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Quest Means Business

Will Saab Be Sold or Liquidated?; Interview With Jeffrey Katzenberg

Aired January 08, 2010 - 14:00   ET

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

MAX FOSTER, HOST, QUEST MEANS BUSINESS: Saab fights for survival as GM begins to wind it down.

Still waiting for the upturn, thousands more jobs lost in the U.S.

And Hollywood mogul Jeffrey Katzenberg says 2010 is the year 3D technology comes home.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Good evening.

Saab is heading down the lonely road to liquidation, but even as GM executives plan the automakers demise, they are looking at new bids. It could the very last chance to save the jobs of more than 3,000 Saab employees.

Now Saab is in liquidation. The board has appointed a U.S. consulting firm to supervise that wind down. But a Swedish trade union calls GM irresponsible for its handling of the whole affair.

Now, because there are still bids on the table, though, this isn't as simple as it seems. The Dutch car company Spyker says it has made a fresh bid, and very interestingly, Bernie Ecclestone, there, the Formula One tycoon is also bidding in partnership with Genii Capital, that is a Luxembourg-based investment firm.

Now, these are the numbers that matter, right here, 3,400 jobs are on the line, over there in Sweden. Up to 8,000 jobs could go worldwide. And Saab has lost something like $340 million in 2008, which is how we got here. Sweden setting aside $75 million for education and job schemes for redundant Saab workers.

Now, whatever happens to the business, the Saab name will stay in use with Sweden's leading aircraft company, now completely separate from Saab autos, but sharing the name. In fact, Saab built nothing but airplanes in the first decade of its existence and it branched out into cars back in 1949. General Motors bought a 50 percent stake in the car maker in 1989 and took 100 percent ownership in 2000, possibly regretting that now.

Now, last year GM announced it would sell Saab after sales fell to just over 93,000 vehicles in 2008. And this year, the Swedish sports carmaker, Koenigsegg, appeared set to buy Saab, but the deal fell apart back in November. Then in December GM said it would wind down operations and sell Saab's assets despite some interest from several new potential buyers.

Jim Boulden has been following this story for us.

Explain where we are, Jim, because how can it wind it down, on the one hand, and then try and sell it on the other?

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Well, it has said - GM has said for several weeks now it is going to wind down Saab. The minute they said this -- a long time ago, as well -then every couple of months an offer bubbles up and then we think, well maybe it will get sold. You mentioned one there. We also did have another one from Spyker as well, earlier. That was-that fell apart. So, GM said enough is enough. There is a time and a place and Saab's time had ended.

Now, there was still the little hope that maybe someone would come up with a bid. And then we had these two bids, last night. Swedish reports say there could be two other bids, could be four bids on the table that GM is actually having to look at.

But you know you could get a bid every other week and go on forever. So, GM has said, look, we are going to start the liquidation process. We want this liquidator to come in and start to get rid of the assets.

Now, they could sell these assets to some of these companies. Bernie Ecclestone, we don't know what he wants from Saab. Is he going to make Saab cars? Well, there is a lot of technology in there. Maybe that is what he's interested in and he could still buy that, of course, from the liquidators. So, how Saab goes from here, I'm not really sure. But GM says that as of now, I will be liquidated.

FOSTER: And where is the value? If GM can't make it work, who can and how can they?

BOULDEN: Well, they have advance energy efficiency technology. They have very advanced safety technology. They have onboard entertainment.

(CROSS TALK)

FOSTER: They've got the name.

BOULDEN: The name is interesting. Now, this is what we don't know yet. Who owns the Saab name?

FOSTER: Because the aircraft also has rights to it?

BOULDEN: Yes. I still have been trying to figure out all day, who owns the Saab name. Will GM sell that name? Can GM sell that name? We don't know. So that brand is an interesting aspect, because Beijing Automotive, the Chinese car company has also bought part of Saab. And they have already started to take some of the power train, some of the technology, going to China. So that his in there, as well.

FOSTER: OK, Jim, we'll let you find out all those details over the weekend.

BOULDEN: I'll try.

FOSTER: And come to us. One thing that we do know is that there are lots of employees of Saab wondering what the hell is going on right now. And as we mentioned the Swedish Industrial and Metal Workers Union has criticized GM's handling and decision to start liquidating Saab. Stefan Lofven is the president of that union. He joins me now on the line, from Stockholm.

