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Quest Means Business
The Story of the Irish Economy; Interview With Ford's CEO
Aired September 30, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Good evening.
Tonight, big budget deficits and big bailouts. It's the story of what's happening to the Irish economy.
Also tonight, Ford's chief executive, on this program, talks about how bad things are in some parts of the world.
And it being a Thursday, it's Q&A, because its time for Ali and me to get nasty.
I'm Richard Quest. I mean business.
Good evening. Good evening.
Tonight, Ireland's budget deficit has ballooned after a new bank bailout. Tonight on this program we check the scale of the economic crisis in the country. Also a look at how finance ministers meeting in Brussels are reacting. We must begin, though, with those Irish banking stocks, that sank the Euro, that fell against the dollar and the yen. It was a busy Thursday as Ireland counted the cost of rescuing its banks.
Join me over in the library and you'll see exactly the extent of what took place. The cost for bailing out Ireland's banks, could not total nearly $70 billion. The lion's share is 46 billion, which will go to Anglo-Irish. Now admittedly that is a worst-case scenario. The government taking a controlling stake in Allied (sic) Irish. And the important thing, of course, is Allied Irish, it is all to do with the large, bad property transactions done when the Irish economy was growing fast. The reason that the government has done this, and this is what basically everybody was taken a gasp at, failure was not an option, and why? Because the Irish finance minister said that Allied Irish-Anglo Irish was too systemically important because of any-what it could do for the Irish economy. There was nothing intrinsically significant about this bank but what it meant for the economy, according to the finance minister, too big to fail.
(BEGIN VIDEO CLIP)
BRIAN LENIHAN, IRISH FINANCE MINISTER: The banking crisis which began in Ireland with the dramatic drop I property prices, which started in 2006, and became very apparent on the balance sheets of the banks, I think, by 2008. That crisis has been resolved. A final figure has been put on the cost of eliminating and downsizing institutions. And I final cost has been placed on how viable-how the banks, which will be behind our recovery, can function in the future.
(END VIDEO CLIP)
QUEST: Now the important thing to realize is if you come back here, this total cost, under European rules, this all has to be accounted for in this year. Even though the money will dribble out in two or three billion a year for the next 10 years, it actually has to go into this year's accounts under Eurostat regulations. And that is why this year's accounts for Ireland the black whole of deficit will be 32 percent. Ireland had been looking at a deficit of about 12, 12.5 percent. But when you lump all that money in, then suddenly it-well, you can imagine the sort of size. It is 10 times the EU guidelines under the stability and growth pact.
Now, the Irish government was quite blunt about the need to rescue Anglo Irish. I spoke to Michael Noonan, the finance spokesman for the opposition, Fine Gael Party, in Ireland. And I asked him whether today's announcement really, frankly, wasn't a surprise.
(BEGIN VIDEOTAPE)
MICHAEL NOONAN, FINANCE SPOKESMAN, FINE GAEL: I'm not critical of the government for the action they took this morning, particularly. I'm critical of the actions that led to the necessity to do what they did this morning.
QUEST: By that, of course, you are referring to the policies leading up to what? A year ago? Two years ago? Three years ago?
NOONAN: Two years ago they introduced a blanket guarantee scheme which guaranteed all of financial instruments across a series of financial institutions. That went farther than the similar guarantees went, anywhere else in Europe. And of course, once they had guaranteed, then they had difficulty in extracting themselves from the promises. And the estimates of liability on Anglo Irish Bank when they guarantee was issued was 1.5 billion. And today the range is from $29 to $34 billion. They worked on very inaccurate information. The government ministers were badly served by some of their advisors and the then-governor of the central bank, the then- regulator, and they got into this difficulty.
QUEST: Isn't the real problem, though, the policies that were in place before then, from both sides of the political divide in Ireland. That allowed an economy to overheat to such an extent that enabled a property disaster to take place.
NOONAN: This government has been in office for 20 of the last 22 and half years. We-our party was in government until `97 and we had real growth in the economy and there was no property bubble. So, the present government are the people who caused the property bubble, caused the cheap borrowing, and caused the crisis, the opposition didn't have any part to play in it.
QUEST: Is it helpful though, now, to be highly critical of the steps that are being taken when clearly in Brussels today, for example, the actions taken by the Irish government have been warmly received?
NOONAN: Well, we acknowledge today that the government had to take action. They had to cure the difficulties that they had created for themselves. We think the actions they took today give certainty to the market. And we think that their commitment to bring forward budgetary for the next four years is something that the markets now require to restore confidence. So we haven't been highly critical of the actions taken today, but we have been highly critical of the neglect of government in arriving at this position.
QUEST: Do you believe that the actions taken today and in the last news, will be sufficient to prevent Ireland facing, basically, Greece?
NOONAN: Well, some of the actions that were taken today have immediate affect but much of the action that was promised today will have affect, first of all, in the December budget and then in three annual budgets after that. So if the government sticks to their budgetary plans then there is no danger that we will go down the Greek road, but as I say their commitments haven't been yet delivered.
