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Quest Means Business
Showdown Over Austerity in Greece; Paris Air Show Yields Lucrative Orders for Airbus, Boeing
Aired June 20, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN DEFTERIOS, CNN ANCHOR, QUEST MEANS BUSINESS: Austerity or bust, the Eurozone gives Greece a stark choice.
Stop the dithering. Airbus' chief operating officer challenges Boeing to redesign the 737. We'll hear from both airlines.
And when I was 22, why U.S. Open Champion Roy McIlroy is poised for a very good year.
I'm John Defterios in for Richard Quest. And this, of course, is QUEST MEANS BUSINESS.
Tonight Europe is pushing Greece even closer to the edge. European finance ministers are keeping a hold of vital funds and the only thing that stands between Greece default. The price of release is painful reform. And before the Greek government can do that. It must survive a no- confidence vote scheduled for Tuesday. The Euro group wrapped up a meeting in Luxembourg this morning. Finance ministers say they want to see the Greek austerity program to go through and only then will they release their share of fresh bailout funds.
In total, the latest installments are worth $17 billion. Ministers said national unity is a prerequisite for success. It is a shot aimed at thousands who took part in protests in Athens last week, including these on Sunday. The Greek Prime Minister George Papandreou has been in Brussels to meet Herman Von Rompuy, president of the European Council. The real crunch comes tomorrow in the Greek parliament where lawmakers decide whether to back the prime minister or sack him.
Diana Magnay joins me now from Athens with the very latest from Syntagma Square, where we some protestors back there.
Diana, it is almost like the European Union or the Eurozone is dangling a carrot in front of the Greeks and saying, here is the money. You know the next steps. But it is a fairly high stakes game.
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Absolutely. They are really putting the pressure on Greece at this stage. So that everyone of those parliamentarians behind me, and I think it was to them that the call for national unity was addressed. So that they are aware that literally a default, at this stage, lies in their hands.
As you said on Tuesday there is a vote of confidence in George Papandreou's new cabinet. That is expected from everyone I've spoken to, to pass. The really critical date comes the week after when parliament will vote on this austerity package. And depending on whether Papandreou gets the majority that he needs-that he does, incidentally, have a majority, even though it is a small majority in the parliament. Then Europe and the IMF say that they will release those-that $17 billion which will prevent Greece from defaulting in July. And then they will be able to discuss and possibly release a second bailout package, which is for the same amount of money, incidentally, as the first, John.
DEFTERIOS: If Evangelos Venizelos, who is now the new finance minister, is an old Pasok hand, he was a defense minister, culture minister, very popular with the very people in that square behind you. But can he really deliver austerity? Will they buy this new cabinet? And particularly, the voice from him that more needs to be done?
MAGNAY: Well, this is a difficult question. Because he is an old hand, as you say, and an old Socialist politician for whom, things like privatization, which is one of the IMF's key demands, sit very badly. He hasn't the economic background of George Papaconstantinou, the former finance minister. I think there was (AUDIO GAP) appointing him was to try and create some unity within George Papandreou's Pasok Party and to quell a rebellion. So really he was there to try and (AUDIO GAP) the Pasok into pushing that vote through the parliament, John, next week.
DEFTERIOS: OK, we have to leave it there. We are fighting the technical ghost there from Athens. But thanks very much for the analysis. Diana Magnay joining us just above Syntagma Square in downtown Athens.
Well, if the government looses Tuesday's vote of confidence the austerity program could stall. Elena Panaritis is a member of the Greek parliament and an economic advisor to the prime minister, Mr. Papandreou. I asked her if the government can get past the first hurdle and survive the next 24 hours.
(BEGIN VIDEOTAPE)
ELENA PANARITIS, GREEK PARLIAMENT MEMBER: Absolutely, they will survive that vote of confidence. There is no question about it. The new reshuffling of the cabinet has given stronger confidence to our own members of parliament and has given a breath of fresh air, if you wish, also to the Greek society.
DEFTERIOS: Behind you, in Syntagma Square. you still have quite intense protests. What can you say about the willingness of the Greek people, not to go for a revolution, some of the language we see in the analysis coming out of Greece today? And to go for yet another round of austerity?
PANARITIS: The reason people protest is because they have actually been the recipients of the severest austerity measures that Greece has seen after the Second World War and I would say the Western European world has seen after the Second World War. And here there is a second wave, or a stronger wave of austerity measures coming, yet without any tangible outcomes of a better daily life for the daily Greek, the average Greek. And that is what they are protesting about.
DEFTERIOS: One of the criticisms, as you know, is that Greek government has not delivered on his promises to Brussels. Specifically when it comes to privatizations. And this new finance minister, in March, was suggesting that the privatization program was too aggressive. What can we expect from this new government on privatizations and austerity then?
PANARITIS: The issue of privatization is actually a very good example of the problems we face, in the country, in terms of structural deficiencies. It is not as easy to privatize one's-the structural element, in other words property rights, regulatory environment. The definition of brand names, and so on, is well defined. And that is why it was not as possible to keep up in the same speed of requests.
Don't forget we have been in this program only a year. And usually this type of reform programs take a little longer than just a year. So, keeping your promises, I would put a little bit of a pinch of salt on it. Because we have to put promises in austerity measures in terms of structural reforms, it is not a lack of willingness. But it is actually the actual fact of dealing with the beast, the beast of our problem, the lack of very good institutions.
DEFTERIOS: What did you think of the European Union delaying, yet again, giving money to Greece until early July, waiting for Greece again, to deliver more austerity. It seems to be a cat and mouse game, which is quite a dangerous one for Greece.
