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QUEST MEANS BUSINESS

South African Unions Still on Strike; Russian Military's Inflatable Decoys

Aired September 2, 2010 - 14:30:00   ET

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


(AUDIO/VIDEO GAP)

VELSHI: And in CNN "NEWSROOM," 2:00 p.m. Eastern, keep the topics coming on our blog. In fact, today's topic came in a Tweet from Laura the Expat (ph). So Tweet with the hash tag, CNN.com/Q&A or log onto CNN.com/QMB and CNN.com/ali. Your idea could be what we're talking about next week.

Have a good one, Richard.

QUEST: Have a good one.

Coming up in a moment, how did I not know the answer to that one?

We are going to look at Moscow's money saving army of inflatable decoys. They're blowing up Russian tanks.

It's QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And here, the news always comes first.

The U.S. special Middle East envoy today said talks between Israeli and Palestinian leaders were long and productive. The U.S. is hosting the first direct negotiations between the two sides in almost two years. Former Senator George Mitchell says in the initial session, both leaders condemned violence against civilians, pledged to work together to maintain security and reiterated their common goal of a two state solution.

Senior members of Pakistan's cricket team, at the center of a spot fixing allegation, will miss the rest of the team's tour of England. The players maintain their innocence and Pakistan's high commissioner in London says he believes them. A police investigation into the alleged scandal is continuing.

People on North America's Eastern Seaboard are watching anxiously as Hurricane Earl approaches. It's a category -- it's a category three hurricane at the moment. Forecasters expect the worst of it to remain offshore, but it could still cause dangerous storm surges and evacuation orders are in place for some coastal areas. President Obama has already signed a disaster declaration for the state of North Carolina.

There's been an oil platform explosion off the U.S. Gulf of Mexico. It happened about 160 kilometers from the state of Louisiana. Unlike the Deepwater Horizon incident in April, the Coast Guard says the blast did not cause any injuries. The owner of the platform, Mariner Energy, says so far, there's no evidence of an oil spill.

Russia's defense spending will rise to 2.9 percent of the country's GDP next year and a new state arms program is expected to cost almost $500 billion. It all seems to suggest the development of a very solid Russian defense force in the next decade. For now, though, parts of the nation's war machine are looking somewhat hollow.

Matthew Chance in Moscow explains.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): The pride of Russia's military on parade in the capital. This former superpower has a bizarre military secret and in a field outside Moscow, it's being blown up -- literally. In the event of war, inflatable hardware, like this fake missile launcher, could be deployed on the front lines. Tanks, too, are available in blowup form -- all designed to confuse and mislead Russia's enemies.

The trick, say the manufacturers, is in the detail.

VIKTOR TALANOV, MARKETING DIRECTOR, RUSBAL: It's an additional fuel tank.

CHANCE: (on camera): Oh, right, an additional fuel tank. Whoa.

TALANOV: On this -- on this...

CHANCE: Why would you need an additional fuel tank on an inflatable?

TALANOV: Because if you have several tanks...

CHANCE: Yes?

TALANOV: -- and -- and the real (INAUDIBLE)...

CHANCE: So it's just to make it look more realistic?

TALANOV: Yes. Yes.

CHANCE: OK.

(voice-over): In the company's workshop, design teams draw up the complex patterns needed to produce convincing fakes. The entire arsenal is already being stitched together, from blowup fighter jets to artillery guns, even radar.

(on camera): Well, the interesting thing is, the Russian military has now ordered large numbers of these inflatables, specifically, replicas of its latest battle tank and its most sophisticated missile systems. For Russia, at least, it seems that fooling the enemy may be an important part of its future war strategy.

(voice-over): Critics say the money could be better spent on improving Russia's real, often decrepit military. But for now, these popup fakes are proving a cheap stand-in for the real thing.

Matthew Chance, CNN, Moscow.

(END VIDEO TAPE)

QUEST: Now, what to do next?

Tonight, that's what South African union leaders are trying to figure out after members rejected the government's latest offer to end the more than two week old strike.

Nima Elbagir reports from Johannesburg.

