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Quest Means Business

Duchess of Cambridge Pregnant; Line of Succession; Royal Pregnancy; Starbucks Reviews UK Tax Strategy; Bean Counting; Tax Outrage; Euro at Six- Week High; Texting Turns 20; Text Appeal; Texting's Effect on the English Language

Aired December 03, 2012 - 14:00   ET


RICHARD QUEST, HOST: A new life at the palace. The Duke and Duchess of Cambridge announce they're expecting their first baby.

A new slice of life for the Lincoln. I'll be speaking to Ford's chief exec Alan Mulally live on this program tonight, revamping the brand.

And the long life of the short message. Tonight, texting turns 20.

I'm Richard Quest, considerably older than that.


QUEST: And I mean business.

Good evening. A prince and his lady, a duke and a duchess, and now, Britain's Prince William and his wife Catherine are preparing to become mum and dad. The royal couple are expecting their first child. Catherine was admitted to a London hospital earlier today with acute and serious morning sickness. She's expected to remain in hospital for several days.

We don't know many details. Certainly not the baby's due date. Clarence House, Prince Charles' official residence, has told CNN that the duchess is not yet 12 weeks pregnant. The UK prime minister, David Cameron, was quick to share his feelings on the news.


DAVID CAMERON, PRIME MINISTER OF BRITAIN: Well, it's absolutely wonderful news, and I'm delighted for them. I'm sure they'll make absolutely brilliant parents, and I'm sure everyone all around the country will be celebrating with them tonight.

UNIDENTIFIED CORRESPONDENT: Were you tipped off? Did you know before the rest of us?

CAMERON: I got a little note came into a meeting I was having, and I found it quite difficult to keep it to myself, but I was. But not in any great advance of anyone else. Thanks.


QUEST: The prime minister of the UK, David Cameron. In just a moment, we'll be talking to Max Foster, who's outside the hospital. Max, you stay exactly where you are whilst we just consider the ramifications constitutionally according everything goes to according to plan.

This is the current line of succession, and Catherine and William's baby will redraw the line of succession. Now, so far it will go from Queen Elizabeth to Prince Charles to Prince William, to Harry, and then after Harry to Andrew and Beatrice.

Under the rules, of course, men always take precedence over women, even if the male -- the male child is born after the female child. But that's the line of succession as it stands at the moment.

The -- what happens now, of course. Baby Cambridge comes along and breaks that line of succession, and now the line, of course, goes Charles, William, and then down through William's heirs through Baby Cambridge.

Now -- and the interesting thing is, the Cabinet Office of the UK has confirmed that Baby Cambridge, boy or girl, will become the heir to the throne. And if it's a girl, then it won't be knocked off the top spot by any later male arrivals. That's the succession. Max Foster is outside the hospital. It's cold in London tonight.

MAX FOSTER, CNN ROYAL CORRESPONDENT: Yes, exactly. We'll be here for some time, I think. This announcement, Richard, obviously came before you'd normally announce a pregnancy, before 12 weeks and the 12-week mark, and that was because the duchess has been hospitalized.

I was with her on Friday, Richard. She was out on a hockey pitch in high heels playing hockey, she was on great form. She went off to her parents' house in Bucklebury over the weekend, and clearly something happened today that worried her and William enough to come to hospital.

They weren't rushed by ambulance. They came up in a car. They're in the hospital behind me. She's being treated for hydration and nutrients. Most importantly, she's getting rest. There is concern about her, but not undue concern, a source told me, Richard. So, that's the case at the moment.

It had been announced earlier than expected and she will be very concerned, everyone's very concerned, but not unduly concerned at this point. But the prime minister and many others focusing on the fact that a new heir to the throne could possibly be on its way.

QUEST: Max, you told us you were with the duchess earlier last week or whenever it was. Did you see any signs? Are you one of those people who after the event is saying, well, I guessed all along?

FOSTER: Well -- the bump wouldn't have been showing, but she was in winter clothing. I have to say, I was with a colleague who was noting how she was rubbing her stomach quite regularly.

But Richard, you and I have been following this over the last year and a half. Of course, these rumors started bounding straight after the wedding, so endless rumors, endless measurements of her body language, and I decided to ignore it on Friday because everyone else was talking about it.

