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Quest Means Business
Interview With GM's European Chief; Interview With Toyota's VP
Aired March 02, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Digging deeper: General Motors finds billions it needs to remake Opel. Tonight we speak to GM's European boss.
Learning the lessons: Carlos Ghosn tells me Toyota's misfortunes have taught him what not to do.
And repairing the damage: Toyota's vice president tells this program what still needs to be done.
It is going to be a busy hour. I'm Richard Quest. I mean business.
Good evening.
From General Motors to Toyota to Renault, Nissan, tonight's show we are all about motor cars and more cars. Over the next hour the latest indicators on the health of the auto industry, their plans for the future, and how their clearing up after an accident-prone start to the decade.
We begin, though, with General Motors in Europe, which has announced a big funding boost from its parent company as it tries to rebuild GM Europe, Opel and Vauxhall. The U.S. company will more than triple the money that it is putting into the restructuring effort at Opel and Vauxhall. And that could greatly increase the chances of GM's 50,000 staff, here on the continent, keeping their jobs.
There is more to it than just that because with the GM money comes, of course, government money. GM said in February, this is the way of the situation. Go back to February and GM said it would pump $800 million into GM Europe. At one point it was planning to sell the entire business, now- now that $800 million has turned into $2.6 billion, in loans and equity from GM to-now saying, of course, they will perhaps only need around maybe less than $2 billion from European governments, who have, to some extent, said that they are agreeable to some form of support, possibly in the form of loan guarantees. And you'll hear more about that from GM.
In Germany, some politicians say it shows GM already has the funds without getting more from taxpayers.
And things do look up. In the United States sales for General Motors are up more than 12 percent. And it is expected a better, perhaps, season coming along. The brands are doing very well, Chevrolet, Cadillac, Buick and GMC, and, of course, GMAC, the credit division.
However, just when you thought it was all going better, what is around the corner? A major recall of 1.3 million cars in the United States, GM has recalled. With Toyota we had accelerator, brake-and brake issues. GM's problems are much more to do with power assisted steering. And we needed to delve into that a little bit more. The cars that are being recalled look like this. There are four models in all. You have the Chevrolet Cobalt, the Pontiac G4 and G5, and the Pontiac Pursuit. Not all model years are affected, it depends what was made and where it was bought.
General Motors is telling drivers to bring them in because the power steering, apparently, is prone to breaking down. The U.S. safety watchdog says that it could be blamed for up to 14 crashes.
Now, the vice president of quality at GM says drivers can still control the vehicles, apparently, they may make take more effort-there we are.
"The vehicle can still be safely controlled because the customer can still steer the vehicle."
GM says it is looking for a remedy for this solution. So, you get the idea. GM is very much in the news tonight.
Here in Europe it has taken GM less than 24 hours to come up with that extra cash for its European arm. On this program last night, the President of GM Europe Nick Reilly said that his efforts to get governments to contribute were continuing, but he wasn't giving anything away. So, we had to have Mr. Reilly back. Because, after all, within 12 hours of being on this program the money was found, Nick Reilly explains how.
(BEGIN VIDEO CLIP)
NICK REILLY, PRESIDENT, GM EUROPE: Timing is such that when you and I talked the night before, it wasn't actually fully approved. It had only went to the board yesterday. And these things-these things take time and you can't announce something before they are done. So, sorry about the timing on that, but actually the result was good.
(LAUGHTER)
QUEST: And well, listen, it gives us a chance to have you back again to talk a little bit more. And that is also worthwhile and welcome, and we thank you.
Nick, what about this? GM is putting a lot more money into the European operations, but still requiring or seeking sizable amounts from European governments?
REILLY: Yes, we are going to put in a little bit over 50 percent of what we'll require. That, by the way, if you compare it to other companies who have had support from European governments, or from other governments, in Japan, or elsewhere, who have also supported their car manufacturing industry during the crisis, is a high proportion for the company to put in.
We are just looking for support, while the credit markets are not functioning properly. We are looking to support from the governments to be enable us to go to commercial banks and get loans. And they do that through guarantees. And the EU has created a framework specifically for that, in order to help companies that need bridge financing to get through the crisis. And many companies have already got it. Opel doesn't have any, so we are asking for it.
QUEST: Right, now is this going to be-this is loans? Is it grants? Is it repayable, is it commercial terms?
REILLY: Yes, it is commercial terms. It is not grants. It is not government money, either, it is going to be from commercial banks, and maybe the EIB.
QUEST: Right.
REILLY: But what the government does, it provides a guarantee against a certain amount of that-not against 100 percent. Between 70 and 90 percent, they guarantee, and that only enables us to go and negotiate commercial terms with the bank.
QUEST: One other story, just to quickly talk about, recalls. 1.3 million vehicles, because of power steering. It this a case of when one recall happens we just simply notice all these other recalls?
REILLY: There is certainly an element of that, yes. It is a very topical-a very topical, subject, obviously. This is-this is a decision we've made to recall. It is power steering, as I understand it, in the U.S.
QUEST: Right.
