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Quest Means Business
Lufthansa Strike; Interview With Daimler CEO
Aired February 18, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: (INAUDIBLE) just brace themselves for a strike that will have (INAUDIBLE) effects on every continent.
Shocking losses, even by car industry standards, the CEO of Daimler tells this program, we're on the comeback trail now.
And not yet out of the woods. Tiger says he wants to make amends. Can he also clean up his brand though? I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Welcome to you. Tens of thousands of airline passengers face severe disruptions starting next week. As many as 4,000 Lufthansa pilots are expected to walk off the job, crippling services for four days possibly. If you're due to fly Lufthansa next week, here's what you need to know. Well, the pilots go on strike, something like February 22nd to February 25th and Lufthansa says (INAUDIBLE) to reduce the impact, it'll publish a revised flight schedule it says early on Friday afternoon. That's central European time and passengers can exchange their tickets for travel at a later date and Lufthansa will also pay for train tickets for anyone traveling within Germany.
Now the pilots' union (INAUDIBLE) cockpit says the main goal is to secure jobs in Germany. Airlines are cutting costs as passenger numbers fall and Lufthansa says the union is trying to interfere in the running of the airline. A wave of industrial unrest is hitting the airline sector. We've been talking in recent months about British Airways but actually Lufthansa is much bigger, so it could have a bigger impact, at least here in Europe.
Lufthansa says the strike could cost about $34 million a day, $135 million in all. And strangely, shares in Lufthansa actually gained a little ground on a generally good day for German stocks. So investors not too worried at this point about the long-term impact it seems. Lufthansa is part of the Star (ph) alliance group of airlines. Just take a look at how many airlines Lufthansa actually has agreements with. In total, there are 26 of them, with more than 2,000 scheduled flights every day. Lufthansa is an important link in this enormous chain which means its pilots have the potential to disrupt travel plans of people flying some of these airlines, because the flights may well be operated by Lufthansa.
Now Jim has been following this story for us. Jim, when you look at it in that context and the context of the alliance, it's actually enormous potentially isn't it, this strike?
JIM BOULDEN, CNN CORRESPONDENT: It is and I think it's important we should say exactly what Lufthansa feels is -- how many passengers are going to be affected by this. And I like this quote that came out today where they said basically a strike with appreciably damage the company, its customers and its staff. I think that's putting it mildly because what you're going to see here is thousands of flights being disrupted, especially out of Frankfurt and out of Munich and when it comes to the alliance, what's interesting, I dug into this a little bit and Austrian Air in the airlines and Belgium and others have said that our flights won't be affected, but don't forget, some of the flights you think are, aren't ours.
FOSTER: Book a ticket with one of the alliance partners, you may not know you're going to be traveling on a Lufthansa plane for part of your journey.
BOULDEN: This map shows you the Lufthansa, the ones in yellow (INAUDIBLE) 90 plus countries, more than 200 destinations. That's far bigger than most airlines. Then you add in this, that's the yellow -- then you add in the green which is the partners and the connections and things that go on with those other 25 members of the alliance. Look at that. That is amazing and especially the U.S. you see there because you have United Airlines. You've got Continental Airlines. You've also go Air Canada in North America just as an example. Singapore, Air China, all involved. Now as I said, let's be very clear, they are (ph) going to be affected specifically. It's just that certain flights that you might think are theirs will be affected because they would have been flown normally by Lufthansa.
FOSTER: So people who haven't even heard of Lufthansa may well be affected by the strike in a completely different part of the world.
BOULDEN: Yeah and the fact that it's going for four days, even though it starts -- I talked to the union today and they were very clear. It starts at midnight.
FOSTER: German time.
BOULDEN: Yes, Sunday night. But you got to expect something's going to happen a little bit before then and then it goes through Thursday (INAUDIBLE)
FOSTER: ... to get the pilots back.
BOULDEN: And importantly, the union said it was asking other airlines -- I'm sorry, other unions in Germany to not break that strike. So that's one of those issues you always have to find out, will other people walk across the picket lines that we will see outside of the airports in Frankfurt and Munich and could that affect other flights as well? Who knows.
FOSTER: Any chance this could be sorted by Sunday?
BOULDEN: When I asked the unions today, we should say Lufthansa was not wanting to speak today, but the union said that there are no ongoing talks and let's be honest, some of the pilots haven't had a contract since March of last year. So they haven't settled it by now. Let's see, but they've been talking for months and months and months.
FOSTER: OK, Jim thank you so much. Now some of you have been in touch to let us know how you feel about the action (ph) at Lufthansa. Anthony Smith-Chaigneau writes, if it falls on the 4th, we would be very upset he says. We're attended a wedding in Malta and that would spoil something very personal to us. The airlines need to sort themselves out as they are degenerating into squabbling organizations unworthy of patronage.
If you're due to fly Lufthansa in the near future, we do want to hear from you. If you're worried about how you'll be affected and if you're making other travel arrangements, do send us your I-reports and you may well see yourself here on CNN very soon. To find out how to do it, go to www.ireport.com.
Quantas Airlines is also suffering from weak demand and is responding by scrapping its first class cabins in most flights. Profits at the Australian airline were down 72 percent in the first half of this financial year. It says the market for first class travel is on long-term decline and it's changing the layout of several planes to provide more business and economy seats. Quantas shares finished the day down just over 8 percent.