And even on you would have noticed they went up to Cambridge last week as well, and there William was presented with a babygrow. I was right next to the duchess when she was looking at these papier mache dolls in the school. Everyone was talking about babies, but it just was going on and on and on, but it turns out she was actually pregnant last week.

She's only been pregnant for less than 12 weeks. We're not being told exactly how many weeks it's been, but less than 12 weeks is all we know, and it's very, very early stages, as any mother will tell you.

QUEST: Absolutely. Max Foster joining us from outside the hospital and, of course, as Max was pointing out, this is exactly the time when most mothers-to-be would not be announcing their pregnancy.

But obviously the circumstances for the Duchess of Cambridge going into hospital, it wouldn't have been very long before one and one would be put together, and whether accurate or not, we'd have been off to the races.

Coming up next, we'll completely turn the agenda and we'll return to our business world. Trouble brewing for Starbucks. Why? UK lawmakers are calling its tax strategy "immoral."


QUEST: The coffee company Starbucks is reviewing its tax affairs and says it needs to do more to maintain public trust after a UK parliamentary committee laid into the company and others -- look at them: Amazon, Google, Starbucks.

The Committee of Parliamentarians said that tax avoidance tactics, they described them "outrageous, immoral, and an insult." The damning report says Amazon, Google, and Starbucks are not paying their fair share.

In just a moment, I'll give you an example of how Starbucks is alleged to do this. First, though, our correspondent Jim Boulden reminds us correctly and promptly the three companies say they are acting within the law.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): US multinationals Starbucks, Google, and Amazon have been accused of not paying enough corporate tax in the UK. In a new report, a parliamentary committee says international companies are able to exploit national and international tax structures to minimize corporate tax. The outcome, they don't pay their fair share.

This comes after executives of these companies were hauled before the committee last moth to face questions about their tax structures and accused of using loopholes to avoid paying their fair share.

MATT BRITTIN, GOOGLE UK AND IRELAND: As we pay all the tax you require us to pay in the UK, we paid $6 million --



BRITTIN: -- of tax last year.

HODGE: We're not accusing you of being illegal, we're accusing you of being immoral.

BOULDEN: In their report, the lawmakers also criticized UK tax authorities. The UK Revenue and Customs says it already works to ensure that international companies are paying the tax due in accordance with the law. But the parliamentary committee says it wants tax authorities to be more aggressive.

The British government says it will inject more money into the tax authority to hire more investigators to go after companies and people who try to avoid paying taxes.

GEORGE OSBORNE, UK FINANCE MINISTER: We've got to be very clear at a time like this when we're dealing with a deficit, the people have to pay the taxes that are due. It's not right that wealthy people or multinational companies avoid the taxes that are due.

BOULDEN: We reached out to the companies for response. While Google had no additional comment, all three, Starbucks, Google, and Amazon, all insist they are paying the proper amount of taxes on their UK profits and around Europe, and have broken no laws.

But Starbucks says it's now in talks with UK authorities over its tax structure. The coffee chain says it will reveal details later this week.

BOULDEN (on camera): What's changed? Well in part, pressure from consumers. Starbucks says in a statement it has listened to customer feedback and feedback from employees.

ANDREW SPICER, CASA BUSINESS SCHOOL: When you walk into a Starbucks, you see a board saying "This is our community activities," they show you pictures of the people picking coffee beans in the rainforest. But then, you're struck by a big contradiction. These people aren't willing to pay their taxes in the UK.

BOULDEN (voice-over): In the hearings last month, the companies were accused of using complicated structures to funnel income to low-tax countries.

AUSTIN MITCHELL, PUBLIC ACCOUNTS COMMITTEE: I don't get, frankly, from all this -- why Luxembourg is so lucky. The books are here, the warehouses are here, the billing is here, the business is here, the customers are here.

BOULDEN: But unless or until governments cooperate with each other to close loopholes, companies will be free to find the most tax-efficient structures all within the bounds of the law.

Jim Boulden, CNN, London.


QUEST: So, let's give you some idea of -- and this -- a lot of what we're now going to show you is taken from the parliamentary committee -- how Starbucks is said to have, if you at least alter their balance sheet to their best advantage.

And of course, you have the Venti, you've got the Grande, you've got the Tall, and the Espresso. Now, think of these beans as being Starbucks revenues in the United Kingdom, roughly $1.5 billion worth of revenues over the past three years.

