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Quest Means Business
Report Recommends Radical Changes to Operation of Banks In Britain; BofA Cuts 30,000 Jobs
Aired September 12, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: A bold blueprint for Britain's banks. They are told to reform their ways.
Bank of America is making sweeping changes of its own; 30,000 jobs are to be cut.
And to the Frankfurt Motor Show, the heads of GM Europe and Jaguar tell us there is a bumpy road ahead.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello.
Britain's biggest banks are to be told there is a price for stability. It is an extra $11 billion a year. The U.K.'s independent banking commission says banks ought to hold on to even more cash to protect savers in the event of a future financial crisis. The commission chaired by John Vickers also recommends radical changes to the way banks operate. Jim Boulden has been look at what it all means for the industry.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN BUSINESS CORRESPONDENT (voice over): A day the banks in Britain knew was coming. It is known as the Vickers Report. And it heralds a major overhaul of Britain's banking laws.
JOHN VICKERS, U.K. INDEPENDENT COMMISSION ON BANKING: Status quo is not an option. Things have got to change.
BOULDEN: But what could change in Britain? Banks based in the U.K. would have to separate the retail from the investment banking. Banks will also have to keep even more capital on their books than already mandated by new international rules.
The business community is worried the Vickers Report would be too tough.
NEIL BENTLEY, CONFEDERATION OF BRITISH INDUSTRY: It could undermine our competitiveness because it will increase the cost of lending in the U.K. and that will be out of step with the rest of the EU. And it will make it-it will be more expensive to bank in the U.K.
BOULDEN: The commissions recommendations are to ensure that banks ordinary High Street operations are not at the mercy of the riskier side of investment banking. So U.K. taxpayers would not be on the hook to bailout any big British bank if its investment arm gets into trouble. The commission says, after all, Britain's banking sector is four times bigger than the country's GDP.
VINCE CABLE, U.K. BUSINESS SECRETARY: The report is very, very clear that we need a strong (UNINTELLIGIBLE). So that we don't have the problems in the past, of retail banking, the ordinary, you know, British households and business, that kind of banking being mixed up with investment banking casino operation.
BOULDEN: The government is now studying the report, but even if it becomes law, it would not be fully implemented until 2019.
(On camera): While these proposals to partially separate retail banking from investment banking only apply here to the U.K., members of the commission say they wouldn't be surprised if other countries had a serious look at them when reforming their banking sectors.
(Voice over): Some banking experts disagree.
PETER HAHN, CASS BUSINESS SCHOOL: I think one of the things that we found in the efforts to look at the more global strengthened regulations, is that each country has its own influence. And that consumer banking, as an example, is very different in Germany, in Spain, than it is in the U.K. So, I don't think we'll see other countries follow this model.
BOULDEN: Then there are worries some banks might just leave.
VICKERS: If there were a bank which effectively says, look, I'm here because I get the U.K. taxpayer subsidy. Without that I don't want to be here. It is not clear that it is a good idea at all for the U.K. to say, oh, please, please, stay, we are all very happy to subsidize you.
BOULDEN: The commission says banks will have some flexibility how to ring fence their retail operations. But says up to $3 trillion worth of assets must be kept within the retail banking ring fence, just in case. Jim Boulden, CNN, London.
(END VIDEOTAPE)
FOSTER: (UNINTELLIGIBLE) Greece dominated trading here in Europe. Senior German politicians are now talking openly about the possibility of Greece going bust and leaving the Eurozone. It all added up to a miserable Monday for European investors with all of the main markets closing deeply in the red. The Paris CAC 40's 4 percent loss takes it to its lowest level now since March 2009. The DAX is at a two-year low. Financial shares were hardest hit. There were rumors that French banks are about to face a downgrade because of their potential exposure to Greece. The damage was severe. As you can see, three major banks, each saw major share losses.
Investors may be feeling bruised, but John Vickers said today Britain's banks should not be seen as too delicate to reform. Vicky Pryce is senior managing director at FTI Consulting. She advises the U.K. government, as well, on business and (UNINTELLIGIBLE). She joins me now.
Thank you so much for joining us.
The Employers Federation talked about this, the trade unions think it doesn't go far enough and the Employers Federation says, you know, it is fine. What do you think of it?
VICKY PRYCE, SENIOR MANAGING DIRECTOR, FTI CONSULTING: Well, I think the employers will be a little bit worried and have been, for some time now, in case it actually increases the cost of banking, for their customers. And that is a big issue. I think if you look at how those changes are implemented over a period of time and see what the effects would be. The costs shouldn't be that great and think the banks should be able to absorb some of that themselves.
I think there is an issue. That is, first of all, leaving it until quite late; 2019 is when they really will be implemented, assuming everything goes according to plan, which is to coincide with the Basal III changes as well, which makes sense, except we are expected to be doing a little bit more, which might be costly in terms of capital.
The other thing is can you really do this change by yourself, in the U.K.? So, in other words, what will be the competitive implications for the banking sector here.
