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Quest Means Business

Global Markets Rally; US Fiscal Cliff Deal; Stocks Surge After US Budget Deal; Fiscal Cliffhanger; Budget Compromise and Debt Ceiling; Portugal Austerity Assessment; Hollande Undeterred; French Car Sales Slump; Euro Outlook 2013; Dollar Strengthens; Avis Zipcar Merger

Aired January 02, 2013 - 14:00   ET

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

RICHARD QUEST, HOST: It's a case of a fiscal fizz. Markets rally as Congress avoids going over the top.

Save the super tax. France's president vows to fight a constitutional court ruling.

And hop to it. We discover the tricks of the brewing trade.

I'm Richard Quest. A new year, and I mean business.

Good evening. It is a worldwide rally on the equity markets as lawmakers in America struck that bargain and applied the band-aid to the fiscal cliff -- mixing my metaphors early. US lawmakers finally agreed the deal on taxes and they agreed to postpone their decision on spending cuts by two months. So, the markets that are open --

(RINGS BELL)

QUEST: The Dow Jones is more than 200 points higher. Investors got their appetite for risk back -- the phrase "risk on" -- at a gain of nearly 1.75 percent. And that feel-good factor was well and truly in evidence in Europe. Strong gains across the board.

Financial stocks amongst the best performers. Look at London, up 2.2. Milan up nearly 4 percent. All the big markets showed good gains.

Now, let's delve a little bit deeper into the deal itself, and really, the deal boils down to three points. The so-called Bush tax cuts from 2001 to 2003. They have been made permanent for the vast majority of Americans, 98 percent, according to the president. Income tax will go up for those earning $400,000-plus, $450,000 for a married couple.

And the automatic spending cuts due to start today have been postponed for two months. All that took almost a year and a half to agree upon. Remember, those spending cuts would have been 100 billion this year, 50 percent on defense, 50 percent on other discretionary spending. Barack Obama, the president, said more work's needed.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think we all recognize, this law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody.

The fact is, the deficit is still too high, and we're still investing too little in the things that we need for the economy to grow as fast as it should.

(END VIDEO CLIP)

QUEST: That's the president. The Dow Jones Industrial is up more than 200 points. I'm showing you that again. Alison Kosik is at the New York Stock Exchange. Alison, how deep, how robust, how firm, whatever you want to say, is that 200 points on the Dow?

ALISON KOSIK, CNN CORRESPONDENT: I think today it's going to hold, Richard, but as far as what's going to happen tomorrow and next week and the week after that, good luck seeing gains like this hold as long as they have all day.

Listen, I talked with one trader today who's actually quite the curmudgeon and he took a more positive view, though. He thinks the market will wind up surging the first couple months of the year, but then reality will eventually set in by March because Congress will have to deal with the issues of the spending cuts and the debt ceiling, which they pushed off for another two months.

So, what the reality is, is many are really concerned, Richard, about how ugly things are going to get very soon when those two battles collide over spending cuts and the debt ceiling. So, what the trader says, you know what? Enjoy the ride until then, but after that, another trader says buyer beware, Richard.

QUEST: Right. Now, this is interesting, because as we came to the end of last year, all the talk was about shift out of bonds, shift back into equities. And we saw that today. If the -- if the confidence unravels in the early part of next year -- of this year, then it's a very different game in the market again.

KOSIK: Oh, yes. To bonds they go. Yes, out of equities, into something safer. I can certainly see that. Yes, look at the VIX right now, the VIX has dropped 13 percent. We saw it spike over the past -- what? -- five sessions before the negotiations really got tangled up on Capitol Hill.

So, yes, right now, it is risk on. But what traders are telling me, it's for a very short time period, because reality once again is going to set in when those negotiations -- when they have to put on those boxing gloves again and try and get their way on Capitol Hill.

QUEST: Alison Kosik in New York. The Dow is over 200 points, and the risk is on in terms of equities. Alison, good to see you. We've got much that we'll talk about over the year ahead.

Now, this rally that continues, we talk about what's happening and the events that'll be taking place, but what exactly are the deadlines? All Congress has done is to deal with several new deadlines for themselves.

Let's have a look and I'll show you the first deadline, comes up on the 26th of February. That's the date. Now, the US has already hit the -- or at least it's at the roof of the debt ceiling, but with these "extraordinary measures" that Tim Geithner is doing, he can buy time under the headroom until roughly the end of February. That's the date that people are looking at.

Thereafter, we move into March, and March the 2nd. One section in the Taxpayer Relief Act that was just passed pushed forward until March 2nd those automatic spending cuts. Now, by that, they are going to have to decide -- we were just talking about it -- March the 2nd is another crucial day or crucial time when both sides, Republicans and Democrats, will be arguing on that.

