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Quest Means Business
ECB Agrees to Anglo Irish Debt Deal; Euro Rally Impact; Incoming Bank of England Governor Answers Questions from MPs; Dreamliner Update; Dollar Up Against Euro, Down Against Pound Up; Alcatel-Lucent CEO Quits
Aired February 07, 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: In Frankfurt and London, Europe's central bankers step out their stall. It's all about the future of growth and the world economy.
They know what happened, the just don't know why. New details on the 787 Dreamliner investigation. We have the story.
And knowing when it's time to go.
(BEGIN VIDEO CLIP)
BEN VERWAAYEN, CEO, ALCATEL-LUCENT: Well, there always is a good moment and a bad moment, and this is probably as good as it gets.
(END VIDEO CLIP)
QUEST: Ben Verwaayen takes a bow, and we have a farewell interview with the head of Alcatel-Lucent.
I'm Richard Quest, I mean business.
Good evening. Tonight, Europe's central bank has been dealing with a bit of business, from rescues to interest rates and the euro, and finally, repudiation and reputation. First in line, taking a problem bank of Ireland's hands. It was a busy day for the ECB. If you join me in the library, you'll see exactly what's been taking place.
It's all about Anglo Irish and the debt deal in Dublin. Anglo Irish is now called IBRC, and overnight, after a stormy parliamentary session in the Dail. The liquidation was approved.
Now, the -- as part of that liquidation, the ECB had to agree to convert debt to longterm bonds. It stretches the repayment of those bonds from 10 to 40 years. Not only that, the bad assets will be transferred to NAMA.
It is a very sharp reflection of the determination of the Irish government to deal with this issue hard and fast. Enda Kenny says it removes a stain from Ireland's international reputation.
(BEGIN VIDEO CLIP)
ENDA KENNY, IRISH TAOISEACH: Today's outcome is an historic step on the road to economic recovery. It secures the future financial position of the state by reducing the burden on Irish taxpayers arising from the bailout of Anglo Irish Bank and Irish Nationwide.
Step by step, the government is undoing the disastrous banking policies that brought this state to the brink of national bankruptcy.
(END VIDEO CLIP)
QUEST: And it's worth pointing out that Anglo Irish is perceived to be the poster child for everything that was bad, from alleged criminal activities through to the incompetence of management of the bad loan book. You name it, Anglo Irish is way up there.
Other things on the ECB's agenda was the euro versus the US dollar. Now, we talked about this earlier in the week. The euro is up 8.2 percent in the last six months, and it's likely to stay that high, or even go higher, which is a concern for the president of the ECB, Mario Draghi, because at higher rates, then of course Europe remains uncompetitive.
(BEGIN VIDEO CLIP)
MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: As I said last time, the exchange rate is not a policy target, but it's important for growth and price stability, and we'll certainly want to see whether the appreciation, if sustained, will alter our risk assessment as far as price stability is concerned.
(END VIDEO CLIP)
QUEST: Just those very words alone took some of the heat out of the euro. It was down nearly 1 percent in trading because, of course, the fear is that if the ECB does start to move in very much with some sort of managed debt strategy, we are a long way from that, but that's what Francois Hollande of France was calling for the other day in his address to the European parliament.
As for on the personal front, the president of the ECB defended his action as Italy's central bank governor. It's all about Monte dei Paschi Bank, which is embroiled in the derivatives scandal. Draghi was the governor of the Bank of Italy at the time and closely supervised the actions, and he did admit that he perhaps could have done more.
The ECB was just one central bank that we were watching today. The other was the Bank of England, which decided to hold interest rates at a record low, and no more QE. No surprise there. But today, the man set to take control of the bank signaled he may be ready to make some changes.
He's Governor Mark Carney from the Bank of Canada, and he told a UK parliamentary committee, he's talked to the British finance minister about altering the way inflation targets are set, though he stressed that the bar for change should be high.