(BEGIN VIDEOTAPE)

NIMA ELBAGIR, CNN CORRESPONDENT: It's now the third week of these municipal worker strikes here in South Africa and the Congress of South African Trade Unions has formally rejected the government's latest offer of a 7.5 percent pay increase, although union bosses have gone back to the negotiating table with government negotiators.

Meanwhile, on the streets of Johannesburg today, strikers went out on rallies to illustrate their commitment to hold out for the 8.6 percent they've been asking for.

UNIDENTIFIED MALE: They're not (INAUDIBLE) our demands and our demand is what we want. And we hope and thought the government will respond to this. If not, the strike continues.

ELBAGIR: The South African government has made it very clear that there is no more money left. They said this latest offer is their final offer. A government spokesman said today that already this offer will be costing the South African taxpayer 6.5 billion rand. That's almost $1 billion U.S.

Nima Elbagir, CNN, Johannesburg.

(END VIDEO TAPE)

QUEST: Now, when we return in just a moment, it's a flaming nightmare for Ferrari and I'm not being crude. We'll show you why the luxury car brand is feeling the heat, in a moment.

(COMMERCIAL BREAK)

QUEST: If you're in a new Ferrari 458 Italia, the car maker wants to see you right away and sooner rather than later. Ferrari is recalling more than 1,200 of the luxury vehicles -- every last one of them. Five of the super cars burst into flames. Yes, that's a real car and those are real fire -- that's a real fire.

Ferrari says it's the glue in the wheel assembly that's prone to melting and can ignite.

Now, I'll put this in perspective. The 458 Italia, which looks like that -- that's the before and after picture of it -- costs $230,000 each. Ferrari is controlled by Fiat, which managed to climb 2.5 percent in Thursday's session.

I'm joined by the car journalist, Chris Harris.

He joins me from Monmouth in the U.K.

Chris, let's -- let's talk about, first of all, what's gone wrong with these Ferraris and then we can talk about the effect and how it's been handled.

What is the core problem with the -- the cars?

CHRIS HARRIS, CAR JOURNALIST: What's happened is that there's a -- I think they call it a wheel arch lineup, which is a bit of plastic which sits inside the wheel arch of the car that stops grit and stuff being kicked up into the engine bay of the car. That's held into the car near a heat shield by some glue and by some mechanical parts, as well. And it just seems that the glue isn't up to the job. And when the car is put under extreme temperatures, operating temperatures and ambient temperatures, that glue can melt back and then drip onto the exhaust. The heat shield can move and, as we've seen, the thing can catch fire.

QUEST: And spectacularly catch fire. It's obviously a danger and that's why Ferrari have -- have decided to -- to recall the cars.

HARRIS: Yes, I mean there -- there's two ways of looking at it. Car -- modern cars are such complicated mechanical objects, all it takes is a small problem in the process to end up with a fairly dramatic result. And there's nothing more newsworthy than a self-combusting Ferrari, is there?

So it's a bit of a P.R. disaster in that respect.

But, no, you -- you can argue it shouldn't really happen. But then these things do happen, I suppose, is the only way you can look at it.

QUEST: Let's just talk about that for a moment, because it does prove the point that it doesn't matter how much you spend on the car if this sort of thing can go wrong.

Is it serious for Ferrari or is it just a -- a bloody nose and embarrassment?

HARRIS: I think it's the latter. I think a lot of -- I think a lot of people would like to see Ferrari burn themselves. There's lots of acrimony in the car world. But, really, it's just bad luck.

I think it's just a shame that it happened in high ambient and high operating temperatures, because that's when you use your Ferrari, isn't it?

You use it when the weather is good and you want to nail the thing and make it go fast. And that creates heat.

So it does seem that it's a problem like that. But no, it's -- it's an isolated incident. There have been five that have gone up. Ferrari is -- is conducting a really comprehensive recall. It's be -- it's operated very fast. All five cars are being replaced free of charge, as well. So that's the kind of, you know, (INAUDIBLE) about the cars.

So you can't really argue with the response. It's pretty positive.

QUEST: Let -- the -- was it, do we know, was this a bad batch of glue?

Were they using a new, different type of adhesive?

Were they experimenting on something different?

