VIDEOTAPE)
FINIGHAN: And we've got some big Abu Dhabi news. In less than 24 hours, Abu Dhabi will be joining the CNN family. Yes, on Tuesday, we open a brand new global production center there. Stan Grant hosts a new show, "PRISM," from the Abu Dhabi studios. The program will take one story each day and look at it from multiple points of view. That's "PRISM." It starts Tuesday, 21:00 hours in Abu Dhabi. That's 17:00 hours here in London. It's a big week for us here on CNN.
Now, firefighters are waging a desperate against a fire raging at sea. We'll have more on the efforts to stamp out this oil rig fire and on the ecological damage that it's doing to the area.
Don't go away.
(COMMERCIAL BREAK)
FINIGHAN: Hello.
Welcome back, live from London.
This is QUEST MEANS BUSINESS from CNN.
I'm Adrian Finighan in for Richard Quest.
Let's briefly show you what's happening on Wall Street right now.
And, well, the Dow Jones is up by about 34 points. When we were talking to Susan a little earlier it was down by about 12 points. So we'll wait to see what happens. It's at 9749 right now.
Well, firefighters are battling a major blaze on an oil rig off the coast of Australia. The rig's been leaking thousands of barrels of oil into the sea for weeks now and desperate efforts to plug the leak accidentally set the rig alight on Sunday.
Iskhandar Razak has more on the efforts to put the fire out.
(BEGIN VIDEOTAPE)
ISKHANDAR RAZAK, CNN CORRESPONDENT: (voice-over): The wild raging inferno has engulfed the oil rig. The blaze started after workers attempted a well kill, aimed at plugging Timor Sea oil and gas leak. That involved pumping heavy mud from the nearby West Trident oil rig to the leaking well on the sea floor and somehow it triggered the fire.
JOSE MARTINS, PTTEP RIG OPERATOR: The mesa -- measures which we have been able to take so far can only mitigate the fire. They will not stop the fire. The best way to stop the fire is to complete the well kill and stop the flow of gas and oil at the surface from the H1 well.
RAZAK: The well has been leaking for 10 weeks and the company operating it says about 400 barrels of oil spews from it a day. Several attempts to plug it have failed and green groups say it's an environmental disaster.
JOHN CAREY, PEW ENVIRONMENT GROUP: We've already seen 25,000 barrels of oil spewed into the ocean and we worry that this fire will add to the toxic cocktail that has already been seen with the oil spill.
RAZAK (on camera): The federal resources minister, Martin Ferguson, says he's told the National Offshore Petroleum Safety Authority to do everything it can to fight the fire. Geo-science Australia has also been put on standby to provide technical support.
(voice-over): The company in charge of the rig, PTTET Austral-Asia has refused to answer questions about the fire, but says no one has been injured and all non-essential personnel are being evacuated from the nearby West Trident rig.
Specialist fire crews are also flying to the scene. But as the fire burns, the oil is continuing to flow into the Timor Sea.
Iskhandar Razak, ABC News.
(END VIDEO TAPE)
FINIGHAN: More on oil right now and the Norwegian energy company, StatoilHydro is changing its name. They're dropping the Hydro bit. It's part of a revamp of their image, including a new logo.
Earlier, I spoke with the CEO, Helge Lund, who advises the U.N. Secretary-general on climate change.
I asked him about where he stood on this whole debate between energy and the environment.
(BEGIN VIDEOTAPE)
HELGE LUND, CEO, STATOIL: Well, I think we both have an energy challenge and a climate challenge. And I sincerely believe that you have to solve both and you cannot solve one of the issues at the expense of the others. Therefore, I think that it is important that the oil and gas industry is engaging themselves on -- on this matter, and I -- because I think it is clear that the climate issues cannot be solved without private companies and -- and private enterprise.
FINIGHAN: So how realistic are the politicians' desire for a -- a low carbon world?