So, obviously, they take their revenues and quite a large chunk goes straight into overhead. They've got to pay the staff, they've then got to pay rent, they've got to actually switch on the lights. So revenue -- so overhead makes up a bit.

Then they pay 4.7 percent -- it was 6 percent, but now it's 4.7 percent of their revenue to their subsidiary in Amsterdam, and that's for what it calls "royalties." The parliamentary commission seriously questioned what this was all about and whether it was justifiable.

They have internal loans to Starbucks USA. They then have high margins for the coffee that they pay to the Swiss company, which actually buys the coffee, even though no coffee ever goes to Switzerland. So, some goes there, a bit more goes back to the royalties.

And of course, by the end of the day, when it comes to actually making profits and paying any money to the UK, as you can see, there's barely a bean left for taxation and profit in the UK. The question is whether all this is more of a fiction than a reality that's designed to avoid or evade -- probably avoid -- tax.

Bill Dodwell is head of Deloitte's Tax Policy Group. You've seen these sort of arrangements a million times, well, haven't you?



QUEST: But you -- the point I'm making is, you arrange your affairs to minimize your tax in the highest-tax location.

DODWELL: Let's go back 20 years where American companies came to Europe and they said to themselves, we don't have an operation in every state of the USA, why should we have an operation in every country in Europe? Because some of those countries are smaller than US states.

So, that was born, the idea of centralization of activity, and people looked to see, I won't just do this 30 times, I'll do it once somewhere. And then, when they've said where should that somewhere be, that was a question of where you got the people, where you've got the right relationships with your business, and the tax. All of those things taken together led to some of those location choices.

QUEST: I think that's one aspect. But when you get the seemingly -- where they're seemingly using the transfer pricing rules to their maximum effect, the select committee -- or the parliamentary committee in this case said they'd never seen loans as high as Starbucks was paying internally. Now, I'm not obviously -- I understand you can't necessarily comment on one particular --

DODWELL: I think the parliamentary and accounts committee was just wrong on that aspect. It's a very easy matter to price a loan, and I'm fairly sure HM Revenue Customs, the UK tax authority, could easily do that and check that straight forwardly.

QUEST: Are you saying -- and I know you're not here to defend any particular company --

DODWELL: No, I'm not.

QUEST: But are you saying that this is a storm in a coffee cup blown up because of austerity and the need to raise revenue? And what most of these companies are doing, there's nothing wrong?

DODWELL: I think there's -- it's a more complex picture than that. Yes, I absolutely agree that the current economic environment is at the root of some of that. But equally, it's probably true that over the last decade or so, one or two have perhaps gone a little further than they might have done in some of that profit allocation methodology. And the only --


QUEST: Profit allocation methodology is tax avoidance in my language.

DODWELL: It could well be, yes. It could well be. And the OECD, which is the international body that looks at these things and manages it for the large countries, is going to look at this because it, too, has reached that conclusion that there was a slice of aggressive transfer pricing, as you put it, taking place here.

But I don't think that's the generality of things. And then the next era to come to is the digital one. Because of course that used not to exist.

QUEST: And that is not as tasty as coffee and we'll have to leave the digital for another --

DODWELL: Indeed, it's not.

QUEST: I'd love to give you some coffee to take with you, but all I've got is some old beans.


QUEST: Such as it is, old beans. But many thanks again --

DODWELL: Lovely questions.

QUEST: -- for joining us. Now, the Currency Conundrum.


QUEST: The British Royal Mint released this coin to commemorate the engagement of Prince William and Kate in 2010. Why was the coin controversial? The queen hadn't approved the image, the likeness was considered to be unflattering, the coin was supposed to be released for the wedding. We'll have the answer for you later in the program.

Now the rates. The euro's at a six-week high against the dollar. The pound's strengthening against the US currency. The yen's higher, too. Those are the rates --


QUEST: -- this is the break.



QUEST: Happy birthday text messaging or "hppy bday 2 u." A happy birthday to the text message. The SMS has turned 20. The first one was sent here in the UK. It was sent today. It was in 1992. It actually said "Happy Christmas" or "Merry Xmas." It made billions of dollars for the cell phone companies since then.

Now, in a world of tweets and e-mails, the next 20 years are, perhaps, certainly a little less certain. Isa Soares reports.


