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QUEST MEANS BUSINESS

US Stocks Struggle; Audi Sees Record March Sales in US; Sony Reports Painful Restructuring Ahead; Sony's Struggles; Billion-Dollar Tech Deals; Avon Has New CEO; US Dollar Loses Ground; Future Cities: Vancouver Embraces Urban Farming for Sustainability

Aired April 9, 2012 - 14:00   ET

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


RICHARD QUEST, HOST: It's a jobs jolt as the US market gives a reaction -- the first reaction -- to the unemployment report.

Cutting jobs to get out of the red. Sony is planning to downsize.

And Facebook's photo upload. It's bought Instagram for a billion dollars.

I'm Richard Quest. A new week, and I mean business.

Good evening. It's back to work and back below 13,000 as traders on Wall Street return from an Easter break, and they have two big reasons to sell: rising inflation in China and weak jobs data on Friday.

Felicia Taylor is at the New York Stock Exchange. I suppose Q2, the numbers, the market, disappointing is an understatement.

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Absolutely. A job creation of 120,000 jobs in the month of March is dismal at best. We were expecting more like 200, 210,000. So that's almost a 50 percent drop in what expectations were. And a lot of traders and investors are wondering how in the world could they get that number so wrong.

And the other thing that's interesting is that the unemployment rate dropped from 8.3 percent to 8.2 percent. You have to scratch your head and go, how is that feasible when job creation didn't exist And the answer is that people are dropping out of the jobs market, so that's why the percentage actually declined.

So, there was do doubt about it that this was a much weaker than expected number. And the other problem was that the revisions in January and February were also much less than expected. So, that's the problem that's hitting the market right now.

And because of that number that was so weak, people are going to be listening to Ben Bernanke's speech this evening --

QUEST: Right.

TAYLOR: -- in the US in Atlanta to see whether or not he's going to hint at any kind of stimulus, considering this.

QUEST: The problem is that those jobs numbers were the bright spot, if you like. They were the reason for optimism that was then fueling the consumer confidence. The virtuous cycle, if you like, which can now turn into, potentially, Felicia, the downward spiral.

TAYLOR: Absolutely. There are analysts out there that are predicting that this is the beginning of a correction. They don't actually believe that that's going to happen, now, and I'll tell you why. They're hoping that, once again, the Federal Reserve chairman is going to add stimulus to the economy.

But you've got to remember, there's a lot of division within the Federal Reserve. There are plenty of dissenters that don't believe that that's going to do it. But in an election year, it would be a little surprising if he didn't want to boost those numbers and add to another round of quantitative easing --

QUEST: The fundamental --

TAYLOR: -- so, it's frightening that analysts think that this could be the beginning of the downturn once again.

QUEST: The fundamental fear is it is 2010 and 2011 redux. We started --

TAYLOR: Absolutely right.

QUEST: -- good in those years, and we reversed. Isn't that it?

TAYLOR: Absolutely. Couldn't this be the beginning of what is not a recovery? It's been tepid at best to begin with. So, are we going to see more numbers coming in like this and begin a downward trend that shows that job creation just doesn't exist?

You have to look at an ADP report that said that there was going to be increased numbers. And that got it so wrong. You really have to wonder why. Why did they get these numbers so wrong, and is there actually going to be any kind of strength in the month to come? A lot of doubters out there.

QUEST: All right. Felicia, we'll talk more about this in the days and weeks ahead. Felicia Taylor is at the New York Stock Exchange remember, if course, that most of Europe is closed for a longer Easter holiday. In the US, they get right back to it after the weekend.

As you can tell, the situation is confusing. The data we're seeing from the US gives us mixed signals about the recovery. In contrast to the disappointing job numbers, the luxury car maker Audi saw record March sales in the United States, up 18 percent from the previous year. How can this be?

Johan de Nysschen is the president of Audi America, and he said that despite this mixed messages, customers are feeling less self-conscious about buying high-end purchases.

(BEGIN VIDEOTAPE)

JOHAN DE NYSSCHEN, PRESIDENT, AUDI AMERICA: There's actually quite a bit of pent-up demand. The high-end consumers have always had the means to acquire luxury vehicles. There was a time when, I guess, socially it wasn't going to be the right thing to do. And generally, that has passed.