I mean is it -- is it ever possible to -- to become completely, almost not dependent at all upon -- upon fossil fuels and carbon fuels?
LUND: I think all experts and all of us in the energy sector, we see that we depend on hydrocarbons for decades and decades to come. So we have to both work to make our own industry make less CO2, i.e. Become more CO2 efficient. I also think that we should look at using our technology, our skills -- big project execution capabilities to -- to look at ways, also, to engage in the renewable industry. And Statoil is doing that.
FINIGHAN: So what is the -- what does that mean for the -- for the price of -- of fuel?
Is -- is it going to become less expensive or -- or more expensive, as we use less of it?
LUND: Well, I think generally over decades, I think, as the world population is growing, the demand for energy will increase. And I think it's likely that, over time, energy will be more expensive than it is today.
FINIGHAN: All right.
How -- how do you see your industry, then, changing in the years to come?
And what will be driving it -- will it be political, will it be environmental, will it be demand?
What -- what are the main things that are going -- that are going to be driving changes within the energy sector?
LUND: Well, I think all of the EEC energy sources have already been tapped. So as I look into the future, I think we see more and more complexity, more political complexity and more commercial complexity and also more technical complexity.
The only way I know to respond to all of these challenges is to build a competence organization and also to continue to be in the forefront of technology development. This is the name of the game in the energy industry.
FINIGHAN: And I -- I can't quite believe that I'm -- I'm asking this question of -- of someone who is the CEO of an oil company, but what do you hope to see come out of -- of -- of the Copenhagen summit on -- on -- on climate in December?
LUND: Well, I think that the worst thing that can happen to the industry is that -- is the continued uncertainty around the framework and the investment conditions. So I really hope that we have a clear political agreement and an agreement that can set out a clear framework for industry to operate within.
And long-term, I think the only way we really can solve the CO2 challenge is to engage industry through a higher CO2 price than we see today.
(END VIDEOTAPE)
FINIGHAN: Helge Lund, the CEO of Norwegian state oil firm, Statoil.
Now, where -- when share prices come crashing down, not everyone loses. After the break, our weekly Biz Clinic series takes a long look at short sellers.
(COMMERCIAL BREAK)
FINIGHAN: Hello again.
It is little more than a year since the practice of short selling was temporarily banned around the world. As the markets tumbled, many painted short sellers as the villains, accusing them of exaggerating share price falls.
Traders are now, of course, free to short shares once again.
In this week's Biz Clinic, Maggie Lake takes a closer look at whether these traders really do deserve that bad press.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): Well, not everybody likes short -- or, rather, short selling, a centuries-old practice that first came under fire in the 1600s, when authorities imposed the world's first ban, after a merchant tried to short the Dutch East India Company.
Short selling has since been blamed for countless crashes, including 1929, 1987 and now, at least in part, the latest global financial crisis.
So what is it?
STEPHEN FIGLEWSKI, NYU SCHOOL OF BUSINESS: Well, when you're selling, you actually own the stock. Short selling, you sell the stock with the expectation -- the intention that you're going to buy the stock later, all right?
And in order to sell the stock, since you don't own it, you've got to borrow it from somebody.
LAKE (on camera): The problem with betting that a company's stock will go down is that it can undermine investor confidence. Detractors say in extreme cases, it can actually cause a run on a company's share price.
That has some in Washington on the offensive.
(voice-over): The chairman of the Senate Banking Committee, Chris Dodd, has come out blasting the practice of certain types of speculative short selling. Bankers concede stricter rules may be needed, but they argue shorting stocks can actually help, not hurt, markets.
In a letter to regulators, Goldman Sachs says: "Short selling enhances liquidity and pricing efficiency in the markets."
Money manager Dan Veru says it is an important way for him to hedge and protect against big losses.
DAN VERU, PALISADE CAPITAL MANAGEMENT: We short stocks all the time in our convertible arbitrage strategy, which, simply stated, you would own a convertible bond and short the equivalent representative number of shares against that bond. That's a strategy that's very well established. It's been done for decades. And shorting is an integral part of how the return is captured.