And then, March the 27th. The US government is at the moment operating on continuing resolutions. They are temporary budget agreements. If they don't get a new one -- it's basically more IOUs, more IOUs, permission to spend, permission to spend, permission to spend.

If it runs out, then the fact is, the US government will have to shut down, or at least parts of it will. That's different to the debt ceiling, by the way, where they just will default. It's very complicated.

Robert Shapiro says that the debt ceiling, not the fiscal cliff, is the serious problem that faces the United States. He was the undersecretary for commerce under President Clinton and he's an advisor to President Obama.

(BEGIN VIDEOTAPE)

ROBERT SHAPIRO, FORMER US UNDERSECRETARY OF COMMERCE FOR ECONOMIC AFFAIRS: You know, because we don't have a parliamentary system, we go about these large and difficult tasks of fiscal consolidation in a different way than Europe. We take a nibble here and a nibble there, and in the end, we come up with a big result.

We took one nibble last year, and we cut $1.2 trillion in spending over 10 years. Now, we've cut -- we've added $700 billion in revenues. And I expect in a couple months, we'll come back and there'll be a third deal.

QUEST: The global economic environment is not as conducive or amicable to the way the US wants to go about its budgetary process. Funds can either go overseas to other countries or you end up with these vast volatility and dislocations.

SHAPIRO: Yes, in principle, that's correct. But the fact is that throughout this process, global investors have been perfectly willing to lend in ten-year tranches to the United States for yields of less than 2 percent.

That tells us two things. One is that the Federal Reserve's quantitative easing program is working. And the other is that global investors still have confidence that the United States, in its way, will find its way to restoring fiscal balance, as we did in the 1980s and as we did in the 1990s.

QUEST: This debt ceiling business, this is really serious, isn't it? Because there could be a nasty slip-up --

SHAPIRO: Yes.

QUEST: -- which could cause much grief and mayhem.

SHAPIRO: Well, I have written and said for some months that much of the concern over the fiscal cliff was hype and that the economy was largely indifferent to whether or not we raise taxes or cut spending so long as we did something, but that the one really serious issue was the debt ceiling.

And for the first time in 2011, the debt ceiling became a negotiating chip in the fiscal debate. And that's very dangerous. It's very dangerous --

(CROSSTALK)

QUEST: No, no, no, no -- let me just --

SHAPIRO: -- fear over talks --

QUEST: -- let me just jump in there, because on that point, do you --

SHAPIRO: Yes.

QUEST: -- before you answer the full question, do you believe that the debt ceiling will be a negotiating point when it comes up between now and February?

SHAPIRO: Well, the president has said he won't negotiate on it again. He has said it's not a negotiating -- it's not a matter of negotiation, and he will not negotiate on it. I think the president has to be very firm on that.

(END VIDEOTAPE)

QUEST: That's Robert Shapiro talking to me earlier. Portugal's prime minister says his budget may be unconstitutional. France's president has been told his tax reform is unconstitutional. Back onto this side of the Atlantic with the budget battles in a moment.

(COMMERCIAL BREAK)

QUEST: Portugal's president has sent this year's budget to the constitutional court. The plan includes steep tax hikes and welfare cuts. The government says those are needed to meet deficit reduction targets agreed as part of last year's $100 billion bailout.

The president signed the bill into law on Monday. He said he wanted to avoid a political crisis. It places an unfair burden, he believes, on some taxpayers.

(BEGIN VIDEO CLIP)

ANIBAL CAVACO SILVA, PRESIDENT OF PORTUGAL (through translator): The implementation of the budget will lead to a reduction in the income of citizens, whether through a strong increase in taxes, either through a reduction and benefits. Everyone will be affected, but some more than others, giving rise to doubts about the fairness and the distribution of sacrifices.

On my initiative, the constitutional court will be called upon to rule on the conformity of the state budget for 2013 with the constitution.

(END VIDEO CLIP)

QUEST: So, that's Portugal, and now France begins the year with a similar legal battle. Francois Hollande says he won't be deterred by the Constitutional Council's rejection of his 75 percent tax on the wealthy. In Paris, our correspondent Jim Bittermann for us.

The Constitution Council did not make a political judgment, it was a technical judgment on things like households versus individuals, and Hollande is coming back. He says he's going to have another go at getting that budget -- that tax rise through.

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Absolutely right, Richard. They're going to re-write the thing. Basically, what they did was they constructed the law in such a way that it applied to individuals and income taxes in this country apply to households.

So, they said that, for example, a person owning a million euros would be taxed at 75 percent and if his wife was earning nothing, she would be taxed at zero, so you'd have a 75 percent tax.

