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QUEST MEANS BUSINESS

New CEO at GM; Women in Manufacturing; US Stock Markets Dip; Volcker Rule; Pan-European Banking Union; European Markets Down; Ireland Beyond the Bailout; Dublin Rebounds; Ireland's Recovery

Aired December 10, 2013 - 16:00   ET

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


(NEW YORK STOCK EXCHANGE CLOSING BELL)

MAGGIE LAKE, HOST: It's that time of the day, it is the closing bell on Wall Street, stock markets closing just slightly lower. It's Tuesday the 10th of December.

GM drives through the glass ceiling. For the first time in history, a woman will run the company.

No more bets, please. US regulators crack down on casino banking.

And Ireland's finance minister tells us why he's so confident in the economic recovery.

I'm Maggie Lake. This is QUEST MEANS BUSINESS.

Good evening. General Motors is handing the keys over to Mary Barra. She'll become the first woman to run a major automaker when she takes the CEO seat on January 15th. Mary Barra may not be a household name around the world or even in the Motor City, but she is an executive vice president and 33-year veteran of GM.

Barra started out at the Pontiac Motor Division where her father worked for 39 years. She has held senior leadership roles in human resources, international design, engineering, and program management.

Since August, Barra has served as executive vice president of global product development and global purchasing and supply chain. She explained her strategy for the company in an interview with "Fortune" back in October.

(BEGIN VIDEO CLIP)

MARY BARRA, INCOMING CEO, GENERAL MOTORS: If we're going to compete in a segment in any market, we're going to go to win. I think that was a change for General Motors, and frankly, the team has rallied around that. Because everyone, whatever industry or business you go to, people want to go and do their best.

So, I feel so much of what I need to do is just set up the systems, enable the processes, and have the right leadership that our designers and our engineers and our buyers can go do the best work they can do every day. And like I said, I -- simple thing I said is no more crappy cars.

(END VIDEO CLIP)

LAKE: That's putting it bluntly. Joining me now is Peter Valdes- Dapena. He's a senior writer at CNN Money who covers the auto industry. Peter, I want to talk about GM, but first, a lot of people have said this is overdue. A car is a massive purchase for families, usually the women very involved in the purchase. Makes a lot of sense to have a woman at the helm.

PETER VALDES-DAPENA, CNN MONEY SENIOR WRITER: It really does, because they do have -- they do bring a perspective on it that a lot of male buyers typically aren't focused on some of the things on the more practical aspects.

But make no bones about it, Mary Barra is a person with a serious engineering and car background. She knows this business really, really well, so she brings a lot more to the table, certainly, than just that --

(CROSSTALK)

LAKE: And just in terms of that -- yes.

VALDES-DAPENA: And in terms of "no more crappy cars," they've been on a run.

LAKE: Which leads me to what I'm really thinking about. This is a really important week for GM, not only a new CEO, but the government's selling the last of its shares. Obviously, they are far from those dark days where they almost collapsed. But exactly what state is GM, especially when you stack it up against the competition, which is also, frankly, doing well?

VALDES-DAPENA: Pretty much the whole industry's doing well, but GM -- if I were GM right now, I'd be really happy. Because not only the things you mentioned, they're profitable, their stock price is up.

This is a business that's about products and about cars, and GM's in very good shape there, Motor Trend Car of the Year Cadillac CTS, Automobile of the Year, Chevrolet Corvette Stingray. Consumer Reports calling the Chevy Impala the best sedan they've ever tested and the Sierra the best truck on the market.

So, in that stuff -- and that's an area that Mary Barra should be rightly proud, because she was head of product development before this -- they're doing very well there, too. And that stands in good stead for the future.

It means that they're doing well now, but since they clearly know how to make a good product and the person who helped develop those products is now in charge of the whole company, that's a good sign for the future of General Motors.

LAKE: And as you point out, somebody who is not only herself has pedigree in terms of the car industry, but roots in the state. Her father worked at -- I mean, it's in her blood.

And the first time someone from the car industry is running this company, right? The last two CEOs were from outside the company -- outside the industry, rather. Right? Telecoms, Whitacre and Akerson both not necessarily automotive people at their core.

VALDES-DAPENA: Right. That was a very -- that was a very different time. Before that, GM generally has been run by people from not only inside the industry, but inside GM. And in that sense, Mary Barra's a little bit of a return to the times of --

LAKE: Is that going to be a problem, though?

VALDES-DAPENA: -- more traditional --

LAKE: Can she continue to clean up their bureaucracy if she is from the inside?

VALDES-DAPENA: Well, one of the things that a lot of people I've talked to have credited her with is tackling that bureaucracy. She did spend some time, for example, as the head of HR, of human resources. She went from product side --

LAKE: Nobody knows about --

VALDES-DAPENA: -- to human resources --

LAKE: -- nobody knows about -- yes --

VALDES-DAPENA: -- and back to product.

LAKE: -- having to thin out than the people in human resources.

VALDES-DAPENA: And how to change culture. GM used to have a massive document on how to dress at work. She boiled that whole thing down to just one sentence: dress appropriately.

LAKE: Investors certainly seem to like it. And then, nothing like staring at the abyss of the company collapsing to get management on track for the future. Peter, thank you so much for sharing your insight with us. Appreciate it.

Well, Barra knows GM inside and out, as Peter was just telling us. She joined the company at 18 and has never looked back since.