Now let's get up to date then with the news headlines. Fionnuala now joins us from the newsroom
FIUONNUALA SWEENEY, CNN CORRESPONDENT: Hello Max, here's a look at the headlines and starting with the latest on that reported coup attempt in the west African nation of Niger. Unconfirmed reports say renegade soldiers and armored vehicles stormed the presidential palace in the capital today. Niger's ambassador in London confirms that an ongoing attempted coup d'etat is taking place, but has no further details. Niger is one of the world's largest producers of uranium.
On now to a controversial meeting in Washington at least to the eyes of China. The Dalai Lama met President Barack Obama at the White House. The president said in the meeting that he supports Tibet's unique religious, cultural and linguistic identity as well as the protection of human rights for Tibetans in China. The two leaders met despite strong objections from the Chinese government.
Interpol has issued a red alert for 11 suspects wanted in connection with last month's slaying of a top Hamas official in Dubai. Today, Britain and Ireland (INAUDIBLE) their Israeli ambassadors. There's a report the alleged assassins used forged European passports. A senior UAE official says seven more suspects are implicated in the murder.
A NATO commander says it could take allied forces another month or so to secure Afghanistan's Helmand province. And British General Nick Carter (ph) says it might take more than three months to make sure the militants stay out. On the sixth day of operation Moshtarak, NATO and Afghan troops are pressing their offense against Marjah, the last Taliban stronghold in the region.
And those are the headlines. Don't forget to tune in for more on the day's biggest stories, world one at 8:30 p.m. London time. In the meantime, Max, back to you.
FOSTER: Fionnuala, thank you so much. Now Greece used a clever conjuring trick it seems on its accounts to disguise the true extent of its borrowing. But they needed a professional slight of hand to make those debts disappear. Find out which financial wizards are in the frame.
(COMMERCIAL BREAK)
FOSTER: (INAUDIBLE) strong run going this session as investors seized on some better than expected company results. For the fourth day running, all the main indices finished higher. The FTSE in London climbing nearly 1 percent in fact. The Paris CAC and the DAX in Frankfurt both gained more than half of 1 percent. The British pound slumped low this Thursday as a report showed a sharp rise in government borrowing. And the currency fell to around $1.55 1/2, approaching its weakest level against the dollar in something like nine months. Government data showed the spending outweighed income by more than $6.5 billion last month. That came as a shock because it's the time of year when the government usually has its biggest tax intake. It's the first time there's been a budget deficit in January since monthly records began back in 1993.
Concern over debt levels in Greece is turning to anger at the banks that seem to have helped to cover it up for so long. Goldman Sachs is believed to have arranged currency trades which masked the true extent of Greece's borrowing. The EU is investigating whether Greece entered into the deal to get around EU limits on government debt.
Germany's leader Angela Merkel said it is a scandal if the same banks which quote, brought us to the brink of the abyss also helped to fake the statistics. EU officials have ordered Greece to tell them everything about the deals. (INAUDIBLE) Jerry Wattenberg financial analyst. I asked him to explain what exactly Greece did.
(BEGIN VIDEO CLIP)
JERRY WATTENBERG, FINANCIAL ANALYST: The governments of Greece borrowed money essentially through an (INAUDIBLE) transactions so something was done in the private markets as opposed to the public market. And I think what's concerning the governments around Europe and the EMU (ph) is that they were not clear in disclosing that they were doing this transaction. Interestingly enough, the transaction is not specifically complex. They're done every day. I think what was a little bit different is that if a company for example wanted to do this transaction, would not be able to because their financial statements would be audited and it would raise a red flag as to maybe conditional borrowing that are not disclosed so quickly.
FOSTER: So a country can do it but in a way that is getting the auditing now from the European Commission because the European Commission wants to get all the details about these transactions with Goldman Sachs for example, so they can go through them. And what will that show do you think (ph)?
WATTENBERG: Well, I think it will show us that they are fairly straightforward transactions and they want to check to see that everybody who was signing off on them from the Greek side knew exactly what was going on. Again, this is not the first time it's been done frankly. You know, Italy had done it, a much larger transaction as well with JPMorgan prior to this. And so it was not unheard of or new in the market. It was just new for Greece entering into the EMU. And I think what's really going to happen is going to be they're going to scrutinize to see, to make sure that Greece was being as up front with the other countries in stating if we can get into -- we are following the budget deficits. We are following the targets and then from then, the governments will then feel that they were given a fair shake and that now there's a little bit of a concern that maybe they didn't deal with the (INAUDIBLE) straightforward a position as they could have and that's probably what's kind of giving a little bit of concern to Germany particularly.
FOSTER: And what some on the commission are worried about is that Greece over borrowed. Shouldn't the banks be looking at that as well, because surely they wouldn't want to sort of lend to a country which has over borrowed just as they wouldn't want to lend to an individual whose overborrowed.
WATTENBERG: Yeah and I think it is true. I mean when you do this long-dated (ph) transactions 10 or 15 years versus a government and especially we do know that governments in the past have been defaulted, in Latin America for sure and in Russia, in Europe, in Asia as well. So the question is, if banks need to evaluate the credit situation. Interestingly enough, this transaction I think was rightly (ph) different because the end result would be that Greece would be part of a stronger entity. So technically maybe the credit risk would be a little bit less because --
FOSTER: (INAUDIBLE)
WATTENBERG: (INAUDIBLE) a little bit of a back stop maybe.