QUEST: In terms of Anglo Irish the words of the minister this morning basically using, in terms of Anglo Irish, and sovereign, in the same sentence. Was that a surprise to you?
NOONAN: Well, I think the difficulty was that they put sovereign credit rating at risk because of their commitment to rescue what was a private bank at the time of rescue. There was no state involvement in that bank whatsoever, until the government nationalized it. And this was their major policy error. Not to give precedence to the sovereign and to the almost equate the difficulties in the bank they were rescuing with the sovereign credit rating.
(END VIDEOTAPE)
QUEST: Ireland's opposition finance minister.
Concern over the country's debt overshadowed a meeting of Euro Zone finance ministers that took place in Brussels. Also on the agenda, grist to the mill, the downgrading of the Spanish government bonds by the credit ratings agency Moody's, which added to the tense atmosphere. Spain has now lost its much vaunted and hullaballooed triple A rating by all three major ratings agencies. Our correspondent reporting from Brussels tonight, Phil Black.
(BEGIN VIDEOTAPE)
PHIL BLACK, CNN INT'L. CORRESPONDENT (voice over): Big smiles from Europe's finance ministers. The happy family, if you believe this image. But across the world headlines are screaming, once again, about the Euro Zone's debt crisis. Talk to some of these guys quietly and they'll tell you the mood here is tense and sometimes difficult. That emotional strain is focused on two debt heavy members of the Euro Zone family, Ireland and Portugal.
(On camera): How would you describe the tone and the feeling of the meetings that are taking place here?
FERNANDO TEIXEIRA DOS SANTOS, PORTUGUESE FINANCE MINISTER: Uh, there is a lot of concern.
BLACK (voice over): Portugal has announced a new wave of austerity measures.
DOS SANTOS: Cutting wages, freezing pensions, cutting social benefits, increasing taxes; it is a very strong package and this will be enough for us to reach the targets in terms of deficit, this year and next year.
BLACK: Right direction, says the Euro group, but it is not enough.
OLLI REHN, FINANCE MINISTER, EUROPEAN UNION: We also encourage the Portuguese authorities to back the budgetary measures by comprehensive structural reforms and to foster (ph) and enhance potential growth, focusing on removing rigidities in the labor market.
BLACK: The other troubling Euro relative island has made a staggering confession, bailing out its banks will cost at least another 5.7 billion euros. It's deficit is more than 30 percent of GDP. And it will have to cut hard to get that to under 3 percent in line with Euro rules in just four years. The official response from the Euro group:
REHN: The costs are very large but, yet manageable.
BLACK (On camera): The common message from Euro finance ministers is Ireland can sort this out on its own. Some officials are stating publicly here that, yes, Ireland is in big trouble. But it will not need a multi- billion Greek style bailout from the Euro Zone. But not every one is ruling it out.
To you, as a finance minister, how does that sound?
JOSEF PROELL, FINANCE MINISTER, IRELAND: It's difficult for Ireland. It's clear but it is possible. If support is needed by the European Union, we have a special fund, given the signal in the last month, and it is open also for Ireland. But, first, Ireland has to fulfill their homework and then we can get discuss about concrete support by the European Union.
BLACK (voice over): In this city, only a day earlier, tens of thousands of people rallied against the austerity measures, rolling out across the continent. Europe's finance minister explained why they must happen.
REHN: The financial crisis and economic resistance has, in two years, wiped out 20 years of achievement in the stabilization of public finances. And this is eroding the foundations of sustainable growth and job creation. That is why we need an effective strategy of debt reduction.
BLACK: And they say the talks are tense and difficult, I get the feeling that is a real understatement. Phil Black, CNN, Brussels.
(END VIDEOTAPE)
QUEST: The issue of Ireland's soaring debt, as you can imagine, hit the banking stocks across the board. Credit Agrico was down 3.5; Barclays was off nearly 2 percent. And that downgrade of Spain by Moody's didn't help. Losses were limited by upbeat U.S. economic data. That economic data didn't actually cheer up the Big Board too much.
(DESK BELL CHIMES)
If you look-well, it cheer it up at all, frankly. The Dow is off 50 points, a half a percent, 10,785. We'll talk more about the Dow a little later in the hour.
We need to talk about Ford. The motor company is keen on recovery. The chief exec tells us tonight he's so upbeat from the Paris Auto Show.
And after this break, we are going to be in Ecuador where the president got jostled by protestors and the protestors were from the police.
(COMMERCIAL BREAK)
QUEST: Unrest has gripped Ecuador's capital today. And the national police are the ones that are doing the demonstrating and the rioting. It is all about the loss of bonuses and cancellations of promotions. Tonight the leader of Ecuador is at the hospital recovering from having been attacked.
In Ecuador the journalist Martha Sandoval joins me on the line.
Martha, we have a poor connection, but you are outside the hospital at the moment. What happened?