FOSTER: Well, that would be that the British banks loose competitive advantage over the European banks that aren't making the changes.
PRYCE: Well, that is possible. I think there is a great (UNINTELLIGIBLE), is that the whole point of the report, and the whole point of setting up this commission was a reaction to what happened before. Can we avoid international crisis in the future? Financial crisis are very expensive. They are very costly in terms of GDP. We has happened to the U.K. on the world economy. And the idea of separation, or at least some sort of segregation of assets, is to ensure that these financial crisis are not ((UNINTELLIGIBLE) in the future.
FOSTER: And that has been broadly accepted by everyone, hasn't it? So there is a principle here that has been agreed.
PRYCE: Absolutely. But the question there is, can you do it on your own. In other words can you insulate yourself from crisis that might originate somewhere else? I think the point of the previous comments that we are getting in your program, is what will happen in the other countries? Are they going to follow suit? Or are they going to carry on as they are?
FOSTER: What have you heard?
PRYCE: Well, I mean, I haven't heard anything. Because nobody is talking about it, they are waiting to see what is going to happen here. I don't think there is any serious inclination to do anything much about separation on the capital side. We have seen already the Swiss, who are becoming considerably more sort of hawkish, if you like, in that area. So, that may be followed by others as well.
FOSTER: So the ball is in Europe's court?
PRYCE: I think so, yes-and the U.S.
FOSTER: We should look to U.S. as well, shouldn't we, and Asia, because these banks are global. They are all competing with each other. And if there is a country doesn't install all of these restrictions, then their banks are going to do really well?
PRYCE: The U.S. didn't even implement Basal II. So, learn, what are they going to be doing now with Basal III, so indeed I think that is going to be an issue. There are serious differences between the various zones, if you like, the economic zones, if that is going to be a problem in terms of implementing what we want to-
(CROSS TALK)
FOSTER: There are doomsayers who say, you know, we are heading towards another recession. There could well be another financial crisis. We saw the French banks in trouble today. Some American banks been having trouble on the markets, the London ones as well. This isn't being taken into effect until, as you say, 2019. So it is not going to make any difference anyway if we go into another financial crisis.
PRYCE: Well, it does makes sense to delay, actually, because of what is going on right now. And I think banks need to understand how they are going to be implemented. But yes, there are crisis, right now, that we have to deal with. And I think the banks will have to look at their capital, as we are now. But there are others, of course, like Andy Haldane (ph) at the Bank of England, who had been calling for a reduction in the capital of the banks right now. Sort of, if you like, pro-cyclical, so that we can actually have enough money to lend to businesses which actually need this right now. So there is going to be a bit of a period where, yes, there is a report out, which actually requires quite a lot of changes, but in the short term I think the banks will be doing quite a lot of things, in order to survive.
FOSTER: OK, Vicky Pryce, thank you very much indeed for joining us.
Well, Bank of America are cutting 30,000 jobs. That is more than 10 percent of the workforce. The banks says it is part of a plan to save $5 billion. It hopes most of the jobs will go as a result from attrition and eliminating unfilled positions, though. Felicia Taylor joins me now from outside the Bank of America's New York Headquarters.
This was very big news, wasn't it, on Wall Street?
(AUDIO GAP)
FOSTER: OK, we're going to try and get in touch with Felicia, get those audio signals working. We'll be back in a moment.
But cost cutting is something we're going to look to more in the program as well. It is a policy that brings people into the streets. We'll hear from Nobel economics laureate Joseph Stiglitz about his view that some austerity measures are doing more harm than good.
(COMMERCIAL BREAK)
FOSTER: Returning now to the news of Bank of America cutting 30,000 jobs. Felicia can now hear me.
Very big news, wasn't it, Felicia, on Wall Street? This had a really big impact. Because of what it means, really, for the banking sector?
FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: Absolutely. I mean, this is widely expected. We heard rumors about this as early as last week. So it wasn't a surprise. But what is interesting was the way he announced it. At an investors conference he talked a lot about the reductions that he is planning to implement, and has already been implementing in what has been phase one. Phase two of this, and it is called Project BAC, New Project BAC, will begin in October and continue through 2012.
So these are 30,000 jobs cuts that will happen over the course of time. It is on top of the 6,000 that we have already heard about and is part of this $27 in reductions that he intends to make through 2014. So, it is an interesting play that he's decided not to announce at the investors conference, but instead released it in a press release. Almost sort of ducking the idea of how he was going to make these spending cuts.
I spoke to an analyst earlier. And he said that likely there would be even more job reductions in the coming days-in the coming months, rather. We actually had a chance to speak to one of the Bank of America employees. And his description of the tone inside is one that is simply somber, Max.
FOSTER: Yes, Felicia, just wondering. It is a very tough thing for a company to endure, and all the people there, but does it somehow symbolize what the financial sector has been going through on its road to recovery, if we can call it that?