(BEGIN VIDEO CLIP)

BARRA: From fifth grade on, I loved math and science, and so it was very natural for me to want to go into those. I wasn't quite sure what I was going to do with it. At one point, when I was headed to college, I was just simply going to major in math because I really enjoyed that.

And then found that a career in engineering really applied math, and so it seemed to make a lot of sense. And then, automotive is -- it's kind of in my blood. I grew up in southeastern Michigan.

My dad was a dyemaker at General Motors for about 39 years, so from the days where you stood outside the dealerships looking to see the new vehicles, that was kind of how I was raised, so it seemed very natural to go into the auto industry.

(END VIDEO CLIP)

LAKE: Barra's appointment stands out in a field that is traditionally dominated by men. Just one in five workers in the auto industry is a woman, and it's the same across the manufacturing sector. Out of a total workforce of 12 million, 3.3 million are women. There are currently 21 female CEOs in the Fortune 500. Barra becomes the 22nd when she takes up her new role in January.

The trend, though, remains: women are a minority in the boardroom. according to the 2013 Catalyst Census, they comprise 16.9 percent of corporate board seats. There has been no significant change in the numbers in nearly a decade.

Come January 15th, Mary Barra will be the most powerful woman in the Fortune 500. Leigh Gallagher is assistant managing editor at "Fortune" magazine, and she is the co-chair of Fortune's Most Powerful Women summit, so I'm sure that you had a smile on your face when you saw the announcement today.

But Leigh, I was going to say that I feel like I've been talking about this for the last ten years, and I'm right. The numbers really haven't changed. One thing about Mary, she has an engineering background. That's unusual, still, isn't it? Is that what's sort of holding us back, education?

LEIGH GALLAGHER, ASSISTANT MANGING EDITOR, "FORTUNE": Well, it's interesting. It might be unusual in the rank and file, but when you look at the women who are running the biggest companies in America, they are almost all math and science majors, which is an interesting trend.

Just today, as I was going back through this, I really looked at this. If you look at Indra Nooyi, majored in physics and chemistry, runs Pepsi. Ginni Rometty, engineering, runs IBM.

(CROSSTALK)

LAKE: I talked a lot about education with her --

GALLAGHER: Ellen Kullman, runs DuPont, engineering major.

LAKE: Yes.

GALLAGHER: And the list goes on and on and on. Marissa Mayer, of course, computer science background. So, if there's a lesson here for young women, I think that really it's this -- math and science is really winning the day at the top echelons of corporate America for women.

LAKE: But it's hard to change that culture at a low level now with the students who are in there. A lot of that requires investment, that requires money. We're in a period where all we're talking about everywhere is cutting budgets. How do you change that? How do we increase the pace of change?

GALLAGHER: I think we have to get young women interested in math and science, and there's a lot of initiatives involved in doing just that. But I think in terms of overall leadership, I do think we're really at the point of seeing a sea change.

If you think about it, OK, so there's 22 -- 23 Fortune 500 CEOs who are women. Well, in 2008, there were 12. And in 2010, there were 8. So - - I'm sorry, in 2004 there were 8. I'm getting my numbers wrong.

LAKE: Yes.

GALLAGHER: I wasn't a math and science major.

(LAUGHTER)

LAKE: Right. And neither was I. But -- so we are moving --

(CROSSTALK)

GALLAGHER: But we're moving in the right direction --

LAKE: -- for mentoring.

GALLAGHER: -- pretty fast. And if you look, a woman is running "The New York Times," a woman is running "Time" magazine.

LAKE: But what about family.

GALLAGHER: A woman ran for mayor.

LAKE: Very quickly, family is still an issue, isn't it? Taking time out.

GALLAGHER: It's still an issue. One thing that's interesting, at that women's summit, our Most Powerful Women's summit, where that interview was taken from, later, Anne-Marie Slaughter did an interview --

LAKE: Yes.

GALLAGHER: -- and she said, now many women in the audience have a stay-at-home husband? A large -- not a majority. A lot of women raised their hand, and --

LAKE: This is --

GALLAGHER: -- this is the group that will probably more than any group have that.

LAKE: Yes.

GALLAGHER: But that's the secret to a lot of women's success.

LAKE: And hopefully they'll change some of the rules so that it doesn't have to be case.

GALLAGHER: There's this need -- yes.

LAKE: I think -- I think that's one of the big barriers.

GALLAGHER: And we're seeing that -- we're seeing more flexibility in corporate America.

LAKE: Yes.

GALLAGHER: We're seeing the understanding that everyone benefits when there's more women in the boardroom. Everyone does. It's just obvious.

LAKE: Absolutely. Let's hope this is the beginning and you're right about the sea change. Leigh, great to see you.

GALLAGHER: You too, thanks.

LAKE: Thank you so much. Well, no record highs on Wall Street. Zain Asher joins us from the New York Stock Exchange. Zain, looks like a lot of people were sidelined.

ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Absolutely, Maggie. What we saw today was just some light profit-taking, which is --

(CROSSTALK)

LAKE: I wish we had more time, I could talk about this forever.

ASHER: -- to be expected. The market held between a very sort of tight range today. Low volume, which doesn't necessarily -- which usually does mean volatility as well. Also, we didn't really see much in terms of economic data, so there wasn't that much to trade on.

People were squarely focused on the Fed. That is what everyone here is talking about, the Fed, what will happen next week. They're not necessarily expecting tapering to happen next week, but what they do expect is that we are going to get some clarification on the timeline, some clarification on the scale and the timeline.