MARTHA SANDOVAL, JOURNALIST: Exactly. Hi, how are you? Yes, I am in the lower floor of the hospital. We are waiting to see if we can talk to the president, himself. And at the moment the crowd is calm outside the hospital. This is the hospital of the police force, that is very important to note. It is the hospital of the police force and many of the officers (AUDIO GAP) working at the time in the security (UNINTELLIGIBLE) inside the building-outside and inside the building as well. Children have been sent home their schools. Transportation and the airports, and the-
(CROSS TALK)
QUEST: Right.
SANDOVAL: --has been cancelled. President Correa had a gas bomb explode really close to him, about eight or 10 feet. So he's being treated here in the hospital. But also he went to surgery about 10 days ago so his knee has been affected because he was pushed around. And so that is what (UNINTELLIGIBLE). He's been here from around 10:00 o'clock in the morning and it's past 1:00 right now.
QUEST: Martha, let me just interrupt you there, if I may. The police were protesting over lack of promotion and canceling of bonuses, it is pretty extraordinary, isn't it, when those who are charged with keeping the peace are the ones breaking it?
SANDOVAL: That is correct. That's correct. People-that's exactly the question that people are asking. And the government is asking for explanations as well. They are the ones that are called to keep the peace and right now they have (AUDIO GAP). The biggest one that President Correa had since he's president, since he's in office.
QUEST: Right. OK, let's just talk about this in just a little bit more detail in the sense that the crisis that has affected Ecuador, and we have been talking about it with Spain, with Ireland, just how bad is the economic situation at the moment?
SANDOVAL: Well at the moment the government says that the economic crisis did not affect Ecuador largely and that the country is doing pretty good. We are talking about numbers that are talking about growth in the economy of Ecuador in the last readings. And so the government does not say that we have economic problems at the moment.
QUEST: Do we believe that the roughing up of the president and the leader, do we believe that this was a-I mean, it was a serious matter, but that the injuries or what took place has had any serious consequences.
SANDOVAL: He talked recently with a public radio and we believe he is fine, it is just that his surgery was recent so apparently he has a plaque (ph) right now and it has to be checked, and it might have been displaced a little bit. But we don't think it is anything severe or any kind of injury.
QUEST: OK. Right, but I notice looking at the reports now, that actually supporters of the president are now, briefly, supporters are now at the hospital as well, that's correct?
SANDOVAL: That's correct. Opponents and supporters are getting out on the streets. Actually, there is a massive call through Internet, phones, to be-to call for a protest in one of the main streets of Quito (ph).
QUEST: Right.
SANDOVAL: And so we don't know at the moment how many people are there but, we know that it has been called for people to come out to the streets.
QUEST: Martha-
SANDOVAL: Not only people, there are also many-
(CROSS TALK)
QUEST: Martha, we'll have to leave it there. We'll have to leave it there, Martha, for the moment.
In just a second or two it is Q&A, when we are talking M&A, which is high action in the sky, aviation. Coming up next.
(COMMERCIAL BREAK)
ALI VELSHI, CNN CORRESPONDENT: QUEST MEANS BUSINESS and so do I. We're here together in the CNN NEWSROOM around the entire world, Richard.
Hello and good to have you back.
QUEST: And good for you to be back. Good for us both to be doing this.
Ali, each Thursday, once again around the world, around the United States, it is business travel innovation. Nothing is off limits and today it is the travel side of our brief the airlines.
VELSHI: A lot of airline news this week. We have had major merger news. This week Southwest Airlines announced it is buying up AirTran. And tomorrow United Air Lines and Continental complete their merger forming the world's largest airline. You'll be reporting on that with a conversation with the chairman of the new airline tomorrow morning, Richard.
But is all of this-it might be good for the airlines, is it good for consumers? Richard, you are the travel expert at this network, so I'm going to let you go first. You have 60 seconds.
(DESK BELL CHIMES)
QUEST: And it starts now. Look, Ali, forget the idea about mergers being new. Mergers have been around. Here is a list of the mergers and the acquisitions in the aviation industry in just the last 10 or 20 years. For example, Pan Am, which bought National. Pan Am was then, of course, went off to-went out of business. We had American which bought TWA. When it gets interesting, of course, is when it national across borders. Air France bought KLM. Lufthansa has swallowed Swiss, Austrian, Brussels and BMI. And British Airway, Iberia, and of course, American Airlines.
Ali, the airlines are making money at the moment, but fares have gone up by 8 percent, in economy. You wouldn't know that, because your fare, Ali, in business class has gone up 10 percent.
VELSHI: Oh!
QUEST: Expect more fares to go up in the weeks and months ahead. Capacity is down, but fares will be up.
(DESK BELL CHIMES)
VELSHI: I'm surprised you ever walked far enough into a plane to find the economy section. Hey, Richard, sit back and relax and enjoy my argument.
The last time there was any real good news in the airline industry was when the Wright Brothers had a successful flight. The fact is that airlines have been wildly unprofitable, as you know, for years losing about $50 billion in last decade just here in the United States. And that is the airlines that exist.
That is starting to change, as you just mentioned, though. While anything that potentially reduces competition, like mergers, seems bad, airlines need these mergers as a way to cut costs and make more money. Now ultimately making money allows the airlines to expand and buy new planes and fly new routes.