REILLY: And you don't loose the steering, but you loose the power steering, you loose the power part of it. You can still steer the car, but it has been decided that we need to-we need to recall those. There are recalls from every company, every so often. It is not a great thing to do, but the most important thing to do is to do it quickly. As soon as you really kind of know about it, and then, get it sorted out.
(END VIDEOTAPE)
QUEST: So, that was Nick Reilly, talking to me and explaining, and putting into perspective, of course, what has happened in the last 24 hours.
Toyota still has a lot of explaining to do after recalling nearly 8 million cars and leaving the impression it could have acted sooner and more decisively. Executives are back in Washington at this moment. And these are pictures of the testimony. This time they face questions from members of the U.S. Senate.
U.S. Transportation Secretary Ray LaHood is putting in another appearance as well. It is the third Q&A session lawmakers have held over the problems with Toyota cars. Toyota will promise to give U.S. executives more say in quality and safety issues. He says it has fixed 1 million vehicles so far.
Jim Boulden caught up with Andrea Formica, a senior executive of Toyota Motor Europe, at the Geneva auto show, and began by asking him how Toyota Europe is dealing with the recalls?
(BEGIN VIDEOTAPE)
ANDREA FORMICA, SR. EXEC., TOYOTA MOTORS EUROPE: Clearly we are very focused, at the moment, in managing this recall campaign, in the best way. We have a daily capacity of about 50,000 cars, and hopefully, by the end of July we will, you know, we will fix 90 percent of these issues. But so far I think customer feedback has been-has been very good. And frankly speaking, customers are a bit surprised that, you know, such a little to have created such a big fuss, at least here in Europe.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: That is on repairing already sold Toyotas?
FORMICA: That's correct.
BOULDEN: What do you-we are now into March.
FORMICA: Yes.
BOULDEN: How would you describe February, as far as new sales go? How much did this hurt?
FORMICA: Well, I think we need to look at the result-at the net balance between, you know, sales to our current customers, who are showing great interest into Toyota, and of course, those customers who are new to Toyota, who may be biased by, you know, what they heard in the media. So, I think it is a bit premature to say. I think our order book (ph) is higher compared to last year.
BOULDEN: But no indication yet from your sales teams about February?
FORMICA: Of course, there are different situations market-by-market, right? Clearly, in some markets, like the U.K., there has been an impact. To a lesser extent, in Germany, Netherlands, but outside of these countries, the impact has been lower. Certainly very little impact in Northern Europe or Eastern Europe; at the same time, however, you know we are seeing market dynamics very different from last year. You know, the German market, for instance, in February was 35 percent below last year.
BOULDEN: Discrepancies coming your way.
FORMICA: So, it is difficult to understand how much of this is market driven.
BOULDEN: Right.
FORMICA: How much of this is actually performance driven.
BOULDEN: Can Toyota say now the worst is over?
FORMICA: Well, certainly, for us, in Europe, we are not seeing, you know, headlines in the media, anymore, which obviously helps.
BOULDEN: You are talking about this hybrid launch as sort of a massive, more integrated hybrid launch into Europe-or worldwide, indeed. How quickly are we going to see those on the road?
FORMICA: The Auris HSD, which we present today, is the first example of running-out (ph) hybrid technology into a mainstream model.
BOULDEN: Right.
FORMICA: This car will be made in Europe, and-
BOULDEN: This one right here?
FORMICA: Yes, the Auris, hybrid synergy drive, so it is really in the heart of the European market, and it is the first example. So, we will see more and more versions of hybrid, into mainstream core models in Europe in the next years.
BOULDEN: And we are now seeing the third generation Prius, as well, in Europe.
FORMICA: Sure.
BOULDEN: For the first time.
FORMICA: But we are very happy with the launch of the new Prius, which we introduced in the market last year. Last year we sold 44,000 new Prius, which is 3 percent more than 2008, in a declining market, so.
BOULDEN: Yes.
FORMICA: I think it is very interesting because we are moving from, you know, pioneer, into, you know, mainstream buyers.
(END VIDEOTAPE)
QUEST: That is Toyota. Auto stocks did well this session, and these are the numbers. BMW is up nearly 3 percent in Frankfurt. Daimler also rose. Paris Peugeot lead the gains, up more than 3 percent. Renault also put on 2.5 percent. We will hear from the chief exec later.
And one other bit of transportation, you are slightly off subject, Lufthansa announced a smaller than expected loss. British Airways shares were much higher, over 4 percent higher, in the London market, on the possibility that things are not going to be too bad for too much longer.
So, that is the way the markets traded on this Tuesday. You are up to date there. The news has been a busy day and we need Fionnuala Sweeney at the CNN news desk to bring us up to date.
(NEWSBREAK)
QUEST: Manchester United has plenty of die-hard fans but will they be able to put their money where their mouth is to take over the club? When we return a close look at the financial players aiming on of the world's most audacious takeovers.
(COMMERCIAL BREAK)
QUEST: Welcome back.