PANARITIS: Yes, I think it is also, you know, a real structural element of the way the IMF and the other two European players, the ECB and the European Commission are doing business. They have to wait for us to take measures so that they can deliver the fifth tranche. That is the way all bailout programs work. So it is understandable. On the other hand that delay also has a long, if you wish, a risk. The risk of generating a big uncertainty in the way the euro is going to be responding, or being resolving, in the markets.
So, it is a bit of a catch-22 really. I do understand why there is a delay. But also it generates uncertainty in the markets.
(END VIDEOTAPE)
DEFTERIOS: Once again Elena Panaritis, the economist joining us from Syntagma Square. And fighting a little bit of the elements there with still the protests just below her.
Well, the uncertainty over Greece drove stocks into the red on Monday. It was a pretty toxic session for bank shares. In London Royal Bank of Scotland slumped more than 4 percent. Lees (ph) and Lloyd's banking group also suffered. Commerce bank was one of the worst performers on the DAX. No surprise there because of the restructuring in Greece. Financial stocks also suffered in Athens. Banks listed on the benchmark index saw losses between 3 and 5 percent each.
The picture is a little bit brighter for the U.S. stock market. We are seeing modest gains on Wall Street. Shares of Wal-Mart led the Dow higher, as a Supreme Court decision put the brakes on a massive job discrimination class-action lawsuit that spilled into the market as well. And the gains were limited. Investors cautious about the Greek debt crisis and whether, in fact, we can see progress on that debt ceiling and budget reform in the U.S. Congress.
Well, the Paris Air Show is well and truly taking off. Not every plane meant to perform made it off the ground, however. We'll explain why when QUEST MEANS BUSINESS continues. Stay with us.
(COMMERCIAL BREAK)
DEFTERIOS: On the first day of the Paris Air Show Airbus has been making many of the headlines, although not always for the reasons that it might have wanted. A couple of high-profile technical problems have thrown a wrench in the works of two of its flagship demos. First it had to ground one of its A380 Superjumbos after an accident on site. The right wingtip of one of the planes clipped a building so the aircraft was pulled out of the show as a precaution. Korean Airlines stepped in to offer one of its planes to fly during the A380 demonstration.
It was a similar story for the Airbus A-400 M. The new military plane was limited to just one flyby today. It was pulled from all other demos because of a gear box problem.
There have been some bright spots for Airbus, though, this is the jet that its parent company, EADS, will hope one day fly from Paris to Tokyo in just two and a half hours, if you can believe that. It unveiled this hypersonic plane. It looks a lot like a Concorde. Although, its designers are keen to stress it is a very different airplane. For one thing, emissions are supposed to be zero. We won't be flying it though, for maybe another four decades, 40 years. Take a look at that thing, though.
And AirAsia could also give Airbus a boost. It is reportedly close to sealing a deal to buy 200 of its A320 Neo planes for $18 billion. That is the list price, of course. We don't know how much the airline would actually pay for that freighter and flighter. Those A320 Neo planes have proved to be popular with the airlines. The Airbus chief operating office for customers says they are the company's fastest selling model in history right now. A little earlier John Leahy spoke with out Jim Boulden at the Paris Air Show.
(BEGIN VIDEOTAPE)
JOHN LEAHY, COO - CUSTOMERS, AIRBUS: Yes, I think you are going to see a lot of operators switching over to the Neo. As I was saying before we call it the new engine option, but it is really becoming a new environmental obligation. If you can save 15 percent on fuel burn, reduce the noise, reduce CO2 by 3,600 tons a year. How can you say I'd rather not do it? The airlines realize that, which is why the airplane is selling at a faster rate than any other airplane in jet aviation history.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: What do you say to those who say, well, it is an old aircraft with a new engine?
LEAHY: It is selling at a faster rate than any airplane in jet aviation history.
BOULDEN: Your competitor, Boeing, hasn't actually been able to decide yet whether it is going to make it equivalent with the 737, or a brand new one or with a new engine. Do you find that you are getting a lot more orders because your competitor hasn't been able to say what they are going to do?
LEAHY: No, I don't think we get orders because of that. I think we get orders because of what our airplane can do. And I think that they should stop the dithering and make up their mind one way or the other. But the one thing they can afford to do is just stay with the old 40-year-old design of the 737. That airplane is obsolete.
BOULDEN: OK, let's start with the A350. The buzz around that for a lot of years is that you are decided you are going to give it a more hefty engine, because a lot of your customers airlines have said they wanted something with a bit more thrust.
LEAHY: Well, there are three models in the A350 family. There is the 800, the 900 and the 1,000. We are leaving the 800 and 900 alone, but on the 1,000, it is the airplane that is designed to go nose-to-nose with the 777 300ER. We are going to put a 97,000 pound thrust engine on it. Take the takeoff weight up to 308 metric tons. Now what that means is we can do all the missions the 777 300ER can do, like Singapore to London, we can do it saving 25 percent on the fuel bill. That is important.
BOULDEN: Where do you see the economy now? It is always important to understand whether it is positive or negative. We seem to be obviously in a more positive era now. Is that how you see for new orders for the next coming years?
LEAHY: Well, I think as long as the economy stays in an upward trajectory, yes. If we go into a double dip recession, of course, the airlines get hit very directly, because airlines really track GDP growth. They tend to grow in mature markets at double the rate of GDP growth, in other markets maybe even at higher rates. So, if you can see GDP growing in a region, like China. You'll see aviation taking off in the double- digit ranges. And that is exactly what is happening.
(END VIDEOTAPE)
DEFTERIOS: Once again, John Leahy with Jim Boulden at the Paris Air Show.