TAYLOR: Yes, absolutely. And it has been a very difficult road to recovery. I mean, the financial sector obviously was heavily impacted with all that exposure to the mortgage-backed securities, and certainly, in the financial crisis. So for Bank of America to have come back it has been a very difficult road. And frankly, banks don't make the kind of money that they used to. I mean, interest rates are at historic lows. So they can't even make money on the ways that they had in the past. So that is one of the other reasons that they are looking for other ways to reduce costs. And frankly, that comes at the expense of employees.
The share price, however, did react well. It was up about 1.3 percent at the word of these job cuts. And then, of course, it flattened out again. But you can expect that there is going to be a lot more difficulty in the days to come. This story certainly isn't over for Bank of America.
We don't know yet, what he plans to do, Mr. Moynihan, with Countrywide. And that has been one of their biggest problems. There has been discussions as to whether or not they will allow it to go bankrupt. I'm not sure that that is actually a possibility, legally, frankly. So we still don't know what they are going to be able to do about all the exposure that Countrywide has given them to the mortgage-backed securities market, Max.
FOSTER: OK, Felicia, outside Bank of America. Thank you very much indeed. She was talking there about the Bank of America shares. Let's have a look at shares more widely. Let's see what the Dow is doing currently. It is actually down, nearly 1.5 percent to 157 points. Continuing concerns about financial sector in Europe; same story, really, as we have been having over the past couple of weeks.
Stock market turmoil we have seen today in Europe is not a one-off thing. These kinds of huge swings started back in August. And they are starting to become expected, as well, really. Joseph Stiglitz is the winner of a Nobel Prize in economics. He is a professor, as well, of economics at Columbia University, in New York. He saw this pandemic of investors' jitters coming from a long way off.
(BEGIN VIDEOTAPE)
JOSEPH STIGLITZ, PROFESSOR OF ECONOMICS, COLUMBIA UNIVERSITY: Well, I think this is actually fairly predictable when after the crisis in Greece began to develop in January of 2010, Europe did not come together to work out a viable framework. And, in fact, as the discussions proceeded, it became clear that there was political dissention in helping Greece, that Germany did not fully understand the extent to which its self interest was interlinked with that of the rest of Europe.
FOSTER: And what about the way the policymakers, the politicians, are dealing with this? Because they are trying to carry out these structural reforms to try to reassure the markets. But the markets aren't being reassured.
STIGLITZ: Well, the fundamental problem is that the European political process is in some sense not aligned with the economics. I'm quite convinced that senior political officials, government officials, in Europe would like to deal with the problem, deal with it effectively. But they have voters at home. And the process is very slow.
FOSTER: What is your solution, at least in the sort of medium term, solution. Do you think they should go back to throwing cash back into the economies, and to give up this sort of longer-term chat? Because it is going to cause all sorts of problems in the meantime, isn't it?
STIGLITZ: Well, very much, I think they have to go away from austerity. Go for a growth strategy. Interestingly, in the July agreement of the leaders, in addressing the problems of Greece, they recognize that if Greece continue to impose austerity, then the economy would slow down. And as its economy slowed down its fiscal problems would get worse. So they explicitly said that they needed to provide funds to help Greece grow. Because Greece couldn't do it within its own budget framework.
FOSTER: And this matters beyond Europe, of course, because all of these events are sending wall street markets sideways, well, aren't they? Do you think it is a risk that this European crisis is going to confirm that the American economy is going downwards?
STIGLITZ: Oh, very much so. And you know the whole global crisis began when the United States mismanaged its economy and created all these sub-prime mortgages. And we exported our problem to Europe. And it looks like now it is Europe's turn to reciprocate the favor.
FOSTER: It does seem as though the countries outside Europe are pretty confidence about the euro as long as Germany sort of stays behind it, and that the German economy stays strong. But are you suggesting that the German economy could really be dragged under by all of this? You know, everything that is happening in this neighborhood?
STIGLITZ: Very much so. Oh, very much so. But let's go back to the point, that if Germany and France, and the other countries, do not come to the assistance of Greece and Spain, the likely defaults, restructurings of the bonds, would have a devastating effect on the economy of Germany, would-on the banking system, the financial system, not only of Europe, but of the United States. And all of that would send tremors, which would bring-weaken the economies significantly.
So it is in Germany's self interest to come to the assistance of Greece and Spain and Portugal and Ireland. But whether German voters recognize this, is not yet clear.
(END VIDEOTAPE)
FOSTER: Joseph Stiglitz speaking to me a little earlier on.
Next, we are heading to Chicago, with Richard, for "Future Cities".
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN HOST: Coming up after the break; how Chicago's famous sites are the film industry's newest stars. "Future Cities" is next.
(COMMERCIAL BREAK)
FOSTER: Well, Los Angeles may be America's film capital, but it doesn't have a monopoly on the action. This month Chicago is our "Future City". Without any extra dressing required it is a mixture of classic and modern. And it is making it look like a ready made film set, as Richard Quest found out. It is not surprising that the city is seeing celluloid as an important part of its future.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: If I don't know Chicago, I don't know nothing.