And whether we are talking the legacy airlines here in the States, for instance, like Delta, Continental, United, US Airways, and American, or the newer smaller, generally more nimble discount carriers, like JetBlue and Southwest, almost all airlines at some point or another will resort to the same tricks that we passengers despise. Extra fees, Richard, they know it makes us mad. They do it because they can, and in some cases because they have to, to make money. Bottom line, Richard, it is tough for airlines to have a positive bottom line. And until the industry is truly profitable-
(BUZZER SOUND)
VELSHI: --you and I are going to pay the price.
QUEST: Ah!
VELSHI: And they'll find a way to make us do it, Richard.
QUEST: That was a few extra seconds there, Ali, which I will give you for the moment. But now, of course, it is time for The Voice. And for that, it is time for you and I to go head to head.
The Voice, the questions, this week.
THE VOICE: Welcome back, gentlemen. You've had a few weeks off from the quiz to get your heads together and to practice with your bells. Plus you to might be the most frequent flyers I know, so we'll start with a tough one.
Since 2002, how many non-charter commercial passenger airlines have filed for bankruptcy? A. 29; B. 24; C. 20; D. 17?
(DESK BELL CHIMES)
THE VOICE: Richard, that was you.
QUEST: I am going to say 17.
(GONG SOUND)
THE VOICE: Richard, you are exactly right; 17 is the correct answer and you are on the board early. The most recent was Mexicana Airlines, which suspended operations in August. Now many of these airlines, like United and Delta, have emerged from bankruptcy but only after major restructuring.
Richard, on the board, one to nothing.
Here's No. 2: According to Airports Council International which region saw the largest number of airline passengers last year? A. Europe; B. North America; C. Asia-Pacific Region; D. The Middle East?
(DESK BELL CHIMES)
THE VOICE: Ali, that's you.
VELSHI: Asia-Pacific Region.
(BUZZER SOUND)
THE VOICE: Ooo, I'm sorry that is wrong.
Richard, care to make it 2 and 0?
QUEST: Ah, the most airline travelers last year has to be North America.
THE VOICE: Richard, you are proving yourself to be a frequent flyer. That is exactly right.
VELSHI: Wow!
THE VOICE: That is exactly right. North America barely finished ahead of Europe, with just over 1.46 billion passengers in 2009. Richard, you might make it a perfect 3 and 0.
VELSHI: I don't work the stuff.
THE VOICE: Ali, it is time for you to save face.
OK, time to stretch your legs a little bit, gentlemen, or maybe not. What is the average amount of leg room in the economy class on most major airlines? A. 32 inches; B.28 inches; C. 35 inches; D. 24 inches?
(DESK BELL CHIMES)
THE VOICE: Ali.
VELSHI: I'm just ringing in because there is no chance Richard would every know what the average economy leg room is on a plane. I don't think he knows where economy is on a plane. I'm going to go with 28 inches.
(BUZZER SOUND)
THE VOICE: And I'm going to say you are wrong, Ali.
VELSHI: This is rigged.
THE VOICE: Richard, care to make it 3 and 0?
QUEST: 32 inches.
(GONG SOUND)
THE VOICE: Richard has made it 3 and 0 to convincingly win this round of Q&A. You see, gentlemen, leg room is measures by seat pitch. That is the distance from your back to the seat in front of you. And I want to thank you both for flying Voice Airlines.
VELSHI: Wow, Richard, for a guy who never makes it to the back of a plane I'm impressed with how much you know about this. You do have an edge on me, in traveling, so we'll try a different topic next week and I'll see if I can do a little better.
QUEST: But for the moment that will do it for this week. Remember, we are here each week. Tomorrow, of course, our around this time, on you program, and on mine, Ali, we'll have that interview with the new chief exec of United Airlines, Jeff Smisek.
VELSHI: That is the new joint airline, United and Continental, the merger goes through tomorrow.
And, of course, catch us in the CNN NEWSROOM at 2 p.m. Eastern. Keep the topics coming on our blog, CNN.com/QMB and CNN.com/Ali. Tell us each week what you want us to debate.
Richard, see you next week.
QUEST: See you next week.
Now, today I read an absolutely remarkable article I think you'll want to read twice before you complain about leg room, whether it is 28, 38 type of seat, inches or whatever. Passengers on a Russian tourist flight -- they were forced to stand up because of a lack of seats. Now, it's true, they had to stand for the whole flight. I've posted the article at Twitter.com/richardquest. That's where you can see it, Twitter.com/richardquest. Read the article and wince at the mere thought of it.
OK, it's payback time. U.S. insurer AIG takes the first steps toward repaying the government for its $182 billion bailout. We're in New York to talk about that in a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And here, on this network, the news always comes first.
A volatile situation at the moment in Ecuador. Police officers and military troops are protesting against a law that they fear cuts their benefits. Hundreds of police officers seized the international airport in the capital and they've taken over bases in Quito and other cities. President Rafael Correa says he won't back down. He was jostled and pushed by the crowd earlier when he tried to calm things down. Ecuadorian TV reports he's now being treated in hospital.