Well, Airbus' main rival, Boeing, has been showing off the version of its 787 Dreamliner at Le Borges (ph). It says it has also won orders and commitments for its new 747-8, intercontinental from two unidentified customers. Jim asked Boeing's Jim Albaugh, head of commercial airplanes, how confident he was that the 787 will finally be delivered this year.
(BEGIN VIDEOTAPE)
JIM ALBAUGH, CEO, BOEING COMMERCIAL AIRPLANES: The first airplane this summer and that will be to ANA. I'm very confident of that.
BOULDEN: And how many are we expected to be then manufacturing per year, per month. How quickly are you ramping up?
ALBAUGH: Right now we are building two airplanes a month. And we'll ramp up to 10 airplanes a month by the end of 2013. But we're taking a very disciplined approach to ramping up to make sure the factory is ready, the supply chain is ready. And when we do go up in rate it is something we can achieve.
BOULDEN: There has been a bit of a hiccup as far as the union is concerned, in the U.S. about where you make all the 787s. Where does it stand right now? There has been some talk that the union isn't very happy. You want to make some of these in South Carolina, away from your main production base.
ALBAUGH: Yes, we were very surprised by the NORB ruling. In our view it is not consistent with the law. And it is certainly not consistent with precedent. But I'm going to let our attorneys take care of that. You know, I'm focused on building airplanes and making some of the strategic decisions we need to make for our product lines of the future.
BOULDEN: One of the strategic decisions everyone is waiting for is whether there will be a replacement for the 737, your sort of single aisle workhorse.
ALBAUGH: Yes.
BOULDEN: Whether it will be just an upgraded version of that. And a lot of airlines are saying they are desperate to know the answer to this.
ALBAUGH: Well, we are looking at the market. We are talking to our customers. We are understanding the technology. And we could do either one of those options. We have a design for re-engine that is on the shelf. And that is a low risk approach. It is taking a very good airplane and making it better.
BOULDEN: And more fuel efficient.
ALBAUGH: Yes, more fuel efficient. The other approach, though, is one that our customers really want us to do. And they have issues of profitability, with fuel prices, their environmental footprint. And we can build an airplane that is 20 percent more efficient than the 737. That is higher risk. And right now we are taking a very cautious approach. We are trying to understand, you know, all the variables. And we'll make a decision probably toward the end of this year.
BOULDEN: If it is a newer plane, then it is not until what, 2020? That we will see that replacement for the 727 (ph)?
ALBAUGH: Yes, 2019, 2020, correct.
BOULDEN: And the airlines have patience, waiting for that. Because obviously we are talking about fuel prices now?
ALBAUGH: Well, I think they are. I mean their option is to continue with us on the 737 which we will continue to make better. And in our view the NEO, the A320, with the re-engine, only makes that airplane as good as the one that we are currently producing.
BOULDEN: That is from your Airbus competitor, of course?
ALBAUGH: That is correct. So, yes, we think our customers will wait for that airplane. They've told us they'll wait.
BOULDEN: You are not a company that just do an economic forecast, but your economic forecast that have come out has made a lot of buzz; a very positive, robust, looking for the next two decades. You have seen a marked increase in the number of planes sold, even from what you thought a few months ago.
ALBAUGH: Well, there certainly are issues that impact the airline industry. You've got SARS, you've got volcanoes, you've got terrorism, you know, issues like that, fuel prices. But if we look back historically, air traffic grows by about 1.5 times world GDP. And based on what we think is a conservative estimate, and we think there is a market for over 33,000 airplanes over the next 20 years, which adds up to about $4 trillion.
BOULDEN: As far as the oil price goes, when it gets higher it actually helps in some ways because airlines decide they need to upgrade to newer planes. Now we're seeing the price coming down a little bit. Where do you feel comfortable with the oil price and how does that affect your decision making?
ALBAUGH: Well, I don't think the trend is going to be down any time soon. I mean, I think it is going to continue to be upward pressure on fuel prices. And that really is, is one of the things that we are considering in our decision. Do we want to evolve yesterday's airplane or do we want to build and airplane for the next 50 years, knowing that the direction of fuel prices is probably up.
BOULDEN: So, you are talking about the 737 again?
ALBAUGH: Correct.
BOULDEN: So, kind of hints which way you are thinking?
ALBAUGH: Well, I'll tell you what, our customers will help us decide direction to go.
(END VIDEOTAPE)
DEFTERIOS: Double Jim, there, at the Paris Air Show, Jim Albaugh of Boeing, with Jim Boulden, our Jim Boulden at the Paris Air Show.
Well, you are watching QUEST MEANS BUSINESS. Straight ahead Richard shows us why going green can feel like a joy ride if you are in Denmark's capital.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: The merry-go-round of sustainability and sacrifice. It is "Future Cities" from Copenhagen after the break.
(COMMERCIAL BREAK)
DEFTERIOS: Red hot and green, tonight a tale of hedonistic sustainability. That is a mouthful. It is all about making cities more green and living standards less gray, a lot less gray. That made us wonder whether doing good usually has to hurt. Well, not if you are in Denmark's capital with Richard.
(BEGIN VIDEOTAPE)
QUEST (voice over): Copenhagen is a city with fun, literally at its heart.
Tivoli Fairground is slap bang wallop in the middle of the city. The guttural screams of its visitors the soundtrack of people's daily commute to work.
(On camera): Running Tivoli does not come at the expense of the environment. All this whooshing and whirring is powered by wind.
STINE LOLK, TIVOLI GARDENS: Tivoli has been working with minimizing the impact on the environment since 1996. One of the very big projects is the wind turbine. That supplies the Copenhagen grid or the magnet (ph) with the same amount of electricity that we use here.