A group of Manchester United supporters is plotting to buy the club that they love; one of the most valuable names in the world of sport. Never mind White Knights, this lot are calling themselves the Red Knights, after United's famous red shirts. The club's current owner, Malcolm Glazer, U.S. sports tycoon and his family, they are extremely unpopular with United fans.
The takeover that they were involved with, and there were five, left the club saddled with debts of more than $1 billion. Some supporters say that burden is hampering progress on the pitch, and hence, the Red Knights' plan has come into force. So, Man Us, Red Knights, who are amongst the richest fans. The ringleader is Jim O'Neill, for a day job he is chief economist at Goldman Sachs, he is asking for Man U fans from around the world to support the Red Knights.
O'Neill is working with Richard Hytner, the deputy chairman of the advertising agency, Saatchi & Saatchi. Hytner lead the opposition to an earlier bid, to buy United, that was in 1998, when the suitor was then BSKYB, Murdoch's company. Enter co-founder chair holders, United Against Murdoch, which helped to fend off the Australian tycoon.
O'Neill also met with Keith Harris, executive chairman of Seymour Pierce, a London investment bank.
You are getting the idea. This group of people calling themselves the Red Knights are relatively powerful. Drew Barrand of the Sport Industry Group, Oliver Houston, of Manchester United supporters (UNINTELLIGIBLE) both sat down with Red Knights. I began by asking them about the mood at that meeting?
(BEGIN VIDEOTAPE)
OLIVER HOUSTON, MANCHESTER UNITED SUPPORTERS TRUST: We had been meeting with these people-they had been dubbed the Red Knights, that is the term we've been using for some time now-to explore ways in which we could put together a consortium, a bid, that we could put an offer to the Glazers, and put the club in the hands of the supporters, where we believe it belongs.
Now, this was the first of what we believe are going to be many meetings. The purpose of this meeting was to explore all the various different scenarios. At that meeting a team of lawyers was appointed, in Fresh Fields, and a PR firm in Finsri (ph) was appointed. So, this is just very much the first step.
QUEST: Oh, yes, but first steps-first steps, I mean, first step, you know, they rapidly become self-fulfilling. Are you prepared to put supporters' money behind this? Or, are you looking for somebody else to pay the bill?
HOUSTON: These people are supporters. That is what-
QUEST: No, I mean, at this-a
HOUSTON: Look, these people are hardcore Manchester United supporters. They are very high-net worth, but they have nothing but the good of the club in their hearts. Now, the supporters do have a vital part to play, and I'm sure you'll have seen these statements that the Red Knights put out, specifically asking the supporters trust to grow its membership from 50,000 to 100,000 as a first step.
They are effectively saying, we will get the money, as long as you back it; because this is about the supporters giving their consent and their backing to the bid. And they don't want to proceed just on their own back. They want to do it if the supporters want them.
QUEST: Right.
HOUSTON: So, it is our job now to show them that the supporters want this bid.
QUEST: Drew, it is an extraordinary situation, isn't it, to some extent. You've got a seller who doesn't want to sell, you've got the supporters that want to buy. You have got a group of people coming together as investors. And I can't remember seeing anything quite like this before?
DREW BARRAND, SPORT INDUSTRY GROUP: Absolutely. It is a very, very unique scenario. I think when we are looking at it from a purely logistics point of view, there are only two ways that the Glazers can be forced out by United. Either by accepting a rival bid for the club, whatever the entity might be that wants to do that. Or by a certain situation where either the Premier League or the U.K. government looks at it and says it is not being run properly. Now, clearly the latter has not happened, so we are at the former.
QUEST: But not only that, but not only that, according to the Deloitte's report, if you take out the currency fluctuation, Man U is the most valuable club and has performed the best. So what is your beef?
HOUSTON: Well, it you take into account the UAFA report as well, it shows that Manchester United is the most indebted football club in the world.
QUEST: But it's not your debt.
HOUSTON: Manchester United-it is our debt, if you think about it. The supporters are the ones who are paying this back. Since the Glazer takeover in 2005, where they borrowed money to take it over-
QUEST: It's their club!
HOUSTON: The acquisition debt-
QUEST: They own the club!
HOUSTON: -was then put on to Manchester United, and those liabilities are now on Manchester United, the company, and its parent, Red Football Joint Venture. The money is being paid by supporters. The money doesn't come from anywhere else. It comes from supporters paying tickets, through the gate. And let's not forget the Glazers have put up ticket prices, year after year after year.
QUEST: Right. But, Oliver, you are missing the point.
HOUSTON: I don't think I am.
QUEST: You don't own the club. It's the Glazers club. They paid for it, they bought it, yes, they put debt on it.
HOUSTON: Yes, they put debt on it and it is the fans who are paying that back right now. And the fans are very upset that not only are they having increased ticket prices and reduced investment in the team, but also the Glazers now are taking out vast sums of money and pocketing it, personally. Not reinvesting it in the company, pocketing it personally.
QUEST: Drew, what is this really all about, do you think? I mean, it is obviously and animosity against the Glazers, at one level. It is a lack of investment in the club, which has performed well on the pitch. So, I mean, what-one could arguably say that despite all the complaints.