Police in New York are trying to identify a body that they pulled out of the Hudson River and determine whether it's a college student who is believed to have committed suicide by jumping from the George Washington Bridge. Tyler Clementi's roommate and another Rutgers University student have been charged with invasion of privacy. They're accused of secretly broadcasting a same-sex sexual encounter involving Clementi over the Internet.
The Spanish cyclist, Alberto Contador, is denying accusations of doping from the Tour de France this year, which he won. Contador says a positive test for the stimulant Clenbuterol was due to food contamination. He's been provisionally suspended from competition while the case is investigated.
So, Ireland is counting the cost of rescuing its banks. And it's a cost that could reach nearly $70 billion in total. The phrase too big to fail is being uttered once again. It concerns Anglo Irish Bank.
Joining me now is the economist and finance lecturer at Trinity College, Dublin, Constantin Gurdgiev.
Constantin, the core question, how could the situation for this bank have got so bad, two years after the crisis began?
CONSTANTIN GURDGIEV, ECONOMIST, TRINITY COLLEGE, DUBLIN: Well, indeed, that's a big question which occupies, pretty much, the markets and Ireland itself, and especially the Irish taxpayer, who is footing the bill right now for the rescue, you know, of that bank -- or, rather, closing that bank -- an asset bank.
The situation is as follows. The Anglo Irish Bank was probably the poster child for lending during the magis (ph) boom, which started in the largest (INAUDIBLE) and property in the history of the advanced economies. This is an economy which has gone through a very severe contraction on the real side of the economy itself in terms of growth, but also in terms of the property markets. As a result of that, the taxpayers are currently looking at footing a massive bill, which is the nexus of one third of the - - the national...
QUEST: Sure.
GURDGIEV: -- income...
QUEST: Sure.
GURDGIEV: -- of the entire country.
QUEST: But -- but -- but let's -- the question, though, really becomes why now?
Why did this happen today and now?
GURDGIEV: That's a question which will have no answer. We are two years into the crisis and the government continues to come up with new estimates, which, in our view and in the view of the independent economists, like myself, is getting closer and closer toward the realization of the real extent of the problem. But still, it's some ways off.
For example, today's announcement in terms of the Anglo Irish Bank and the rest of the banking system in Ireland implies that the government is looking at the bill of $50 billion euros in order to rescue the banking system overall.
George Towel (ph) estimates from 18 months ago have been to the tune of $67 billion. So they're still off but they're getting closer and closer in terms of realizing the potential of their losses.
QUEST: Do the -- the idea that this one bank, that wasn't even big enough to be stress tested earlier this year, this one bank could bring down the Irish economy is mind-boggling.
GURDGIEV: It is mind-boggling. But when you realize that the bank, which had about $70 billion worth of lending, is looking at the losses of $39 billion, to us, that's, you know, the level of the impairment that we are looking at. That is the level of the exposure of that bank to the structural part of the property market. And remember, that since the -- probably the beginning of 2002, 2003, the Irish economy was characterized solely by growth, even primarily by the property market alone.
QUEST: Excellent.
Constantin we'll have you back -- I mean not excellent what you were saying, but excellent that we had you to say it and to add -- well you can -- you know what I mean, Constantin.
Many thanks for joining us and we look forward to having you on the program again to talk more about this.
A fascinating subject.
Shares in AIG are up after the troubled insurer and the U.S. government came up with a plan to repay taxpayers. AIG was bailed out just over two years ago. Now, it says it's going to be able to repay the money.
Maggie Lake is in New York -- Maggie, the amount that AIG got -- I can't find me piece of paper, but it was -- it was triple digit billions and beyond.
MAGGIE LAKE, CNN CORRESPONDENT: A hundred -- $180, Richard, $180 billion to date and counting.
QUEST: So, what are they paying back?
When are they paying it back?
LAKE: Yes, I mean, you were just talking about too big to fail, boy, AIG really was the epitome of that for -- for us here in the U.S., during the financial crisis. And maybe a little bit of a ray of hope here for those grappling with those kinds of institutions.
They're accelerating their exit plan, remember, they've been paying back. They've been selling assets and working on this. But this is the sort of big push to really speed that process up.
It's pretty complicated, but one of the main things to come out of today's announcement is that the government is going to be -- the U.S. government is going to be converting their preferred shares into common stock. They are -- which -- that immediately, on paper, gives the taxpayer a $10 billion paper profit. Now, it brings the government ownership up, actually, to 92 percent, which is a bit odd in an exit strategy. But the plan is that they're going to steadily start to sell off those common shares back into the private market...
QUEST: OK...
LAKE: -- in -- into the stock market. Tim Geithner, the Treasury secretary, saying that this puts U.S. taxpayers in a considerably stronger position to recoup our investment. That's the whole point, to get the money back.
And Benmosche, the CEO of AIG, is agreeing, saying that this is a big step toward making AIG independent again and saying that this actually sort of simplifies the current government support, because both the Treasury and Fed were involved in AIG's bailout.