QUEST: What they are proving here at Tivoli is that having fun needn't come at the expense of the environment or the city. It is a message that is very close to heart of one of the city's rising stars.
Bjarke Ingels is the head of BIG Architecture. It is the mission of his young architects to dispel the urban myth that the price of sustainability is pleasure and comfort. Here they believe in hedonistic sustainability.
BJARKE INGELS, FOUNDER, BIG ARCHITECTURE: Hedonistic sustainability is this like a departure from the sort of traditional idea that sustainability is a question of how much of our life quality are we prepared to sacrifice in order to afford being sustainable. So, almost like a sort of Protestant idea that it has to hurt to do good. And rather what we are trying to do is to sort of look at examples where buildings and cities do sustainable design can actually increase life quality.
QUEST: Copenhagen's bike friendly streets are proving the point. They benefit the environment and improve the quality of life. The big thing is to extend this principle to living in the city and to do so through architecture. For example, the Eight House, an award-winning, multi-purpose block shaped like a figure eight. And built for maximum efficiency.
INGELS: Housing spends energy on heating so they wan to have as much sunshine as possible. Offices, they spend energy on cooling so they want to have as much daylight but without getting the sunshine. So, essentially by allowing each program to gravitate towards its favorite position, we can sort if in a passive way to optimize their consumption patterns.
QUEST: With its cycle ramp, all the way up to the penthouse, what might be out of place in today's Copenhagen would be very familiar in the 18th century city.
INGELS: The king, he was into astronomy, so he wanted to, you know, look at the stars, but he was simply too lazy to take the stairs. So he asked for a tower where he could actually ride all the way from the ground floor to the roof.
Well, I think where he really had a point is to remember that architecture is here to essentially create the framework for the life we want to live.
QUEST: Creating that life was the aim of the mountain dwelling. After all, one man's roof is another man's garden.
INGELS: We are trying to combine things that are normally seen as diametric opposites. You know, a house with a garden in a sort of dense urban location. So, you don't have to choose if you want to have the suburban style lifestyle or the urban lifestyle, you can actually have both.
QUEST: The next project from this progressive Danish firm will impact life for all in Copenhagen. They've designed a power plant that turns waste into energy. With is very own man-made ski slope on the roof.
INGELS: This is both economically and ecologically sustainable in the sense that you turn waste into energy. But it is also socially sustainable because you are turning a big power plant into a public park for skiing.
QUEST: BIG's pioneering approach has been the subject of global attention. Today, Ingels shares his vision with the South Korean President Lee Myung-Bak.
INGELS: If the delegation had more time we could have actually taken a bicycle from the ground.
(LAUGHTER)
QUEST: Hosted by the Crown Prince Frederik, the Korean president is here to see for himself how Copenhagen's buildings are leading the way.
LEE MYUNG-BAK, PRESIDENT OF KOREA (through translator): I'm very interested in how to preserve energy and how to make architecture display and reflect the needs of our time. So this is a very good example for us to take back to Korea.
CROWN PRINCE FREDERIK, DENMARK: We have been into energy solutions and alternative energy sources for more than 30 years. So, we feel very proud and honored that we can share some technology and some know how with Korea.
QUEST: Denmark's long tradition of adapting it cities continues. The work of its architects makes sure that even one of Europe's oldest capitals builds sustainability into a better future.
(On camera): It is the same points being made here at Tivoli in the heart of Copenhagen. The notion that sustainability involves sacrifice is being smashed, as it has to be in any true future city.
(END VIDEOTAPE)
DEFTERIOS: Coming up on QUEST MEANS BUSINESS it is all about saving Greece. Can Athens push through deeper spending cuts? Hear the view from a CEO who makes his life and work in the debt shaken nation, when we come back.
(COMMERCIAL BREAK)
DEFTERIOS: And welcome back.
I'm John Defterios and here are the headlines at the bottom of the hour.
Syria's president says the public should not be afraid of the military and anyone who's fled should go back home. In a speech on Syrian state TV, Bashar al-Assad addressed the ongoing unrest in Syria. He offered to discuss legitimate demands, but blamed the violence on gangs and conspirators.
NATO has now admitted carrying out an air strike west of the Libyan capital of Tripoli. The Alliance says that it hit a high level command and control site. But Libyan officials say 15 people were killed, including three children. NATO says it is investigating those allegations.
More fallout from the corruption scandal dogging world football. Governing body, FIFA, says Vice President Jack Warner has resigned. He's been provisionally suspended by FIFA's ethics committee. He now says FIFA and all the ethics committee procedures against Warner have been closed for good.
Amid mentioning pressure, a new deadline looms for Greece. As we've been reporting, the EU says the debt-plagued country now has until July 3 to get its financial act together if it wants to see another multi-billion dollar bailout check. The EU says Athens must make deeper austerity cuts before handing over the next slice of the rescue money, now tallying $17 billion. Amid the pressure and protests, can Athens push through more cuts?
A short time ago, I put that question to Christian Hadjiminas, the chief executive of technology company, Theon Sensors, based in Athens.
(BEGIN VIDEOTAPE)
CHRISTIAN HADJIMINAS, CEO, THEON SENSORS: Yes, I think they can. And there's no doubt in most of the -- within the business community, at least, there's no doubt that the Greek government will manage to pass -- to vote on those new austerity measures.
And, therefore, we -- we believe that, at the end of the day, it's going to work out OK.
DEFTERIOS: How does the business community see this cat and mouse game, where Europe is not willing to put the money up until Greece delivers another round of cuts?
How is that viewed down in Athens by the business community?