ISA SOARES, CNN INTERNATIONAL CORRESPONDENT (voice-over): The sound of that first text.


SOARES: A novelty back then.


SOARES: It was enough to make you nervous.

UNIDENTIFIED FEMALE: Cool, it's my first text message.


SOARES: But receiving and sending text wasn't that simple back in 1992. Neil Papworth, the former developer at a telecoms company had to type the text on his office computer first. A couple of seconds later, he had reached his colleague's mobile phone.

SOARES (on camera): Today, we don't need a computer to send text messages. We can do it on the go, even through voice recognition. So 20 years on since that first text message, how does Neil feel we've come along? Let's give him a ring.



SOARES: Hi, Neil. Does it feel like 20 years.

PAPWORTH: No, it doesn't feel like 20 years ago at all. Time has really flown by since then.

SOARES: How long did it take you, and what did the message say?

PAPWORTH: The message was actually sent from -- just like a computer terminal, which is basically just like looking at your PC today. Hit "send" and that message said "Merry Christmas."

SOARES (voice-over): But like any new technology, initial growth for text messaging was slow. The average US user sent 0.4 texts per month back in 1995.


SOARES: Five years later, it had increased to 35 texts per person per month.


SOARES (on camera): With the death of old phones like this one came new ones with new technology. Soon, texting was cheaper than calling. Today, texting is the most widely-used data application in the world, with 81 percent of mobiles subscribing to it.

CHARLOTTE CONNELLY, MAKING MODERN COMMUNICATIONS AT SCIENCE MUSEUM: This Nokia 3310, which launched in 2000, and it's part of that texting culture, it's around the time that texting got massive, and I'm sure lots of people will recognize this as something they spent hours texting on.

SOARES (voice-over): That was then. Today, free text-messaging alternatives like WhatsApp and BlackBerry Messenger mean that texting is on the decline. Still, Neil Papworth thinks it's not the end of SMS.

PAPWORTH: Not everybody has got a SmartPhone and not everywhere around the world yet has got data networks that are capable of doing instant messaging and things like that. In pretty much all those places, the thing that is there, is on every phone, and is guaranteed to work is SMS.

SOARES: At least we'll have a couple more years to mangle our words.

BFN, Isa Soares, CNN, London.



QUEST: Like all communications, the text has played its part in making history. Barack Obama announced his running mate in 2008. It was the first time it had been announced in this way. "I've chosen --" Yes, I've just got make sure he spelled it right.

Then, other texts perhaps were a little more sordid. Tiger Woods' mistress released messages from the golfer. Most of them are not suitable for broadcast at this time of the day or, indeed, perhaps, at any time of the day. This one is. "You almost ruined my whole life."

And then you've got those people who probably shouldn't text because what they say is simply embarrassing. The British prime minister David Cameron criticized over his text with Rebekah Brooks, then the CEO of News International in the UK.

He would always sign off, "LOL." Cameron thought it meant "lots of love." Brooks had to point out it meant "laugh out loud."

The problem that the prime minister had with abbreviations is the sort of problems that now have critics saying texting is the ruination of grammar, the downfall of civilization.

Well, earlier, Shyam Sundar of Penn State, a professor who's studied the effects of text speak on the English grammar, joined me in the QUEST MEANS BUSINESS mobile phone. I asked him if he thought texting had damaged the English language.


S. SHYAM SUNDAR, DISTINGUISED PROFESSOR, PENN STATE UNIVERSITY: Some people might argue that indeed students who are poor at grammar are somehow drawn to texting, and other people might argue that students who text a lot indeed do poorly on grammar. We don't know which causes which at this point. All we are seeing is a systematic statistical association between these two.

QUEST: Is it keeping you up at night worried about the decline in grammar of the younger generation?

SUNDAR: I don't think I'm seriously worried about declining grammar. I do think that -- there are creative ways in which we change grammar over time. As you know, in America, we don't use the word -- the letter "u" in some of the words that you guys in England use, for example. So, these are all parts of the evolution of grammar.

Grammar evolves over time, and what I do think about overnight is what are different ways, creative ways in which people adapt the language, especially in the context of using these newer technologies that come with certain limitations, like bandwidth, and also certain affordances, like synchronicity. You can synchronously communicate back and forth.