Stefan, what information have you managed to get about what is going on over in Detroit right now?

STEFAN LOFVEN, PRESIDENT, WORKERS UNION: It is that General Motors has decided to put Saab into voluntary liquidation. And to us that is astonishing. And actually irresponsible because what they do is they start this winding down the day after they received offers they are going evaluation. So they haven't done the evaluation yet. And still they start this process. This is very, very surprising.

FOSTER: Yes, and how does this leave the workers because they are sitting there wondering if they are going to have jobs. What are they doing? How are they coping in this situation?

LOFVEN: Well, of course, they are very disappointed because they actually believed, and so did we, after talking to GM, that were serious and trying to sell Saab, to get Saab a new owner and to manage to make Saab go on with another ownership. And everyone really thought that GM was serious in this. But obviously there are doubts about that.

FOSTER: You are pretty much at the mercy, right now, about decisions being made a long way away, aren't you? Are you getting much support from your government or any other countries on this? Or are you just having to sit and see what GM is going to come up with?

LOFVEN: No, what I hear is that the government is also talking to General Motors and I hope the government is clear enough that this is not a proper behavior. I also believe that the American government is also partially responsible for this. Because they are the majority owner and although they are not, of course, in the direct government of GM, they are owners and they are responsible for how this company acts.

FOSTER: Stefan Lofven, thank you very much for joining us. I hope you get some solid information at least, soon, on that story.

Now, we are going to back to the U.S. now as well. Because the U.S. economy has shed a lot more jobs last month than most of the experts had predicted. The U.S. Labor Department said 85,000 non-farm jobs were lost in December. Economists were expecting a very small decline, or even a gain actually. But the report also said that in November a modest 4,000 jobs were created.

Nariman Behravesh joins us now from Lexington, Massachusetts. He is the chief economist at IHS Global Insight.

Thank you so much for joining us. Were you one of the experts that wasn't expecting what we got today?

NARIMAN BEHRAVESH, CHIEF ECONOMIST, IHS GLOBAL INSIGHT: Well, we did predict that the U.S. economy would shed 30,000 jobs. This turned out to be bigger than we thought. We weren't in the camp that thought there would be job gains. It was bigger. But on the other hand, one has to say, that these numbers, these monthly numbers, are quite volatile.

If you look over a six-month period, the trend has been definitely to improvement, in the sense of each sort of month - not quite each and every month - but you know, in their entirety, from six months ago we have seen successively narrower or small job losses. So, things are improving, but I think it is not entirely out of the question, for example, for the unemployment rate to tick up a couple of tenths of a percent in the next couple of months, before finally coming down again. So, it is never in a straight line.

FOSTER: So, for the unemployed skilled worker, sitting at home, desperate for a job and wondering what this means to him or her. What basic information can you give them right now?

BEHRAVESH: Well, it is still a very tough jobs market. It is not going to change dramatically for the better, really for the better part of this year. I mean, our forecast says, for example, that by the end of 2010, the unemployment rate will still be over 9 percent. That still a bad situation. Better than now, of course, but still a bad situation. There is going to be tough going for quite a while.

FOSTER: OK, and the next set of job numbers, you are making predictions already on that?

BEHRAVESH: Well, we are in the sense that we think in the next month or so we could actually see the unemployment rate go up a little bit from the 10 percent we saw today, to maybe 10.2 percent, before finally sort of peaking and starting to come down gradually. So, we could see another month or two of not-so-great numbers, if you will, before we really get into that trend where the U.S. economy is actually month after month creating jobs.

FOSTER: OK, Nariman Behravesh, thank you so much for joining us, from the U.S.

Now, an update for you on one of our top stories. When we come back, Deborah Feyerick will have a live report on that crucial court hearing in the United States.

(COMMERCIAL BREAK)

FOSTER: Now the suspect in the failed Christmas Day bombing of a Northwest Airlines jet has made his first court appearance, very recently.

Let's go to Deborah Feyerick, who is outside the courthouse in Detroit - Deborah.

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Max, the whole hearing took less than 10 minutes. He did enter a plea of not guilty. He walks with considerable amount of difficulty. Clearly suffering from wounds that he go when he detonated that device onboard the plane.