LAKE: But what about the average investor?
Academics say a bit of pessimism can actually be just what the financial doctor ordered?
(on camera): Is it fair to say that short selling is this negative force in the market?
FIGLEWSKI: I don't think so. I don't think so. If you own -- own stock in a company, you want it to go up, even if it's not really worth the price that it's selling for in the market. Now, if there are people out there that have better information, better analysis and know that it's not worth what it's selling for in the market, you would really like we, as a - - as investors in our financial markets would really like prices to reflect, as well as we can, the true value of stocks.
LAKE (voice-over): So what is the business school professor's advice on investing in a short selling world?
Maintain a broad portfolio, think long time and, as he puts it, try to ignore the wiggles and jiggles of the market that short selling can cause.
(END VIDEOTAPE)
FINIGHAN: Maggie Lake reporting.
You know, whenever I need advice on shorting or convertible arbitrage strategies, there's one person I always consult first -- Jenny Harrison, just live from the...
JENNY HARRISON, CNN CORRESPONDENT: I (INAUDIBLE).
FINIGHAN: ...World Weather Center.
HARRISON: You see, I...
FINIGHAN: She knows everything there is to know...
HARRISON: I...
FINIGHAN: ...about shorting.
HARRISON: I thought you were going to ask me about wiggles and jiggles. I liked that bit, the man who said at the end of that, the wiggles and jiggles of the market. I thought that was a nice little phrase, yes.
FINIGHAN: Brilliant, isn't it?
HARRISON: I like that one.
FINIGHAN: If there's one thing that Jenny does know about, and that is -- that is the weather.
I promised you I'd ask about the rain -- or I promised Fred, rather, I'd ask about the rain in Berlin, which I was...
HARRISON: They'll get some.
FINIGHAN: ...saying as though I knew was the weather -- the rain that we had here in London yesterday. But before I do that, I want to -- I want to know what's going on.
When I left Guillermo on Friday, there was some very nasty weather bearing down on Manila.
What happened?
HARRISON: It happened. It went across Manila. This, of course, at the time, was Tropical Storm Mirinae. Then it headed back out into the South China Sea and in just the last few hours, this tropical storm, Mirinae, has made landfall on the south coast of Vietnam. There you can see it on the satellite.
In fact, just before it made landfall, it slowed its forward motion and it actually regained strength and became a typhoon.
Now, there's only one reporting station in Vietnam and you can see that Quy Nhon and over 200 millimeters of rain in just 24 hours. And it did report wind gusts reaching just over 100 kilometers an hour.
But it's still working its way inland. Cambodia, you will see the system come to you as a tropical depression, but still producing very heavy amounts of rain. The winds -- this is the last warning from the Joint Typhoon Warning Center and it had the winds, at that point, actually onshore at just over 80 kilometers an hour.
But I also want to point out, before I show you the rain that's going to come from this, this particular disturbance here now, again, we're keeping a close eye on this, because the Joint Typhoon Warning Center has said that there's a possibility of some formation there, although the wearers are a lot cooler because of Parma and the loop. It stayed so stationery for a long time, it churned up all the waters. And so the waters are a little bit cooler in that region.
But you can see all the rain still to come onshore, as I say, across Vietnam and across into Cambodia. And we're still looking at some pretty hefty totals, too, in the next 48 hours. The red could be easily another 25, maybe up to 50 centimeters of rain. And the winds, of course, will still be pretty strong, and not just across the south. We've still got very strong gusty winds all the way up into the Gulf of Tonkin, across Hainan and also across into Hong Kong.
And then, of course, in Australia, we've got a bit of a heat wave, just to warn you about, really, as we head into Tuesday. Temperatures in Sydney, in particular, under those clear skies, they will be up about 13 degrees above average. But it's just a one day effect, because it's going to cool off again on Wednesday.