And so, people are getting back into the market, and there's general buoyancy. I have to say, even outside the luxury segments in the US auto industry right now, March sales were strong. Everybody's revising forecasts upwards. And consumer confidence is definitely returning.

QUEST: Do you find that slightly contradictory at a time when the overall growth numbers are still low, Europe is still in trouble and, frankly, we're not quite sure we're out of the woods?

DE NYSSCHEN: There's been a period of, I think, positive developments in that area. Gives people a feeling that things are getting better. The unemployment numbers in the US are at least going in the right direction.

And there's early signs, too, that the housing market is bottoming out. And you couple that with, I think, general optimism that Americans tend to have, this is helping to fuel consumer expenditure.

QUEST: When you go back to Europe, you should be bringing some of it back with you. Bottle it and put it on the plane with you, because on this side of the Atlantic, your business, however robust it may be, is -- needs a kick and a push.

DE NYSSCHEN: Yes, clearly, there's a question mark over the economic developments in Europe, and since we are -- not only have our headquarters in Germany but are the leading luxury auto maker in Europe, that is for us an important market and one that we will be watching very closely.

QUEST: And how would you differentiate and describe the Audi purchaser, the Audi driver in the US from somebody who would have, say, bought a BMW, Jaguar, Mercedes, or one of the US domestic luxury cars. What, for you, would be the differentiation?

DE NYSSCHEN: Audi is positioned as a -- not only as a luxury brand, but as a very progressive, forward-thinking, sophisticated and also a little bit understated sporty brand. So, there are a lot of words to describe it.

And if you then take that back and look at the demographic of our customer, obviously affluent, dynamic individuals who have achieved a certain station in life, but they associate themselves with the Audi brand and the product attributes as a reward for their own achievements and not so much to loudly proclaim their success from the rooftops.

They are very well-informed individuals, they know about the products they're buying, and they like the understated but sophisticated brand character of Audi. And that, I think, does set us apart from our illustrious competition.

(END VIDEOTAPE)

QUEST: The chief executive of Audi in the United States.

More grim news, this time from the Japanese company Sony. You could call it Sony's lost half-decade. The change of fortunes at the struggling giant, and it's going to involve tens of thousands of jobs, after the break.

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(COMMERCIAL BREAK)

QUEST: Sony's new management could be about to lay off 6 percent of the global workforce as it gets ready for another year of heavy losses. This is all being reported from the new chief executive, Kazuo Hirai, who warns of "painful restructuring."

If the reports are true, 10,000 jobs could be about to go at Sony. Now, we can't confirm this, but it's just about everywhere, and there's no smoke without fire, and it's obviously been well-telegraphed and leaked, 10,000 jobs are to go.

Sony's estimating a loss of $2.7 billion. The TV business is being blamed. It's in dire need of an overhaul, and the stock has been downgraded by Moody's and S&P.

Which, when you think of the giant that Sony is and the troubles -- or at least the difficulties and challenges -- it's facing, gives you pause forth and thought, because the struggles have been many. Whether it's the flooding in Thailand this year, the Japanese earthquake, 16,000 -- 16,000 - - jobs went in 2008.

So, put this into a perspective. You've got the share price down 74 percent, 16,000 jobs already gone and reports of another 10,000, Sony has failed to turn a profit for four straight years. Now, our correspondent in Tokyo is Kyung Lah, and she explains what's gone wrong.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT (voice-over): The monkey, so struck by a new invention, stands still, listening to a Walkman. The year, 1987.

Sony's heyday, innovating consumer products people loved. The 80s were a long time ago.

Sony today: a new boss, trying to return the company to those original innovative roots. "I have a very strong sense of crisis," says Hirai, referring to the competitive climate in the electronics industry. He adds, "We must swiftly create a unified Sony. Otherwise, we can't survive."

Sony's grim financial report underscored those serious words. The company announced for the full fiscal year ending in March, it expects to lose a stunning $2.9 billion. For the fourth year in a row, Sony says it will end the year in red.

Sony blames tough global conditions, like the Japanese tsunami that cut into production, Thailand's flooding, and the strong yen. But it's Sony's internal problems that are the biggest hurdle, say analysts.