Because otherwise, there would be a lot of Ferraris out there that have -- that could potentially go whoosh.

HARRIS: Yes, I don't think it was some kind of experimental glue. They've not been specific about that. Ferrari doesn't want to comment publicly over and above its statement its made. So I can't really tell you that.

All I can say is that it seems to be the proximity of this glue to a very, very hot part of the engine that is causing the problem.

So, yes, we don't know whether it's a special glue or not.

What I can say is that the fix removes the glue. The whole point of the fix is Ferrari is saying no glue, we're going to mechanically fasten the liner in now, so we're going to use bolts and rivets and old-fashioned stuff. We're not going to use any more glue.

QUEST: Finally, Chris, for those of us maybe tootling around in a Ford Fiesta or a -- a Renault this, that or the other or even a Toyota, a slight worry smile, perhaps, at those who can afford their Ferraris.

HARRIS: That's the problem, isn't it?

I mean if you see a bright red Ferrari by the side of the road that has got flames licking out of the boot, it's pretty difficult not to get the video camera out and try and post it on YouTube. It's just really unfortunate. No one's been hurt. Ferrari has a pretty good record in terms of recalls, it really does, compared to a lot of manufacturers. It's just one of those unfortunate incidents that make really juicy news, I'm afraid.

QUEST: Chris, you've just summed it up beautifully. It's certainly one of the biggest talking points.

Many thanks, indeed. Chris joining us to put that into perspective, joining us from Monmouth.

Now, Hurricane Earl is getting uncomfortably close to the East Coast of the United States.

And parts of Eastern Europe are recovering after a strong storm swept through.

Joining us now, Pedram is with us at the CNN World Weather Center.

This -- let's start, because the -- the one to the north -- to the Eastern United States, Hurricane Earl, lots of people who will be flying transatlantic in both directions will be concerned as to whether this is going to affect them.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, well said, Richard. Absolutely, it is going to be a concern, because this storm, as you said, getting fairly close out there. And it's a major hurricane. It's a category three storm. So winds fairly significant. Some good news with the feature in the way of weakening, but we'll talk about that momentarily.

You can take a look. There's Earl.

Another tropical storm, Fiona, there's going to be a concern for Bermuda. We have Tropical Depression Gaston behind that and another disturbance is going to develop, we think, inside the next 24 to 48 hours. A possibility of it, at least, out there behind Gaston.

But first, if we want to talk about Earl, because that's really been the primary concern. And look very carefully. It was a very organized feature right here.

But as of the last rain, see that dry air?

That's dry air filtering in right to the northwest quadrant of this storm. And that's a death trap for a hurricane. And really, one of the things we look for is cooler ocean temperatures that could weaken a storm. It doesn't have that going for it. We look for wind shear in the upper level of the atmosphere to cut the storm apart. And that's not going to happen.

But it does have dry air filtering into the northwest. So it has weakened now to a category three. We think gradual weakening is going to occur here inside the next 24 to 48 hours. And some time around, say, six in the morning local time, off the coast of the Carolina Banks there, near Cape Hatteras, working your way toward Virginia.

This shows you the swath of winds and how strong the winds will be outside of the center of the storm.

So, no, we don't think it's going to make landfall. But because it's such a broad feature, 118 kilometer per hour winds, that's hurricane force. Somewhere within 100 kilometers of this storm system is possible. So some of the coastal regions will feel hurricane force winds.

To the outer bands, about 62 to 90 kilometer per hour winds. That's also possible being tropical storm force winds and well to the north, very high population area that we were talking about there. And, of course, being Labor Day Weekend, something to keep in mind -- the outer bands of the storm system still a very serious threat as a lot of folks, perhaps, sending their kids out to the beaches. It's not something you want to do this Labor Day Weekend, because this storm system could have a path here that could bring it very close to the coastal regions. But the models right now wanting to keep it just offshore.

Some time Saturday morning, ran -- we think landfall around the Bay of Fundy, working its way toward Nova Scotia, eventually all the way out there toward Newfoundland. So it's something to be watching as the storm system should come to an end, or at least weaken significantly, as it gets there toward Canada some time by Saturday morning, at the latest, Saturday afternoon.