QUEST (voice over): The actress Sarah Bernhardt once said, I adore Chicago. It is the pulse of America. So what is it about this city?
UNIDENTIFIED MALE: It's life, it's everything. That's what it is.
QUEST: Full of both grit and beauty, there is a rhythm on every street, and a beat that is hard to put your finger on.
(STREET MUSICIAN PLAYING TRUMPET)
QUEST (on camera): Thank you.
(Voice over): With more than 2.5 million people, Greater Chicago is one of the largest cities in the United States, after New York and L.A. People here don't see themselves living in any city's shadow. To them this so-called Second City is first, and they are out to prove it.
TIM SAMUELSON, CHICAGO CULTURAL HISTORIAN: Chicago doesn't show any signs of just getting comfortable and not trying hard, and kind of showing its stuff. As the city gets older you'd think that somehow it might just flatten out. I don't see any sign of it, because you constantly have people coming here doing creative things-sometimes they even leave, but then there is always new people coming from somewhere else, to take it even farther.
QUEST: Chicago is taking itself farther by raising its profile through film. The ultimate advertisement for any city; it wants to be the star.
(On camera): The beauty of Chicago is that wherever you look there is a natural, iconic film set in front of your very eyes.
(Voice over): This city has always been visually distinct. A cinematic playground, clanking trains, wide avenues, vast waterfronts. It set the scene for Hollywood for comedies like the "Blues Brothers" to the action-packed "Transformers 3". Chicago knows it is going to take more than looks to keep the industry coming here.
RICHARD MOSKAL, DIRECTOR, CHICAGO FILM OFFICE: I'd have to say our government cooperation and community participation in order to make it feasible for people to even shoot here. So, when you look at Chicago's overall package, and made even more affordable by the fact that the state of Illinois offers a 30 percent tax credit, cost and value and quality, all combined. I think that is what places Chicago in a rather unique position and makes it extraordinarily competitive in what is now a worldwide market place.
UNIDENTIFIED MALE: That's Chicago.
QUEST: It was in 2002 when Chicago had the real wake up call. A huge missed opportunity when the film "Chicago" its namesake, was made in Toronto.
MOSKAL: It hurt us pretty bad. And that got the attention of legislators, that got the attention of any number of different people who are involved in coming up with an incentive to make it possible for us to be more competitive and shoot more movies here.
QUEST: Since then Chicago has snagged some of the biggest blockbusters. In 2007 it was taken over by "Batman: The Dark Knight". The old Post Office set the scene for a bank heist. A candy factory was an exploding hospital. And the Bat Mobile took over Lower Wacker (ph) Drive. Chicago was Gotham City.
(On camera): Michigan Avenue is one of the busiest streets in Chicago. Last year the city closed down a section of the Magnificent Mile, while they filmed "Transformers 3". It was closed for three days! And that shows, the city says, their commitment to helping the film industry.
(Voice over): It is that commitment that brings back business and continues to create high profile opportunities.
MOSKAL: It's a great opportunity for the city in terms of economic development, and job creation. It is extraordinary promotion and, essentially, free advertising and can trigger things like tourism and international business. And places Chicago on a world stage in a way that is almost like an endorsement via the film that is being show there.
NICK MIRKOPOULOS, OWNER, CINESPACE: We are going to convert these facilities, from steel making to filmmaking.
QUEST: With the opening of Cinespace Studios here, Chicago will surely rise on Hollywood's list of top film destinations. Once complete, it will be the largest studio outside of Los Angeles. It has already created around 1,000 local jobs; with the production of two new TV shows, "The Boss" and "Playboy Club".
MIRKOPOULOS: It's going to bring a lot of employment. It's going to wake up Chicago again, and the glory which it was previously.
QUEST: This is a city eager to let the world see all it has to offer. Chicago will continue to be a memorable character, tempting people to come and see it for themselves. Richard Quest, CNN, Chicago.
(END VIDEOTAPE)
FOSTER: Now ladies and gentlemen, start your engines, the Frankfurt Motor Show is off and running. We'll have the CEOs of GM Europe and Jaguar, after the break.
(COMMERCIAL BREAK)
FOSTER: Welcome back. I'm Max Foster. You are watching QUEST MEANS BUSINESS. Time now for the main news headlines.
(NEWSBREAK)
FOSTER: Welcome back.
I'm Max Foster.
You're watching QUEST MEANS BUSINESS. .
Time now for the main news headlines.
A furnace explosion at a French nuclear site has killed one person and injured four. It happened at a center for processing and decommissioning nuclear waste in Southeastern France. Officials say the blast did not cause any structural damage or radioactive leaks.
Bodies burned beyond recognition after a fuel pipeline exploded in a Nairobi slum. There's nothing left of some beyond dust. Police say at least 75 people were killed. The number has been climbing all day. The final toll is not expected until Tuesday.