"We don't know if Sony will turn around under Hirai or not," says Osamu Katayamua, "But Sony has no choice. Sony has to entrust him at this point."

LAH (on camera): At age 51, Hirai is a rather young CEO for a Japanese corporation, and he's an untested leader of a giant company. Analysts say he'll need youthful energy, for he steps into, arguably, the toughest job in Japan, Inc., turning around what's regarded as a corporate dinosaur.

Kyung Lah, CNN, Tokyo.

(END VIDEOTAPE)

QUEST: There's lots happening today in the technology digital world. Microsoft and Facebook have both done billion-dollar deals, and they each got something very different for their money. Microsoft went for AOL's patents, with more than 800 of them, and that was a deal worth $1.1 billion.

Shares in AOL are up more than 40 percent right now. Microsoft got some of the first social networking patents ever created in return, and that could be very useful in the weapon of never-ending legal battles between tech companies.

And now, the Facebook, which has just announced a huge purchase, it's bought the mobile photo app Instagram for $1 billion. The chief executive Mark Zuckerberg says it's the first and possibly only time Facebook will buy a company with so many users.

Instagram launched on Android last week. If you want to know what Instagram is and where you can put your photos that make them look retro, that's one we took in the office a short while ago.

Meanwhile, Avon has a new lady at the top. Sheri McCoy joins the beauty company as chief exec. She joins from Johnson & Johnson, J&J. Avon rejected a $10 billion takeover from Coty last week.

And the question I've been asking on Twitter @RichardQuest, $1 billion to buy Instagram, an app that basically makes your pictures look a bit funny. It seems an enormous amount of money. So, @RichardQuest, what am I missing about this deal that Zuckerberg and Facebook sees? What are you seeing that I simply can't see, other than a bit of old sepia tint?

After the break, Vancouver's recipe for success. Fresh food straight from the ground even in the middle of the city. It's our Future City, the urban farming revolution is next.

The currencies that you want to look at: the US dollar's headed the same way as stocks. It's losing ground against the euro, the franc -- Swiss franc, and the pound.

(COMMERCIAL BREAK)

QUEST: In a Future City, there are many things to consider in the search for sustainability. For instance, how we get our power, or also, how we use water and how we get food.

Vancouver on the west coast of Canada has made that one of its social planning initiatives. From urban farming to edible landscaping, it's Vancouver that knows eating what's right there in front of you is the key to becoming a Future City.

(BEGIN VIDEOTAPE)

BRENT TODERIAN, URBANWORKS, VANCOUVER: This is one of our many farmers' markets in the city of Vancouver. Local food has become a very, very important part of becoming the greenest city in the world, which is one of Vancouver's actual goals.

So, it's not superficial. It's very deeply embedded in all of our city-building thinking in Vancouver. Thank you very much.

SEANN DORY, SOLEFOOD: We're on Hasting Street, which is in the downtown east side of Vancouver, one of the most economically disadvantaged neighborhoods in Canada, and this is SOLEfood Farm, which is a half-acre urban farm in the middle of this neighborhood.

In our first season, we grew for four and a half months, and we produced roughly 10,000 pounds of food. Our second season, we did well over double that, so close to 25, 30,000 pounds of food on 17,000 square feet, so less than half an acre, which is a lot of food.

We grow lettuce and arugula and kale, chard, tomatoes, peppers, eggplants, cucumbers, strawberries. All the stuff that's grown here is taken to market and sold at market. So, we're growing a lot of stuff in a pretty small space.

GREGOR ROBERTSON, MAYOR, VANCOUVER: The urban farming movement is a real revolution in cities all over the world. People rediscovering the importance of food and the ability to grow food in cities is far more significant than, I think, anyone realized.

UNIDENTIFIED FEMALE: Organic carrots are awesome.

ROBERTSON: It is a very important thing for many Vancouverites, and it's -- I think it's part of who we are. There's a lot of pride in this that we are a very green city and a healthy city.

STEVE JOHANSEN, ORGANIC OCEAN: Today, we came out here to show you guys Spot Prawning, Spot Prawn fishing out of Vancouver. We're about five miles from downtown here at the dock at Granville Island, catching big, beautiful, wild, sweet, Spot Prawns.