FOSTER: Let's see what Angela Merkel says. She said it would be a disgrace if it turned out to be true that banks had already pushed us to the edge of the abyss were also party to falsifying Greek statistics. Were they party to falsifying statistics?
WATTENBERG: I don't think they were a party to falsifying anything. The did a transaction by a government.
FOSTER: A legal transaction.
WATTENBERG: A legal transaction, the governments are adults (ph). They are not cowboys. They're running a country. They're running the public finances of a large country and they have responsibilities to their people. They have responsibilities to their governments. They're either appointed or elected or something along those lines and the banks are executing transactions. Yes, they're showing them to them, but the banks are doing something that they want to do and no one made anybody do this transaction. There was no, there was no requirement. There was no ultimatum that the bank was holding over the head of Greece. And (INAUDIBLE) the actual ultimatum that maybe forced Greece to do something like this would have been coming from the Germans who were saying, you must get your house in order to our standards, not your standards and maybe that was a little bit of a concern.
(END VIDEO CLIP)
FOSTER: Jerry Wattenberg speaking to me a little earlier on. Now a year ago, car makers in Europe and Asia looked on as the U.S. auto industry imploded. This year, the spotlight has swung around and it's an uncomfortable experience. (INAUDIBLE) Daimler talks to CNN after delivering a sobering message to shareholders. That's coming up next.
(COMMERCIAL BREAK)
FOSTER: There hasn't been much fun owning shares in Daimler over the past decade. The stock has lost half of its value over 10 years. But at least there's always been the dividend to console you, not this year though. The German company said it's scrapping its annual payout to investors after a bigger than expected loss. It was $3.5 billion in the red in fact in 2009 making Daimler shares another downward (INAUDIBLE) They lost more than 4 1/2 percent this session.
Daimler's been accused of reacting too late to the financial crisis. I put the charge to Dieter Zetsche. He's the company's CEO.
(BEGIN VIDEO CLIP)
DIETER ZETSCHE, CEO, DAIMLER: We have reported Q1 through Q3 and while we obviously had disappointing results in Q1 and less so but still in Q2, (INAUDIBLE) in Q1 continues improvement of our situation quarter to quarter. We delivered on. We became profitable in Q3, actually with a better performance than most of our peers and that's even more true for Q4 where from ongoing business we had another significant improvement to 600 million profit and I don't think we have to hide in comparison with our peers in this regard.
FOSTER: And yet you're scrapping your dividend and your main German competitors are going to make a profit in 2009 and you're going to make a loss.
ZETSCHE: We have a consistent dividend policy. We said it all the time that we will pay out 40 percent of the profits. As 2009 was not profitable, it's logical not to offer a dividend. At the same time we gave clear guidance for profitable year 2010 and for our clear intention to pay out dividend in (INAUDIBLE)
FOSTER: Other companies of course are suffering in a similar way to you. They haven't given their guidance on 2010 though. You are giving that guidance. So tell us what you're expecting from this year.
ZETSCHE: Well I think that is a clear signal of confidence. We have said that we expect an EBIT of more than 1.45 billion for Mercedes cars and of more than 2.3 billion for Daimler and Geo together (ph) and in this environment, I think these are pretty ambitious and positive targets to be pursued.
FOSTER: You do have an opportunity, you do compete with some of Toyota's brands in the Lexus range at least. Are you going to go in hard and try to grab that market if it does suffer?
ZETSCHE: Well, first of all, I feel so for the colleagues from Toyota who are in a very difficult situation. Of course we are in competition and we will sell as many Mercedes cars to customers as we can but we will not specifically leverage this difficult situation of Toyota.
FOSTER: Is there a particular brand though Toyota or Lexus brand that you're going to go for?
ZETSCHE: This is certainly not my position to assess the situation and the consequences for Toyota, but obviously there are in serious challenge which may have longer-lasting impact on their brand.
FOSTER: It's an opportunity for Daimler though isn't it, so it will have an impact on you.
ZETSCHE: We are working with a lot of momentum for Mercedes altogether on a worldwide basis. We are gaining market share against Lexus before this trouble started so we'll see there are further shift of momentum as a result. But we in the first place blend our own strategy and our own way forward and not that much interaction to the situation of our competitors.
(END VIDEO CLIP)
FOSTER: Well, the U.S. (INAUDIBLE) Thursday's probe into new safety issues at Toyota. This time the problem appears to be with the steering. At least 80 complaints being received so far involves Toyota's best selling car which is the Corolla, around 500,000 cars from 2009 and 2010 model years could be affected according to an official with the highway safety watchdog. Toyota has recalled more than eight million cars in the past five months to fix a series of potentially dangerous faults (ph). Toyota's share closed down just over 1/2 of 1 percent this Thursday.
Now Federal Reserve Chairman Ben Bernanke meanwhile is gearing up for important testimony next week. He'll give his semiannual economic report to Congress and discuss Fed preparations for -- to withdraw stimulus measures worth billions of dollars. Despite some encouraging U.S. economic data in recent weeks, there's a worry that the Fed will withdraw economic support too soon.
Robert Shiller is an economics professor at Yale University and he said on CNN's "World Business Today" that the U.S. could fall back into recession.