Libyan families are streaming out of Bani Walid, where Moammar Gadhafi's loyalists haven't surrendered. Residents describe fighting inside the city, even though the Transitional Council's fighters haven't entered. But anchor for the loyalist Al-Rai TV, has read a message seemed to be from Gadhafi. Al-Rai says the former leader wants hit supporters to continue fighting.
One of only two survivors from last week's plane crash in Russia has died from his injuries. The plane was carrying the Lokomotiv Yaroslavl team to a game in Minsk. Twenty- six -year-old Alexander Galimov was the only member of the team aboard the plane to survive the crash. The cause is still under investigation.
The Frankfurt Motor Show kicks off -- or kicks into gear this week. It's a chance for car makers to show their wares and break into new markets. For General Motors, it's an opportunity to build on its recent successes in Europe. The challenge is how to manage different brands across continents.
There's Opal, which the company almost sold in 2009. It's performed well in Europe, but there were more rumors that GML -- GM was looking to sell the company earlier this year.
But Chevrolet -- that's a household name in the U.S., but not so well known here in Europe. And there's Buick, another company without much of a European presence. But one thing -- but one that is using Opal's technology more and more in its newest models.
Juggling the needs of these brands and keeping the whole operation balanced and profitable is one of GM's biggest challenges.
GM executive vice president, Nick Reilly, is also overall president of GM Europe and he's, in fact, about to show off Opel's new electric powered concept car.
Well, the company expects to return to profit in 2012.
I asked him how GM can stay on the right track in Europe.
(BEGIN VIDEO TAPE)
NICK REILLY, PRESIDENT, GM EUROPE: How we keep it going is to keep our market share increasing. That's the critical thing. Actually, the cost reduction is the relatively easier side, although it's painful and difficult decisions. But there's a lot of competition out here and we have to show that our cars are -- are as good or better than anybody else's and we -- we deliver good value.
Fortunately, the latest cars we've been bringing out have been doing exactly that. And so our market share is going up.
FOSTER: Just explain where Opel stands in your lineup of brands right now, because there's some suggestion that it's not making the money it should, and, therefore, it doesn't have a future with the company.
REILLY: Yes, OK, well, we -- we basically have two volume brands in Europe now. That's Opel Vauxhall, as well as Chevrolet. And Opel Vauxhall is a little bit above Chevrolet, but really stands for a very different type of brand. It's German engineering. It's got long, historic heritage in Europe and it's been a volume manufacturer for some time.
And the numbers I was talking about just earlier of profitability were Opel Vauxhall. So Opel is now profitable. Of course, we can always make more. But we haven't had the full benefit of the restructuring yet, which we'll get in 2012.
As for Chevrolet, they are a fast growing brand in Europe. They have got nearly 3 percent now of market share and we only introduced it about six years ago. So we're pleased with that. Obviously, you have to invest in a brand like that. So that's not returning amount of investment as we expect it to in the future.
But overall, we can see our way to being a -- a good, sustainable profit -- profitable company in the long-term.
FOSTER: So are you committed to Opel long-term?
No plans to sell it once you've built it up?
REILLY: No, we have no plans to sell it. In fact, you know, somebody is -- has fun every so often putting that rumor around, though I suspect it's because we're doing a little better and some of the competition don't like it. But I think Detroit has been pretty clear in recent months that Opel is not for sale.
We took the decision to keep Opel Vauxhall in the GM family in 2009. We never wanted to sell it, because of the bankruptcy in the U.S., we -- we had to consider that. We were able to reverse that decision and it's a very, very important part of GM going forward.
FOSTER: As you restructure the company and try to make it ever more efficient, there's some suggestion that Opel could link up with Buick somehow, there's some sort of synergy there. You know, it's a global company, so you can make use of synergies between the U.S. and Europe.
Is that something that you are considering?
REILLY: Yes, clearly, where it makes sense. I mean they are two different brands, so you have to present them differently. But essentially, Opel and Buick don't compete much in the same markets and they have a different brand position -- heritage, but they have a very similar brand position in the market, so -- in the higher part of the volume market.
And so we can use the same platforms in several of the segments of the market and get some synergies between Opel and Buick where it makes sense. We're not going to just do it for the sake of doing it, but where it makes sense and we can save money and investment, that's certainly what we'll do.
FOSTER: And China is obviously where it's at, if I'm right in reading all the commentary on the auto sector.
How is GM Europe, how are you helping GM make those big inroads into China I know you're interested in making?
REILLY: You know, well, actually, I was running China not that long ago. And you're certainly right, it is the booming market in the world.
We look at it as, from a General Motors overall point of view. And we are actually number one in China. We have Buick and Chevrolet as our main brands. We do also sell Opel in China, but they're manufactured in Europe and so they tend to be rather niche. It's a niche brand. But we're selling successfully over there. But it's not our main focus for the China market. We're selling two million cars over there between our brands, Buick, Chevrolet and our commercial vehicle brand, Wuling.