Obviously, the Fed does have to be very careful about what they say and how they say it. The last thing they want is a pullback. Maggie?

LAKE: Zain, thank you so much. When banks gamble, the economy loses. When we come back, we'll talk about what regulators are doing to close down the casino.

(COMMERCIAL BREAK)

LAKE: Nine hundred twenty-one pages, just one rule to stop American banks gambling with their own cash. The Volcker Rule now has the seal of approval from five regulatory bodies, including the Fed and the SEC. It's meant to prevent banks from playing the market for profit and losing.

The rule bans banks from making bets with their own money, a practice known as proprietary trading. It also prevents banks from owning a significant stake in hedge funds or private equity funds. It won't be enforced until 2015.

Now, the final rule attempts to tighten up some loopholes, which allow banks to trade with their own money. It all centers on what you mean by "proprietary trading." The problem is, it's difficult to define. Paul Volcker himself joked, "It's like pornography. You know it when you see it."

Now, banks say an activity is not proprietary trading when it is market-making, where banks hold securities in order to handle customer transactions, or hedging, where banks trade to offset risks. These can both resemble proprietary trading. If you think about the London Whale, trades there in that instance where said to be a type of hedging.

So, to keep banks in line, the final Volcker rule says, "For market- making" -- this is some of the details -- "banks must be engaged in both buying and selling. They must demonstrate historical demand and compensation must not reward or incentivize proprietary trading."

Now, when it comes to hedging, the rules here say that "This must be designed to reduce risk. Risk must be specific, identifiable. Banks need ongoing recalibration of trades to make sure they don't build up speculative positions.

So, regulators want details. Bart Chilton is commissioner for the US Commodity Trading Future Commission. He likens proprietary trading to high-roller rooms at casinos, except a losing hand doesn't just affect the gamblers, it affects the entire economy.

Commissioner Chilton joins me now from Washington. Thank you so much for being with us. Congratulations, I know this was a long road to hammer out to get this rule into effect. In the end, is it tough enough?

BART CHILTON, COMMISSIONER, COMMODITY FUTURES TRADING COMMISSION: It is, Maggie. It's a fantastic thing that we've done in that for a long time, I thought this thing was not going to be appropriate whatsoever. Two weeks ago, it still would've allowed for the hedging to become speculative.

But we put some sideboards on that so far. What we've done is we have, as you expressed, we've gone ahead and put a coloration analysis -- that is, the hedge has to equal the risk. It can't be speculative in nature. That's a key thing. I think it's tough enough, and I think it's good for consumers and good for markets.

LAKE: One of the other things you were really pushing for is to have the CEOs -- they're not signing off saying we are not doing any proprietary trading, but they are having to give assurances that they are pursuing compliance, that they believe their compliance is in place. Why was that so important?

CHILTON: Well, we want somebody to sign on the bottom line. We want somebody to say whether or not they actually have compliance programs in place and that it looked at a bunch of different metrics. They're insuring that they're overseeing their compliance programs, not that they just say they're in place, but that they know they're in place.

(CROSSTALK)

LAKE: And that they are personally responsible --

CHILTON: That they have the internal fortitude --

LAKE: -- the CEO?

CHILTON: -- and the internal mechanisms to ensure that what they say, they actually do. That they walk the walk and talk the talk.

LAKE: And that the buck stops at the top. Presumably, they are not going to be able to as easily get away with the defense, "Well, I had trusted people that I thought were taking care of these things."

CHILTON: Yes, you're absolutely right. And that's why we want the CEOs to actually sign on the dotted line. And that's an important part of this. I'm not so sure that without it, you'd have such a meaningful rule.

LAKE: Now, we know that banks have deep pockets. They are lawyered up. And we already know that there is talk that they're going to try to fight this in court as well as look for any loophole that they can still find. And critics say that despite your efforts, there are still lots of them here. Are you worried about the fact that although it exists on paper, it's going to be awfully hard to enforce?

CHILTON: Well, I think it will be -- we'll be able to enforce it, Maggie, but I look at any sort of lawsuits as a sign that we probably did a decent job of making it strict. We're a litigious society. The world is a litigious society, so that doesn't concern me. I think the rule is very good and can withstand any potential litigation.

But there are certainly gray areas, and we're going to have to continue to work on those to ensure that those that want to try and create these high-flier bets and markets don't go ahead and do that, and that we as regulators are nimble and quick and that we're looking around the corner and trying to plug any loopholes that may exist in the future.

LAKE: And that will certainly be a relief to taxpayers who ended up holding the bag last time around. And Bart, you don't make money living in a courtroom. I'm sure the banks are conscious of that. Bart Chilton joining us from Washington. Thank you so much.

CHILTON: Thanks.

LAKE: European finance ministers are trying to thrash out some major changes to their banking system as well at a gathering in Brussels. The goal is to find a way to wind down failing banks and prevent a future economic crisis. The talks on the proposed Pan-European Banking Union continue, and Sweden's finance minister says it could take some time.

(BEGIN VIDEO CLIP)

ANDERS BORG, SWEDISH FINANCE MINISTER: It might be possible to find a political agreement on the broader principles today. It might be a long night, but there are some good steps that have been taken. And then we will probably have to get back on all the legal work later on, before Christmas. So, yes, I think that that could be the basis for a compromise today.