QUEST: All right. The professor on the ruination of civilization as we know it through the text. What's your favorite text abbreviation, @RichardQuest? Is it 2B or is it LOL. I'm sure -- or maybe just that nice horrible little smiley face. Your favorite text message or your favorite text short abbreviation.

Proving that I am truly multimedia, we'll take a tweet or a text to a break. In short, a significant message from St. James's Palace. We'll have the details of the Duchess of Cambridge's pregnancy --


QUEST: -- after the break.


QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just one moment. First, this is CNN and, on this network, we always put the news at the top.


QUEST (voice-over): Israel is facing diplomatic fallout over plans to build new homes in the West Bank in East Jerusalem. France and Britain have called in the Israeli ambassadors for talks. Germany and Russia are also raising concerns. The settlements are widely believed to be illegal under international law, though Israel denies that.

A Syrian opposition group says government airstrikes have killed at least 10 people in the town of Ras al-Ain today. It's located along the Turkish border. Turkey's (inaudible) scrambling its own warplanes into the area to keep Syria's violence from spilling onto its soil.

Egypt's Supreme Judicial Council says it will delegate judges to monitor the December the 15th referendum when President Mohammed Morsi's draft constitution (inaudible) planned on ruling on the legitimacy of the body drawing up the constitution on Sunday. Pro-Morsi protesters blocked the entrance.

News International's chief executive has quit. Tom Mockridge will be replaced by the current BSkyB chief operating officer Mike Darcey at the end of the month. In an email to staff, Mr. Mockridge said he was uncomfortable with the role he'd been given under Rupert Murdoch's overhaul of News Corporation.

The Duke and Duchess of Cambridge are expecting their first child. The baby will be third in line to the throne after Prince Charles and Prince William. The Duchess is thought to be fewer than three months pregnant and she's been admitted to a London hospital with acute and serious morning sickness.



QUEST: Catherine and William's announcement comes 19 months and the biggest, most anticipated royal wedding in more than three decades. Mark Saunders, the royal biographer, is here with me now.

I have to ask you: did you guess?

MARK SAUNDERS, ROYAL BIOGRAPHER: Everybody's going to say they did. I've been working on the story for a week now. But I couldn't stand it out. So I'm going to say, yes, I did guess. But the news, it did take me by surprise. And I think it took everybody by surprise. But Buckingham Palace had pretty much preempted Fleet Street. I think their hand was forced by the fact that Catherine was taken to hospital.

You could never keep something like that secret. And you can imagine the speculation that would have followed had they not revealed the reason why she was taken to hospital. But to just great news now. Let's just hope she's OK.

QUEST: Right. Let's talk to -- this is the picture outside the hospital for us this evening. Let's just talk about the, if you like, where this fits into royalty U.K.

The line -- the lineage now moves obviously, assuming all goes well. The cabinet officer said, you know, even if it's not legal yet, in fact, that boy or girl will be the next monarch.

SAUNDERS: That's true.

QUEST: In line.

SAUNDERS: I don't know whether you're going to need Parliament to pass this if that is required, then it would be a very, very quickly done and there would be no contest in fact. You and I have discussed this before.

Back in 1982, when Diana was first announced that she was -- it was certain that she was pregnant, they had a meeting with the Queen, Prince Charles, Diana and it was decided then that whatever the birth, whatever -- whether it's male or female, that child would be the next in line to the throne. As it was, it was academic, because William was a boy.

So this isn't new. But the act will actually now be placed. We know the prime minister is in favor of it. Vast, vast majority of people in this country are in favor of it. But it would still be unique, if it is a girl, it will still be a moment in our country's history, because we talk about modern royal family. The Royal Family, since 1066, have always been modern. They've always adapted to the times.

QUEST: So as they now look to Sandringham and one hopes that Kate is well enough to go to -- well, I assume they'll be going to Sandringham with the Queen and everybody else in Norfolk?

SAUNDERS: That's Christmas, yes. That is -- that is -- as the Queen always says, that's her favorite -- her favorite holiday. But what a tremendous ending for the Queen this year --


QUEST: Would you expect her to refer to it in her end-of-year --

SAUNDERS: Absolutely.

QUEST: You think so?

SAUNDERS: Absolutely. We -- I mean, we didn't think --

QUEST: You want to bet?

SAUNDERS: Yes. We didn't think the Queen could top the James Bond thing.