BARRAND: I think we are looking at a situation whereby, obviously, football is very unique. It is not a normal customer to business relationship. You know there is an emotional investment, there is all sorts of investment going on. I think we are looking at a situation where the supporters, rightly or wrongly, believe that they are-their club is not being run correctly.
Now, the bottom line is, do the Glazers care what the supporters think in that regard? Are they willing to sell? It is looking unlikely at the moment, but this is the scenario we find ourselves in. But I-
QUEST: How much is the club worth, do you think?
BARRAND: How much is it worth?
QUEST: Yes.
BARRAND: If you add in the value of the global brand, its players, the stake (ph), you are talking-God, coming up to a billion pounds, I would have thought, in terms of any kind of market.
QUEST: Would you pay more than a billion?
HOUSTON: To us Manchester United is priceless, but in terms of what the Red Knights are prepared to pay for it-this is their own money remember, so they are only going to do it if it is a sensible price and supporters have a part to play in persuading the Glazers to sell at a sensible price.
(END VIDEOTAPE)
QUEST: Well, we'll have more on that later in the program. Along with a "Profitable Moment" about who really does own Manchester United.
When I return in just a moment or three, the head of Hotel.com will be joining us. Look, can we still get a bargain room, or are we destined to sleep on the streets. In a moment.
(COMMERCIAL BREAK)
QUEST: Welcome back.
The euro touched its lowest level in nine and a half months against the dollar, over the past few hours. And this week promises to keep the European currency firmly on the spotlight. The attention will be on Greece on Wednesday. The government there says it will announce plans for even harsher spending cuts. Its current austerity program is already provoked a storm of protests on the streets last week. The country's biggest public sector union is calling for 24-hour strike on March 16th.
One effect of changing currency rates is often to change the pattern of where we spend out money when we travel. A weak euro means that for Americans coming to Europe it becomes noticeably cheaper. The dollar has of course strengthened. You and I talked about that on this program last night.
Then you may also notice the price of hotel room is still remarkably cheap. And that's true across world, according to Hotels.com's latest hotel price index report. We follow this very closely on this program. And we're always to happy to have the president of Hotels.com, David Roche, who joins me now.
David, the tenor of what we are seeing, at the moment, we know prices have fallen. But have they sort of bottomed out, and are we starting to see them rise again?
DAVID ROCHE, PRESIDENT, HOTELS.COM: I would use the word bottoming, Richard. I think that what you can see in the trend over 2009 is that they were falling steeply at the beginning of the year, and less steeply at the end. And we think that 2010 is the year when they will stop falling and maybe for a lucky few hoteliers they may start to rise again.
QUEST: Of course, all hotels are not equal. So, if you are talking at the luxury end where a lot of business travelers used to stay, but now no longer stay, we are seeing some quite sharp falls in rates, aren't they?
ROCHE: I think that is true. I think that the five-star sector has been the hardest hit and I think what you are really seeing is trading place, essentially, between the star ratings. You are seeing that, you know, five-star hotels are pricing where four-star hotels used to, four- star hotels pricing where three-stars used, etc cetera, etc cetera, and a general narrowing of the band.
QUEST: So you still believe that if you want a cheap bargain, it is not over bar the shouting, just yet. So into this factor-let's just take for example, Greece and it currency crisis.
ROCHE: Uh-huh.
QUEST: Does that mean that as we look to the summer, Greece becomes- do you think-a cheaper, better bet?
ROCHE: I don't think that is a necessary conclusion. I mean, remember that Greece is still in the euro, and it is the strength of demand coming from the Euro Zone, which will probably drive most of the pricing there. Overwhelmingly, Greece is actually a domestic market and most of the stays that happen in Greece, in the summertime, is the domestic Greek market. So, we'll have to see. I mean, it is anybody's speculation about what happens in the market there. But I wouldn't assume that just because the Greek economy is a little weaker, that there will be a dramatic fall in prices at Greek hotels.
QUEST: Right.
ROCHE: Now, they've already fallen.
QUEST: Yeah?
ROCHE: In euro terms, in '09, about 9 percent. But remember if you are coming from the U.K. to your earlier point about Forex, you've actually seen them rise 2 percent in the year.
QUEST: Look, I know what most of our viewers want to know. Most of our viewers want to know where's the best bargains to be had? Because if they really want a cheap bargain, David, where is the best place to go?
ROCHE: Well, I mean, every unusually, try Moscow for size. In euro terms, Moscow has fallen 41 percent, year-on-year in 2009. So it has never been cheaper to stay in Moscow. But there are bargains right across the spectrum. And I think the sites such as Hotels.com are really driving hard at getting promotional pricing on the site. And we are seeing that the sell through of the rates that carry heavy promotions on them has moved from about 30 percent of our total sales to about 50 percent now. So, there are really bargains across the spectrum.
QUEST: OK, but within that, finally, but within that, if we look at the booking engines.
ROCHE: Yes.