So GM is very happy with what's going on in -- in China. We will get a small share of that from Opel, but that's not our main priority.
FOSTER: And just a final word as one of Europe's top business leaders.
What are your thoughts right now about the state of the economy and the way we seem to be lurching from economic crisis to economic crisis and policymakers just don't seem to have a grasp of it?
REILLY: Yes, it's -- it's -- quite honestly, it's very concerning, because we did feel that we were coming out of the -- the recession quite firmly at the beginning of this year and now there seems to be one swing to another, as you say, largely political. But they don't seem to be able to get the things sorted out.
Until now, I'd have to say, we haven't really seen the impact of that yet. Our customer order intake is still holding up pretty well and I understand other car companies don't feel too bad yet either. But if this keeps going, then consumers and fleet customers are going to lose their confidence and they'll put off their buying.
Until now, it's OK. But obviously concern for the future.
(END VIDEO TAPE)
FOSTER: Nick Reilly speaking to me early.
Well, also in Frankfurt is Jaguar, which has three concept cars to exhibit. That's been overshadowed, however, by the surprise resignation of Tata Motors' CEO, Jaguar's parent company. Carl-Peter Forster was credited with turning Jaguar around.
I asked the current Jaguar CEO, Ralph Speth, if his departure put the company in a difficult position.
(BEGIN VIDEO TAPE)
RALPH SPETH, CEO, JAGUAR: Well, I guess that overall, we are in a strong position right now. We say thank you very much to Peter for all his support. And we will move on.
FOSTER: I -- I was just asking you about Jaguar's strategy now that the executive most responsible for it has left.
SPETH: I guess we defined (INAUDIBLE) the Land Rover strategy already quite a while ago. We are (INAUDIBLE) in the strategy. We focused the organization and work -- we are working according to priorities. I guess we are on track and we delivered. So in that context, we are moving rapidly, doing restructuring and growth simultaneously to really deliver leading edge results.
FOSTER: A lot of pressure on you right now, because I think doesn't Jaguar account for something like 57 percent of Tata Motors' revenue right now?
You've got to keep that up, haven't you, with the -- with the environment so tough economically right now?
SPETH: No, there is not a pressure at all. It's an honor to work for Jaguar/Land Rover. Those are two iconic, very authentic brands and one company. It's fascinating and it's exciting to work for Jaguar/Land Rover.
FOSTER: But like all car companies in Europe, you're suffering with this debt crisis, economically, which is driving sales down for all the companies.
How much has that affected you?
SPETH: Well, we are exporting more than 75 percent of all our product all around the world. We see strong growth in China, in India, in South America. But we also see this kind of debt crisis. Nevertheless, with our very excellent and strong portfolio, we are cautiously optimistic despite all these economic challenges.
But one thing is quite clear. I guess nobody, at the moment, can predict the future.
FOSTER: There was a company statement that said sales were down 23 percent in July because of the debt crisis.
SPETH: No, overall, I guess we are very strong. We are 10 percent stronger than in the previous year. So that gives us a very good position. The financials are solid.
So I guess we can weather the storm.
FOSTER: What would you say to those analysts and investors who are worried that the -- that the key member in the leadership team has left, about the future of Jaguar?
What will you say to reassure them, as someone who is now in the prime position at Jaguar?
SPETH: We have the full support of our parent company, Tata. Mr. Ratan Tata himself is a very innovative captain and Ravikan (ph) is -- has initiated the transformation. I guess we are set up and we have a very strong team. We have a very strong port (ph). And as a team, we can really go for the future.
(END VIDEO TAPE)
FOSTER: The voice of Jaguar now.
Now, next, it's a shocking case of alleged modern-day slavery here in the UK. We have all the details in just a moment.
We'll also hear how legal research company, Nexis Lexis, is using its skills to help other trafficking victims.
(COMMERCIAL BREAK)
FOSTER: U.K. police are standing guard at an alleged modern-day slave camp. On Sunday, more than 200 officers raided this traveler's caravan site (ph) in the county of Bedfordshire, where 24 alleged slaves have been rescued. Five people are being questioned, detained on suspicion of slavery offenses. Police say they believe some of the rescued men have been living in a state of virtual slavery for up to 15 years.
Living conditions are shockingly filthy and cramped and some of the men were in poor health.
The raid is part of a long-running investigation that included officers from the U.K. Human Trafficking Center.
About two hours from now on CONNECT THE WORLD, I'll be speaking with the director of Anti-Slavery International about this case. Police are calling it one of the worst cases of modern slavery ever discovered in Britain. That's later on CONNECT THE WORLD.
Here on QUEST MEANS BUSINESS, we are looking at the role of businesses in the fight against slavery. Legal help is an important tool in fighting modern-day slavery, both in punishing traffickers and in getting compensation for victims.
Kenneth Thompson is senior vice president and global chief legal officer for Lexis Nexis.
He told me how his company is using its expertise to help crack down on trafficking.