(BEGIN VIDEO CLIP)
MARK CARNEY, INCOMING GOVERNOR, BANK OF ENGLAND: One of the issues in the United Kingdom is the speed with which inflation is returned to target from above in an environment of public necessary -- I should say necessary public and private -- deleveraging.
And what's the path of monetary -- what's the optimal path of monetary policy in that environment.
QUEST: Now, John Thurso is one of the MPs that was sitting on that Treasury Select Committee and told me Governor Carney's thoughtfulness and experience was obvious.
(BEGIN VIDEOTAPE)
JOHN THURSO, TREASURY SECRETARY COMMITTEE MEMBER: I was impressed, I have to say. He was clearly a class act. There were a few googlies bold in there to try and trip him, up the sort of obvious questions. He dealt with them extremely well.
The obviously one was about the difference between what he could do in statute and what he couldn't do, and he very clearly replied that he would follow the statute. So, he was good.
But even more impressive to my mind was the answers he gave to those questions about what he thought himself in regard to monetary policy and in regard to the economy. He's clearly thoughtful, he's clearly very experienced.
QUEST: He made it quite clear, didn't he, that he's got the existing range of weapons, QE, bank weight, and the like, but would develop new ones if necessary, but didn't tell us much more about the new ones?
THURSO: No, absolutely, and I -- he's probably right to do so, because the more we were to have made him speculate, the more there would have been speculation before he arrived. We were right to ask the question, he was right to answer them in the way he did.
I think the most telling point he made was when he said there should be a debate, but it should be a short debate.
QUEST: Do you fear that he might take risks?
THURSO: No, I don't, because I don't think it's -- I think he made clear to us, it's not his job to take those risks. It's the job of the bank to have the debate or to lead the debate, but ultimately, it's the job for those of us in Parliament, in politics, the chancellor, to decide what the remit is.
And what he said was, is tell us what the bounds of our remit are, and we'll act within it. Now, the debate's going to be about what should be the bounds of the remit.
QUEST: And the -- the other reason he's being brought in by the chancellor is to shake things up, and if what we hear from the bank and from Threadneedle Street is true, they are, I would say, a little uncomfortable and perhaps waiting with some trepidation for his arrival.
THURSO: There are a lot of benefits from bringing in somebody who's got a proven leadership track record, but a different way of doing things, into an organization. There is equally always a risk, and commerce is littered with chief executives who came in with high expectations, but the culture that existed defeated them.
What I rather hope -- because the great thing about the Bank of England, it's got a lot of people who are very academic and who are very evidence-driven and evidence-led.
My own suspicion is that if he is what he says he is, which is a leader with a vision and who likes to operate with consensus, if you marry that to a bank, which is always been very academic in its thinking and open to evidence-led and evidence-based conclusion, we might end up with a really good marriage, and I'm going to be hopeful until proved otherwise.
QUEST: And finally, I assume amongst your committee and amongst members there's no more xenophobic nonsense about a Canadian running the Bank of England. We're beyond that argument now, aren't we?
THRUSO: Oh, absolutely. We're all sovereign -- we're all subjects of Her Majesty, so let's leave it at that.
(END VIDEOTAPE)
QUEST: Indeed. Straight ahead on QUEST MEANS BUSINESS, progress has been made in the Dreamliner battery inquiry. The plane remains grounded, except for the this one, which was in the air and we'll tell you why it was allowed to fly in a moment.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: US safety officials still don't know the reason and the cause of the battery fire which has grounded 787 Dreamliners from around the world. They now are getting more information, though. At a briefing today, they are finding out more about what took place with the batteries, those lithium-ion batteries that are on the aircraft.
There are two of them on the Dreamliner and, of course, one of them is around about here, and one of them is at the front, and that was the one where the problem was caused. There was smoke, there was flames, and we now know that there was a thermal runaway of that. But still, they don't know why.