(BEGIN VIDEO CLIP)
ROBERT SHILLER, PROFESSOR OF ECONOMICS, YALE UNIVERSITY: Historically, double-dip recessions are very rare. In fact in the whole post-war period, there's really only one such example. That's the '80,'81,'82 example. But we're in such an unusual circumstance that I'm willing to go out on a limb. I'm not going to say it will happen, but I think it's a serious possibility.
FOSTER: The fresh economic data released on Thursday shows the U.S. economy still has a very long way to recovery and Alison Kosik is at the New York Stock Exchange with a bit more on that and Wall Street's reaction. Hi Alison.
ALISON KOSIK, CNN CORRESPONDENT: Hi Max, investors are taking the news in stride. In fact they're adding to the market's recent gains. Initial jobless claims increased by 31,000 last week, so the job market recovery is much slower than other parts of the economy. Economists had expected claims to drop.
And inflation ticked up last month. The producer price index jumped by 1.4 percent. It's much worse than expected.
It's a mixed bag for Wal-Mart. The world's largest retailer reported a 22 percent jump in its fourth quarter profit compared to a year ago. A key measure of sales declined for a third straight quarter and that's partly because Wal-Mart has cut prices on food and electronics. Shares of Wal-Mart right now are down more than 1 1/2 percent and although Wal-Mart shares are lower, the major averages are in the plus column. Take a look, the Dow Industrials up 60 points. The Nasdaq higher by 9 and the S&P 500 is better by five. Max.
FOSTER: Alison, what's happening to AIG because you had released (ph) really bad assets of course as we've reported on, but it's decided to keep them. Could you just explain this one?
KOSIK: Exactly, an AIG spokesman says the company plans to retain up to 25 percent of its derivative portfolio. It's a portfolio that devastated the company back when the bottom of the housing market fell out and that's when the government stepped in with a huge bail out to rescue the company. AIG has been set to sell off all of its derivatives portfolios, but now that the credit markets are making a comeback, the company reportedly plans to hold on to part of the portfolio as it (INAUDIBLE) the market for these securities as it sees it turning around. The company says it still plans to close down its troubled financial products division which manages the derivatives portfolio by the end of this year. That unit of the company was also in charge of writing (INAUDIBLE) contracts on sub-prime mortgage-backed assets which almost destroyed AIG. Max.
FOSTER: It's amazing how much difference a year makes Alison. Just a quick word on Wal-Mart as well because those figures are disappointing weren't they?
KOSIK: They are and what it was, its profit was OK, but it had -- and the problem was with its sales. Not as many people were going out buying and (INAUDIBLE) it lowered its prices and not enough people go out there and buy those products. That ultimately hurts the bottom line with Wal- Mart.
FOSTER: Alison in New York, thank you so much for joining us.
Now this week, President Obama set his policy (INAUDIBLE) set a course for steady growth, but Washington remains divided over the stimulus plan he signed into law a year ago now. Allan Chernoff takes a look at stimulus spending over the past 12 months to see just how many jobs it actually created.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Dr. Suzanne Walker could easily find a higher paying job. Her skills are always in demand, but she chooses to serve the under served at this non-profit health clinic in Queens, New York, which is expanding, thanks to Federal stimulus funding.
DR. SUZANNE WALKER, COMMUNITY HEALTHCARE NETWORK: Our agency community healthcare network is still hiring, looking for very good people, people who are dedicated, to provide good health care.
CHERNOFF: Like Suzanne, the clinic's new employees, seven thus far, also could likely find work elsewhere since health care is largely recession proof. That means recovery act funding for Medicaid clinics like community healthcare network is having no impact on the unemployment rate says Chris Mihm of the U.S. Government Accountability Office which tracks Federal spending.
CHRIS MIHM, U.S. GOVT. ACCOUNTABILITY OFFICE: That has not created an awful lot of jobs and there wasn't a great deal of expectation that that would create jobs.
CHERNOFF: The fact is, three quarters of all stimulus spending thus far, $190 billion, has gone either for entitlement programs, mainly Medicaid or tax relief, neither of which does much to create any jobs. And as the so-called stimulus spending continues, two thirds of the entire recovery act budget is for these two categories, not for jobs. What the money is doing is providing sorely needed help to those hit hardest by the recession, Americans on Medicaid and those without health insurance. The economy turn down, what happened to demand here?
CATHERINE ABATE, CEO, COMMUNITY HEALTHCARE NETWORK: The demand increased and we saw a huge percentage of increase this year and again the uninsured rate was increasing. It's because people lost their jobs. They lost their coverage.
CHERNOFF: For private companies and state and local governments that have received stimulus money, claim they've created or saved more than 600,000 jobs. But the Government Accountability Office finds that number is unreliable. Some employers are counting part time jobs as full time and others reported jobs but said they had received no stimulus funds. The real job producing stimulus funding has only recently begun to be distributed, money for construction, roads, bridges and even here at community healthcare network, an expansion to build 20 new exam rooms that should put 70 people to work. And that kind of spending will extend all the way out to 2016. So far though, the recovery act has been more of a social safety net than a jobs building program. Economists say the recession will be long over before stimulus spending has a big impact on expanding employment. Allan Chernoff, CNN, New York.
(END VIDEOTAPE)
FOSTER: (INAUDIBLE) Google finds itself in a jam-packed courthouse to decide the fate of its Google book service. Is it all about the love of literacy or is it hard-headed commerce? We'll investigate after this.