But not everyone is convinced, Richard. There are some who are saying that this seems a little premature to them. They think that it's politically motivated because the bailouts are so unpopular...
QUEST: Right.
LAKE: -- the administration wants to sort of distance itself as we approach those mid-term elections. And they're a little worried that AIG is a little too shaky to be doing this. But both AIG and the U.S. government are -- are sort of applauding this and saying we're moving forward.
QUEST: I'm -- I -- I have a nasty feeling I'm going to regret this question, because I did consider, at the height of the crisis, buying AIG's shares, figuring, you know, what the -- what the heck, so you lose the lot?
I mean you're either going to make or lose.
What would have happened if I had?
LAKE: Well, if -- if you had, at the height of the crisis, when they were under a dollar, you would have made a very nice sum. They're trading at, what, $38 today.
But, Richard, the reason you didn't and the reason it was probably smart not to is that this is a very -- a stock that's really being pushed around by the speculators. And that means while if you cash out at $38, you would have made a lot of money, knowing when to get out is really important. There are a lot of ifs with this company still. You know, they say they're moving toward being independent. It depends a lot on asset sales. It depends on market conditions. And just remember, with this announcement today, the government is going to be selling over a billion shares of this company, probably for years. So if you had been smart enough to sell maybe today, if you'd both it under a dollar, you would do OK. But this is not a stock that the average retail indivest -- investor really wants to step into without doing your homework...
QUEST: Maggie, Maggie, Maggie...
LAKE: -- and knowing that they're going to take on a lot of risk.
QUEST: And that's why you and I are doing this job and not making fortunes on Wall Street.
LAKE: It's a trip...
QUEST: Because we're...
LAKE: -- because it's true.
QUEST: -- we're too busy looking at, on the other hand. On the other hand, I couldn't resist. I couldn't.
LAKE: It is true.
QUEST: All right, Maggie, many thanks.
Maggie Lake in New York.
In just a moment, there was one American company -- car company -- that did not take bailout cash. It is, of course, the Ford Motor Company. And the chief executive, Alan Mulally, tells us why he's so confident that he made the right decision, in a moment.
QUEST MEANS BUSINESS.
Good evening.
(COMMERCIAL BREAK)
QUEST: Ford's chief executive tells CNN he expects an improved performance next year. He says the car maker is solidly profitable in 2010.
Jim Boulden caught up with the chief executive, Alan Mulally, at the Paris Auto Show, the oldest and one of the largest and biggest shows in the world.
Let's go to Paris.
And Jim is joining us now.
Alan Mulally, look, you know, I have to say, one of -- in the business world, one of my heroes for the way he pretty much single-handedly took Ford, turned it around and didn't take bailout cash.
JIM BOULDEN, CNN CORRESPONDENT: And he continues to be so bullish, doesn't he, Richard?
I mean this is a man who came from the airline industry, an engineer. And they took him into a whole new field at Ford and said we need you to fix this company.
He is so bullish about Ford that I asked him, in this interview, whether he should be a little bit more tempered in 2011.
But first, we talked to him about what's called one Ford -- his idea that you can build one car around the world and save costs. And this is what he's really passionate about.
Let's hear that.
(BEGIN VIDEO CLIP)
ALAN MULALLY, CEO, FORD: Well, this is a fantastic example of the one Ford. And, of course, four years ago, what we decided -- the big decisions we made were, one, to focus on the Ford brand; two, a full family of vehicles -- small, medium and large, cars, (INAUDIBLE) and trucks; and, also, every one of them being best in class and then the -- the last pillar was that we'd use our global assets worldwide. So here's the focus.
BOULDEN: This is it, yes.
MULALLY: And we just revealed it today.
BOULDEN: Yes.
MULALLY: We'll make two million vehicles off of this platform. And you can see all around the room here, we have 10 different top halves. So we have four door, five door, hatchbacks, wagons, multi-activity vehicles, five passenger, seven passenger. So all are off the same platform, plus the sports model.
So this is Ford, in essence, of leveraging all these global assets and bringing it to bear for all the customers around the world.
BOULDEN: It kind of sounds simple. I know it's not. But the -- the bottom line is that this is a way to build a new brand of car but also save money and not duplicate. I mean is that -- too simplistic?
MULALLY: No, it's absolutely right. And when you look at Ford now and you look at how we have focused on the Ford brand and how we have now leveraged all of our assets worldwide, the complexity comes down, our investment efficiency comes down, plus it's every year now, year after year, we can continually improve this family of vehicles. And so you can imagine what that focus is going to mean and -- and bringing the enabling technology in and then bringing the scale in so we can offer that with the very best value to the consumers around the world.
BOULDEN: China, India, obviously the -- Brazil, these markets very key. And they -- that's where you can see most of the growth, even if you see a slowdown in Europe.
Is that true?
Is that what you're thinking?
MULALLY: Well, the -- you know, we're committed to serving all the markets around the world. The U.S., Europe, these are tremendous markets. They're growing a little bit slower, but they're very large markets. And so we're actually committed to serving those markets. Plus, with our one Ford plan, where we can leverage our scale...