(END VIDEO CLIP)

LAKE: European stock markets closed lower today. One trader summed up the mood. He said, "Everyone's talking about tapering, and that's causing people to take a bit off the table." There was also another factor at play in the Swiss market. The stronger franc hit stocks like Roche, Novartis, and Nestle as it makes their exports more expensive.

Exit ahead: Ireland is close to making a clean break from its three- year bailout program. Our interview with the Irish finance minister as we kick off our Irish Recovery series next.

(COMMERCIAL BREAK)

LAKE: Ireland is set to exit its international bailout this Sunday, but European officials still want the country to make deeper budget cuts. The European Commission has warned Ireland to slash an extra $690 million from next year's budget to meet its deficit target.

In a paper sent to Ireland's finance committee, the Commission has urged Dublin to cut spending and raise taxes by a total of $3.4 billion. That's if Ireland wants to bring down its deficit to 3 percent of its GDP by 2015.

Now, Ireland was pushed to the brink of economic collapse after a real estate crash sparked a banking and economic crisis. The country officially fell into recession in September of 2008, the first eurozone country to do so, actually.

Later that year, the Irish government began injecting billions of dollars to prop up three of its major banks. Bailouts to Irish lenders would continue for another two years.

On November 16th, 2010, then prime minister Brian Cowen dismissed rumors that the country needed an international bailout. Less than two weeks later, his government accepted a $113 billion bailout package from the EU, the IMF, as well as the UK, Denmark, and Sweden.

In December of that year, Dublin announced a four-year austerity plan, including $13 billion in budget cuts, attempting to tackle its massive deficit. The country is confident those measures are working. Just last month, the Irish government announced the country would exit the bailout program on December 15th, this Sunday.

The property crash, the banking turmoil, and the economic downturn all hit the Irish capital hard. Five years after the crisis, Dublin is now on the mend, as tech and social media companies flock to the city. Jim Boulden took a tour to find out more. This is his first in a series of reports on Ireland, Beyond the Bailout.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Barry?

BARRY O'DOWD, HEAD OF EMERGING BUSINESS DIVISION, IDA: Thank you.

BOULDEN (voice-over): You don't have to travel far in a taxi to see that Dublin is on the move once again.

O'DOWD: 2013 for us is going to be probably our best year in the last ten years. So, it's nice here, down by the river.

BOULDEN: Barry O'Dowd is one of the people tasked with bringing young, fast-growing companies into Dublin's Docklands area.

O'DOWD: Word is out in the marketplace that talent is available here. When you go down to this Silicon Docks areas, the average age here is 25, 26. Typically in these projects, they are the very, very content level of graduate employees.

So, this is the new Facebook headquarters that's going to be. It would be ready for occupation in early 2014. So at the moment, Facebook are located just two blocks from here. They have about 400 people there at the moment.

BOULDEN: Right.

O'DOWD: They've announced an expansion that will bring it to 500 people. They've announced this building that they're moving into, which has go the capacity to bring it up to 1,000 people.

BOULDEN: OK. Well, let's see a bit more of this area from above, shall we?

O'DOWD: Sure.

You're seeing here with Google behind us, they have over 2,000 people now there. They're operating in about 48 different languages. They're the European, Middle East, and Africa headquarters.

So you go over there, and you go on one floor and you'll find people handling the Nordics. Another floor will be handling Southern European or whatever. And so, it's tech support. It's sales jobs. They're predominately graduate staff that are employed there.

BOULDEN (voice-over): Then there are the companies you likely have not heard of yet. Engine Yard is one of them.

O'DOWD: This is Eamon Leonard.

BOULDEN (on camera): Hi, Eamon.

EAMON LEONARD, ENGINE YARD: Nice to meet you.

BOULDEN (voice-over): With just a handful of employees, this firm from San Francisco has teamed up with a local firm to offer services for the Cloud into Europe, and did all of that during the economic crisis.

LEONARD: We just had our heads down getting on with it, really. It's a very Irish way of getting on with things. You can sit there and watch the world burn or you can try to do something about it.

BOULDEN: Like a good start-up, Engine Yard has a ping-pong table and takes up a fraction of a loft space in a Victorian warehouse. Ironically, it once housed an architecture firm that was reshaping the area during the boom, before the real estate bust. That bust made in-town spaces like this much more affordable.

LEONARD: All the third-party peripheral stuff is related to that, so service providers, office space, it suddenly becomes available, becomes cheaper, and things become more affordable.

BOULDEN: But many of these tiny firms down here aren't about to create thousands of new jobs overnight, so it's Dublin's task to attract hundreds of these small firms just to replace the jobs lost in the economic crisis.

Now, within sight of the city's famous Ha'penny Bridge, property prices are shooting up in some parts of Dublin, blamed on, of all things, a housing shortage, as more graduates move in, some from abroad who once emigrated. This kind of growth is different this time, says Barry O'Dowd.

O'DOWD: The cost-base of our hotels, transport costs, are holding their own. Our wage costs have been brought down significantly.

BOULDEN: During the boom time, Dublin had a nickname: the City of Cranes. Five years on, it's small firms alongside the tech giants helping the city make small steps of recovery.

Jim Boulden, CNN, Dublin.

(END VIDEOTAPE)

LAKE: Ireland's finance minister is confident about the country's recovery and says the country can exit the bailout without a credit line from the EU. Jim Boulden sat down with Michael Noonan and asked him if other bailed-out European countries could learn from Ireland.