QUEST: If you like. One is never sure, you know, who has got the best deals. Who has got the unique deal? Because obviously the hoteliers put all their product out, often to several different places.
ROCHE: Well, that is true. And I think that there is a-look, I think we have got to acknowledge that there is a drive towards price parity.
QUEST: Right.
ROCHE: In the market, where pricing is, you know, becoming more similar across all the various channels, whether direct from the hotels or through intermediaries. And that is kind of a good thing. Because remember if you are-you know, from the consumer's point of view, if you are visiting an intermediaries' site you are seeing the choice right across the market. Where if you are visiting the suppliers' site you are just visiting that particular hell-that hotel, in that market and that may or may not be good.
(LAUGHTER)
QUEST: You might have been right the first time, if you get the wrong hotel, you could be in that particular hell as well.
ROCHE: Very true.
QUEST: All right. David, many thanks indeed. Come back again.
ROCHE: Nice to be with you.
QUEST: We like to have you discuss this and to bring us up to date.
When I come back, we are going to Geneva again. The big manufacturers jostling for position. You might think they would be trying to take advantage of the Toyota trials and tribulations. The boss of Renault tells us what he's been thinking of, next.
(COMMERCIAL BREAK)
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
The future of the auto industry is on show -- and do I mean on show -- in Geneva this week. We may be over the worst of the downturn. Car makers still face a tough environment. Much of the support they had last year has now disappeared. The so-called Cash for Clunkers schemes -- in other places, they were called cold scrappage schemes -- all have come to an end pretty much.
So the buying that we saw as a result of them has now gone into reverse.
I asked Carlos Ghosn if he was seeing any organic growth now that the government money seems to have dried up.
(BEGIN VIDEOTAPE)
CARLOS GHOSN, CHAIRMAN AND CEO, RENAULT-NISSAN: Hopefully, there is organic demand coming back on the -- on the market. You know, every time you put in place a strapping system, you're going to boost the sales, renew it, and then when you stop it, you're going to have a decline in the sales. But the only big differences is the fact that now you're ready for it. You know the decline is coming, but you adjusted your inventory, you have adjourned your investments, you have adjourned your head count for the new situation.
So we think that we're going to have about a 10 percent decline in sales in Europe due to the fact that the tracking systems are stopping in different countries, but there is an organic demand. And this organic demand will pick up some time during the year 2010.
So we are optimistic for the year 2011, but we're still cautious for the year 2010.
QUEST: So when you -- if you had to put a number, a percentage on demand for the growth, what do you think it would be?
GHOSN: Well, I think for 2010, in Europe, the market is going to be down 10 percent.
QUEST: Right.
How much business are you picking up, do you think, because of Toyota's misfortune. I know no one ever wants to say, because it is there but for the grace of God goes any other company, but you must benefit somehow.
GHOSN: Yes. We -- we are obviously benefiting somehow, indirectly. But you know what, I think many of the Toyota customers are just refraining from buying cars until they wait to see what is the conclusion of all the inquiries going on and the explanation going on.
So I don't think too -- too many of the competitors are benefiting from it. We are seeing these consumers today out of the market.
QUEST: What have you learned from what you've seen happen at Toyota and the way in which it's been handled, do you think?
GHOSN: Well, in fact, what you learn is that you should make sure that in your processes and your action, you have to be very proactive in the way you handle consumer concerns about quality, because if -- if -- if there is any breach in the trust around the quality of the product and particularly your response to these quality problems, it's -- it's a disaster for any -- any car maker.
So we are reviewing all our processes. We are being absolutely very cau -- you know, cautious into our approach, very prudent into our approach, because, hopefully, this lesson, which is coming from one of the competitors, will not be lost. We will learn things and we will adapt to this.
QUEST: So, as -- you know, as the chief, is this something you are taking your role and the things that you can learn from what you've seen happen at Toyota, you -- you are looking closely yourself at?
GHOSN: Exactly. We are looking to our own processes. We are looking to our own situation. We're making sure that the decisions are being made very quickly as near to the field as possible to avoid situation -- embarrassing situations where the consumer have the impression that it takes a lot of time to react to a quality problem.
QUEST: Finally, if you take the industry and your company, my traffic lights here in the studio, do you want a red, an amber or a green?
GHOSN: Oh, today I think that, 2010, we are amber, but moving to green.
QUEST: Amber moving to green?
All right. I'll turn up with it.
Carlos, many thanks, indeed.
Nice to have you on the program tonight.
(END VIDEO TAPE)
QUEST: Carlos Ghosn making me work hard -- amber over to green. Let's continue the theme of tonight's program.
Alison Kosik is at the New York Stock Exchange in -- in New York -- or she was a second or two ago, but we appear to have mislaid her.
Instead, let us have a look at the New York Dow Jones Industrials. The market that is open and doing business at the moment is up 19 points, just a very little change, 10424 tonight.
What we were going to talk about with Alison is the way in which GM's numbers, Ford's numbers and all the automakers have seen quite a sharp rebound in sales -- auto sales. And that is looked at very closely because, of course, as the major economic driver throughout.