QUEST: Right.

SAUNDERS: This has. And she will -- yes. She will mention it in her speech, yes.

QUEST: She will?

SAUNDERS: Yes, definitely.

QUEST: For the Queen. I'm going to ask this straight out -- it's worth a bell -- because viewers consistently ask me this question.

Is it likely, A, that the Queen will abdicate at some point?

SAUNDERS: Never. Never. Never. Never.

That will never happen.

QUEST: You're sure you don't want to think about that?

SAUNDERS: That will never, ever happen.

QUEST: Is it likely that particularly now there's another potential line in the throne already on the way, Charles would skip for --

SAUNDERS: Again, never going to happen.

You've got to remember, Richard, this -- these -- this isn't a game. This lineage goes back a long, long way. And if you start saying, OK; we don't like this one. Let's move onto this one. You will end up with King David Beckham. That's what will happen eventually. You will just pick your own -- it will be who's the most popular person.

No, the Queen will never abdicate. She will be -- Charles will be old when he gets to the throne. He will be old, and much of his work will have already been taken over by William and Catherine anyway. But the word "abdication" is just not mentioned in that --

QUEST: Retirement.

SAUNDERS: No. It won't happen.

QUEST: Finally, if it's a boy, a name.

Oh, actually, no; let's -- we're been previous here. We've just been --

SAUNDERS: Very quickly, though --

QUEST: We're being previous.

SAUNDERS: Balmoral, Balmoral, the bookies at Balmoral, that's the place to find out the name. The last three major royal births, we found out the name from the bookies at Balmoral because they get a run. It started with Beatrice 20 years ago. And we stumbled across it. So if you want to know what the name's going to be, check out the bookies at Balmoral. They normally know.

QUEST: Balmoral being the Queen's Scottish home.

SAUNDERS: Scottish (inaudible), yes.

QUEST: Where she will spend -- where she spends the summer.

Let's wish Kate well as she goes through some difficult days in the early days of her pregnancy.

SAUNDERS: Absolutely.

QUEST: Good to have you. (Inaudible).

The stately Ford Lincoln has been stuck in the slow lane for a long time. Now instead of just abandoning it, Ford is hoping to revive the brand by going back to its roots. The chief execute, Alan Mulally, always good to have Alan on the program. He'll be after the break. QUEST MEANS BUSINESS.





QUEST (voice-over): The answer to today's "Currency Conundrum" -- excuse me -- why was this coin released to commemorate the engagement of Prince William and Kate Middleton so controversial?

There's the coin. And the answer is C. The likeness of the Duchess of Cambridge was considered to be somewhat unflattering. The image had been approved by the Queen and the Prince William. It was the first royal engagement coin to be produced by the British Mint.


QUEST: It's been the preferred means of conveyance for plutocrats, potentates and presidents for more than 90 years. Recently, though, the Lincoln -- the Lincoln motorcar -- automobile -- has lost some of its luster. Sales in the U.S. were half of that of the Lexus car in 2011.

Now Ford, which owns the Lincoln brand, is aiming to reverse that.


QUEST (voice-over): It's launching a new midsized luxury sedan, the MK Zed or Z -- here we go. It's all about heritage. Throw in a bit of old Abraham Lincoln. It's aimed at those who don't -- aimed at those who don't need to show off. Ford is relaunching the brand's original name, the Lincoln Motor Company, hoping to move forward by looking back.


QUEST: Alan Mulally is the president and chief exec of Ford. Alan is with me now from our bureau in New York.

And it is always good to have you, Alan, on the program; I thank you for giving us time.

ALAN MULALLY, PRESIDENT AND CEO, FORD: Absolutely, Richard; good to talk to you again, too.

QUEST: Right. Now, Alan, so this is fascinating because you're taking a brand that some would say just pension it off, a bit like some of the drivers of the Lincoln. They're a bit old; and they're not the right demographic for your future.

But you're trying to bring the age down and the spend up.

MULALLY: Well, that's true, Richard. It really is -- it goes to back to really to your point of celebrating the heritage of Lincoln over the years. And as you know, Lincoln has been part of the Ford Motor Co. for nearly 90 years.

And it's always been known for elegant styling and design, inside and out, and also very useful and exciting technology and innovation. And of course, in Ford's case, you know, we had purchased Aston Martin and Jaguar and Land Rover and Volvo, and we had decreased investment in Lincoln.