What we learned today from the NTSB and the inquiry. The NTSB said there was multiple signs of short-circuiting in a single lithium-ion cell. Now, what does that mean?
Basically, one of the batteries, cell six within one of the batteries, overheated, short-circuited, multiples short-circuited, which led to uncontrollable rise in temperature in the adjacent cells, thermal runaway, and the temperature exceeded 500 degrees Fahrenheit, 260 Celsius. The precise cause, why that should happen, that remains a mystery.
(BEGIN VIDEO CLIP)
DEBORAH HERSMAN, CHAIRMAN, NATIONAL TRANSPORTATION SAFETY BOARD: We do have a long road ahead of us, and it really depends on where the evidence leads us. One of the challenges in a fire, in any fire, is very often the very best evidence is consumed by the fire, and so there are some challenges with doing fire investigations.
(END VIDEO CLIP)
QUEST: Now, you want to know what that battery looked like, by the way, over here. This is what the actual battery looked like, those five, six, and seven over here was the issue of what they were talking about, and that's where they saw the thermal runaway.
There was one Dreamliner in the air today. It was a ferry flight that was bringing a plane back from Texas. The plane had been in Texas, where it was being painted at an outside supplier to Boeing. Boeing -- it's for a Chinese airline, and Boeing wanted to bring the aircraft back to Everett.
They got permission, and as you can see, the landing a short while ago at Everett. Look at that nose wheel. Beautiful. Perfectly on the center line. There were some very dramatic restrictions on that aircraft. The crew had to check the batteries beforehand, it had to fly direct between Fort Worth and Seattle, and they had to land immediately if any battery issues came up.
I referred to these batteries a while ago. Now, the battery is the core of the problem, and we now know that it's inside the battery, not external, that led to the issues. So, I turned to Mary Schiavo, former inspector-general of the Department of Transportation, who always helps us understand these things, and she told me the investigators have a great deal of work still to do to understand why.
(BEGIN VIDEOTAPE)
MARY SCHIAVO, FORMER INSPECTOR-GENERAL, US DEPARTMENT OF TRANSPORTATION: That's correct. We don't know why yet, and also don't have the solution to get the planes flying again, but it does sound like they're very close.
QUEST: They're close to knowing that the problem's in the battery, but they -- they're looking at manufacturing, they're looking at design and all these other issues. But suggests unless they can pin it down, it won't be anytime soon.
SCHIAVO: That's right, except that Boeing is also proposing a series of containment issues, separating the battery, cooling it down, et cetera.
And with the FA giving them permission at least to start a ferry flight, and I suspect other flights soon thereafter, it certainly does sound like they are testing a number of containment options, clearly not elimination options, with the NTSB also pointing out that Boeing said this would not happen except maybe once in a million flight hours, and in fact it happened twice in under 100,000 flight hours.
QUEST: If we get to a situation of containment, what we're really saying is, don't worry, if fire breaks out, we can contain it and put it out. That's not a satisfactory way to proceed.
SCHIAVO: No, it's not, because remember, that's what they said in the 2007 regulation that allowed them to use the batteries. They said, well, we'll contain it. And clearly, the idea of containment did not work. And do, they'd better be very suspect of that idea, because that was the whole idea that allowed them to use them in the first place.
QUEST: Is the whole question of certification, bearing in mind the inaccuracy, bearing in mind the inaccuracy on a crucial point, which has subsequently failed, is that going to be one of the long-lasting ramifications of this investigation?
SCHIAVO: It is, but those recommendations, when the NTSB issues those criticisms and recommendations, remember that's all they can do is recommend, they can't force any action.
The most blistering of those recommendations on certification will go to the Federal Aviation Administration, which was supposed to be on top of this certification process, and it has become glaringly obvious that they were not.
The most cited entity in all of NTSB's history is not Boeing or Airbus or an airline, it's the Federal Aviation Administration.