(BEGIN VIDEOTAPE)

MICHAEL NOONAN, IRISH FINANCE MINISTER: I think problems tend to be unique to the countries that generate those problems, but because we worked through a European bailout program and because other countries are in it, I'm sure there are common experiences that can be shared, and I have done that, for example, with my Portuguese colleagues.

BOULDEN: But you've decided to exit the bailout without a safety net, without a line of credit. Why? That was a big decision, and we were all waiting to hear about that decision. Why did you decide to have no safety net?

NOONAN: Well, first of all, it wasn't a clear-cut call. It was an evenly-balanced on the way into making the decision. I suppose the factors were, one, that we had a backstop anyway because we're carrying about $20 billion in cash reserves in our treasury agency.

And secondly, the process to getting a bailout or getting a precautionary program weren't quite clear. And with our cash balances, we wouldn't actually need a precautionary program for 12 months, 15 months. So there was a timing issue with a possible precautionary program as well, if it would be coming at a time when we didn't need it, and maybe not available at a time when we could need it.

BOULDEN: But you've said this is not a time to throw your hats in the air and claim victory.

NOONAN: No. The bailout was one piece of work which we had to do. At the same time, we had a domestic program running in parallel where we took the economy sector by sector and repaired the damaged sectors and built on them and built on the strong sectors.

So we have an economy moving now across all sectors. We're in our third year of growth. Unemployment is reducing, employment is going up. At the end of our period in office in two years' time, we expect to have 2 million people at work again. Over the last 15 months, we've been putting on about 1200 jobs a week, net, which is a very significant growth in jobs for Ireland.

BOULDEN: But your budget -- upcoming budget has more austerity in it, has more tax rises, so you're not out of the woods yet.

NOONAN: No, the fiscal correction was necessary. Our obligation under the program and our obligation in the interest of normal prudent management is to get our deficit down to the European requirements.

BOULDEN: Part of the bailout agreement, of course, was privatization, and you have recently pulled the privatization of the big gas company. Also, you still own a chunk of the state airline. I'm wondering if you feel that the austerity program is falling backwards, or is it a temporary blip?

NOONAN: No, it's simply that we always said we wouldn't get involved in fire sales. We don't need the money, and we're not in the position where we have to sell at any price.

But if somebody comes back for the gas company tomorrow and offers what we consider to be the fair value price, we'll sell. We're not ideological about this. But we're not going to be pushed into selling at below fair value. That's the issue.

BOULDEN: Well, we're sitting here in Dublin, and I noticed some cranes along the river, which is good to see, building cranes again.

Ironically, house prices -- or property prices in Dublin are shooting up this year. It was the real estate bubble that got Ireland in trouble in the first place. What are you going to do to address this? Because you want Dublin to be affordable for people to come into these companies, these start-ups that are lining the Docklands area.

NOONAN: Well, where the position now is that there was nothing wrong with development and construction except that it got too big. It went over 20 percent of GDP, and then it became a kind of a scapegoated sector that was getting blamed for everything.

BOULDEN: A lot of people wanted to see these developers that they thought it was criminal what happened, they wanted to see them go to jail. But people didn't go to jail Why is that?

NOONAN: Well, I suppose the bankers are the real scapegoat profession as a result of the Irish collapse, and then the builders. The cases that will be brought against particularly the bankers are very complex, and that work is proceeding. But we understand that some bankers will before the courts in 2014.

BOULDEN: Do you think the builders should get off scott-free?

NOONAN: Well, the builders didn't get off scott-free, because their businesses went bust and they went from being extraordinary wealthy people with extraordinary lifestyles to struggling now and looking after property portfolios owned by NAMA, our bad bank for building assets. So nobody has got off scott-free.

But whether people broke the law or not and will be accused of criminal offenses, the first round of that is more likely to be bankers than developers.

(END VIDEOTAPE)

LAKE: It's being called the biggest gathering of global leaders in recent history. Nelson Mandela's memorial service in Johannesburg when we return.

(COMMERCIAL BREAK)

LAKE: Welcome back. I'm Maggie Lake. Here are the main news headlines we're following this hour.

(BEGIN VIDEO CLIP)

LAKE (voice-over): Tens of thousands of South Africans have turned out in Johannesburg to remember Nelson Mandela. The national memorial service was held in an outdoor stadium in the rain. That did not keep the crowds away, including celebrities, religious leaders and dozens of heads of state.

U.S. Secretary of State John Kerry urged Congress today to put off more sanctions on Iran. Some lawmakers are pushing for harder sanctions in order to force the country's hands on the nuclear issue. Kerry wants to continue with the current diplomatic path, which eases some economic sanctions if Iran limits parts of its nuclear problem.

Ukraine's president sat down with three former predecessors on Tuesday to try and defuse tensions in the country. Viktor Yanukovych later met with E.U. foreign policy chief Catherine Ashton as protesters again convened in the capital to vent their anger at the president's decision to align with Russia.

French President Francois Hollande has arrived in the Central African Republic after two French soldiers were killed in the fighting there. The soldiers are part of a joint African French force charged with stopping violence between competing Muslims and Christian militias.

The Nobel Committee awarded its Peace Prize to the Organization for the Prohibition of Chemical Weapons today. Created 20 years ago, the group was praised for its work to eliminate an entire category of weapons of mass destruction. The group's chairman said many challenges lie ahead as it works to eliminate serious chemical weapons in 2014.