Whereas if you had a household of a husband and wife, each of them earning 800,000 euros, neither would be taxed at the top rate because their combined income -- nonetheless, their combined income is over 1.6 million euros.

So, it basically was a technicality, the government thinks it can get around it, it can rewrite the law and bring back something that will pass muster, Richard.

QUEST: Will it still be 75 percent? I saw some suggestions that even the president may be rethinking that very high number.

BITTERMANN: Well, it's possible he would rethink it, but the problem he has put himself into here, the box he's in, is that ever since the election campaign here, he said he was going to impose this 75 percent tax on people earning more than a million euros a year. And so, he's kind of in a political box there.

And by the way, the constitutional court also struck down other provisions of the budget law. In total, they struck down tax increases worth, according to a newspaper here this morning, more than a billion euros in tax revenue.

So, it's not just the 75 percent tax we're talking, it is other things, too, that have been struck down, and the government's going to have to work at redrawing its budgetary legislation if they want to try to avoid that. Richard?

QUEST: The lights of Paris and the Arc de Triomphe behind you are absolutely sparkling and delightful, and they would suggest a booming economy and bon amis. The reality -- let's just take the latest car sales numbers in France, which are downright depressing, Jim.

BITTERMANN: Absolutely, down 14 percent last year, and French carmakers were particularly bad-hit. Some of the import models sold even better than the previous year, but the overall car sales down 14 percent, and it's an indication of what's happening in the overall economy.

One of the things within those statistics people are pointing to is that light vehicle and truck sales were down, and they -- the experts believe that that's an indication that business may be slowing down, as well.

That coupled with the unemployment figures that came out just before Christmas here, and in fact, the unemployment picture is grim and getting grimmer, 30,000 more unemployed, more than 10 percent of the population unemployed. So, yes, the lights are -- on the Champs-Elysees are a little deceiving, Richard.

QUEST: Jim Bittermann with the lights -- which I'm sure the lights will also be put out after Christmas and the New Year's celebrations are over. Jim is in Paris.

As the German chancellor Angela Merkel pointed out in her New Year's message, Europe's crisis is far from over. The first full quarter of landmark days, two of them have already happened. I want to show you first of all this.

These are the dates: the fiscal compact enters into force. It doesn't necessarily have an effect until next year, but it does cut the -- the compact is in force for 2014. There needs to be strategic -- there needs to be coordination on government debts and on budgetary process. It's been ratified by some 16 EU countries.

In Ireland, the country assumes the presidency of the European Union. That lasts for six months. We will find out what the Irish agenda is. And that, of course, puts forward with the fiscal compact as well, because it will be Ireland that will obviously have to manage and massage the way that does come into effect.

February the 7th, we end up with a council summit meeting. Banking talks will be on the agenda, there: banking union and, crucially -- crucially -- for Europe, the question of further fiscal integration.

Then you get the flash estimate of GDP, which was expected to show Europe pretty much stagnant or in recession. And perhaps the most important, the Italian elections, they take place on Sunday, February the 24th. Mario Monti will be leading a coalition. Christian Schulz, the senior economist at Berenberg Bank, joins me.

As you look at all those dates, which are now gone, but as you look at those dates, which one will you be keeping the closest eye on?

CHRISTIAN SCHULZ, EUROPEAN ECONOMIST, BERENBERG BANK: I hear the biggest headline maker will be the Italian elections. We have the buildup ahead of it with the campaign, with Berlusconi, the former prime minister, sounding quite euro skeptic, also quite German-skeptic.

That might make the other side of the equation, the Germans, quite nervous, and that overall, I think it's going to have the biggest impact on markets, at least.

QUEST: And I was just asking you before we came on air: between the euro -- the ongoing eurozone crisis and the US fiscal debt and the debt ceiling and the budget and the sequester, which do you think we should be most concerned about?

SCHULZ: I think between the two, I would still say that Europe is the biggest source of risk. There's more politicians working in may different countries that don't have a responsibility for the entire system as in the US, where politicians in the end have proven last year, 2011, or two years ago now, and this year as well, that in the end, they will come to a solution, whereas in Europe, you have some politicians which are really jokers.

QUEST: So, if we've got the -- if we've got Italy and the election -- I was just writing out here, there has been quite a lot done in the eurozone with ESM, we've got the fiscal compact, we've got banking union, you've got the OMT. Has Europe turned the corner yet, despite what Chancellor Merkel said? Is it your gut feeling economically it's turned the corner?

SCHULZ: I think yes it has. Europe has made considerable progress. Some countries are almost done with austerity. Italy is a very good example, here. They've already adjusted their fiscal position, something that the US has not achieved at all with this fiscal cliff negotiations now. The Italians have already done, next year they don't need extra austerity. That can turn around the economy.