QUEST: Finally, I don't know whether you're a betting woman or not, and if you're not, well never mind. But when would you think the planes go back in the air?
SCHIAVO: Oh, I think probably within a couple weeks to get the flight testing going. Remember, Boeing is proposing some changes, and before those can be approved by the FAA, they have to flight test them.
So, I think it will be back flying with Boeing's tweaking of this battery system literally within maybe a week or two, they'll start the test flying. The others, it'll be at least a month, because the NTSB is not going to release their report for at least 30 days.
(END VIDEOTAPE)
QUEST: So, there you have it, and perhaps a week or two before test flights and a month, at least, before the fleet is back in the air, says Mary Schiavo.
A Currency Conundrum for you now. In 13 US states, lawmakers are calling for a law to let them use their own currency. In South Carolina, they also want to legalize the use of gold and silver coins. Those coins from only North American countries, only South American countries, or all the countries in the world? Which gold and silver do they want to use?
As for today's market, the dollar was up against the euro, however, the greenback was lower versus the pound and flat against the yen. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: "I misjudged. I was too optimistic." Those are the words and admission of a chief executive who's calling it a day. After four and a half years of restructuring and trying to build sustainable profit, Ben Verwaayen is stepping down from Alcatel-Lucent, the telecoms equipment maker. The firm post losses for the fourth quarter and, indeed, for the whole year.
The former BT chief executive took the top job in 2008. If you join me at the CNN super screen, you will see exactly how he has performed since then. A very interesting set of share price mores.
There were the very strong rallies when there was a better-than- expected quarterly results in Q4. Then, of course, you get these -- falls, where sales fall short of estimates. A big drop in sales, and that was quite a dramatic one. And then, the company languishes during 2012, and we get this, warns that it'll miss 2012 targets.
So, overall in the time that he's there, taking it up and watching it come back down again. A little earlier, I had a frank discussion with Ben Verwaayen, and I suggested that he knew now was the right time to go.
(BEGIN VIDEOTAPE)
VERWAAYEN: Well, there always is a good moment and a bad moment, and this is probably as good as it gets, in the sense that you have to go in France for renewal of your mandate as a board member, and then you are appointed as the CEO. That's the sequence of things.
You do that for three years. Alcatel-Lucent is a stable company now. We had a rough 2012, we stabilized the balance sheet, we stabilized the results, as you have seen, in Q4. And then you have to ask yourself, are you the right person to move through the next three years, where the focus will be much more on execution than in the past.
And if you raise that question, you know the answer. And if you raise the question with the board, you know the answer you get, and that's a search. And that's the right thing to do.
QUEST: It's interesting, isn't it? Because CEOs rarely know the moment that it's time to go. As you say, you either go too soon and you're accused of jumping before the job's done, or too late, when don't let the door hit you on the way out. That balancing act is really difficult, isn't it?
VERWAAYEN: You have to buy a mirror, and that's what I've done. And you have to look into the mirror. I've always had the view that management has a sell-by date. I always also have the view that different circumstances require different skill sets, and you need to have the courage to confront yourself.
And then you have to talk to the board in an open way. Now, boards are -- of course, the second that you start to have that type of conversation, they also are very aware that it is a process-driven issue.
So, we hired the headhunter, we went to a search committee. All we did yesterday, then you have to come out today and make sure that everybody knows.
Emotionally, it's always difficult to say good-bye. I'm a club person, so I love my teams. But at the same time, this is what you have to do if you want to do the best for the organization.
QUEST: Alcatel-Lucent was this marriage of a company which has struggled. You've had to reform and restructure, job losses -- and losses as well. Are you satisfied with the trajectory?
VERWAAYEN: Well, it's one company now. I think that we have the customer at the heart of the organization. It's all about innovation. That's what we have done. We haven't executed all elements in a way that I was hoping.
2012, I misjudged. I've said that for your camera a few times. In the beginning, I was too optimistic. We redressed it at the second half, we took very severe action. It paid off. You can see the results improving. But the -- the show has to, of course, be in the results of the longer term.