BOULDEN: Yes.
MULALLY: -- and bring these vehicles everywhere, then that allows us to really serve the emerging markets. And remember, the emerging markets are not so much about taking the market share away from somebody. You are introducing a lot of new people to your vehicles.
So the fact that we have the one Ford strategy is going to enable us to do that simultaneously and to provide all this technology that people want -- the fuel-efficient, the quality, the safety -- and be able to do it affordably for millions of people.
BOULDEN: Ford has a very good 2010. In 2011, everyone is talking about austerity. Everybody is talking about budget cuts. Everyone is talking about a possible double dip recession.
Are you concerned that maybe in 2011, you can't build on what you've done in 2010?
MULALLY: Well, everything we see today is -- is the big economy -- the more mature economies like Europe and -- and the United States -- are starting to recover. All the fundamental data say that. Now, clearly, it's slowed down a little bit, you know, recently. But that's not uncommon as we come back from a recession.
Of course, we're coming back from the worst recession of all time. And so it is slower but we see all the fundamentals recovering. A rest -- around the rest of the world, tremendous growth. And overall, the automobile industry is going to expand anywhere from 5 to 10 percent this year alone.
So our guidance, the best guidance we can give today is we're going to be solidly profitable supporting our customers with these product lines in 2010, positive free cash flow, moving to a net positive debt next year and improved performance in the next year.
(END VIDEO TAPE)
BOULDEN: So, Richard, positive, positive, positive. He's also very positive that consumers will want to buy electric vehicles, another big push here at the Paris Motor Show -- Richard.
QUEST: All right, Jim.
And for you, another good dinner on the Champs d'Elysees, French rich food tonight, no doubt.
Good. Thank you.
BOULDEN: Thank you.
QUEST: Send me the bill.
Jim Boulden. He'll have put on weight by the time he's finished this assignment.
A series of storms are eyeing parts of Europe as the weekend comes close.
Pedram is at the World Weather Center to bring us up to date.
How bad is it going to be?
PEDRAM JAVAHERI, CNN METEOROLOGIST: Oh, pretty soaking out there across parts of England there, Richard. About Saturday, Sunday time period, wet conditions are expected. Gale force winds also in the forecast. And take a look, a series of storms, as you said, beginning to move in there. But right now around London, in between storm systems. And that's going to give you clear skies. The current temperature is about 13 degrees. But check your calendar, yes, October is just hours away. And with that, we are going to begin to see the wettest month of the year around parts of the U.K. and so some showers expected tonight into the early morning hours. And another system beginning to move in out toward the Black Sea and working its way into Ukraine.
But take a look. If you're flying high across areas within, say, London tomorrow, you're going to expect some afternoon delays. Breezy conditions, gale force winds possible. Dublin, the same story. A few showers out there by the afternoon hours. But no major travel delays as of right now.
But take a look at the secondary storm system that is working its way across the Black Sea, parts of, say, Ukraine, and also Southern Russia, a few isolated thunderstorms possible. And behind this feature, some cooler air coming in for October standards -- a little below average for this time of the year. But you can take a look. Some isolated hail possible out there. Some stronger storms around, say, Southern Russia. Within Georgia, a few storms possible, as well. And, again, travels around Frankfurt going to give you a few showers in the morning, but generally it should be quiet as far as the planes being affected by this.
But take a look at the Northwest Europe. Again, we talked about being in between storm systems. One feature moving out across portions of the U.K. -- a stronger, broader storm system beginning to move in.
And you know what?
The Ryder Cup taking place this weekend. It's starting around Celtic Manor out there. And some showers are going to begin to work their way inside the next 24 hours. And, really, the forecast doesn't look too good for the first match out there some time tomorrow morning. We're going to see some showers begin late tonight.
Heavy rain by tomorrow morning into tomorrow afternoon. Southwest winds about 20 to 30 KPH. But the temperature is going to be, again, seasonally cool out there, 15 to 10 degrees by the overnight hours. And right now, generally clear skies over parts of Europe, but we're going to see the showers begin moving in as temperatures in Paris have cooled off to 13 degrees, as well, Richard. But, yes, some showers out there in the next couple of days.
QUEST: Many thanks for that.
We'll be talking more about those storms, no doubt, tomorrow.
When we come back in just a moment, I will update you on the situation in Ecuador.
(COMMERCIAL BREAK)
QUEST: CNN has now confirmed reports from Peru that the border between Peru and Ecuador has been closed as a result of the disturbances currently taking place in Ecuador. As we get more details on that and the significance, we'll obviously discuss it more on this network.
In the United States tomorrow, a film comes -- is released about the creation of the social media sensation, Facebook. Two of Hollywood's big names, screenwriter, Aaron Sorkin, and the director, David Fincher, are involved in the project. It's controversial. It's already one of the most talked about films of the autumn season.
Felicia Taylor joins me from New York.
Controversial and talked about -- is it any good?