(BEGIN VIDEO TAPE)
KENNETH THOMPSON, GLOBAL CHIEF LEGAL OFFICER, LEXIS NEXIS: Fundamentally, the business of Lexis Nexis, I think, is grounded in the law. And as a result of that, it's -- our underlying purpose as a business is to advance the rule of law around the world. And as a result of that, human trafficking and the fight against human trafficking has become one of our signature initiatives in terms of advancing the rule of law.
FOSTER: And is it at a business, purely, that you're getting involved or is it something particular?
Have you used your particular skills to help in the battle?
THOMPSON: I would say both. As a business, we are involved, our people are involved. And in addition to that, as a lawyer, and Lexis Nexis as a business, one of our primary core markets is providing products and services to lawyers.
Therefore, we have access to law firms on a pro bono basis and as a lawyer on a pro bono basis, we -- we are able to connect people to provide legal services to trafficking survivors, as well.
FOSTER: We've discovered lots of people have been quite surprised about how close to home human trafficking is.
Have you -- were you surprised, for example, about its presence in America, which a lot of people assume is a foreign problem, don't they?
THOMPSON: The biggest surprise is that you see it in such internal U.S. cities as Toledo, Ohio, or even smaller cities. And as a result of that, one of the big challenges that you face is educating folks that this is not just a problem from those -- located in those areas where the trafficking victims traditionally come from.
FOSTER: And in terms of what businesses can do, should all businesses appoint someone to at least look at their possible involvement in human trafficking, even though they think they're so far away from it?
THOMPSON: Well, I think from a Lexis Nexis perspective, I essentially -- and in terms of what businesses and other businesses can do, I think that there are three basic components.
First of all, there's education and awareness. We just spoke about the fact that people are not aware of how prevalent the problem is and where it exists. I think that there's an opportunity to work with policymakers and law enforcement to make sure that there are adequate laws on the books and that they have the tools that they need to enforce those laws. And, finally, I think that is an opportunity to work with groups such as the Polaris Project, the Samiriman Foundation (ph), to make sure that trafficking survivors have access to the support that they need as they re-enter society.
And one of the first things that any business can do is simply to take a look at their supply chain. You know, all of us have suppliers that allow us to put in place our own products and services and offer those into the markets. And we ought to be actively looking at those supply chains to make sure that trafficking is not involved in those chains.
(END VIDEO TAPE)
FOSTER: OK, we're going to take you to the weather now. It's a very windy Europe. Parts of it are, at least -- Guillermo.
And you're going to explain why.
GUILLERMO ARDUINO, ATS METEOROLOGIST: We have remnants of Katia.
Remember that hurricane that was in the Atlantic?
And now remnants are moving through the northern sections here of Europe. So we're going to see a change in temperatures. You see anywhere from Britain, especially into Poland and the Baltics and Belarus and Germany, the Czech Republic, you're going to see a gradual change in terms of temperatures.
And along with that, we have the winds, especially in the north. So if you are watching from Scotland, well, it's bad now. It's getting better. If you are watching from Scandinavia, Norway, Sweden and especially Denmark, you are going to see the winds, the very intense winds.
Temperature-wise, we see a change now for the northern areas in here, right, because the south remains pretty much the same, warm. So we get that little bit of a sampling of autumn weather coming up and very fast.
So stormy weather in Scotland as we speak. In the last 12 hours, we have seen a lot of storms in there. They will continue. They are actually associated with remnants of Katia. In the north here, you see the eye or whatever is left -- not an eye anymore, but it's moving into Scandinavia. So I want to emphasize on that, because these winds that we have seen in Edinboro, Glasgow and in Luftus (ph) are going to shift into Denmark, into Norway and in Sweden, North Germany, too, and do you know what, the Low Countries, as well.
So look at what's going on right now. Glasgow, 54 kilometers per hour winds; Dublin, 52 kilometers per hour winds; London, 24; Paris, it went down from 30 in the last two hours to 13 right now. And that's going to shift and it's going to bring along delays at airports. So the only thing you can do, if you're going anywhere around here, the influence of the low pressure center is to plan ahead, to come up with a lot of patience and, you know, remember, if you have a meeting, you may not make it on time, because it is going to be treacherous.
Amsterdam, Dublin, London, Paris, even into Copenhagen, especially, that's where the delays may be because of these winds.
Everywhere else, we are fine. But remember, temps are going to go down.
And in India and Pakistan, these areas are going to continue to see gusting winds and heavy rain because of a monsoonal low here that continues to develop. So we're expecting a lot of precipitation in the area and in Northern India.
You know, it's monsoonal flood season, so we will continue to see this. And it's going to gradually trade -- trail southward and improve the situation, but it's going to take its time.
And, finally, I want you to know that the rain continues to fall in South Korea and in North Korea. So we will see some more rain coming up -- Max.
FOSTER: OK, Guillermo.
Thank you very much, indeed, for that.