But let's talk about what's been happening in Europe, because there is another feature there. This storm system has been a pesky one in place here for the latest 24 hours, producing significant rainfall totals out of Poland and also the Czech Republic, upwards of almost 200 millimeters that being on Wednesday. And that feature going to lift to the north here. But if you have travel plans across Europe, right now, it looks like it's going to be pretty good.

Travel plans out there, green is a go for most everyone. And looking at Frankfurt, with little to no concerns to talk about. As this feature begins to lift to the north, high pressure builds -- and, Richard, the forecast looks rather dandy.

London, currently it's 17. Look at this -- Glasgow at 19 degrees. And we're talking the first week of September, when statistically, the temperatures in Glasgow about 18, 19 for a high. And we think the next 24 hours, temperatures across the northern portion of Europe, around London and also into Glasgow, around Scotland, going to be into the 20s. So a little above average. A nice way, Richard, to end the -- the weekend here -- or start the weekend, I should say, with the forecast.

QUEST: I'm much more concerned with that temperature in Madrid. I'm off to Spain tomorrow on me summer holidays and a nice 32 in that part of the world will do me nicely.

Many thanks.

JAVAHERI: Enjoy.

QUEST: Joining us there, Pedram Javaheri at the World Weather Center.

When we come back in a moment, endless rows of pasta, salami and bottles of olive oil -- a new food emporium dedicated to all things Italian has opened up in New York. Maggie Lake paid a visit and tucked it in her review, in a moment.

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: The market went up 200 points odd in New York. Today, it's up just 20 odd -- 24 points.

Alison Kosik is at the New York Stock Exchange -- Alison, why have you run out of steam?

ALISON KOSIK, CNN CORRESPONDENT: Well, you know, Richard, you know, it's going to be a holiday next week, did you know, the Labor Day holiday?

I think -- I don't think there's anybody left on the floor behind me. I see a lot of paper on the floor, but I think everybody has gone home for the long weekend.

I think what's really happening with stocks is they're taking a breather between the big rally we had Wednesday and then Friday's key jobs report.

We did have a lot of economic data today, though, that is keeping the markets in positive territory -- the new jobless claims numbers fell for the second week in a row. We also got better than expected August sales -- retail sales numbers for some of the nation's retailers. That's good news and a better than expected pending home sales report.

So that it keeping stocks in positive territory, at least -- Richard.

QUEST: And, of course, you've got the jobs numbers tomorrow, which we will be watching very closely, indeed.

What are you expecting, 100,000 off -- 150,000 off?

KOSIK: Yes, it's -- it's not going to be pretty, that's for sure. I mean economists are expecting to see a loss of about 130,000 jobs or 120,000 jobs, somewhere in that range. You know, they're also expecting the unemployment rate to tick up to 9.6 percent. But I want you to know that most of that is -- of the job losses that I mentioned is going to be because those temporary government Census jobs are going away.

The private sector is what we're really going to be keying in on though, Richard. That's the number we're looking for. There's an expectation there to add about 40,000 positions. We'll see if that's true, because we had that ADP report yesterday that said a loss of 10,000. So we'll wind up -- we'll wind up seeing, you know, who's exactly right. We'll get that answer tomorrow -- Richard.

QUEST: It's Labor Day this weekend and if I'm not mistaken, that means, Alison, put your white shoes back into the closet. No more white shoes out...

KOSIK: I shall.

QUEST: -- particularly in the Hamptons.

Alison Kosik in...

KOSIK: I've got it.

QUEST: -- in New York.

Now, the celebrity chef, Mario Batali, and his business partners, have opened up a brand new Italian food emporium in New York. They're serving up mouth-watering delights.

Will shoppers fork out for a slice of food heaven?

Maggie Lake has been to discover.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN CORRESPONDENT (voice-over): They cut a ribbon made of -- what else -- fine Italian pasta. The grand opening of Eataly, the massive new Italian food mecca in Manhattan.

Dignitaries like New York Mayor Michael Bloomberg were quick to give their seal of approval.

UNIDENTIFIED MALE: Mr. Mayor, how is the pizza?