(COMMERCIAL BREAK)
FOSTER: Welcome back. I'm Max Foster in London and this is QUESAT MEANS BUSINESS here on CNN. Now Google's rivals are getting another day in court. A New York City Federal judge is hearing complaints over Google's ambitious plans to create the world's largest online library. At issue are numerous copyright debates and other legal objections. Maggie Lake is live in New York. (INAUDIBLE) fine print as it were Maggie.
MAGGIE LAKE, CNN CORRESPONDENT: And in this case there's going to be a lot of it Max. Listen, Thursday is the start of what is expected to be a long and very complex legal case. In fact the judge overseeing it all, Denny Chin (ph), sat down and said right off the bat, I'm not going to rule today. He has over 500 submissions so there's going to be a lot to go through. Let's talk about what's at stake here, the kind of the central issue.
So back in 2002, Google launched Google Books, which, on the surface, sounded amazing -- they're going to digitize all the books that are out there in the world for everyone to be able to access. They started that project. Pretty much immediately, a group of publishers, authors, objected, sued the company for copyright infringement.
After years of negotiation, Google has reached an agreement with the Authors Guild and Association of American Publishers for works registered in the U.S., U.K., Australia and Canada.
Now, under that agreement, Google can scan the works, the right holders will get about 67 percent of the take and Google gets the rest.
However, there are still plenty of authors out there who are not happy about this, who are against it, as are the governments of France and Germany. There are privacy advocates -- a whole load of groups stacked up against this. And one of them is the U.S. Department of Justice. They are concerned about this, in particular the issue of what they call orphan books. Those are books that are still under copyright by the right holders are -- are not found. No one knows where they are.
The Justice Department is worried about copyright, first of all. They say allowing this would turn the existing copyright laws on their head.
They're also worried about anti-trust issues -- does giving Google access to that under some kind of agreement -- those orphan books and -- and books in general -- give them an unfair advantage over rivals Amazon, Yahoo! and Microsoft. Those rivals say, you bet it does.
So those are some of the issues being addressed in this case. And the thing is -- and that -- and that sort of simplifies it for everyone. But it is one of these situations where you've got very old laws on the books, it -- and you're trying to fit it into this very new universe, this digital universe. And so it's kind of uncharted territory, which is why everyone is watching this so closely and why it's expected to take such a long time to get through. Some people even saying it may not end here. It may go all the way up to the Supreme Court.
Either way, it's certainly going to vote -- be landmark, whatever the decision is, when we finally get it -- Max.
FOSTER: And, also, Maggie, it seems that for a while now the -- the tide seems to be turning against Google a bit as it's got bigger and bigger and turned into this very, you know, large, profitable organization.
Do you think there's a sense of a backlash against Google in this as well?
LAKE: Yes, I would think we would -- we would be naive to say that there isn't some of that playing into this, especially from privacy advocates. They're participating in submitted things, too.
You know, there is this concern that as Google enters all these different markets, it's just gathering so much information about it all and how is that being used and where is it going?
That's really key. It's not a legal point in this case, but it is certainly important against a backdrop and also the fact that the Justice Department is involved, you know, remember, way back when, they tried to break up Microsoft because of monopoly. A lot of people have been saying at what point are the authorities going to really start looking at Google and the scope and the reach of the businesses that they're in?
So this is the very beginning of that and it's certainly an issue that's at play in this case -- Max.
FOSTER: Maggie Lake in New York.
Thank you so much.
Now, in the past few months, millions of people have had their first taste of entertainment in three dimensions by going to see the 3-D version of "Avatar." But one company says it's not long before you'll be watching a 3-D screen in your home.
Jim Boulden takes a look at the latest innovations from Broadcom.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT: What's the latest?
What is the hottest?
ROBERT RANGO, EXECUTIVE VICE PRESIDENT, BROADCOM: There's a lot of new things. One of the things that we really like to talk about is the movement of data, the movement of pictures and media from one device to the other. So we're going to make it very easy for consumers to move their -- their information, whether it's on their cell phone or on their Netbook or on their they've, and move it from one device to the other using sort of seamless, wireless connectivity, using DLNA.
DLNA is a new technology, a new standard that allows devices like cell phones to talk to TDs (ph).
BOULDEN: And what does that stand for?
RANGO: It stands for Digital Living Network Alliance.
BOULDEN: That's something I did not know about.
RANGO: There we are.
So here's a -- a new product from Broadcom. It's our -- our Tablet Reference design. You know, we envision that the Tablet will become a new, important form factor in the home where, you know, your teenager daughters or sons might walk around with a -- with a smaller device attached -- bigger than a cell phone but smaller than a PC.
BOULDEN: OK.
RANGO: So you can envision that this eventually will be a -- you know, half an inch thick and, you know, a seven inch screen. And what they can -- what we can do with this is share information across cell phones, TVs.
BOULDEN: How quickly do you think that this might be integrated into a -- a mobile device by a manufacturer?
RANGO: Very quickly.
BOULDEN: (INAUDIBLE).
RANGO: I mean DLNA is already a standard. Many, many companies are supporting it.
BOULDEN: Yes.
RANGO: You'll find DLNA in devices from Samsung, L.T. and Sony. And Broadcom enables it with our chips and technologies for -- for platforms and for cell phones.
BOULDEN: So we need to get used to DLNA if we're looking for something of this size?