Now, one interesting person who was in the audience, Heabbe Aref, you were on the plane, you also decided to come to court today. Tell me what you saw in court today, first of all, when you looked at Umar Farouk.

HEABBE AREF, PASSENGER ON FLIGHT 253: I saw, you know, maybe, kind of a different person almost, from what I saw. He looked the same, but he had a little bit more actions. When I saw him on the plane he was very blank, he didn't move he didn't struggle. He, you know, he spoke in court today. You know, he didn't say anything on the plane, so it was a little bit different. Seeing him, felt a little strange. You know, I felt something in my stomach, and my heart. I think it was just a little bit of -brought back the feeling, maybe, of what I felt on the 25th.

FEYERICK: And that feeling, was it terror, was it panic? He was trying to blow up the plane. He is accused now of attempted murder. One of those would have been you.

AREF: Right. Well, at the time, when I saw him the first time on the plane I didn't know that he had an explosive. We were told it was just firecrackers. But I realized that I saw that there was a fire on the plane so I realized that he was trying to do something harmful. And that, to me, was a little, you know, frightening. And I get a little bit of -not fear, but it just brought back some of that feeling.

FEYERICK: When he was on the plane did he seem defiant at all? Did he seem that he was -everyone talks about a martyrdom operation, a suicide mission. Did he seem defiant, like he was doing this in the name of Allah?

AREF: No, not at all. He didn't say a word. He didn't have any actions at all.

FEYERICK: In the court today, did he seem more resigned to you? Did he seem different?

AREF: Just that he had, you know, maybe a little bit more actions and maybe - I felt that he was, uh, I don't know.

FEYERICK: On a personal level, why was it important for you to be here today?

AREF: You know, I am an attorney and I you know, I have been to proceedings before and I just wanted to see one that actually affected me, personally. And it affected the country, this is a big event. And it is unfortunate that I had to be a part of it, personally, but I did want to just see it for myself as opposed to getting accounts of it later.

FEYERICK: And finally, has this affected the way you plan to fly in the future? The way you travel?

AREF: I love traveling and I still plan to travel. I think I'll feel a little bit different as I'm traveling and I'm on the plane, unfortunately. And I hope that sort of goes away. I think also a lot of, you know, maybe Muslims and other people in the community might feel a little bit, you know, worried about having to travel and all the extra security measures. I support the extra security measures as long as they are even-handed and applied across the board.

But I think, unfortunately, a lot of people in the community might fear that things specifically might happen to them. I know a lot of women who wear a hijab have already been kind of singled out and mistreated and I think that kind of treatment is not going to work. I think it is important to intelligently and strategically heighten security. And I think there are ways to do it, you know.

FEYERICK: Heabbe Aref, a passenger onboard that plane, Northwest Flight 253, in court today to hear Umar Abdul Farouk -I'm sorry, Umar Farouk Abdulmutallab. Again, he pleaded not guilty. The judge asked him if he was on pain killers. He did say yes, but that he understood the charges against him. A very long journey, ending up in a U.S. court, Max.

FOSTER: Deborah Feyerick outside the courthouse in Detroit. Thank you so much.

Now after the break a business story with a whole new dimension. Media companies are diving into the world, the new world, of 3D. But will consumers join for the ride? We'll put that to a man behind the some of Hollywood's most profitable movies. That is just ahead.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster in London in for Richard Quest.

And this is QUEST MEANS BUSINESS on CNN.

Now, we got a taste of it in 2009, but this year, the action will jump out of our screens in a very big way, in 3-D. And it seems like everyone in media and technology is aching to get involved.

First, we have the TVs themselves, although this one might not fit into your living room. Yes, that is a normal person standing next to that TV. It's a Panasonic -- a huge new 3-D plasma with a 152 inch screen. And we all want one.

A raft of manufacturers launched 3-D TVs at the Consumer Electronics Show in Las Vegas this week in more practical sizes, I'm glad to say.

Then there are the films, of course. And movie studios have been trying to drag 3-D into the mainstream for decades now. But James Cameron's "Avatar" takes it to a whole new level. Worldwide box office take-ins have already passed $1 billion, with 75 percent thought to be generated by the 3-D version.