The market is higher. We saw good gains in Europe. QUEST MEANS -- oh, no, we're going to be -- Alison, are -- are you with me now -- Alison?
ALISON KOSIK, CNN CORRESPONDENT: I am, Richard.
Hi, there.
QUEST: Ah, there we are. We look -- we lost you for a moment. We obviously didn't pay the electricity bill. But we -- we -- we've got the hamster going a little faster at the back. And...
KOSIK: Good. Good.
QUEST: Alison, I -- I -- I don't want to steal your thunder, but I was -- I think I've already implied that auto sales were much on the New York agenda today.
KOSIK: Oh, definitely. Definitely on the radar here on Wall Street. And I think you -- have hit the nail right on the head. I mean we're seeing that auto sales were up in February. You know, you talk about Ford, which drove ahead with 43 percent more higher sales in February. General Motors up 12 percent. And even Toyota didn't do too bad either, only taking a dip of 9 percent. I mean analysts had predicted that the sales -- the sales hit for Toyota would have been in the double digits.
But still, though, what these automakers are saying is, sure, they're seeing numbers higher, but they're still not great numbers. And they're actually saying -- the ones, except Toyota -- that they didn't actually take any -- any -- any customers from Toyota, that they're claiming that -- that these customers were actually just -- just buyers of their models -- Richard.
QUEST: Your market is up 20 points at the moment. We had a strong day in Europe on the back of autos -- auto companies and a bit of transportations.
But I do get the feeling that there is a wait and see environment out there. We seem to have stopped the slide that we saw at the beginning of the year. February was a bit better, but we're by no means off to the races.
KOSIK: Well, I mean the NASDAQ and the S&P have moved into positive territory for the year. They did that yesterday. And we're still in the green, even though we are off our highs of the day, Richard. You know, there is the -- the renewed confidence that a bailout for Greece is on the horizon.
So we're seeing, you know, stocks still having that modest rally. We are fizzling out of it. It could be people just taking -- taking gains at this point. I mean I think you're not going to see any huge moves, Richard, until we get that very important jobs report on Friday. That is what I think investors are waiting for at this point -- Richard.
QUEST: Right. Alison, you're not off the hook completely, because we are going to talk about, at some point this week, what you've been spending your money on.
KOSIK: We have to get to that, Richard.
QUEST: I know.
KOSIK: It's very important.
QUEST: Absolutely. And hopefully some nice gifts for me.
Alison is in New York at the Stock Exchange. The market is up 20 points at the moment.
Earlier, a moment ago, we were talking football. So, in a moment, we're going to look at the league table. This is one that shows how they rate in terms of the cash rolling in -- who's up, who's down. We'll have that in a moment.
(COMMERCIAL BREAK)
QUEST: Now, welcome back.
If you tend to read the tabloid stories about the escapades of millionaire soccer players, you won't be surprised to hear that football is actually getting richer. Some believe it might be recession-resistant, if not recession-proof.
If you look at the top line money coming in, that tells you a fascinating -- and the figures are really quite extraordinary. The richest club, of course, is Real Madrid, number one for the fifth year, topping Deloitte's Money League for the season that ran '08-'09. It has now broken more than 400 million euros. You're going to see euro dollars, of course - - 500 -- over a half a billion dollars for Real Madrid on its own. And the reason, of course, we'll -- I'll explain to you in just a moment.
The top three, now if you look at the top three, you've got Real Madrid, you've got Barcelona, so you've got a one-two play going on between these two over here. And coming in is Manchester United is number three. ManU would have actually been top of the league if the pound were still at the levels seen in June '07. But the -- what happened, of course, was with currency fluctuations, ManU drops further down.
But in the top 20 on the Deloitte survey, seven of the clubs in the top 20 are U.K. -- U.K. clubs.
Now, the -- the reason -- this is important to understand. The money spinners here for any club, they are match of the day. That's basically ticket sales -- season ticket sales and corporate stuff. You've got broadcast. That's -- oh, well, I mean you -- you know what that means, obviously. And you've got big sponsorship -- the naming of stadiums and things like that.
Real Madrid is boosted by improved TV contracts. Real gets 1.1 billion euros over seven series -- over seven seasons. The majority, of course, elsewhere is shared within the divisions.
So earlier, I sat down with Alan Switzer.
He is the director of sports business at Deloitte's.
And I asked him what made -- because these three really -- haven't -- aren't much different to previous years, so what made the survey so interesting?
(BEGIN VIDEOTAPE)
ALAN SWITZER, DIRECTOR, SPORTS BUSINESS GROUP: It's interesting to see that we now have a Spanish one, too. So if Real Madrid is the top 50 in a row, so nothing new there particularly. But Barcelona now jumped ahead of Manchester United in second place. So you've got a real Spanish one-two. And also interesting to look at the performance of the 20 clubs as a whole. I think good revenues, 3.9 billion, about flat, which, you know, in previous years have been quite significant growth. But interesting to compare that to many other industries in the recession, whereas the experience quite suffered decline.