But it remains the case that Europe has done all this in a very front- loaded fashion. It has done considerable damage to the economies, and we'll have to see when these economies actually start growing again.

QUEST: So, when the chancellor says in her New Year's message, we're not out of the woods, but everybody says we're not out of the woods. But she went further, didn't she? She actually said things will -- could be worse in 2013. Is she right?

SCHULZ: In some countries, the risk is quite high. You mentioned Portugal, which has huge income tax increases, that's going to really hurt demand there. Spain also still has a lot to do, even though the government is doing a good job, there's still a lot to do. Things could be worse, at least at the beginning of the year. Italy is probably going to be better - -

QUEST: For the eurozone as a whole, because the last numbers we saw suggested -- well, more than that -- stagnant or a third year of recession. What's your gut feeling?

SCHULZ: We think that at the beginning of the year, it's still going to be weak, the winter is going to be weak. But then, we'll have a gradual and strengthening recovery, which will be uneven, so countries such as Germany will be leading. Italy might be a good leader, too. France will be lagging, and certainly the Iberian countries will be behind.

QUEST: It's a very odd world, isn't it, out there at the moment? I can't remember a time when it's been quite as complex.

SCHULZ: Indeed, but also very promising. We have considerable progress in Europe. Europe really is working on the fundamentals and could emerge from this crisis as much more dynamic and maybe even more dynamic than the US place.

QUEST: Good to see you. Many thanks, indeed, for joining us.

SCHULZ: Thank you.

QUEST: Time now for our Currency Conundrum. One country started the new year with a redenomination of its currency. Was it Fiji, Zambia, or Moldova? We'll have the answer for you. They knocked zeros off the currency, redenominated it.

As to the rates, the dollar's strengthening. It put on a third a percent against the euro and rising against the pound. Those are the rates --

(RINGS BELL)

QUEST: This is the break.

(COMMERCIAL BREAK)

QUEST: Shares in the car-sharing company Zipcar racing ahead. It's because the company is the exchange's biggest gain on the NASDAQ. Zipcar is now up some 50 percent after Avis agreed to buy it for half a billion dollars. It's valued at twice Zipcar's closing price on Monday. Now, the deal needs shareholders' approval.

Zipcar is the world's largest car-sharing company. You know how it works, you rent cars by the hour, they park them all over major cities. Jim Boulden explains even more.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Members of one of these car-sharing clubs, like Zipcar or Streetcar, can bypass the taxis, the bicycles, and forget owning their own vehicle and just walk up to one of these small cars parked on a city street.

BOULDEN (on camera): This is one of more than 1500 Zipcar vehicles here in the UK. So, what are the costs? Well, the annual fee is around $100, and the hourly rental can go between $8 and $10.

BOULDEN (voice-over): Zipcar says that by renting, it saves someone more than $5,000 a year compared to owning a car. Start-ups Streetcar and Zipcar quickly gained traction with drivers. The ease of use, booking online or on a mobile device, and simply walking up caught fire. The economic crisis forced many drivers to look at car-sharing.

Zipcar now says it has more than 700,000 members in the UK, US, Canada, Spain, and Austria. The big vehicle rental firms like Hertz started car- sharing arms as well. Hertz On Demand has vehicles in the UK, the US, and five other countries.

Rival Avis Budget has now gone a step further by purchasing Zipcar outright. Good news, perhaps, for those members who have found it hard to get a car club vehicle on the weekends.

BOULDEN (on camera): One of the most interesting aspects of these car- sharing clubs is that the cities have willingly set aside valuable car- parking spaces in order for these car companies to thrive. Why? Well, cities say it takes many cars off the roads. In fact, Zipcar claims that for every one of its cars, it's taken 20 cars off of city streets.

Jim Boulden, CNN, London.

(END VIDEOTAPE)

QUEST: It's not just Zipcar that's zooming ahead. The Dow's off to the races. We'll explain what's behind the fiscal cliff flourish in a moment. The market's 1.75 percent higher. Look at that, 13,333 -- well, 85. QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.

(BEGIN VIDEO CLIP)

QUEST (voice-over): Financial markets worldwide have risen after the U.S. House voted to pull the United States back from the fiscal cliff. America's far from out of economic difficulties, potentially contentious political debates fly ahead, including extending the debt limit and cutting government spending.

According to a new U.N. report, more than 60,000 people have been killed since the start of the Syrian uprising and (inaudible). U.N. human rights commissioner says that figure is truly shocking and much higher than expected.