Now, content providers generally don't want to be left out. Just when you thought the football World Cup couldn't get any bigger, it's about to hit the first big test of 3-D TV, actually, because U.S. viewers will be able to watch some of this year's matches in 3-D on ESPN.

That all sounds well and good, but are consumers going to fork out for yet another TV?

In Las Vegas, John Fort from "Fortune" asked someone whose jobs it -- job it is to know what audiences want. And that is Hollywood mogul Jeffrey Katzenberg from DreamWorks, the studio that made hits like "Shrek" and "Madagascar."

(BEGIN VIDEO CLIP)

JEFFREY KATZENBERG, CEO, DREAMWORKS: Well, you know, I think 2009 was the year in which this new, incredible technology, enabled 3-D, has been introduced to the world -- obviously, in movie theaters first. And no one has been disappointed. It's been an extraordinary year. There were 10 new 3-D movies introduced this year out of almost 200 films. And those 10 films did almost 10 percent of the entire box office.

And four of the 10 films were four of the 10 most successful movies for the year.

That's kind of an amazing thing when you think about the first year of introduction to it. Here at CES, the thing that's exciting is, is that we're now seeing it move toward the home. And, you know, there's been a lot of talk here CES the last two years. This year you're actually seeing it. You're seeing pretty much in every booth, if a company has anything to do with video, you're seeing 3-D as a component of it. And it doesn't matter whether it's a handheld device or a flat screen or our partnership that we announced with Samsung yesterday, cameras, you know, just anything in that world people are excited about.

JOHN FORT, "FORTUNE" MAGAZINE: What I'm wondering, though -- and, of course, you know, the hardware folks will say the technology is there.

Is it really there to the point where you get an experience at home that approximates what you got in the theater...

KATZENBERG: Well, the answer...

FORT: ...so you don't feel like...

KATZENBERG: ...to that is no, because you never get in the theater what you get at home. And I don't...

FORT: Of course not.

KATZENBERG: And I don't think that -- to me, that's not the comparison.

FORT: Yes.

KATZENBERG: But the comparison that you should make is think about a live sporting event. You know, to go to a Laker game live and be in an arena with 20,000 people is a singular experience. But watching the Lakers live at home on television in the comfort of your home is also a great experience. You don't equate them.

So seeing 3-D in a movie theater -- you know, a big giant -- we were talking about Imax surround screens in it -- you're not going to touch that in your home. That's not what you're competing with.

FORT: But I guess I mean is it good enough?

3-D used to give us a...

KATZENBERG: No (INAUDIBLE) good.

FORT: It used to give us a headache.

KATZENBERG: That stuff is just...

FORT: You could only watch it straight on.

Is this an experience where I can get eight of my friends together, put on the glasses at home and really enjoy it?

KATZENBERG: You will be blown away. The quality of these new monitors and the digital reduction and the Blu-ray discs, it's exceptional. And all of those things that we all sort of associate with what I always call my father's 3-D, you know, which is motion blur and headaches and...

FORT: One red lens...

KATZENBERG: Right.

FORT: ...the other blue.

KATZENBERG: The blue, yes, the goofy glasses and all that, that stuff is all gone. It's gone in the movie theaters and it's gone at home. And if you check out these new Samsung monitors that they introduced yesterday, you know, I would just say they are so beautiful and the quality of the image that they deliver is so extraordinary. And it's way ahead of anything that we anticipated.

(COMMERCIAL BREAK)

FOSTER: Jeffrey Katzenberg speaking to "Fortune" magazine from Las Vegas.

Now, from electric dreams to an energy nightmare, it's bitterly cold here in Britain and everybody is turning up the heat. We look at the companies that are finding themselves frozen out.

That's in just a moment.

(COMMERCIAL BREAK)

FOSTER: Freezing conditions across the U.K. this week have seriously disrupted transport for train and plane travelers. At the same time, there's record demand for gas, a people crank up the heating at home.

But are supplies being stretched too thin right now?

Jenny Wivell reports.

(BEGIN VIDEOTAPE)

JENNY WIVELL, CNN CORRESPONDENT (voice-over): While temperatures in the United Kingdom plummet to lows usually seen in the Arctic, gas consumption across the country is soaring. To cope with the highest demand its ever had, yesterday, 94 companies had their gas supply stopped by the national grid.