RANGO: Yes. And eventually, the user won't need to know if it's DLNA...
BOULDEN: No.
RANGO: -- or Bluetooth or wi-fi. It's -- it'll just ask you, do you want to move your pictures and video and you'll either say yes or no. It'll be that simple.
You've seen "Avatar" in 3-D Imax. Well, we're bringing it to your home now on your flat panel TV. So this is going to give us...
BOULDEN: (INAUDIBLE) trying?
RANGO: -- a Broadcom chip that provides this capability for your home.
BOULDEN: I'm still just getting used to high definition TV.
So how long until you think we're actually going to be getting 3-D TVs in our house?
RANGO: I think this is the -- within the next 12 months you'll start seeing these TVs, these kinds of things rolling out -- these features. And then, of course, there's got to be content that comes along with it...
BOULDEN: Yes.
RANGO: -- but that will follow shortly after.
BOULDEN: But we're talking about TVs that are going to cost many thousands of dollars?
RANGO: Certainly they'll start off at a higher price point and work their way down, but I don't think that this 3-D capability truly is -- is going to increase the cost very much.
BOULDEN: OK.
RANGO: And this TV will also be Internet connected with wi-fi and Bluetooth.
(END VIDEO TAPE)
FOSTER: (INAUDIBLE).
Well, that gives you the flavor of what the big guns in technology are up to.
At the other end of the scale, a British teenager is emerging as the latest software entrepreneur. Dylan Maryk hopes his latest idea for the iPhone will get pulses racing.
(BEGIN VIDEOTAPE)
DYLAN MARYK, APPLICATIONS DEVELOPER: So if you fancy someone and you see them across the room, if you're too shy to talk or something, you can just collect a wink animation and just kind of hold it up.
BOULDEN: Is that something you're going to use?
MARYK: I haven't used it yet.
Who knows?
Maybe.
BOULDEN: Maybe.
(END VIDEO TAPE)
FOSTER: Who knows?
You can see that interview in full with Jim Boulden tomorrow on QUEST MEANS BUSINESS.
Now, you can be the greatest designer in the world, but not many people get rich just by selling expensive dresses. But never mind you, you've got a sought after name, there's another way to make it pay. In a moment, we'll look at the sweet smell of success.
(COMMERCIAL BREAK)
FOSTER: Welcome back.
Well, like the Dior and Givenchy before him, Alexander McQueen's iconic fashion label will live on despite his death. Now, it's been confirmed by the label's owner, French luxury group, PPR, its president, Francois-Henri Pinault says this would be the best tribute to McQueen. The superstar designer was found hanged at his London home last week on the eve of his mother's funeral.
Now, any -- anyone with an interest in fashion loves to look at -- at the clothes on the catwalks. But most people can barely dream of buying the creations worn by the top models, which is why most designers nowadays put their names to something more accessible -- the perfumes that allow us to own a piece of the brand.
As Alina Cho now reports, that's where the big bucks are really made.
(BEGIN VIDEOTAPE)
ALINA CHO, CNN CORRESPONDENT (voice-over): Carolina Herrera...
CAROLINA HERRERA: I mean it's a dream.
CHO: Donna Karan.
DONNA KARAN: I think it's a way to reach a huge amount of people.
CHO: And Oscar de la Renta.
OSCAR DELA RENTA: It's sort of like an invisible press, you know?
CHO: These three iconic fashion designers are not talking about their clothes, they're talking about perfume.
(on camera): Why was it so important for you to launch a fragrance?
DELA RENTA: You know, I was always intrigued by fragrances. I never ever knew that it was going to become the big business that, in fact, that it became.
CHO: (voice-over): How big?
(on camera): How lucrative, financially, is it to have a fragrance for a brand like yours?
HERRERA: It is very, very much so.
CHO: Is it as lucrative as the clothes?
HERRERA: More. Much more.
CHO: (voice-over): Industry insiders say fragrance can account for up to 75 percent of a designer's entire business. Globally, Donna Karan's designer scents bring in $500 million a year and there's no price tag on what it does for the brand.
UNIDENTIFIED MALE: It has a role, a very important role in terms of establishing an identity.
CHO: One reason celebrities all want a piece of it. But designers were the first.
HERRERA: If your fragrance is successful, your name goes everywhere.
DELA RENTA: I smell the fragrances.
CHO: For de la Renta, who dresses famous faces and first ladies with gowns that cost thousands, his signature scent, launched in 1977, is a way for consumers who can't afford this Oscar to buy this Oscar.
DELA RENTA: The fragrance is the one luxury that you can really buy for relatively little money.
CHO: But it only works when it works.
UNIDENTIFIED FEMALE: Some designers do unbelievably well on the fragrance category. And then there are other young designers who think, OK, I'm going to quickly get a fragrance license and it's a bust because people don't know their name yet.
CHO: But some say the best part -- fragrance doesn't have a size.
UNIDENTIFIED FEMALE: It's not about trying it on. It's about having a relationship. It's a seductive relationship with you and the product. You know, it's something that becomes a part of you.
(END VIDEO TAPE)
FOSTER: And our Alina Cho reporting for us earlier.
Now, earlier in the program, we were talking about how passengers of certain flights are bracing for a strike. A Lufthansa strike expected next week. But, actually, there may be more immediate concerns, because the flights are being affected by the weather, as well.