Well, with our One Ford Plan, we decided in 2006 -- we decided to have a laser focused not only on the Ford brand but also on Lincoln. So we continue to invest in the toughest of times, as you know. And the MKZ that we're revealing today is our first proof point, our exciting proof point of the new family of luxury Lincoln vehicles.

QUEST: I will allow you an MKZ, not a zed, but only because you're in New York for us today.

Alan, as we look at the -- as we look at it, you're also much more proud about attaching the name Ford to the vehicle and to the name Lincoln. And that partially is a reflection of the way that company is now perceived, particularly since you didn't take bailout cash.

MULALLY: Well, Richard, I -- that's really an important point, because you know, clearly we have together, with all of the stakeholders, created a very exciting, viable and a profitably growing Ford based on these tremendous products, a complete family of vehicles, with clearly the best in class in quality and fuel efficiency and safety and really smart design.

And of course, along with that decision was now to focus on Lincoln and the luxury customers to round that out. And that's why today is so exciting, because this is the first of Ford vehicles that we'll see over the next few years that absolutely are going to provide that luxury experience that many, many customers look for.

QUEST: Right. Alan, if we factor in now the Ford -- the third-third- third across the Ford world, where do you -- I mean, Europe, we know, is your biggest challenge at the moment. So the core question, how far do you believe you are from restructuring Europe to your satisfaction and profitability? How long will it take?

MULALLY: Well, very important question and, of course, as you have captured, we are moving very decisively on our better plan to serve the European customers, both with a more complete family of best in class vehicles that we described, but also taken the actions on the productivity and the utilization of our facilities.

And we announced the closing recently, there -- the utilization of our factories and improving the utilization and the capacity. But in addition to that, also the fact that we're going to bring more of our One Ford family of vehicles around the world to the customers in Europe. It's going to take us a couple of years to do that. We know how to do it. Everybody watched us do it in the United States.

And this is the right things to do because for us to be able to serve our customers, we need to use our facilities more efficiently because our number one goal is to serve our wonderful customers in Europe.

QUEST: We've talked about the Lincoln and your new Lincoln with Ford, and we've talked about Europe and the problems. But, frankly, the elephant in the living room that we cannot ignore is the fiscal cliff. And I know you've been talking to the White House, talking to the president. Can you give us any reason to be optimistic other than financial Armageddon that will happen if we all go over the cliff?

MULALLY: Well, you know, Richard, I really am encouraged and the president continues to ask for our thoughts and opinions and our help. We are very pleased to be a part of the solution.

And the last few weeks have been -- is really centered the discussion about what do we do -- not only about the fiscal cliff, which needs to deal with both the revenue side but also the expense side -- is what do we do to create the environment where businesses can grow, can be more competitive and provide the economic expansion that we all -- that we all want?

And I think that I see people coming together with this laser focus on economic development. And of course, the fiscal cliff is one part of that.

I might also add, Richard, that we're very encouraged by the ongoing dialogue in Europe on the very same subject because clearly, we're in a recession in Europe and pulling together around a compelling vision to facilitate economic growth is what's most important -- most important for all of us.

QUEST: Right.

Alan, thank you for joining us and next time I'm in your part of the world, take me for a spin on one of your test tracks and on that new MKZ.

MULALLY: Absolutely.

QUEST: Give us a -- give us a proper --

MULALLY: Absolutely. Look forward to it, Richard, and sure good to see you again. Remember to keep flying Boeing.

QUEST: Ah! Oh, you had to gaffe right at the end!

Alan Mulally, of course, for viewers who may not be as familiar, was, of course, the head man at Boeing; now, of course, at Ford. Good to have you, Alan. Nice to see you on the program.

I'm sure I could -- I can see the email from Airbus arriving even as we speak.

Before we move one stage further, some news to bring you, comes to us -- Syria, according to sources, who told CNN and our state -- our Pentagon correspondent, Syrian forces have begun combining chemicals that would be used to make deadly sarin gas for us in weapons to attack rebels.

A U.S. official is telling CNN, "The U.S. has obtained intelligence over the past weekend, indicating this concerning development. It could be ready and used to fill artillery shells. These are concerns the regime may be considering the use of chemical weapons." We'll have more on that very serious matter in the hours ahead.