Today alone a Syrian opposition group says more than 150 people have been killed across the country. Activists say dozens of civilians died when regime warplanes bombed a petrol station on the outskirts of Damascus.

Three days of mourning are underway in Ivory Coast after a deadly stampede in which 60 people were killed in Abidjan. Many of the dead, children. They were crushed by a huge crowd that gathered at the city's main stadium to watch New Year's Eve fireworks. The Ivorian president has promised a speedy investigation.

Mario Monti has kicked off his election campaign with a pledge to cut labor taxes. The outgoing Italian leader says that will spur growth and help struggling Italians catch their breath. Mr. Monti's coalition is in a three-way election race with the Democratic Party and Silvio Berlusconi's People of Freedom Party.

(MUSIC PLAYING)

(END VIDEO CLIP)

QUEST: The rally on Wall Street continues. (Inaudible) the Dow Jones is up 200 -- it's coming up (inaudible) 13,324, more than 1.5 percent.

Lisa Desjardins in on Capitol Hill for us tonight.

I am (inaudible) people (inaudible) you're looking a bit lonely earlier. Now so we've got a lot to get through. So first of all, the fiscal cliff, nobody really likes it, but it was the best they could do.

LISA DESJARDINS, CNN RADIO CORRESPONDENT: That's what everyone says. That's right. Republicans in particular didn't like it. In fact, Richard, last night, House Republicans voted 2:1 against that (inaudible) fiscal cliff bill. But because of overwhelming vote from Democrats, it passed.

The mood around here is not a cheery one. This is not a holiday mood. In fact, they're taking down the Christmas trees literally right now and I think this Congress realizes that there is still much of the steep climbing left ahead for them in the next coming months.

QUEST: Lisa, let's just talk about the debt ceiling for a moment and the spending sequester that has to be agreed by the end of February.

From your conversations there, do you believe this is going -- people are getting ready for a second and third all-out battle over this?

DESJARDINS: I think Republicans are still deciding. I have spoken to some conservative Republicans who do want to mount another charge, who do want to take a stand on -- as they say, on the debt ceiling and in other words, make this sort of an international event.

There are other Republicans who feel that they are licking their wounds right now and they're not sure that they have the leverage to really change the debt ceiling. They feel that they may have to extend it and not put up a fight. I think that's something that's very much in flux right now, Richard.

They're -- there were -- and I think -- I think Republicans are taking a few hits these days, and that could all affect their decisions.

QUEST: Does this extraordinary business about federal relief for the victims of Hurricane Sandy and the way in which that, to some extent, has been held hostage by this whole process, Governor Christie of New Jersey has been speaking about it, I believe.

DESJARDINS: That's right, Richard. You read my mind. That's exactly where I was going with those comments. We've seen an extraordinary, unbelievable amount of criticism against the Republican leader, John Boehner, the Speaker of the House, from his own Republicans.

And from one of the most prominent of all, this man, Governor Chris Christie, he's not just a powerful New Jersey governor, a kind of a guy that sort of has "The Sopranos" type aura, seems powerful. And a lot of people look up to him.

He's also a potential presidential candidate. And here he was, in this last few minutes, just railing against Speaker Boehner and Republicans and Congress, saying nothing can get done here, and squarely putting the blame on Republicans in the House themselves.

It's important for a couple of reasons, but as we're talking about all of this debt and deficit, all of the battles ahead, this further weakness, I think, Republicans as they try and look ahead to the next few months. And it makes their tactical decisions seem to lean away from mounting a big charge as we've been talking about.

QUEST: Let's have a listen to Governor Christie.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), N.J.: The disaster relief was something that you didn't play games with. But now in this current atmosphere, everything's the subject of one-upsmanship. Everything is a possibility, a potential piece of bait for the political game. And it's just -- it is why the American people hate Congress.

(END VIDEO CLIP)

QUEST: Governor Chris Christie.

Lisa, many thanks indeed. If you get a moment, I don't know why I suddenly had this urge to know who is that statue behind you, lit up, over your left shoulder, over your left shoulder, the other way, right down in the back there.

DESJARDINS: So this one.

QUEST: Yes. Drop me an email. Who is (inaudible)?

DESJARDINS: I'll find out.

QUEST: Yes. I don't know why.

DESJARDINS: (Inaudible). You got it.

QUEST: (Inaudible), just one of those things that -- I guess we're all fiscal --

DESJARDINS: (Inaudible) over the right that you had to ask about the left.

QUEST: Which (inaudible) see the one over --

DESJARDINS: (inaudible).

QUEST: -- we can't see the one over the right.