(MUSIC PLAYING)

(END VIDEO CLIP)

LAKE: Tens of thousands gathered today at Johannesburg Stadium to honor the life of Nelson Mandela at a memorial service. Crowds celebrated the former South African president through dance and songs, despite the pouring rain.

President Obama offered a heartfelt eulogy. He asked leaders around the world to consider Mandela's legacy when they are faced with injustice and unfairness in their own economies.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We, too, must act on behalf of peace. There are too many people who happily embrace Madiba's legacy of racial reconciliation but passionately resist even modest reforms that would challenge chronic poverty and growing inequality.

(END VIDEO CLIP)

LAKE: President Obama was just one of 91 heads of state in attendance. The memorial service is one of the largest gatherings of global leaders in recent history and security was extremely tight.

David McKenzie has the story.

(BEGIN VIDEOTAPE)

DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): Massive crowds of mourners refused to let the rain dampen their tribute to Nelson Mandela today. More than 90,000 people expected to flood Johannesburg's open air soccer stadium.

By air and land, thousands of security personnel are on hand at the memorial service to protect the masses and to help bodyguards escorting heads of state from more than 90 countries.

Police officers, South African military troops and elite task forces are enacting their security plan, years in the making.

BRIG. GEN. XOLANI MABANGA, SOUTH AFRICA DEPARTMENT OF DEFENSE: Should anybody or anything dare to disturb or to disrupt that person will be dealt with.

MCKENZIE (voice-over): President Obama, the first lady and three former heads of state, President George W. Bush, and Presidents Clinton and Carter, all present to pay their respects to the man affectionately known as Madiba. With so many dignitaries from far and wide, the security stakes are exceedingly high.

BOB BAER, CNN NATIONAL SECURITY ANALYST: It is up to the locals to do this. The Secret Service can provide close protection but any major armed group has got to be stopped by the locals. They're going to have military units on hand. They're going to keep the crowds away.

MCKENZIE (voice-over): South Africa is no stranger to playing international host. This soccer stadium was the scene of Mandela's last public appearance, the 2010 World Cup. But what makes this event different, the tremendous amount of mourners and the short five days' notice to pull off the event.

JOE HAGIN, DEPUTY CHIEF OF STAFF FOR OPERATIONS FOR PRESIDENT GEORGE W. BUSH: That can also play to your benefit, though. The bad guys like to plan, not knowing when this event was going to take place obviously removes that.

MCKENZIE (voice-over): This is the same venue where Nelson Mandela delivered his first major speech after being released from prison. This stadium, where Mandela received his first major public welcome, is now the place of farewell to the man the world will never forget.

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LAKE: After the break, I'll speak with the head of the world's largest airline, the new CEO of American, Doug Parker, tells me how he plans to avoid the pitfalls of previous airline mergers to make this one a success.

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LAKE: American Airlines is back on top as the world's largest airline. The new American took flight on Monday after making its merger with US Airways official. The combined airline was approved for creation after clearing a series of legal hurdles and challenges earlier this season.

Here are a few of the changes that are coming down the runway. American Airlines will combine frequent flyer programs in early 2014. American will retain its agreement with oneworld global alliance.

It will get rid of US Airways membership in Star Alliance. The two separate airlines had to sell slots at New York's LaGuardia and Washington's Reagan National Airport to low-cost carriers in order to get the government to approve the deal.

I spoke to the new American Airlines Group CEO Doug Parker on Monday and I started by asking him how he's going to avoid some of the problems created from previous airline mergers and make this one work.

(BEGIN VIDEOTAPE)

DOUG PARKER, CEO, AMERICAN AIRLINES: Putting airlines together is hard work and we know that. But we're ready to get to work. We worked hard to get to this point; this is a merger that we know makes sense for our companies. We get the value creation that we need by putting these companies together.

So we've got the best team in place; we've done this before and we've got a list of items we know we need to get through, that we plan to get through and get, indeed, to creating the best airline in the world.

LAKE: Now you said you want to realize $1 billion in savings, in new revenue.

How exactly are you going to do that?

PARKER: Well, the $1 billion in additional earnings each year comes primarily from revenues. You take these two networks that are exceptionally complementary, only -- we only -- there's very little overlap, only 12 routes between the nine -- of the 900 routes that the two airlines fly together have any overlap at all.

So you put those two networks together and all of a sudden, customers have the ability to fly on the combined airline to routes they never could fly on in either of the independent airlines. That's where the value comes from.

There are also some cost savings, of course, in things like information systems, management savings, facilities. But most of it comes from providing more utility to customers and being able to attract customers that neither of us can attract today.

LAKE: Now consumer groups were some of the organizations that were fighting you, trying to block this legally. They failed, but can you give assurances that flyers are not going to see higher fares just because of this merger?

PARKER: Sure. Fares do what they do for all sorts of reasons in our business, as in most businesses, some have the costs, so fuel prices matter. Most of the demands, so the economy matters. That factors into prices a lot more than -- and supply matters, of course. But in this case, as I said, these are two highly complementary businesses, two complementary airlines.

We're going to keep all the people. We're going to keep all the airplanes. We're not reducing supply at all. And I expect we will grow over time. So nothing about this merger should affect prices at all. Again, prices may change for other reasons, but it's not going to be because of this merger.

LAKE: How important is it that you have the unions' support this time around?

PARKER: It's great; it's fantastic. Our unions are supporting because our employees are supporting. This is such a good transaction for the employees of both airlines, who have been through so much. This is a tough business, of course, but it's been through really tough times. And employees have seen pay cuts, layoffs and all sorts of things that have been really difficult on them and their families.