But the delays fairly widespread, as you can see. We've got strong winds across into Taipei; Hong Kong, as well. And then when we move on from there, if we can move on from there -- there we go. We've got some -- a lot -- rather lengthy delays into Singapore because of thunderstorms there -- the usual sort of story.
Meanwhile in Europe, indeed, that rain, Adrian, you're talking about, it was all part and parcel of this storm system coming in from the west, although, as you can see, there's a very thick band of cloud across much of Germany. But this is a storm system working its way in. There's another one developing in the Central and Eastern Mediterranean. And the winds are going to be really vicious all the way through the Bay of Biscay for the next couple of days. There's the rain as it works its way across. You can see thunderstorms across much of Central and Southern Germany. And again, some fairly hefty accumulations over the next couple of days.
The snow is also going to be piling up into Norway; also across into the Alps. And temperatures, as you might expect, a little bit cooler, too, with a lot of snow in the forecast.
Plenty more to come, of course, with our Adrian Finighan as things return after this break.
(COMMERCIAL BREAK)
FINIGHAN: Now, there's plenty for investors in China to celebrate this Monday. The latest set of numbers on manufacturing looks pretty strong. And if anyone over in Hong Kong fancies drinking to that, well, you can now raise a glass of homemade wine.
Hong Kong doesn't have any vineyards, but as Pauline Chiou found out, that's no obstacle to one city entrepreneur.
(BEGIN VIDEOTAPE)
PAULINE CHIOU, CNN CORRESPONDENT (voice-over): In a congested city where concrete wins out over open space, word about a winery in Hong Kong raised skepticism among the city's top wine experts.
UNIDENTIFIED MALE: And I thought it was a joke.
UNIDENTIFIED MALE: My first reaction was where -- where -- where are the grapes located?
CHIOU: Twenty-nine-year-old entrepreneur Lysanne Tusar soon quieted the skeptics.
LYSANNE TUSAR, 8TH ESTATE WINERY: So this is our main ballroom (ph).
TUSAR: A native of Canada who worked in the beverage industry, Tusar's love of wine made her look for an untapped market to start a winery. That's how she landed in Hong Kong, a city she feels sets the trend for mainland China and the rest of Asia.
TUSAR: Hong Kong seemed to make a lot of sense because it is an isolated community as far as production goes.
CHIOU: With an initial investment of just over $2 million from family and a Hong Kong investor, Tusar started the 8th Estate Winery in late 2007.
So where's the vineyard?
There is none in Hong Kong. The 8th Estate buys grapes from other countries. Their 2007 vintage was made with grapes from Washington State; the 2008 vintage from Italy. The grapes are picked off the vine, flash frozen at nearby facilities then loaded onto container ships bound for Hong Kong. The flash freezing process is key.
TUSAR: We have to have a flash freezing facility within, I'd say, about half a day of the harvest site. And that's just to make sure that the grapes stay at their very prime and very peak.
CHIOU: The winery hires an Italian winemaker who spends six months here, making sure the grapes are properly thawed and turned to equalize fermentation. The grapes are then pressed inside a drum by an air bag which squeezes the juice into a catch pan. The wine ages in oak barrels for one to two years.
SIMON TAM, INDEPENDENT WINE CENTER: The business model is so unorthodox and yet so sound.
CHIOU: Independent wine consultant Simon Tam says not owning a vineyard can actually be a huge advantage for the winery.
TAM: They are not hindered or restricted by grapes from one particular patch of area or soil or country, even. They have the flexibility to choose.
CHIOU: But flexibility comes with a cost. The grapes are the winery's biggest single expense, costing between $300,000 to half a million dollars each year, depending on the region.
TUSAR: It's dark, but it's clean.
CHIOU: 8th Estate only produces about 100,000 bottles a year.
So how does the wine taste?
UNIDENTIFIED MALE: The first edition was wild. This is actually very good wine.