This is QUEST MEANS BUSINESS. We're pleased that you're with us this evening. The weather across vast tracts of Europe -- do I really need Tom Sater when I can sum -- no disrespect, Tom --


QUEST: -- but having been in Switzerland yesterday and London today, C-O-L-D.

SATER: Yes. It's going to get colder. I'm sorry to tell you, Richard.

And more snow's been falling in some areas, too. We've got an intricate dance going on in Europe, a number of storm systems spinning some, of course, dropping some good amounts of snowfall and others just ushering in another pool of cold air as the mercury will continue to drop.

Here's our three storm systems, each one producing some light snow, some sleet as well, but really it is the colder air, as Richard mentioned.

In fact, I want to get you into the U.K. and let you know, even though it was a week ago, we had river rises on the River Trent and the Severn (ph), North Wales around the Clywedog (ph) River as well. We've had some snowfall in parts of Scotland. It's a cold rain coming into the coast of Ireland, Northern Ireland as well.

You can see what's left of the snow as it kind of lightly covers the older snow in parts of Germany. And it moves, of course, now, into areas of Ukraine and into Russia where we have seen a good 20 to even 30 centimeters.

Look at the next 48 hours in the Alps. This is going to be a problem if in a week or so we start to get a massive warm-up, and we'll be talking about the threat of avalanches. But it does look like our snow will continue in the troubled area of Moscow that had a record November snowfall on the 30th, the heaviest snow they've ever had on the -- in the month of November in 20 years.

So the cold numbers will continue to move into this area. Oslo right now is at -17, Richard.

QUEST: Thank you for that, Tom Sater, man that knows our serious numbers and we'll discuss the implications in the days ahead. QUEST MEANS BUSINESS, we're back in a moment.





QUEST: Virgin Atlantic, the British airline owned by Sir Richard Branson, may not be flying solo for much longer. Singapore Airlines wants to sell its 49 percent stake in the carrier. Delta Air Lines is rumored and looking to be interested.

So this is the situation. You have Virgin Atlantic, which is flying nicely along the skies all on its own. Singapore Airlines, which is a member of the Star Alliance, bought 49 percent of Virgin many years ago; paid $600 million, an extraordinary amount of money, whoever it sells to, it will lose out.

The rumor almost confirmed is that Delta Air Lines is interested in buying that stake. Delta is a member of SkyTeam. If that were to happen, here's the prognosis. Watch for Air France KLM to buy a chunk along with it and if I was a betting man, I would say if this scenario comes true, dear old Virgin eventually joins SkyTeam.

That last bit, pure, unadulterated speculation. All the -- all those involved say nothing's guaranteed. ""Profitable Moment," next.



QUEST: Today an institution of 1,000 years is changing. A delighted British Royal Family's expecting a new addition, and like the birth of text messaging 20 years ago, this will be a child which will revolutionize the order of things forever.

Whether it is a she or a he, the rank of succession doesn't matter. Either will be able to take the throne immediately after they become born, of course, they will be in the line of succession. And it helps bring about a change in that ever-evolving beast, the British constitution.

Walter Bagehot, whose baby was "The English Constitution" book, said, "The right and duties of the monarch are to be consulted to encourage and to warn."

It is humbling to think that those responsibilities will rest one day with one who is yet to be born.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.


QUEST: The headlines at this hour: a disturbing report from Syria. A U.S. official tells CNN Syrian forces are combining chemicals that could be used to make deadly sarin gas. The gas could be used in weapons to attack rebel and civilian populations. The report reflects intelligence obtained over the past week.


QUEST (voice-over): A Syrian opposition group says government airstrikes have killed at least 10 people in the Turkish border of Ras al- Ain today.

Israel is facing diplomatic fallout over plans to build new homes in the West Bank in East Jerusalem. France and Britain has called for their Israeli envoys for talks. Germany and Russia are also raising concerns.

News International's chief executive has quit. Tom Mockridge will be replaced by the current BSkyB chief operating officer Mike Darcey at the end of the month.

The Duke and Duchess of Cambridge are expecting their first child. The baby will be third in line to the British throne. The Duchess is thought to be fewer than three months pregnant. She has been admitted to a London hospital with acute morning sickness.

You are up to date with the world news headlines.


QUEST: Now to New York, "AMANPOUR" is live.