LAKE: At more than 40,000 square feet, Eataly is the QE2 of food courts and in uncertain economic times, a multi-million dollar business gamble for celebrity chef, Mario Batali, and other Eataly partners.

MARIO BATALI, CELEBRITY CHEF & EATALY PARTNER: It is a gamble. But I think we -- we -- we're kind of betting in the house that the Italian culture is such a draw and that this is so unique that it won't be perceived as a museum or a temple, but like a piazza -- a place where you go and hang out and eat and drink.

LAKE: Eataly already has stores in Italy and Japan. But this location, housing seven restaurants and a high end supermarket, is its splashiest space yet. Eataly sells fine meats, cheeses, breads, pastas. And as for pastries...

BATALI: And what might be a big game changer for all New Yorkers is the amazing, delicious, light interpretation of traditional Italian pastries.

What's this one?

UNIDENTIFIED MALE: This is panna cotta with toasted caramel sauce, a little bit of sauce.

LAKE: I like this.

BATALI: Wen you go there, they're going to know you went to the right place.

LAKE: Unbelievable.

BATALI: Right. It's spectacular.

Now we're going to go look at the vegetable butcher and the vegetable restaurant. This is kakuza (ph). It's like a zucchini with a little bit more seeds. We're going to slice it up and dress it with a little great extra virgin olive oil and a little salt and a little mint.

LAKE: Oh my gosh.

BATALI: Now, if you serve that...

LAKE: Unbelievable.

What's the biggest task for you guys as you -- as you start your launch?

JOE BASTIANICH, EATALY PARTNER: I think that it -- it's not a market, it's not a restaurant, but it's a combination, so the best of eating and the best of shopping. It's a little bit difficult to explain at times. But once you -- once you visit, it's compelling, it's powerful and it's very clear.

LAKE (voice-over): Still, the sheer size and amount of inventory that needs to be made fresh daily presents a massive challenge for Eataly's super chef.

BATALI: The real bet is not whether the restaurants will draw people, because they will.

The real bet is how much of the percentage of the business is going to be retail grocery store?

And for it to really work, it has to be at least 50 percent.

LAKE (on camera): Really?

BATALI: Yes.

LAKE: So it's not just dressing, the grocery store isn't dressing...

BATALI: It's not dressing for the restaurant. No, I see the restaurant as a dressing for the retail.

LAKE (voice-over): It's a retail concept that Batali says has universal appeal.

BATALI: So they see the product, they taste it a little counter or at a little restaurant. Then we show them how to do it at their house so that they can personalize it and own it. Americans will never get tired of that idea. Or Canadians or South Americans or anybody, for that matter.

LAKE: Eataly's famous foodies working hard to build a new global brand one (INAUDIBLE) at a time.

Maggie Lake, CNN, New York.

(on camera): We got good pulp.

(END VIDEO TAPE)

QUEST: Maggie Lake enjoying the Italian food.

And notice not a speckle of food here on this side of the Atlantic.

When we come back in a moment, we've been talking throughout the program about house prices and what that means for you and me. Your Tweets on home sweet home, after the break. It's a Profitable Moment -- or maybe not that profitable, bearing in mind house prices, in a moment.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

There is always an element of schadenfreude when you hear about those people who boasted about the high price of their property and how much it was worth and suddenly found it's reduced in value dramatically.

There's nothing worse than a property boar that insists on going on and on and on about how much they were worth and you now say yes, but look at property prices today.

Well, tonight, we talked a lot about property prices on this program. So now some of your Tweets, your Twitters on the phrases about home sweet home.

Allrighty (ph) Tweeted to me his favorite phrase -- or their favorite phrase: "All quiet on the home front."

PRZamiekel (ph) says: "East or west, home is best."

Edge148 (ph) writes: "Charity begins at home."

Aron19: "Home sweet home mia gata (ph)." Johns13: "Be it ever so humble, there's no place like home."

There's plenty more where this came from.

WendyOCooperML (ph): "Home is where you hang your hat."

And my favorite, MOPhoenix (ph): "An Englishman's home is his castle."

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.

"WORLD ONE" is next.

END