So, am I satisfied? I am happy with the course that we took. I'm not happy with all the results that are on the table. I think it's a mixed scorecard.
QUEST: What will you do next?
VERWAAYEN: Well. Say good-bye to Paris, go back to London. Give some space to the new person who will come in. And -- I'm pretty sure that there are new adventures waiting somewhere, but actually, I don't know. I have thought 100 percent about Alcatel-Lucent. I will do so until the last day, and then I'll see.
QUEST: You're a great thinker on many issues, Ben. You're one of the CEOs that comes out of the box and sees the global picture and sees the change in the world and issues like climate change, management change, and those sort of things. So I know we haven't heard the last of you by any means. But what will your focus of interest be, do you think?
VERWAAYEN: I think it will be fantastic if in Europe we get our heads together a little bit about what the next generation of growth will be.
To be honest, I'm really worried about the fact that we have tendencies to go back to old recipes like what's the industry policy, how can we choose winners and how we do things, and we forget all about the fact that young generation, new generations, have very different interest groups, very different spending patters than what we had in -- when we were young.
So, I think I will make sure that I will be vocal in that discussion, because it is for me unacceptable that we have a youth unemployment that we have today in Europe, and that we have not a -- not a fighting spirit to go and do the new things that you can see all around in the rest of the world.
(END VIDEOTAPE)
QUEST: That -- that's Ben Verwaayen there, joining me earlier to talk about the issues. We'll be back in just a moment.
(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): Witnesses have told Reuters that protesters have attacked and ransacked the police station in Tunisia's capital. The political crisis has been deepening after a prominent opposition leader, Chokri Belaid, was gunned down outside his home on Wednesday.
John Brennan is to face tough questions during the Senate confirmation hearings to become head of America's CIA. Mr. Brennan is one of the architects of the U.S. drone warfare program. He was likely to be grilled on the killing of Americans associated with terror groups overseas and the legality of such actions.
E.U. leaders have begun talks in Brussels hoping to agree a 7-year spending deal after previous meeting in November failed. The British prime minister, David Cameron, said he will not accept any E.U. budget deal unless further cuts are made.
DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: Frankly, the European Union should not be immune from the thoughts and pressures that we've had to reduce spending, find efficiencies and make sure that we spend money wisely.
We're all having to do right across Europe. And when we were last here in November, the numbers that were put forward were much too high. They need to come down. And if they don't come down, there won't be a deal.
(MUSIC PLAYING)
(END VIDEO CLIP)
QUEST: Apple has $137 billion on its balance sheet at least. And the hedge fund, Green Light Capital, is now trying to find a creative way to get access to that mountain of cash. Not only that, the founder, David Einhorn, is suing Apple over the company's own plans for the corporate charter.
Maggie Lake is in New York.
Is this rich men fiddling over large sums of money and who can get their nose in the trough the most?
MAGGIE LAKE, CNN CORRESPONDENT: Not really, Richard, but certainly there are people who are looking after their own interests, I'll say that.
But listen, you can't go to a dinner party lately without everyone asking you what's happening to Apple's stock. It's widely held; it's sort of turned into an investment class of its own. But it's particularly of issue now, especially in hedge fund circles because they were very big holders, rode that wave up.
But of course now that Apple's stock is down, they are about 35 percent from its highs, give or take, they're in hot water. A lot of the investors that pay them big managers' fees are not happy with the fund's performance. That's why this issue's sort of come up again.
But David Einhorn grows -- joins a long chorus, loud chorus of investors who've been looking for Apple to loosen up that cash hoard a little bit. They do -- they did finally cave a bit and pay a dividend.
But it's interesting; Einhorn today, even though he's suing them, he's talking very nicely about the company, saying, listen, I understand they had really hard times before. That really was embedded in their culture.