So football is showing itself to be recession resilient. It's not recession-proof, but recession resilient.
QUEST: To make it -- to make that case within the three areas of revenue that we've already explained...
SWITZER: Yes?
QUEST: -- which bit is holding up and which bit is weak?
SWITZER: The weakest bit is the corporate side of the match today. So general admission, your -- your general supporter base, the tendencies are pretty much the same as previous years. It's one of the last things you give up, you know, your season ticket or whatever.
So but where we have seen some softness are those high value corporate tickets, where it's harder for the corporates to justify that kind of expense.
And I would say the other area is probably some of the smaller clubs have struggled on the commercial side, because while the big brands -- the big clubs that we're looking at here, you know, the big blue chips still want to be associated with them, it's a tougher market dime once you get to the -- the lower leagues.
QUEST: So if you've got the name when you've got the trophies and you've got the -- the fame, you're -- you're pretty much all right.
Why are the Spanish teams the one and the two?
Is it because they are better or is it because they are merely better at marketing themselves?
SWITZER: Well, they have one massive advantage against the English clubs, the German clubs and French clubs, actually. They are allowed to negotiate their own broadcasting deals individually. So Real Madrid, Barcelona, 160 million euros each from their broadcasting revenues.
The rest of the Spanish clubs get a fraction of that.
QUEST: So if ManU, Arsenault, Chelsea Liverpool and -- and the ones in the seven that you've got in your list...
SWITZER: Yes?
QUEST: -- were able to negotiate their own broadcast rights...
SWITZER: Yes.
QUEST: They would do considerably better?
SWITZER: Almost certainly we'd see a -- an English one, two, three, four, maybe, at the top of the league. What we would say, though, is collective selling actually benefits the league as a whole. Individual selling benefits the small -- the theory, but not the whole.
And interesting, in Italy, where we have individual selling, they are now going back to collective selling for a year-and-a-half.
QUEST: So it really depends whether you take the view all for one or one for all, doesn't it?
SWITZER: Yes. Actually, it's about competitiveness, you know?
QUEST: Yes.
SWITZER: You need to have that competitive week in and week out and that's what's showing the revenue a bit more than collective selling does.
QUEST: Let's talk about ManU. If there hadn't been a currency devaluation of the sterling...
SWITZER: Yes.
QUEST: -- ManU, or the euro goes -- we have the euro.
ManU would have what?
SWITZER: ManU would have -- well, I don't know if they would be top, so they would be top probably by 20 or 30 million euros.
QUEST: So, really, in reality, ManU is the most valuable?
SWITZER: ManU, they would see it -- because (INAUDIBLE) probably makes more revenue. And, actually, interestingly, on an operating profit level, it's clearly the most profitable club in the world.
QUEST: Finally, I'm going to give you a check for 50 million.
SWITZER: That would be very nice.
QUEST: Would you invest it in a football club?
SWITZER: Do you expect the money back?
(LAUGHTER)
SWITZER: It -- it depends. What -- we have seen some owners come into the game and were expecting, perhaps, to make an ongoing year on year profit. And often their expectations soon change, because that generally doesn't happen, because football clubs generally, year-over-year, don't make profit.
However, when it comes to selling the club four or five years down the line, they generally do make a turn on their money. So it depends exactly which club you're looking at. But it is possible to make money on football clubs, just not in the short-term.
(END VIDEO TAPE)
QUEST: Fascinating stuff tonight, all of our football and motor -- motor vehicles.
Jenny Harrison is at the World Weather Center for us this evening -- so, now, your -- your turn. You've got the check for 50 million.
And what would you...
(LAUGHTER)
QUEST: What would you invest it in?
JENNY HARRISON, CNN METEOROLOGIST: Richard, 50 million -- I can't possibly imagine so much money. I don't know.
what about you?
What would you invest it in?
Obviously, not football.
That's not the way to go, is it?
But what would you invest it in?
QUEST: Well, clearly. Oh, no, no. I -- I'd just -- I'd just live well.
HARRISON: Yes. Yes, there you go. Oh, you'd invest it in your own lifestyle.
QUEST: Some shocking...
HARRISON: Very good. Yes.
QUEST: Some shocking -- let me get a word in, please.
Some shocking weather out there.
HARRISON: Yes, there is, actually, Richard. It's going to be getting better across -- across in Europe. You're talking about Xynthia, which really made its mark, of course, in the last couple of days. Still in the picture, I'm sorry, I have to tell you that. It's mixed in with this massive cloud. You can it here.
And this is the next storm system we're following very closely. You can see some huge amounts of cloud there. That means rain, but also thunderstorms to the northwest of Africa in the last few hours.
This is the bandwidth of Xynthia here, continuing to move, as you can see, through Tuesday up into the far north, through Scandinavia and the far northwest of Russia.
The winds have been gradually easing, as the system has been pulling further away. And you can see here, we've got winds really fairly light. We'll see some high gusts will be in there, at times, as well.