UNIDENTIFIED MALE: Here we go. Oh!

JOSH WOLFE, CHEF, FRESH LOCAL WILD: It's one of the most sustainable fisheries in the world. It's a trap caught fishery. We set these traps. We're not dragging a net along the bottom. You're destroying the habitat on the ocean floor. That's why you can feel really good about eating Spot Prawns. There's no issues attached to them, and they taste really good, too.

JOHANSEN: It doesn't get fresher, does it?

WOLFE: For me as a chef, I spend as much time as I can doing this. If 20 years from now we would like to still be feeding our developing urban centers around the world.

UNIDENTIFIED MALE: Oh, looks nice!

WOLFE: We need to start looking at proper ways to eat instead of fantasizing about what the possibilities are. We need to eat what's there. We need to eat what's in front of us, and we need to start using it properly.

So, now you know where they come from, let's get them in the restaurant and see what we can do with them.

These prawns came out of the water about an hour and 20 minutes ago.

Want to eat that one? Just a little olive oil to finish it. That's a very light ceviche and wild BC Spot Prawns, seared Albacore tuna, tomato, cucumber, and a balsamic dressing.

JULIA SMITH, URBAN DIGS FARM, VANCOUVER: Here, chick, chick! Lucky, Lucy!

Vancouver passed a backyard chicken bylaw a couple of years ago, and so there's been a lot of interest in backyard hens. They make great pets, they can eat all your kitchen scraps, and make your breakfast. So, you can't say that about the family dog.

I'm a full-time farmer. We're right in the middle of the city in my basement. This is what we do for a living. This is pretty much every day.

EMI DO, YUMMY YARDS, VANCOUVER: More than 50 percent of our world's population lives in cities. If we as urban citizens aren't taking care of our food, who is going to, right?

SMITH: I'm putting five seeds into each soil block, because onions are kind of cool the way they grow. They'll grow away from each other. Most of it will go out to our commercial plats, which are just on the edges of the city. We're trying to make use of unused land.

The commercial farmers with the big equipment don't tend to be very interested in anything smaller than five acres, but us small-scale growers, who aren't using big equipment and have hands, we love those areas.

DO: You have to think really hard about maximizing the fate that you have. We have to think about maybe doing one clod right after the other after the other. I've had a couple of kids gasp in awe as they saw me pulling out carrots and going, "It comes from there?" So, it's been really rewarding to be working here.

SMITH: Not all of our days are spent as glamorously as this one out in the rain planting.

We're already spending a lot of city resources on doing things like cutting lawns and planting ornamental flowers, and a lot of people think that food is beautiful, too. So, if you're going to be tending to something and spending taxpayers' dollars to take care of something in a city park, it might as well be a food crop.

ROBERTSON: One of the explicit goals is edible landscaping in the parks. We have almost 40,000 cherry blossom trees, but they're not edible cherries.

SMITH: We have a pretty young, vibrant city. We're pretty forward- thinking and progressive. We have a sympathetic civic government right now. And so, I think all of the stars have aligned to make urban farming a successful venture in Vancouver.

(END VIDEOTAPE)

QUEST: In a moment -- in a moment, we're going on an egg hunt. Stay with us to find out what's sweet and what's rotten in the global economy. This is QUEST MEANS BUSINESS. Good evening.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, it is the news which always comes first.

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QUEST: There's been a huge increase in Syria's death toll. An opposition group now says security forces have killed 145 people today in side the country. And for the first time, Syrian troops are accused of carrying out deadly attacks on Lebanese soil as well.

Relatives and supporters are growing more concerned about the health of the hunger striker in Bahrain. His daughter says he's having trouble breathing when she talked to him on Saturday night. Abdulhadi al-Khawaja is protesting his life sentence in connection with anti-government demonstrations.

A North Korean rocket launch could take place as early as Thursday, but a new intelligence report suggests Pyongyang could use outrage over the launch as cover for a new nuclear test. Several countries believe the satellite launch is just a pretext for testing a long-range missile.

Bail has been set at more than $9 million each for the two suspects in the spate of shootings in the US state of Oklahoma. Jake England and Alvin Watts had their first court proceedings on Monday after being arrested the day before. They're charged with three counts of murder and two counts of shooting with intent to kill.

END