CHIOU: The Calhoun Shangrila Hotel signed an exclusive three month contract with the winery and allowed us to try it on their patrons. We didn't initially reveal the label.
UNIDENTIFIED MALE: I guess it's a very simple chardonnay.
UNIDENTIFIED MALE: It's good. It's drinkable.
CHIOU (on camera): Where do you think it might be from?
UNIDENTIFIED MALE: It could be from some part of France.
CHIOU: What would you say if I said it was from Hong Kong?
UNIDENTIFIED MALE: This one?
Oh, OK.
UNIDENTIFIED MALE: It's very dry, very nice, no after taste. California.
CHIOU: It's from Hong Kong.
UNIDENTIFIED MALE: Is it really?
Wow!
UNIDENTIFIED FEMALE: I really like it. This is (INAUDIBLE).
UNIDENTIFIED FEMALE: Oh, from Hong Kong?
Oh.
UNIDENTIFIED FEMALE: Unbelievable.
CHIOU: Are you surprised?
UNIDENTIFIED FEMALE: Of course. I'm really surprised.
CHIOU (voice-over): While the reviews were generally on the positive side, the winery realizes it has a long way to go. Quality is key, but so is revenue. 8th Estate hopes to eventually turn a profit in a year-and-a- half and it never anticipated its early years would collide head-on with a global recession.
TUSAR: Having the economic downturn was difficult and especially since we didn't have a product to sell during that. We were just very much in our up start phase. It was a challenge, but I think it's something that we -- we just sort of preserved and pulled through.
CHIOU: Judging from inroads it's making, the 8th Estate Winery may very well prove that "made in Hong Kong" is a label worthy of a toast.
Pauline Chiou, CNN, Hong Kong.
(END VIDEOTAPE)
FINIGHAN: Cheers.
Nothing to raise a toast to as far as Asian markets were concerned on Monday. In fact, China was the only bright spot. The Hang Seng in Hong Kong down 2.31 percent on Monday. No, actually, that was the Nikkei down 2.31 percent. The Hang Seng down just over 6/10 of 1 percent.
The Shanghai Composite, though, up, bucking the trend, 2.7 percent.
The S&P ASX 200, that was down nearly 2.25 percent on Monday.
And we'll be back in just a few moments here on QUEST MEANS BUSINESS with a look at what's happening on Wall Street right now and a look at how the markets ended the day here in Europe.
See you in a moment. don't go away.
(COMMERCIAL BREAK)
FINIGHAN: Let's take a look at what's happening on Wall Street right now. The market up and down like a -- a yoyo. It got off to a great start today. The gains tempered then by a Fed official who came out and said that the banking system is still "far from robust." That sent shares down again.
They're now climbing, perhaps on the back of -- of the good news. It seems that Ford turned in third quarter profits of just shy of a billion dollars -- the first quarterly profit that it's made in more than a year, would you believe?
The Dow Jones right now up 21 points, 9734.
And here's how the markets ended the day in Europe. They've come back a little after big losses on Friday. And if (INAUDIBLE) mining shares. It's been a good day today.
London's FTSE 100 adding more than 1 percent today.
Rio Tinto and Extrada both adding more than 4 percent.
By the close, the CAC Currant (ph) in Paris gained 8/10 of 1 percent.
Automaker Persia was leading the charge over in Paris today.
And in Frankfurt, the -- the (INAUDIBLE) DAX shrugging off the miserable weather in Germany today with a gain of just over a 1/4 of 1 percent, with Commerce Bank among the best performers despite a bigger than expected net loss of $1.6 billion for the third quarter.
Don't forget, you can look out for our Facebook page. We've got a QUEST MEANS BUSINESS Facebook page -- lots of behind the scenes news about the show on there.
And that's it for this edition of QUEST MEANS BUSINESS.
I'm Adrian Finighan in London.
Have a great night.
Christiane Amanpour is next on CNN after the headlines from Hala at iDesk.
END