All the businesses involved had signed the contract which gave them discounts in exchange for giving the supplier the rights to cut off gas if demand rocketed.

Although these companies have alternate power sources, there is a price to pay.

ROGER SALAMONE, THE MANUFACTURERS ORGANISATION: This is going to be a major blow for those companies involved who -- many of whom would have been struggling in the difficult economic conditions over the past year. So I think the real issue is there's something that's a bigger picture that has not -- there's an underlying risk in the U.K. energy system that's been exposed here. The fact of the matter is, is that we're getting more and more dependent on imported supplies of gas and we have inadequate levels of gas storage.

So there's a real risk of this incidence -- these types of incidences will become more frequent and widespread in the future.

WIVELL: National grid says the country has sufficient gas supplies. It's claiming the disruption was caused by technical problems in the Norwegian gas fields.

With snow and ice clogging up the roads across the country, many households have been cut off. Unable to get to work or school, families are turning up the heating to keep their homes warm. Consumer organizations are warning them to budget accordingly.

Economists believe the increased energy consumption, coupled with more accident repairs and people shopping for warm clothes will actually give the country's economy a boost, which could be enough to balance out a 20 percent fall in productivity during this spell of bad weather.

BENJAMIN WILLIAMSON, CENTER FOR ECONOMICS AND BUSINESS RESEARCH: Any productivity loss that -- that happens during these extreme weather conditions is usually made up for further down the line. Furthermore, there are offsetting costs such as increased spend on clothing, increased spend on energy consumption, which actually mitigate the loss in terms of economic output during the bad weather.

There is one issue with regards to the timeliness of payments that the adverse weather does affect and then simply can't be made up for further down the line. This is in terms of people meet -- meeting cash flow demands.

WIVELL: The demand for gas is expected to increase even more tomorrow, as the cold weather continues, leading to further concerns over supply.

Jenny Wivell, CNN, London.

(END VIDEO TAPE)

FOSTER: Meteorologists see no end in sight to this cold spell.

We're going to cross to Guillermo at the Weather Center right now to give us the gloomy news.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes.

FOSTER: Guillermo, how long does this go on for?

ARDUINO: Well, there's another system -- there's another area that is bringing very bitterly cold conditions. And I think that in terms of snowfall, the problem will continue in the south, again, in the southeastern corners of England or Britain. And, at the same time, the temperatures continue to be extremely cold in northern sections.

You will understand when I show you this satellite pictures what's going on. This is the snow cover in Britain. As you see, it is practically -- there's practically no corner without snow or ice. Well, we have this, then the -- the winds that come and -- and they go down to the south, usually can warm up a little bit if there were no snow.

But being the snow there, the cold -- the area is already cold enough not to allow that air to warm up, even just a tad.

Now, on -- in addition, when you have high pressure -- that's what we're going to see right now in the next days in many parts of here. It's like removing a blanket from your bed. So whatever warm air that was there, it's going to go up. And that's what's happening in here.

So, unfortunately, I have grim news to report. I think that when we have snowfall, like in London this weekend, temperatures are a little bit better. When we don't have the snowfall, then we have the high pressure and they are usually bitterly cold.

The more snow that's going to happen is, as I said, especially in the southeastern corner, but on coastal parts here of Britain. Needless to say, we have another low here bringing some intense winds. We're talking about like 125 kilometer per hour gusts in Southern France now, with a temperature of one degree. Imagine what it feels like -- very, very, very cold.

And this low is going to dump a lot of snow all the way to Poland. So it's not only a Great Britain story, but it's into Germany, parts of Poland, here the Alpine Region, and then in the Balkan Peninsula we see some more rain.

So we have some alerts posted right now in here. The tornadoes are possible here. The low is so deep and the circulation is so significant that we may see tornadoes in these areas.

So take cover. Follow what authorities are doing -- are saying. If you're traveling to those areas, you know, come up with a lot of patience because the snow may complicate things in the north and then the severe weather in the south -- back to you, Max.

FOSTER: Guillermo, thank you so much.

We will keep across the weather story for you; also, updates coming to us out of Angola affecting the football team of Togo.

That is QUEST MEANS BUSINESS, though.

I'm Max Foster in London.

"MARKETPLACE MIDDLE EAST" with John Dif -- John Defterios is just ahead.

Stay with CNN.

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