Now, one of the things that's going to happen as that storm system pulls up to the northeast, we're going to see this much colder air filtering in. And by the weekend, much colder again into the southeast. Now, that's actually a good thing, because we've already began a bit of the spring thaw in the southeast. And we don't want that to happen too rapidly, because, of course, that is when we see the knock on effects of flooding. So hopefully this should stop that or halt the process for a few days to come.
Now, here comes the next storm system -- mostly a rainmaker, further to the south, again, but it does mean that Portugal and Spain, you're going to be impacted again, of course. And we've seen flooding here over the last couple of weeks and the central med (ph) to the snow, of course, is further to the north, along the line of the Alps.
So it's a fairly messy picture generally. Central Europe, we're staying mostly dry, the northwest, as well. But we will see some problems with fog, actually, at some of the major airports over the next couple of days, but when it comes to delays, as you can see here, most of the airports, as the areas of snow -- some long delays at Zurich in the morning hours. And you can see that the same can be said for Berlin. But overall, not a bad picture. The U.S., though, delays in the Southeast.
Now, we're going to break.
And, of course, Quest, he does mean business. And he's back with much more of it, so do stay with us.
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QUEST: Welcome back.
The amounts of money washing around an event like the World Cup are simply tremendous. Think about what it costs to be an official sponsor. Sports shoe maker Adidas paid more than $350 million to be asoti -- associated with the tournaments for 2010 and 2014. Even companies that aren't on the official roster of sponsors say they'll get their share of the action.
What about the brands that aren't partners of FIFA's flagship event, like Nike?
Now, if you're not part of the actual event, how do you get a piece of the action?
CNN's Pedro Pinto investigates.
(BEGIN VIDEOTAPE)
PEDRO PINTO, CNN SPORTS CORRESPONDENT (voice-over): It's got Brazil, the Netherlands, Portugal and six other teams that will play at the 2010 World Cup. Nike may not have the rights to supply the official match ball for the tournament or have the company name on billboards in South Africa - - that right belongs to official sponsors, Adidas -- but the American sports apparel company still believes it will be a big part of the biggest show on Earth.
CHARLIE DENSON, PRESIDENT, NIKE: We're every bit a part of it as anybody else. And, in fact, I would argue that we're probably more of a part of it than most, whether they're on the billboards or not, because we're on the pitch. And that's where we should be. That's where we -- our investments and our interests and our passion is to make all of those players better. And so, you know, our investment is with the -- the athletes, the teams, the federations and our ability to show up during the World Cup is something that excites us very much every four years.
PINTO: That's why Nike invests so much money in signing deals with some of the world's top footballers, like Cristiano Ronaldo. The brand pays him something like $8 million every year. According to the brand's president, he's worth every penny.
DENSON: He's one of the greatest players in the world. And I think one of the things that we always look toward with our relationships with the athletes is to be working with the best. And the best always challenge us to be better. And so working with players like Cristiano, you know, what he brings both to the game and to our brand is very, very important to us.
PINTO: Ronaldo recently unveiled his brand new football boots, the ones he will wear at the World Cup. Three hundred journalists turned up at the promotional event in London. This kind of publicity ensures Nike is in the public eye before, during and after the tournament in South Africa.
MICHAEL STIRLING, GLOBAL SPONSORS: Nike has taken a completely different approach from Adidas. What they've focused on is actually sponsoring key players that they've identified, such as Cristiano Ronaldo and Wayne Rooney, whereas Adidas has got the rights to the main event. So the risk that Nike has is that if the clubs or the players that it sponsors fall out of the competition early, unfortunately, its investments will -- will not develop as quick as Adidas. But if they have the winning thing, then they can exploit that very effectively.
PINTO: So, in other words, if one of its nine teams takes home the World Cup trophy, Nike will be laughing all the way to the bank.
Pedro Pinto, CNN, London.
(END VIDEO TAPE)
QUEST: And we'll, of course, have coverage of that event when it takes place.
All about cars, all about sports -- you pays your money, you takes your choice.
When I come back in just a moment, a Profitable Moment indeed on Manchester United.
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QUEST: Finally, tonight's Profitable Moment -- the Red Knight's attempt to buy Manchester United is a unique effort by fans to buy the team they love. And it's made possible by the fact that so many of ManU fans are wealthy bankers, lawyers and deal makers. That's what makes it unique.
The Glaziers are not facing a rag bag of supporters with no nouse (ph) on how the financial world really works. Red Knights are men and women who can raise serious sums of money and make things happen. And they don't like what's happening to the team that they believe is theirs. Well, unfortunately for them, at the moment, ManU does belong to somebody else. And unless the Glaziers are prepared to sell, there isn't much more the supporters can do.
But it's fascinating. We have these two sides that will be ranged against each other. It promises to be a delicious attempt to see who really, not just owns, but who runs the club.
And that, tonight, is QUEST MEANS BUSINESS.
I'm Richard Quest in London thanking you for time and attention, as always, and reminding you that whatever you're up to in the hours ahead, I hope it's profitable.
"AMANPOUR" is next, after your news headlines.
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