HADJIMINAS: I think -- I think that in all of our minds -- or most of the business community's minds -- is the fact that we all believe it's going to be, at the end of the day, this cat and mouse, as you call it, it's going to be resolved.
Our concern is that in the interim period, until this thing is resolved, every day that passes by creates uncertainty. And -- and, you know, the economy is all about psychology. And Greeks have been bombarded from bad news. And that has really added to the crisis beyond the -- beyond the actually debt problems that Greece has.
So, therefore, it's -- it's the interim period until those things are resolved that we are concerned, because at the end of the day, we all believe it will be resolved.
DEFTERIOS: We read articles and research that six out of 10 Greeks don't pay their entire taxes, that the business community doesn't like the tax structure.
How do we restructure the economy to make it actually a legitimate economy that can play on a global scale?
HADJIMINAS: Yes, well, first of all, the government, the last 20 months, he's really done an effort to collect taxes. I -- I believe that although it has taken a lot of -- has taken a lot of control and measures, at the same time, it has decreased the incentive for people to pay taxes because they have increased the taxes at all levels -- the personal level, company level, indirect taxes.
Therefore, we all believe the consensus here. And I believe that it starts being adopted by more and more people, this -- this approach, that maybe it's best to cut the taxes and -- and -- and this way, increase the tax revenues.
It's a vicious cycle, as you can imagine. But at some stage, it has to be cut. And the -- the rates, indeed, you're saying we have six out of 10 Greeks not paying taxes. This is correct. But in -- in -- if you look at the tax rates, for a country like Greece, we also in, at least normally, they are very, very high.
(END VIDEO TAPE)
DEFTERIOS: Once again, Christian Hadjiminas, joining us there from Central Athens.
Well, he's the ultimate comeback kid.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: U.S. Open champion (INAUDIBLE).
(END VIDEO CLIP)
DEFTERIOS: Rory McIlroy cleans up on the green. There could be a lot more green coming his way very soon.
(COMMERCIAL BREAK)
DEFTERIOS: And if you were watching the U.S. Open last night, you saw the birth of a new Holywood star. That's Holywood with one L, that is. Northern Ireland's Rory McIlroy destroyed the competition, breaking all kinds of records to finish, get this, 16 under par. It exorcised the demons of his disastrous U.S. Masters and might be his ticket to the big time.
Right now, McIlroy makes a reported $10 million a year from his main sponsors. I would imagine that's pretty small change.
Let's go back to the history of Tiger Woods. After Sunday's performance, commentators are touting him as the new golfing powerhouse, even the next Tiger. At his peak, Woods was making up to $110 million a year from sponsors and he still tops the "Forbes" list of the highest paid athletes in the world. But he took a hit, of course, from the sex scandals of 2009. And his form on the green suffered, as well. Tiger didn't even take part in the U.S. Open because of an injury.
Golf in the U.S. desperately needs a new big player. A new superstar is needed right now. And someone like McIlroy, who grew up idolizing Woods, suddenly looks like a pretty darned good fit.
Only problem -- he's a European. That means he plays on the European Tour circuit rather than the American PGA.
There is the possibility McIlroy could switch sides. But at such an early stage of such a promising career, there would be a lot of pros and cons committing to either side right now. And one of those is the whole tax question, because the U.S. taxes sponsorship in a very, very different way.
That's not my specialty. I love following business and I love the big bucks, but let's bring in Don Riddell, who can...
DON RIDDELL, CNN CORRESPONDENT: Tax isn't my specialty...
(CROSSTALK)
DEFTERIOS: -- the Inland Revenue or the IRS.
This is extraordinary. First let's -- let's cover, from a sports standpoint, it was a phenomenal tournament. It kind of occurred to me as I -- I saw this guy melt down in the second half of the Masters and he pulls it together and he's, what, 22.
RIDDELL: That's right, only just 22. It's phenomenal for so many reasons. The fact that he's so young. The fact that he was so far ahead of the rest of the field. And as you say, because it was just, what, 10 weeks after he catastrophically melted down at the Masters.
He could have won the Masters. He was four shots clear with just a few holes to play, with just the back nine to go at the Masters. And, you know, that meltdown really could have crushed a lot of golfers. And for him to have come back in the way he has so quickly is just incredible.
DEFTERIOS: You had a chance to meet him briefly, you said. And everything you hear from people like you is that he's incredible mature for 22. So even in defeat at the Masters, he kind of bounced back, held a press conference. And that's pretty good when it comes to branding, I would imagine.
RIDDELL: I would have thought so, yes. I mean he's very, very popular. He plays golf with a smile on his face. You know, he's very exciting. He's obviously young. He's personable. He's an exciting player. He shoots low scores. He hits the ball further than anyone else. So he's -- he's a marketer's dream.
And I think the way he handled himself after the Masters really said a lot about the man. I mean he's a very mature 22 -year-old. To be honest, people that have known him further back said he was, you know, a mature young man at the age of 13 or 14.
DEFTERIOS: Yes.
RIDDELL: He's got (INAUDIBLE)...
DEFTERIOS: All right, I want to get into this. It looks like -- sorry, Don. Jumeirah, which is the big hotel group based in Dubai -- you have Oakley and Titleist. They look profound right now.
What could they...
RIDDELL: Yes.
DEFTERIOS: Because they got him on the cheap.
RIDDELL: Yes.
DEFTERIOS: But what can he tack on after this win?
RIDDELL: Well, it's interesting. You know, golfers make money in three different ways. There's the prize money, obviously. There's the appearance fees and then there's the -- the endorsements.