DESJARDINS: Oh, here, actually, can you pan, pan over here to the -- to the right really quick? This is Will Rogers, famous critic of politicians as well (inaudible) Oklahoma. But I'll find out about the one over the --

QUEST: Well, (inaudible) Will Rogers. But there's wonderful homilies and sayings. Many thanks indeed. And we'll find out who it is (inaudible).

DESJARDINS: (Inaudible).

QUEST: Good (inaudible). I've absolutely no idea why I suddenly wanted to know about that statue but one of those things.

U.S. manufacturing rebounded in December, moving up a low for 2012 in November. The manufacturing sector has been hit hard by the struggling economy and outsourcing to China as Chinese production costs rise, American companies as you may be aware are reversing that and bringing jobs back to the United States. Christine Romans reports.

(BEGIN VIDEO CLIP)

CHRISTINE ROMANS, CNN ANCHOR (voice-over): This assembly line in Canton, Michigan, is humming again. It's auto country, but workers like Michael Cox are building televisions, part of an industry that largely left when manufacturing jobs were outsourced in the 1970s, '80s and '90s.

MICHAEL COX, ELEMENT ELECTRONICS WORKER: There's lots of things went overseas. It'd be nice to see a lot of that stuff come back. There's a lot of people here that need a job and we're willing to do just about anything to work.

ROMANS (voice-over): Element Electronics has reshored an assembly line from Asia stateside. The parts are still imported, but large-screen TVs are now assembled, checked and packaged in America.

MIKE O'SHAUGHNESSY, CEO & FOUNDER, ELEMENT ELECTRONICS: As consumers want more large-screen TVs, it has created an opportunity to bring that production here to the United States.

ROMANS (voice-over): Mike O'Shaughnessy, a CEO and founder of Element; he's determined to create American jobs.

O'SHAUGHNESSY: You grew up in Warren, Ohio, in the 1970s and '80s like I did, you watched jobs leave, and you watched the impact of those jobs leaving on the families and friends that you had.

ROMANS (voice-over): But this isn't just sentimental. O'Shaughnessy says it's good business, and the math makes sense.

O'SHAUGHNESSY: We studied what our total product costs were. In particular, we studied what labor does against duty and freight and other factors, and what we found is that we can produce and assemble TVs here in the United States, and we can do that for about the same cost by introducing some component in larger screen televisions, U.S. labor, U.S. assembly, because it's offset by lower duty and lower freight.

ROMANS (voice-over): And assembling these TVs here means better quality control and quicker delivery to retailers like Target, Wal-Mart and Costco.

So far, Element has created 100 jobs here. Across the country, the number of jobs for skilled factory workers is up 38 percent since 2005, suggesting at least some of the millions of outsourced jobs are making a round trip, helping former autoworkers like Shelby Lisiscki get back to work.

SHELBY LISISCKI, ELEMENT ELECTRONICS WORKER: They closed my plant, and I was out of a job for two and a half years, so it was kind of hard to find something for a while there, but thank God for here. Stuff is being made in America. So that's good.

ROMANS (voice-over): O'Shaughnessy says large job creation is a few years away when they can stop importing the parts. He's already talking to domestic suppliers that have the know-how to start manufacturing those TV components.

O'SHAUGHNESSY: We are on the front end of reshoring. We're on the very front tip of bringing jobs back and industries that long, a long time ago left the United States. I do believe that this is a long-term trend. I think that there's good news for the American worker.

ROMANS (voice-over): Christine Romans, CNN, New York.

(END VIDEO CLIP)

QUEST: Now for the weary travelers amongst you, lie back and relax. Hotels are turning to science to help sleep-deprived guests. But you'll stay away to see our report (inaudible). QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST: The crowded skies over North America and Europe earlier today, there's plenty going on in there. These are the developments to bring to your attention.

Boeing has had a good boost. Boeing has delivered -- in 2012, 537 planes; Airbus delivered 516. It's the first time that Boeing overtook Airbus in a decade or so as -- largely as a result of planes like the 787 and other models that it's created.

Also Reuters is reporting Spanish airline Iberia is in talks with its pilots over deep cuts. We know of course, Iberia wants to lose 4,500 jobs from the workforce. The airline says the cuts are needed for survival. But now it seems talks are underway.

And then going east into India, it's the coldest day in 43 years. Flights have been disrupted, heavy fog, temperatures fall, just 4.8 degrees Celsius. More than 30 domestic flights have been disrupted. And it shows how bad it is, trains have been canceled, too.

Some years ago, a general manager at a well-known hotel said to me, Richard, if you haven't had a good night's sleep, we have failed. Everything else is just trinkets.

Well, now the hotel industry is turning to science to ensure guests get a better night's sleep. Ayesha Durgahee's been sleeping on the job.