FELICIA TAYLOR, CNN CORRESPONDENT: I personally haven't seen it. But the question is, this is the unofficial official look at the face behind Facebook. Critics have called him a cad, a jerk hero, an idealistic, a weasel with a mission that can't be dismissed. So whatever your opinion, there's no question "The Social Network" is getting critical acclaim and certainly headed for nominations at Oscar time.
(BEGIN VIDEOTAPE)
(BEGIN VIDEO CLIP FROM "THE SOCIAL NETWORK," COURTESY SONY PICTURES)
UNIDENTIFIED FEMALE: You're being accused of intentionally breaching security, violating copyrights...
(END VIDEO CLIP)
TAYLOR: It's being called the movie Facebook doesn't want you to see. "The Social Network" -- a mixture of fact and fiction about the founding of Facebook, is thrusting the Web site back into the spotlight just months after its about-face on privacy issues. And the public could be in for a shock.
I mean I think that -- I think that this is a movie about growing up and coming into power.
(BEGIN VIDEO CLIP FROM "THE SOCIAL NETWORK," COURTESY SONY PICTURES)
UNIDENTIFIED MALE: You know he stole our idea and we know he lied to our faces for a month-and-a-half.
UNIDENTIFIED MALE: No, he never lied to us.
(END VIDEO CLIP)
TAYLOR: "The Social Network" explores charges that founder, Mark Zuckerberg, stole the idea from Facebook from fellow students at Harvard University. And while the movie examines all sides of the dispute, including Zuckerberg's, Facebook watchers think the movie could hurt the company's reputation.
ADAM HANFT, MARKETING SPECIALIST: I think the movie will introduce into the culture as a mean the fact that Zuckerberg stole this idea or borrowed a lot of this idea and paid off some people as a result of that. I think most people don't know that. I think people will start to think differently about Facebook.
TAYLOR: Zuckerberg himself is portrayed by actor Jesse Eisenberg as a brilliant, but tortured, figure -- at times, bitter, ruthless and, ironically, anti-social.
(BEGIN VIDEO CLIP FROM "THE SOCIAL NETWORK," COURTESY SONY PICTURES)
UNIDENTIFIED MALE: Your best friend is suing you for $600 million.
UNIDENTIFIED MALE: I didn't know that. Tell me more.
Doesn't anybody have a sense of humor? (END VIDEO CLIP)
JUSTIN TIMBERLAKE, ACTOR, "THE SOCIAL NETWORK": I do think you have a hero, but I don't think you have a villain either. I mean I think that -- I think that this is a movie about growing up and -- and coming into power.
AARON SORKIN, SCREENWRITER, "THE SOCIAL NETWORK": He spends the first hour and 55 minutes of the movie being an anti-hero, the final five minutes of the movie being a tragic hero. And to be a tragic hero, you have to have paid a price and you have to feel remorse. That's somebody you want to give a huge to.
TAYLOR: Whether you want to hug him or not, it's clear Zuckerberg wants this movie to go away fast. He tells "The New Yorker" magazine he does not plan to see "The Social Network." What he did do is announce a massive donation to the Newark, New Jersey public school system on "The Oprah Winfrey Show" just days before the movie's launch.
(BEGIN VIDEO CLIP FROM "THE OPRAH WINFREY SHOW, COURTESY HARPO ENTERTAINMENT)
MARK ZUCKERBERG, FOUNDER, FACEBOOK: It would be a $100 million challenge grant for...
OPRAH WINFREY, HOST: One hundred million dollars?
ZUCKERBERG: This will lay it out.
(END VIDEO CLIP)
TAYLOR: For its part, Facebook said in a statement, quote, "The movie might be a sign that Facebook has become meaningful to people, even if the movie is fiction" -- a sentiment shared by some in the social media world.
SREE SREENIVASAN, DIGITAL JOURNALISM PROFESSOR, COLUMBIA UNIVERSITY: In many ways, I look back to, say, the mid-'90s, when we had a couple of then landmark movies like "The Net" and "You've Got Mali" coming out the kind of capture the zeitgeist of that moment. And you're seeing that now.
TAYLOR: Era-defining movie or not, how moviegoers react to Facebook's contentious past will be an interesting chapter in Facebook's future.
(END VIDEO CLIP)
TAYLOR: You know, it's interesting, that $100 million that he donated to the public school system in New Jersey, the question is, how is he going to pay for it?
He is cash rich -- on paper. Shares of Facebook aren't traded yet.
QUEST: Not yet, but they will be at some point, no doubt.
Felicia Taylor, many thanks...
TAYLOR: No doubt.
QUEST: -- to you, indeed.
We'll have a Profitable Moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment.
It is a supreme irony that the bank that was too small to stress test is now too big to fail.
Back in the summer, Anglo Irish was not even included in those banks being tested by the authorities. It wasn't big enough. So now, for the finance minister to publicly admit that its failure would jeopardize the Irish economy, ha, that was breathtaking.
We always knew the results of the stress tests were a bit suspect across certain countries and banks, but, really, the fact that Anglo Irish nearly took down the economy makes a nonsense of some of those tests. The fear must be there are other financial land mines waiting, ticking and waiting to blow up.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"WORLD ONE" now.
END