Now, a lot of these, you know, sponsorship deals, are already tied up. Now there will be things written into the contract which will be performance related. So if he goes out and wins the U.S. Masters or the Open or whatever, then he can expect more money in return. But I think, you know, it will be when those deals are renegotiated in one, two, three years time, that they can really cash in.
DEFTERIOS: Right.
RIDDELL: Of course, by then, he will want to be a multiple (INAUDIBLE).
DEFTERIOS: But those others are going to come in, I can presume here?
RIDDELL: Well, there's only so much room...
DEFTERIOS: Oh.
RIDDELL: -- there's only so much golf as real estate. You don't want to make yourself look like a billboard. So I mean from the people within the business that I've spoken to, they've said there's not that much more room...
DEFTERIOS: Oh.
RIDDELL: -- with which you could put endorsements. The big ones have gone -- the Camp (ph), Tuerara (ph), that's gone. And it's worth pointing out where these companies are from. You know, Tuerera (ph), you touched upon whether he's going to play in the U.S. or whether he's going to play in Europe.
DEFTERIOS: Yes.
RIDDELL: You know, that is a company that has exposure in -- in Britain and the Middle East.
They don't particularly need him going off and playing in the United States, do they?
Perhaps not. You know, Titleist, FootJoy...
DEFTERIOS: Yes.
RIDDELL: -- this is a company that's just been taken over by a Korean company. So perhaps...
DEFTERIOS: Oh.
RIDDELL: -- you know, they prefer him to stay put...
DEFTERIOS: They could market him in Asia.
RIDDELL: -- in Europe and in Asia.
DEFTERIOS: Interesting.
RIDDELL: So it's not necessarily a given that he'll go and play in the U.S. PGA Tour, even though they would desperately love to have him.
DEFTERIOS: Yes, for the purposes of the PGA raising its profile...
RIDDELL: Yes.
DEFTERIOS: -- after the Tiger Woods black eye.
Nice to see you.
RIDDELL: Thank you.
DEFTERIOS: Thanks, Don.
Don Riddell from "WORLD SPORT".
Let's get an update on the weather.
And it's -- I think it's sports-related, I'm told.
Jenny Harrison is at the CNN International Weather Center.
Nice to see you.
JENNY HARRISON, CNN METEOROLOGIST: Hello, John.
It is sports-related. I thought after all that talk of golf, we need to focus on the next big tournament. That, of course, is Wimbledon. It began this Monday. Now, as usual, there's a few showers in the forecast. In fact, we've seen, in the last few hours quite a bank of clouds pushing across areas of the U.K. and much of Western Europe, as well.
We're seeing one or two showers and thunderstorms. But here comes the rain. Hopefully it hasn't interfered too much with Monday, with play. But I have to tell you that as this system works its way across from the Atlantic, there's a little area of low pressure bringing sort of scattered showers with those funny clouds. It does mean, over the next few days, we could have one or two showers for the tournament.
But, of course, it's not you heard of, so there's usually plays around any rain delays. But you can see Tuesday looks to be a pretty good day. And then Wednesday and Thursday that chance of showers is back again.
The temperature is not bad, sort of the high teens Celsius.
But there's some warnings in place. So as that next victim comes in from the west, we could have some fairly strong thunderstorms. So much of Central France, the northern areas of Spain. Certainly, we do have some strong storms, which brings them possible tornadoes, but certainly some strong winds and some damaging hail, as well.
And you can see the rain. It's fairly well scattered. And there's that line of thunderstorms, as I say, in the next 48 hours.
The temperature is not too bad -- 23 in Paris and a very warm 30 Celsius in Rome.
Meanwhile, in the United States, very hot, of course, across the South in particular. And yet again, another round of thunderstorms working their way across the Upper Midwest. The Central Plains, in the last few hours, the red box, tornado watches; the yellow for severe thunderstorms. And there will be more of that.
But at the same time, that fire danger critical now still across much of Eastern New Mexico but also across much of Texas. Very strong winds and, of course, very dry, very hot and very, very low humidity.
And, again, over the next 48 hours, with the heat in place across the south, we could well be seeing quite a line of severe thunderstorms developing across the Southern states. But as I say, that is probably a couple of days away.
Temperature-wise, it's very warm, indeed, across much of the Southeast, though there's warnings for Tuesday into Wednesday, with, again, those strong thunderstorms. And the temperature is 37 in Atlanta on Tuesday and 34 Celsius across in Dallas.
And then to China. Here it's not about the heat. Instead, it's been about the rain, the torrential rains over the last few weeks. Now it is that time of year, the Mayou Bayou (ph) front sitting across the south and the east of China.
But the impact is just phenomenal. Six million people have been impacted; the cost, as well, and, of course, the loss of life. Have a look at some of these pictures we've got to show you, because every day now, we're just seeing more images of flooded streets like this.
The Yangtze River seems to have peaked at just over 165 meters in the last few hours. But there is certainly more rain in the forecast.
And just quickly, I can show you that rain if you come back to me. And I can show you that rain. There it is.
The next system, John, we're watching, is a tropical storm which is approaching that south coast of China, near to Hong Kong. So I'll have more on that in the hours ahead.
DEFTERIOS: OK.
Thanks very much.
Jenny Harrison at the CNN International Weather Center.
Well, the dot-com era is coming to an end. The dot-anything era has officially begun. Internet regulators moved a step closer today to letting companies end their Web addresses however they want, believe it or not.
So while the biggest Web sites right now are the dot-coms, the dot- nets and the dot-orgs, in the future, the only limit will be your imagination. You could still be clicking on dot-food, dot-bank, or even, believe it or not, dot-nyc, whatever domain name a company wants to register.
The cost?