(BEGIN VIDEO CLIP)

AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): After a busy day, most of us look forward to getting into the hotel bed to completely switch off and recharge. It's a solace that the sleep deprived that can have you nodding off in seconds.

For some business travelers, it can be hit-and-miss. Instead it's a night of tossing and turning, fluffing and rearranging. (Inaudible) time zones and indigestion.

DERK-JAN DIJK, DIRECTOR OF SLEEP-WAKE RESEARCH, UNIVERSITY OF SURREY: It's not easy to be a business traveler for many reasons. First of all, when you travel, you have to sleep in a new environment. Sleep is often a little bit more shallow and you wake up more frequently.

Scientists have known this for a long time. And it's referred to as the first-night effect.

DURGAHEE (voice-over): At the hotel exhibition Sleep 2012 in London, luxury or low-cost, hotels are very aware they have a tough challenge of pleasing every guest.

UNIDENTIFIED FEMALE: Followed by guest comfort, knowing that you're safe and secure.

JAVIER HORTAL, MANDARIN ORIENTAL: The impression of noise, for instance, generating inside the room with air conditioning, for instance.

MIKE FRANKLIN, BED SUPPLIER: You get a choice of many more places where to stay now. So if you don't get a good night's sleep, people just won't come back.

DURGAHEE (voice-over): With premium traffic only growing by 3.8 percent compared to a 5 percent increase in economy traffic, business travelers are still downgrading and spending with caution, which is why hotel groups are paying more attention to their lower tiers.

For instance, Accor has created a new bed for its budget brand, Ibis.

MATHIEU PERRIN, DIRECTOR, PRODUCTS AND SERVICES, IBIS: We had a budget of 400 euros. But what we needed is a real experience and actually experience cost the devil twice the price of a functional bed. And we invest now at least 800 euros per bed.

DURGAHEE (voice-over): Jacques Bolze has worked for Accor for more than 25 years.

JACQUES BOLZE, BED DESIGNER, ACCOR: The topper is the ultimate -- the ultimate part of our bed. This is the first time in economic hotel we have this topper because usually this type of topper are for more luxury hotel.

DURGAHEE (voice-over): Offering extra comfort to business travelers also includes having the right light and sound to fight jet lag.

PERRIN: The bed, the pillows, all this comfort aspect are very important for it feel good in the room, but they are now going to have an influence on your body clock. We leveraged research done by Harvard Medical School, by (inaudible) in the U.S. and also by some research centers in Europe.

(Inaudible) lead to diffuse the light and sound sleep (inaudible) to help the guest fall asleep and the red and orange wavelength of light. That's going to induce melatonin in the evening. With the sound, that's going to help lower your breathing rate. And the blue wavelength of light for raising the body clock in the morning.

DURGAHEE (voice-over): Whether it's the lighting, the pillow or the mattress, the temperature or tone of the room, hotels have a sleepy ambition to do all they can to make sure you get up on the right side of the bed.

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QUEST: Looking forward to a comfortable bed, if you ask me.

Jenny Harrison's at the World Weather Center.

JENNY HARRISON, CNN METEOROLOGIST: Richard, Happy New Year to you. I'm going --

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QUEST: And to you.

HARRISON: Thank you very much. I'm going to start by talking about the mild weather you've got coming your way, already beginning to push in really across much of the northwest of Europe. There's been a bit of a band of rain, even some sleet and snow that's been coming across in the last few hours.

But look at these temperatures. These are current temperatures right now, double figures for London, Glasgow, not too bad in Paris at 7, 5 Celsius in Berlin and then across the south as well, temperatures holding up pretty well. This is the rain that came through, and again, some sleet and snow in the mix there as well.

We will see a few more showers over the next few days, and that system work its way across to mainland Europe, Germany has been very unsettled over the last 12 hours. That's that system heading up towards Scandinavia . It will turn to show there. And then this is the high pressure building in very nicely across much of the west. Now even though it's high pressure, don't expect to see some nice, sunny skies.

There's a lot of cloud in the forecast. Blustery winds as well, but it's those very mild southwesterly winds coming across the northwest and the west that are keeping it so very mild. So the green is your average temperature. The blue indicating temperatures below average. So there is still some cold air up there, but it's been pushed across much of eastern and northern Europe.

And then look at this, out towards the northwest and the west. We are seeing temperatures well above average. Overnight temperatures as well, probably these are more notable, certainly for London, the average is 2 Celsius near the night hours but 10 Celsius Thursday night. A similar story across in Paris and Berlin as well, temperatures above average.

So there is more snow and rain to come out towards the west. It'll be mild with cloud, 12 apiece there, London and Paris this Thursday, Richard.