And Guillermo has more on that for us from the Weather Center...
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes.
FOSTER: Hi, Guillermo.
ARDUINO: You know -- hi, Max.
I flew into Paris last week and even though it was snowing and not so much, we had to wait for like one hour to do the deicing of the wings and other parts of the plane. And I'm looking at Germany right now and I see that we are going to see even more snow in the forecast. And you may say, hey, it's OK as long as there is no wind. Yes, we know.
But we have these problems that -- like the example that I gave you on Paris. When the temperature -- when it snows, when it rains and then the temperature goes below freezing, then we get the icing of wings and other parts of the plane, especially if you're connecting in the morning, because my connection was like 6:00 or 7:00 in the morning. So it was probably the first flight for that plane.
And we are seeing now problems in here, in Germany, especially through Friday and more problems into Italy. It's improving in Spain. I was in Madrid. Also, I got hammered by that bad storm -- snowstorm. Then it cleared. Now we are left with some lingering effects of that low pressure center.
The problem is coming for the Balkan Peninsula in the next week, because temperatures, we believe, are going to rebound a touch. And we are going to see some flooding here, because it's been snowing like crazy. I'll show you also where we have the snow cover and how much.
But this is the jet stream. The cold air in the north, as you see, that continues to concentrate around the northern section of Europe.
To the south, fine. But here, temperatures are going up in -- in the Balkan Peninsula. With all this snow, we may see some floods in the area. And that's the same thing that we were talking about weeks ago -- the same sort of scenario.
El Nino is to blame, because of all this action.
The same in North America, you see, with all the rain, the snow and the -- the abundant snow that we saw over there.
More snow in the Alpine Region. You see there in northern parts of Italy, but especially Austria, Switzerland and parts of France.
As a whole, we don't see so much precipitation, though, in most parts of that Scandinavia and the Baltics will see more snow. And London appears in the -- in the (INAUDIBLE) models with a chance of some snow showers again. So toward evening hours, we may see delays. But then the Nordic cities once again into the North Sea over there is where we see more snow.
Berlin with some combination of rain and snow. Madrid, the same thing, until the system moves away. Frankfurt, Munich, Copenhagen -- these areas where Lufthansa operates or where Lufthansa has the hubs is where we see some more snow.
Of course, I am talking about delays connected to weather. It doesn't have to do with the airline or operations. And sometimes it's creating -- it's creating a backlog and the airport operates normally, but your flight is delayed because some day or days before, they -- some other flights were delayed.
So we see they're starting to take this into account.
The temperatures will continue to be very low, minus seven in Stockholm; very low, indeed, in the United States.
I came back to Atlanta to find that we are at freezing point all the time.
Look at the departures -- even eight degrees below average for the Southeast. If you're flying into these airports over here, they are coming back to normal now with high pressure, but it's cold anyway, so you have to pack accordingly.
And this is the temps that we can expect in the next days -- Chicago at freezing; minus one in Montreal; Dallas, 13. It looks much, much better. We don't see many delays here in the States because of weather. Denver posting some snow and that is where the problems may be.
Stay with us.
Max will be back on QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
FOSTER: Tiger Woods to talk -- the golf star is due to appear at a press conference -- actually, his people aren't calling it a press conference -- on Friday. It's just a chat with friends. He's expected to offer an apology for what he has described as transgressions following allegations he had affairs with several women.
A statement on his Web site said: "Tiger recognizes that he has hurt and let down a lot of people who were close to him. He also let his fans down and he wants to begin the process of making amends and that's what he's going to discuss."
Now, the chat, as it were, with cameras, will take place before a small audience of friends, colleagues and close associates, according to Woods' agent.
Now, Tiger's transgressions have cost him dear. Lost sponsorship contracts with AT&T and Accenture; G.M. no longer allows Tiger to drive cars for free and Gillette stops airy -- stopped airing commercials starring Tiger, but keeps him as its sponsor.
Nike, Pepsi and Gatorade stand by Woods.
Tiger was famously the first sportsman to earn a billion dollars. In 2009, he was golf's top earner in terms of prize money. He won $10.5 million. British P.R. expert Max Clifford says he could yet rediscover his energy power.
Now, the last time Tiger Woods issued a statement, it was through his Web site. And he had this to say: "I've let down my family and I regret those transgressions with all of my heart. I have not been true to my values and the behavior my family deserves. I am not without faults and I am far short of perfect. I'm dealing with my behavior," he said, "and personal feelings behind closed doors with my family."
That's what he said in December.
So what will his advisers be telling him to say come tomorrow?
Well, I'm talking about Larry Woodward.
He's CEO of Vigilante Advertising.
He is in New York.
Thank you so much for joining us.
I just want to talk about the statement that was released ahead of the statement, as it were. What they're saying is that tomorrow will be a chat with friends. It's not a press conference. They're making that very clear. But cameras are going to be allowed in.
What do you make of how this is being portrayed, this event?
LARRY WOODWARD, CEO, VIGILANTE ADVERTISING: Well, Tiger has problems. He hasn't spoken to the public for three months, so he obviously does. And he wants to make sure that it's very prepared and that he says what he wants to say. And I'm sure that his handlers have told him that he needs to say all the things we know he's going to say, that he's let his family down, that he's let his public down, that he just wants to get back to golf and he wants to play.