One hundred and eighty-five thousand. And that is just the application fee.
Well, joining me now is the technology expert and host of "Digital Life."
He's Shelly Palmer.
He's just released his new book, which we're going to talk about, as well, "Overcoming the Digital Divide," for those who are a little bit nervous about social media. nice to see you.
SHELLY PALMER, HOST, "LIVE DIGITAL WITH SHELLY PALMER": Glad to be here.
How are you?
DEFTERIOS: I'm good.
I'm wondering if this is a sellout or not?
I was reading it a lot on -- on what Icahn (ph) did here, because they were extremely, as you know, extremely protective about how the addresses were going to be introduced over time. That quickly changed.
What do -- what do you make of it, really?
PALMER: I think there's a lot -- look, there was an overwhelming vote today -- I think it was 13-3. So, obviously, whoever is in charge got their point across.
I'm not sure this is a great thing. It's $185,000 for openers and $25,000 a year. And that should keep a lot of, oh, onlookers out of the thing.
DEFTERIOS: Yes.
PALMER: You know, it's not going to be OK, dot-joe, dot-curly, dot- moe. But, to be honest, this is reminiscent of a lot of things that get out of hand when, all of a sudden, they -- they are just allowed to run amok. I don't -- we don't need the addresses. And so...
DEFTERIOS: But that was the number one argument...
PALMER: Right.
DEFTERIOS: -- that we needed creativity and we needed the addresses. So you're -- you're saying it's the contrary.
PALMER: I think that there are coveted URLs for brands. What's going to happen now, without question, is the registrars are going to get a hold of all of these names. There will be a new round of cyber squatting. And for anyone with a brand, the people who most use names on the Internet, to help them drive their businesses, who have protection from the Patent Trademark Office or the International Patent and Trademark Offices around the world, these organizations are going to be paying a fortune to fix this...
DEFTERIOS: Yes.
PALMER: -- because I'm going to have to go get my name, Shelley Palmer, I'm going to have to get dot-palmer.
DEFTERIOS: Yes.
PALMER: I'm going to have to get dot-Shelley. I have to go get them all now, right?
DEFTERIOS: That's what I was wondering.
PALMER: And so -- and $185,000, I can't. So when someone gets dot- palmer and decides, look, everybody with the first -- the first name have their own sort of new...
DEFTERIOS: Yes.
PALMER: -- oh, wow!
So what do I do?
I have to go buy it from them -- or at least I have to -- so -- and it's going to happen everywhere. It opens up all kinds of new commerce activity for the registrars. I don't know how it helps consumers very much...
DEFTERIOS: And that's what I was wondering.
PALMER: -- and remember, Icahn (ph) has also moved to IPv6 already. And so this is -- there are plenty of Internet addresses. This is about -- I guess this is about a new level of revenue for the registrar.
DEFTERIOS: Yes, that's what I was thinking. And we don't have too much time tonight. We wanted to talk to you about the book, "Overcoming the Digital Divide." I'm not a...
PALMER: My new favorite subject.
DEFTERIOS: Yes, I was going to say. I'm not a digital native or how do you call it?
I...
(LAUGHTER)
DEFTERIOS: -- I participate, of course, on social media.
PALMER: Born digital, digital native...
DEFTERIOS: Yes.
PALMER: -- digital tourist...
DEFTERIOS: (INAUDIBLE)...
PALMER: -- digital immigrant.
DEFTERIOS: -- 1990. Definitely
PALMER: Analog alien, right?
DEFTERIOS: Right.
Yes. If you're in this, you know, C-suite class...
PALMER: Right.
DEFTERIOS: -- the CEO class of the world, how do you manage this so that it's effective for the bottom line, effective for your brand profile, but not overwhelming?
PALMER: Look, the whole point of the book, "Overcoming the Digital Divide," is that we have analog leaders and digital workers. We have analog management and digital workers everywhere. And so, both in our personal lives and in our professional lives, we've got to get a handle on what are the elements of digital life and how do I control them?
And the easiest one to -- to think about or the best example I can think of is does your online presence match your offline presence...
DEFTERIOS: And what phenomenal (INAUDIBLE).
PALMER: And what does that mean to you?
Your Google presence, your Facebook presence, your LinkedIn presence, they're online 24-7, 365. You're sleeping when someone wants to find you.
Where do they go?
They go to Google. They go to Facebook. They go to LinkedIn.
And so are you managing those every day?
And most people aren't. So this book is all about empowering people, literally empowering people in byte-sized pieces, to take control of their online life as well as they're taking control of their offline life and make them match.
And professionally and personally, that is a huge help right now.
DEFTERIOS: OK.
We're a little bit short on time.
But thanks.
And speaking of which, it's not a heavy read.
PALMER: No, no.
DEFTERIOS: You made it for the C-suite --
PALMER: It surely is.
DEFTERIOS: -- so they can read it on the plane pretty quickly.
Nice to see you.
PALMER: Thanks so much, John.
DEFTERIOS: Thanks for coming in.
PALMER: Appreciate it.
DEFTERIOS: Shelley Palmer, once again, the author of "Overcoming the Digital Divide".
Well, the Don Drapers of the world like to say advertising is based on one thing and that is happiness. but what exactly is advertising these days?
That's the big question at the Cannes Lion Festival.
And we'll take you there, when we come back.
(COMMERCIAL BREAK)
DEFTERIOS: Going viral, a meaningful relationship, a creative conversation -- these are more than just catchphrases these days. They could translate into many millions of dollars for companies.
My colleague, Max Foster, is at the Cannes Lions Festival, or Cannes Lions Festival, finding out what the big guns of marketing are hoping you will capture and what you will capture in your imagination.