QUEST: Jenny Harrison, we thank you very much. Looking forward to very mild southwesterly winds.

In a moment, we head to the U.K. longest running brewery. What goes into the making of the country's popular tipple?

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QUEST (voice-over): The answer to the "Currency Conundrum," which country started the New Year with a redenomination? The answer, Zambia. The new Kwacha note, three zeroes were lopped off as part of a plan to address spiraling inflation.

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QUEST: In Russia, beer is getting a reworking as well. Up until turn of the year, it was considered a food. Now in an attempt to attack widespread alcoholism, it's been reclassified as an alcoholic drink. It means you can no longer buy beer at kiosks or stops in petrol stations or between the hours of 11:00 and 8:00.

Beer is Russia's second most popular alcoholic drink after vodka. Here in Britain, well, beer is by far the best loved at 167 years old, Fuller's is one of the U.K.'s oldest breweries, still very much in business with half- year revenues at $220 million.

We took a trip to its London brewery to see how they turn these hops with a bit of grain and water into a bottle of beer that makes money.

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MICHAEL TURNER, CHAIRMAN, FULLER'S BREWERY: There are lots of sights, sounds and smells at work in the brewery. The bottling line, the keg line and the cask racking line with the steam going everywhere.

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TURNER: We would brew, for instance, 64 million pints of beer a year and one-sixth of that is exported around the world, to 64 different countries, actually.

We are only really interested in making things really, really well, We always want to use the best raw materials, (inaudible) raw materials are the most important thing for us is to brew with real passion.

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JOHN KEELING, HEAD BREWER, FULLER'S BREWERY: Hops are like the herbs and spices in using cooking and they're there for flavor, not for strength; they don't give any alcohol into the beer.

So what a brewer would do is we get samples like this, break the sample apart to have a look inside to see what the hops look like. Well, we look in there to see if there's any twigs and see what the color of the hops are.

The hops are added during the boiling process. You've already extracted the sugar from the grain. We add the hops for the flavor. That makes it -- gives it hoppy character and it gives it that bitterness as well. Then we cool that rapidly down, add the yeast. The yeast ferments the sugar into alcohol and carbon dioxide so the beer has a fizz. And then you have beer.

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UNIDENTIFIED MALE: There's been brewing on the site since 1654 and which makes us the oldest brewery and continuously brewing brewery in the country. We've got cobbles outside. I mean, not too many, because it's not strictly practical.

But there's an old way bridge in the arch and that's (inaudible) all the time. We've got all the old tanks, so the oldest of the enclosed coppers in the country is there.

Brewing is a biological process. It's never the same every time.

Swirl it around.

Some raisins, very fruity beer.

There's little sort of differences between each batch. So for instance, we were making a batch of London Pride. The next batch is totally different from the previous one. It's just like going to the bar, seeing your friend at the bar and saying, oh, today, you've got a haircut, haven't you? It's still London Pride. It hasn't changed. It just today has a little bit more raisin.

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QUEST: The new year's just started and even with 12 calendar pages ahead, deadlines are already appearing on the near horizon. The fiscal fudge deal has given the market respite. The feel-good factors aren't likely to last very long.

From Washington to Brussels, there's trouble ahead. America's lawmakers face an ugly battle over debt ceilings and the like. Europeans will be back at the negotiating table on fiscal compacts and banking union. The Italians have got an election. Mario Monti and Silvio Berlusconi locked in combat. The festive season was lacking in goodwill.

Well, this new year promises to be equally if not more fractious. And the only thing we can promise you is we'll be right here to bring it to you wherever it happens, because 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. The news headlines.

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QUEST (voice-over): The International Monetary Fund, the IMF, has praised the budget deal reached overnight in the United States. Financial markets worldwide have risen after the U.S. House voted to pull the country back from the fiscal cliff. The IMF says the economic recovery would have been derailed without such a deal.

According to a new U.N. report, more than 60,000 people have been killed since the start of the Syrian uprising and the crackdown. U.N. human rights commissioner says that figure is truly shocking and much higher than expected. It is also probably an underestimate. Analysts say some death reports that were short on details were left out of the final tally.

And today alone a Syrian opposition group says more than 150 people have been killed across the country. Activists say dozens of civilians died when regime warplanes bombed a petrol station on the outskirts of Damascus.

Three days of mourning are underway in Ivory Coast after a deadly stampede left 60 people in Abidjan. Many of the dead were children. They were crushed by a huge crowd gathered to watch New Year's Eve fireworks. The Ivorian president has promised a speedy investigation into the incident.

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QUEST: Those are some of the top stories that we're watching for you here on CNN. Now we go to New York. "AMANPOUR" is live tonight with Fionnuala Sweeney.

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