ARDUINO: You're welcome.
FOSTER: Now, soldier, a best man, heir to the throne, Britain's Prince Harry has tried a lot of things in his life. And today, he gave currency trading a go. But this was no small time operation. In fact, Harry ended up sealing a $24.5 billion deal. Not only is that a record trade, it was all -- also for a good cause.
(BEGIN VIDEOTAPE)
FOSTER (voice-over): BGC Partners lost 658 members of staff in the 9/11 attacks. To commemorate, they hold an annual charity day, where the firm and the brokers donate commissions to good causes.
This year, they got a bit of help from the palace.
(CROSSTALK)
FOSTER: After some apprehension and some egging on, the prince got the hang of things. And then he was off.
PRINCE HARRY: Then you'll hold back.
FOSTER: If it's unusual to see a prince wandering around the trading floor, how about a prince and a super model?
Harry, meet Eva Herzigova. They joined forces in the name of charity.
PRINCE HARRY: I can use (INAUDIBLE).
FOSTER: The European markets may be performing terribly at the moment, but the industry can still raise more for charity than any other. Prince Harry expected to help pull in more than $10 million from this event alone.
(END VIDEO TAPE)
FOSTER: Well, on the subject of super models, Fashion Week is underway in New York. It's a make or break week for the industry's designers. One in particular could be in line for one of fashion's most coveted jobs. We talk with the elusive Marc Jacobs, next.
(COMMERCIAL BREAK)
FOSTER: New York Fashion Week is underway. One designer showing his collections is Marc Jacobs, who's rumored to be the replacement for John Galliano at Dior, a very big job.
In a rare interview with Alina Cho, he talked about what the most coveted job in fashion means to him, the one insiders say could be his.
ALINA CHO, CNN CORRESPONDENT (voice-over): You see his name everywhere. The creative genius behind a half billion dollar empire, the creative director of Louis Vuitton.
MARC JACOBS, FASHION DESIGNER: We have to see the shape of the pocket.
CHO: At 48, Marc Jacobs has won nearly every award in fashion, including the industry's highest, for lifetime achievement just this year.
(on camera): It is an incredible validation from the industry.
JACOBS: Yes, but a lifetime is also something that feels very final. And I certainly don't feel like my lifetime is over. And I certainly hope it isn't over. In fact, I hope it's only halfway started.
CHO (voice-over): He may be right. The biggest rumor off the runway is word that Marc Jacobs is in line for one of the most coveted jobs in design, creative director of famed French fashion house, Christian Dior.
JACOBS: Yes. It would be an honor. I mean there is no question that the two great couture houses in Paris are Chanel and Dior. I think it would be very hard thing to turn down.
CHO: Dior has been without a designer since the company fired John Galliano earlier this year for making anti-Semitic comments.
JOHN GALLIANO, FASHION DESIGNER: No, but I love Hitler.
CHO: Jacobs says he doesn't think about the future. His focus is on the present.
(on camera): One day at a time, one hour at a time?
JACOBS: Yes. One minute at a time, one second at a time.
CHO (voice-over): An obsession that started at 15, a stock boy at a hot New York City boutique. Overnight, he was selling his own designs, then designing for Perry Ellis. In the early '90s, he started his own label and created a sensation when he reinterpreted grunge for the runway. Marc Jacobs had arrived.
JACOBS: I instinctively react to things that stimulate me. And that's...
CHO (on camera): Such as?
JACOBS: -- that -- that's -- well, I mean it could be anything, things that have affected me in the past couple of months. The weather has affected me.
CHO: Amy Winehouse?
JACOBS: The death of Amy Winehouse and moving into my new place.
Yes, yes.
CHO (voice-over): A perfectionist.
JACOBS: So we should mock up the size.
UNIDENTIFIED MALE: Yes.
JACOBS: Yes. And put a pocket.
CHO: Famous for working right up until show time.
JACOBS: To me, it doesn't really matter. If it -- if it's a day before the show or a week before the show, if it's before the show, it's before the show.
CHO: A former drug addict with 33 tattoos and a certain fondness for skirts.
JACOBS: I like wearing skirts. I like wearing kilts. I started like a few years ago. I moved from kilts into pencil skirts. I wear now mostly Prada pencil skirts. I like to do the things that make me feel good and that make me feel happy, that don't hurt other people.
CHO: A man who, on and off the runway, has done it his way and yet is never satisfied.
JACOBS: I'm always nervous. I'm a total nervous wreck all the time, or most of the time. I'm very, you know, I'm always questioning my choices. And I'm always relooking...
CHO (on camera): You are?
JACOBS: -- at things. Yes but I -- and I don't think there's anything wrong with that. I don't think that's a negative thing.
(END VIDEO TAPE)
FOSTER: It's probably what drives him, isn't it?
That is QUEST MEANS BUSINESS for you.
I'm Max Foster in London.
"PIERS MORGAN TONIGHT" is just ahead.
But first, a check of the headlines.
END