(BEGIN VIDEOTAPE)
MAX FOSTER, CNN ANCHOR (voice-over): For centuries, artists have come here, to the south of France, looking for inspiration. And now, modern-day creatives are doing just the same thing.
For one week only, this glamorous little port town has become a mecca for executives from the communications business.
BRUCE HAINES, GLOBAL CHIEF STRATEGY OFFICER, CHIEL WORLDWIDE: Cannes, quite simply, is the biggest and the best. It's the festival that everybody in the industry worldwide wants to come to. It showcases the absolute best of global creativity. It's a place where you come to meet people, certainly, but also to get inspiration from the -- from the best work that people are doing globally.
So it's -- it's a place to come and -- and really think about our product. So often, we're thinking about the business of our business, but this is a chance to think about the product that we make for our clients.
UNIDENTIFIED MALE: (INAUDIBLE).
UNIDENTIFIED MALE: My breakfast...
FOSTER: But what is the products?
What do creatives actually create now?
It used to be adverts.
But is it still?
UNIDENTIFIED MALE: And good taste.
MARK TUTSSEL, GLOBAL CHIEF CREATIVE OFFICER, LEO BURNETT: Well, obviously, technology is changing with rapid velocity and -- and the channels are growing by the day. And each day, we have another opportunity to connect two people.
But connecting with people has never been more difficult. People demand content.
So it's not about the channels that we're operating in. That's fantastic. We just have more opportunity to create that conversation between people and brand.
But content is king and the content is the most important -- important piece of the equation.
What we're creating is a relationship. We're not advertising at people any longer. Advertising is dead. You can't sell any longer. You have to create lifelong emotional relationships with people.
And if you look at the great brands out there, they have this lifelong relationship, because they're constantly activating that purpose on a daily basis, creating content that's interesting, that's stimulating, that's relevant and ultimately that's useful.
ALI ALI, CO-FOUNDER, ELEPHANT CAIRO: It's not about the size of your agency today, it's about the size of your views on YouTube.
We all know the big agencies are dinosaurs. We hear that here every year, I think, year on year.
But did we know that the small agencies are also threatened?
Because today anyone with a $500 camera and a YouTube account can kick all of our (EXPLETIVE LANGUAGE). Anyone with an iPhone and a smart app and an old eight vintage camera can -- can do it.
(MUSIC)
ALI ALI: I think TV is still the most effective medium we have. Again, I mean after the revolution, 25 million Egyptians are now online. So that's going to change very quickly, I think. But still, I mean all -- all our clients depend predominantly on TV, which is why we -- we, as an agency, also focus on TV very much and try to -- we try to have the strongest TV product in the country.
And that's, I think, what attracts all the other clients.
So I think primarily you need to have a really strong TVC (ph) and then try to sell the client that we also want to do this on a digital platform or we want to do this -- this or that viral.
I think that's going to change, you know?
If the revolution has changed anything, it's -- I think it told our clients that the consumer is not stupid, because the consumer just had a revolution. And it also told them that the consumer is online and they're all connected and the social mediums are big. I mean if social media can overturn a president, then I think they can do wonders for your brand.
We're up against Lady Gaga and her 100 million views. Everyone in here is competing with Lady Gaga. Every morning, you wake up and say, I want to beat Lady Gaga.
FOSTER: The truth is, celebrities have what a lot of the creatives here want, and that's a meaningful relationship with their customers. But they don't call them customers, they call them fans, which is why customer has become a bit of a dirty word here at the Cannes Lions Festival, just as advertising has.
Max Foster, CNN, Cannes.
(END VIDEO TAPE)
DEFTERIOS: The sun looks pretty nice down there in Southern France.
We're going to take a short break.
We'll update you on the markets and more when QUEST MEANS BUSINESS continues.
Stay with us.
(COMMERCIAL BREAK)
DEFTERIOS: There's just time to check in on the Dow one last time. There's about an hour of trade to go after a bit of a scare at the open, stocks have gone on to make some modest gains. Wal-Mart's shares doing particularly well after the U.S. Supreme Court blocked a lawsuit against the company. This is near the high for the day, a gain of nearly 80 points, at 12083, recapturing 12000 today, with a gain of 2/3 of 1 percent.
Well, the Greek situation is, of course, the primary concern of markets here in Europe. The big three all fell on the day, the Paris CAC Quarante worst of all, up by 2/3 of 1 percent.
Banking stocks across the continent took a hammering worries about exposure to Greek debt weighing down heavily on RBS in the U.K. and Commerce Bank, not surprisingly, in Germany.
Let's take a look at Brent prices for the day. Brent, right now, down 1.3 percent on the session, to finish at 1163. We peaked at nearly $100 a barrel on NYMEX before. It's now trading at $93.22 a barrel. That is up slightly on the day. And Brent was down just over 1.3 percent on the session.
And just time now to tell you about this. Actress Demi Moore is partnering with CNN's Freedom Project for an especially compelling new documentary. She travels to Nepal to meet the 2010 CNN Hero of the Year, Anuradha Koirala, and some of the thousands of women and girls in Koirala's organization who have rescued from forced prostitution. Hear the personal and firsthand experiences of the young survivors Moore met.
And follow along with her as she searches for answers in the fight to end this form of modern-day slavery. That's the world premier of "Nepal's Stolen Children," a CNN Freedom Project documentary. That's at 8:00 London time on June 26th, only here on CNN.
And that's QUEST MEANS BUSINESS.
I'm John Defterios in London for Richard.
"PIERS MORGAN TONIGHT" is just ahead.
But first, a check of the news headlines.
END