And -- and I believe that that might not be the right thing to do.
FOSTER: But why is that?
WOODWARD: Well, I believe that Tiger is a -- an athlete and -- and as a high performing athlete, if he's true to himself, Tiger really probably wants to say that he's furious at himself and that he's let himself down and that what he was doing, the intensity that he had on the golf course he let get off the golf course and that that shouldn't happen again.
And I think that if he said something like that, that that would probably be more understood and relatable to the people that he needs to say it to.
FOSTER: Why do you think of the way his team have handled all of this?
Because, first of all, they didn't say anything. Then they issued these very tightly scripted statements. And now they're pretending that this is an informal chat with friends and cameras are allowed in, but we all know what's going on. It's him trying to control the statement again.
We're never really being allowed into his mind properly, are we?
Is that the problem here, people don't really believe that he's being real?
WOODWARD: Well, it could be one of his -- his -- his problems. Understand, I.M. Geebel (ph) understands that with respect to pitchmen, that perfect pitchmen are as rare as the northern hairy-nosed wombat. They just don't exist. And when we get them, we try to keep them.
They feel that marketing and advertising created Tiger Woods. So of course they would feel that advertising and marketing and public relations can -- can continue to control and protect him.
People, however, don't work that way. And that's really what he's going to have to be dealing with.
The next two weeks are very important for Tiger. He needs to not blame the press. He needs to not say that you've treated my family in a hurtful way. He needs to carry his bags, take them to the golf course, change into his golf clothes and win -- and win convincingly and in a outstanding way.
FOSTER: Because, at the end of the day, he is a sportsman, isn't he?
Why can't he just sort of ignore all of this and get on with the sport?
And I -- I guess it's because he wants to keep a hold of these sponsors and they want certain things from him.
Is that -- am I right in making that assumption?
WOODWARD: Right. Sponsors care what people think. And because of that, Tiger Woods is going to have some kind of persona. He has to have a kind of persona that people can understand and that they can relate to.
And so, in trying to so hard to control that, they might be making an error.
But at the end of the day, it's all going to emanate from his power on the golf course.
FOSTER: And can he come back from this?
We've heard of similar examples, you know, David Beckham, for example, over here in Europe. He managed to come back from an alleged affair that he never admitted to or never accepted took place.
Can Tiger Woods come back in the same way, because we never talk about that in relation to David Beckham.
I say that now, I am talking about it. But it's -- it's not what most people associate David Beckham with. But these affairs are what people associate Tiger Woods with.
WOODWARD: Yes, I believe that he absolutely can come back. Just because, you know, the arc of the moral universe is long, but it sort of bends toward justice, meaning that he is an athlete, after all. And what we want -- what we crave is to live vicariously through our athletes. And so just like a Beckham can bring England the cup, if Tiger can win enough for his legion of fans, he'll be just fine and everything will flow out of that.
If he can't, then he's got different problems. But I think that for him, he really has to understand that this is not a foot race. It's not a 100 meter dash. It is absolutely a marathon and what he does today and tomorrow and in the ensuing weeks is very important.
FOSTER: If Accenture came to you and asked for your advice on -- you know, if they perhaps were interested in going back into a sponsorship deal with Tiger Woods and they came to you for your advice on when that would be best and what -- what would convince you that that's a good thing to do, what would you say to them?
What would you say is the best way of handling this, if they wanted to get back into a deal with him?
WOODWARD: Yes, right now, Accenture would need to hold steady. Tiger Woods is going to take one to two years for us to see really be able to see, can he really learn to control himself off the course?
Has he learned something?
Is he going to be a man of greater integrity because of the things that he's been through?
If he can sort of walk the -- tow the line, as he had previously, as far as we knew. If he can do that and he can continue winning, look, perfect pitchmen are very difficult, as I said earlier, to find. And -- and he just happens to be a perfect storm for that.
So he can certainly come back if he can regain the confidence of sponsors and the people.
FOSTER: OK, Larry, thank you so much for joining us.
And Larry Woodward will join us again tomorrow...
WOODWARD: Thank you.
FOSTER: -- to give us his thoughts after Tiger has had his say.
A fresh look at the markets as we head down to the last hour of trading on Wall Street now. That's coming up on QUEST MEANS BUSINESS in just a moment.
We'll be back after the break.
(COMMERCIAL BREAK)
FOSTER: Let's take a look at the big board then as we head into the closing moments of a trade.
(INAUDIBLE) have their third gain in three days. As you see, they have, up .75 of 1 percent, the Dow Jones Industrial Average. There were some really good results from Hewlett-Packard, which beat expectations, help there. In the broader market, not quite so healthy, though. The S&P 500 also picking up pace. It's up .5 percent after a slower start to the session there.
This is how the markets in Europe closed. The main indices kept this week's strong run going, with investors seizing on some better than expected company results. For the fourth day running, all of them finished higher, the FTSE in London climbing nearly 1 percent; the Paris CAC and the DAX in Frankfurt both gained more than half of 1 percent.
Now, the British pound slumped, though, as reports showed a sharp rise in government borrowing. The currency fell to around $1.55.5, approaching its weakest level against the dollar in nine months. It's regained some of that ground in the past hour, though. Government data showed spending outweighed income by more than $6.5 billion last month.
That is it for QUEST MEANS BUSINESS.
"AMANPOUR" is up next after the news headlines.
END