So to be able to put two airlines together and make one that's stronger, without having to reduce at all, our employees have gotten as excited about that because they know it's good for them.

LAKE: And Doug, if I'm a flyer on either US Airways or American and I come in the next flight I book is going to be on this new combined group, what's going to be different? What will I notice that's different?

PARKER: Well, today you're not going to notice much different at all, frankly. We'll be signing some air forms and things like that. But we've made the conscious decision as we head into the holidays not to try and put a lot of change onto our customers or our employees.

But as we come out of the holidays early in January, you will see us frequent flyers the ability to use your miles on either carrier, to earn miles on either carrier and to burn them on either carrier, to use your upgrades on either airline.

Things that are extremely important to our frequent flyers, customers that aren't even frequent flyers will soon see the ability to fly through coach here on the American Airlines network. And over time, we'll work to get those two networks to where they look exactly like one and where you can fly anywhere either of the airlines fly today, on American Airlines, on the American Airlines brand.

(END VIDEOTAPE)

LAKE: Well, the way we travel is always changing and so are what we carry on these trips. Tumi, the high end luggage maker, has identified three key trends that frequent flyers are looking for. Number one, light weight; number two, hard sided and three, four wheeled.

Jerome Griffith is the chief executive officer of Tumi, and he joins us now with some of these products.

Jerome, I'm surprised at the hard sided. I always think softer; you can squeeze in those spaces. Why hard sided?

JEROME GRIFFITH, CEO, TUMI: Hard sided has been an increasing trend over the last few years. It started in Asia and then moved its way to Europe and now it's starting in the United States. We see that we sell a lot more hard sided bags outside of the U.S. than inside; whereas inside we've always been known for soft bags.

But the trend continues to move a little bit more each year and people are more familiar with these because they're lighter weight and easier to travel with. And since the airlines now may charge you money for putting heavy luggage on board, it's easier for the consumer.

LAKE: And we can see some of the lighter weight, also softer ones are here and some of the ladies, which I know I see a lot of these traveling around in my building, especially.

Why -- your pieces are expensive. How are you finding the global environment right now? How is growth? A lot of people worried about the consumer, worried about what people are spending. What's your outlook?

GRIFFITH: We find that we're incredibly under distributed currently. We only have about 107-108 stores in the United States today. We think we can have around 300 internationally we have about 150 stores. We think we can more than double that store count.

So we find that there's a lot of opportunity for us. And as far as pricing goes for our consumer, our consumers all work; they're all very successful. They're demanding people; they want the best. And they look for great performance. And that's what we try to deliver them, the products that we sell.

LAKE: And durability too. What part of the globe are you seeing the most pick up in? You mentioned especially the hardtops being popular in Asia. Is that where you see a lot of the growth as well or.?

GRIFFITH: Quite honestly, we have pretty consistent growth between North America, Europe, Middle East and Asia. Everyone's in -- within four or five points of each other. And that, I think, is due to the increased distribution.

LAKE: What's your best seller?

GRIFFITH: Right now, the --

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LAKE: (INAUDIBLE) this one, but --

GRIFFITH: -- well, right now one of the best trending products is this product here. It's called Tegra Lite. This is made from something called self-reinforced polypropylene. It is recyclable.

It -- the string is made in Europe. It's been shipped to America, where milling can extrude the string, makes it lighter weight and more durable. It's woven in South Carolina and then it's pressed in Ohio.

And what we find with this is this product was originally made for lining the sides and the underneath of military vehicles, to protect against bomb blasts. So it's very strong. And it's --

LAKE: You're going to need that. I've seen those luggage, what happens on -- I've the luggage depots at airports.

A lot of companies, when they are successful, they do a high end, and then they want to reach another part of the market. So they consider also a more moderately priced line.

Is that something that Tumi would consider? Or are you really only going for the executives for the higher end part of the market?

GRIFFIN: Well, our consumer finds that when they travel around the world, they're really looking for the best quality that they can find. So if you're someone that travels a lot, or if you're in business, because we sell a lot of business products as well, you're looking for something that's durable, that's really going to last and going to meet your needs.

So it's not just the top 1 percent, but we do look and try and make sure that our products and prices are affordable to everyone.

LAKE: Well, I certainly see them everywhere. Best of luck with the expansion, Jerome Griffith.

GRIFFITH: Thanks a lot.

LAKE: Thanks for coming by and showing some of us some of the products.

Now if you are traveling to New York, speaking of travel, my advice to you is wrap up warm. Jenny Harrison is at the CNN International Weather Center.

Jenny, Jerome and I were just talking about the fact you had to come in in your winter gear today. It was tough out there.

JENNY HARRISON, CNN METEOROLOGIST: You did. But you know what, Maggie, you're in for some pretty good days ahead, actually. The snow has stopped. In fact, I'm going to take you straight to an outdoor shot. Have a look at this.

This is New York, sitting by Central Park down there. That's where the snow is on the grass, and the skies are cleared already, some sunshine beginning to appear. (INAUDIBLE) dark. That'll be the next thing. But things are certainly improving as we go through the next few days.

Now what I want to do is show you some incredible photographs that have actually been sent by one of our iReporters. It's not all bad, you see. For many people, who are not actually stuck at home, this is what they do.

This is from Kristen. She headed out into her backyard. This is an icicle. And she used her macro lens to take these pictures. They are just, I think, stunning. She said she wanted to be feeling a little bit different. This as you can see is just a teardrop on the end of a pine branch.

And then there's another one that she's actually taken of a twig literally encased ice. So it was between the ice storm and the snow that she went out using her lens and actually she's a federal worker. So she said she had some time off, the government shutdown a lot of their operations.

This is another amazing thing to look at. You know what it is. It's the White House ,time-lapse photography showing you as the snow comes through what it actually look like. But again, it's not really settling particularly because the system is well now well out of the way.

This is what it looked like across the U.S. this time last year. Hardly any snow. Well, what a different scenario as we are as we know, 60 percent of the U.S. nearly covered in snow. And that is actually nearly three times or more than three times the amount that we've normally see at this time of the year. But just look at the snow still to come.

We've got one or two lake effect snow showers. But really apart from that, we have got more of those clear skies, a little bit of an accumulation, not a lot, maybe much more up towards the northeast, as you can see. And the warnings, they are just diminishing literally hour by hour. So just way up there now, just to the south as you can see of Boston.

But to Massachusetts, but of course when it comes to temperatures, this not likely to change for a few days, still on the low side, -3 in St. Louis. The average is 8 Nashville, still another cold day on Wednesday. And that cold air has still got to really work its way southwards. Minneapolis -17 your high temperature on Wednesday.

So at Thursday at -7, still below the average, it should feel pretty good on Thursday, particularly because it comes with those good sunny skies.

And we've got high pressure across central and western Europe as well. But all this cloud toward the west, that is forcing these fronts to take that direction and this is the wind that we can expect over the next few days.

So again, be prepared if you're traveling for some lengthy delays in some of the airports out across the northwest of Europe across into Scotland, Ireland as well, some very strong winds and then they work their way across towards Scandinavia.

So we've got the cold and the snow and the rain particularly heavy across the southeast, but the winds out toward the west. So this is what we need to talk about. I'll talk about this some tomorrow, actually, Maggie, tell you about the snowfall in the southeast of Europe.

LAKE: All right. I'm bracing. I think it's going to be a cold one this winter, Jenny. Thank you so much.

Rising from the ruins, the Italian economy has finally stopped shrinking. But there's no guarantee that growth will return. We speak to Nomura's top European economist about what's next for Italy.

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LAKE: There's some relief in Rome tonight. The Italian economy has finally stopped shrinking after eight quarters or two years of continuous contraction. GDP was revised to unchanged in the third quarter from the original reading of -0.1 percent.

The skeptics are not convinced and neither is Italy's official statistics office. A spokesman said from a technical point of view, this data is not sufficient to say the recession is over.

I spoke to Jacques Cailloux, chief European economist at Nomura in London. He, too, was not 100 percent confident that Italy has turned a corner.

(BEGIN VIDEOTAPE)

JACQUES CAILLOUX, CHIEF EUROPEAN ECONOMIST, NOMURA: It's certainly turning the corner from a very deep recession that we saw in the first part of this year. So it's quite encouraging.

I think unfortunately, I think the prospects remain pretty dire and this is an economy which is probably going to stagnate over the coming year if not years. So I think we've turned one page, which is the page of the deep recession. But going to expansion, I think, is still somewhere a way from now.

LAKE: What does that do to your overall outlook for Eurozone growth, for the broader region?

CAILLOUX: Yes, I think, I mean, for the region ,again, I think for next year, we're seeing a bit of an economy that might show a bit of growth, less than what we think the ECB and the IMF are looking for. So we're moving closer to 2.5 for next year. There's still a lot to be done in terms of creating potential growth across the system.

Different countries, different positioning the business cycle, Italy lagging, France lagging, Netherlands as well.

LAKE: Against that backdrop, of course, officials are hoping that a banking union will help not only prevent another crisis but put Europe back on the right road.

Is a banking union going to achieve that? Is that the right remedy? Or is this going to create just more bureaucracy?

CAILLOUX: Yes, the banking union is welcome; yes, the AQR, which is starting in this next year from the ECB, that standpoint is also very important. And I think we should not raise the expectations too much out of this exercise. I don't think we should be expecting much in terms of the turnaround in trade growth on the back of this.

So I think the challenge is in terms of deleveraging and the structural challenges that the region face are multi-euro challenges. And the AQR will not turn, I think, the train around just by conducting that exercise.

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LAKE: There's a little too much transparency at Lululemon. This time we're not talking about the leggings, though. It's the founder who's been revealing too much and offending some of his customers.

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LAKE: The founder of Lululemon has stepped down as its chairman after carrying on the fine fashion tradition of insulting your customer. Shares in the sportswear maker took a hit in today's trade after Chip Wilson announced his resignation.

It comes after a series of public relations blunders. Earlier this year, the company recalled black yoga pants after complaints they were see- through. Just weeks ago, Wilson said, "Quite frankly, some women's bodies just actually don't work for it."

Wilson is far from the first to be less than flattering to his customers. In 2001, a senior director of Topman said in an interview the retailer's suits were targeted at, quote, "hooligans." He went further by saying, "Very few of our customers have to wear suits to work. They'll be his first interview or first court appearance."

One of the most infamous examples came in 1991 from the British jeweler, Gerald Ratner. In a speech he described his own products as "total crap." The comment did irreparable damage to his business. Falls into the "what were they thinking" category.

That's it for QUEST MEANS BUSINESS. I'm Maggie Lake in New York. Thanks for watching.

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