He compared them to his Depression-era grandmother, holding onto every penny for tough times ahead. But he's making the point with this suit that it's time to change. Have a listen to what he said to Bloomberg.
(BEGIN VIDEO CLIP)
DAVID EINHORN, FOUNDER, GREENLIGHT CAPITAL: I think there's an opportunity here. I think Steve isn't with us anymore, and that's a negative in a lot of ways, but it's also positive because Apple doesn't have to be committed to that way of thinking on this particular point at this time. There's new people. There's new ideas.
Last year, they did a dividend. This is an opportunity right now for shareholders, because we've had a vote. And the vote is do we want to eliminate the ability to have preferred in the future? Or do you want to have preferred possibility in the future?
(END VIDEO CLIP)
LAKE: Now Einhorn's saying that, even though Apple's still great company, unlikely that they're going to grow 80 percent year-over-year as they have recently. So they have to change their behavior from that sort of high-growth type company.
But it's interesting, Richard. If you look at the stock price -- I think we have a chart of it -- this is really -- we talked the other day about Dell, about the tensions and the benefits of being private versus being a public company that answers to shareholders, some of those shareholders being shortsighted or at least having, you know, having quarter-to-quarter to explain themselves to their own investors.
Einhorn says that's too much money on the balance sheet. You got to figure out a way to free it up. From Apple's perspective, Apple's saying we've got to invest to compete in this area. We know they've been trying to come out with Apple TV.
I talked to an analyst, Shelly Palmer, that you know well, the other day, who said, listen, they're not going to be able to disrupt TV the way they disrupted music. It's not going to be that easy. It's going to cost them a lot more. That particular area has had 10 years to watch what happened to music.
So from the other side of the ledger, if you're Apple, you can maybe understand why they want to hang on to some of that money. But certainly Silicon Valley and Wall Street hedge fund land sort of having a bit more tension between them these days.
QUEST: Maggie Lake, look behind you, Maggie. Look behind you at the weather.
Is it going to be that bad?
LAKE: Well, we'll find out from the experts, won't we? But everybody in New York bracing for what they're saying is a blizzard. But it's going to be worse up north in Boston, I hear. I got my snow boots out, Richard, either way.
QUEST: Maggie Lake's in New York. And she'll probably stay there, at least for the foreseeable future, anyway.
Tons of gold bars are being moved from the vaults of the U.S. Federal Reserve, a perfect prelude to a Hollywood heist. What does Bruce Willis say? After the break.
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(COMMERCIAL BREAK)
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QUEST: The answer to tonight's "Currency Conundrum," the U.S. state of South Carolina's proposing to use gold and silver currency from which set of countries?
Any. South Carolina lawmakers are proposing gold and silver from any country can be used as a currency in the state. Stay with currency of gold. Germany is bringing some of its gold home from New York. Hundreds of tons stored deep within the vaults of the U.S. Federal Reserve will soon be on the move.
And all that bullion's attracting attention from some of the city's most notorious characters, like Richard Roth, who's on the case.
(VIDEO CLIP, "DIE HARD: WITH A VENGEANCE")
RICHARD ROTH, CNN CORRESPONDENT (voice-over): Yes, there is, and in "Die Hard 3," a gang steals the gold inside the New York Federal Reserve.
In the real world, Germany has just announced it wants 300 tons of its gold back from this same Federal Reserve Bank. Where is all this gold located exactly?
Right in the heart of the financial district, couple of blocks north of Wall Street here in Lower Manhattan, that's where the German gold is, inside this rather secure building, the Federal Reserve Bank. The vault for the gold is below street level, some 80 feet down.
Germany began storing gold here, now totaling some 1,500 tons of gold bars, during the Cold War, fearing an invasion from the Soviet Union.
DR. JOERG STEPHAN, DEUTSCHE BUNDESBANK, N.Y.: There's a plan to take it back over many years. So until 2020.
ROTH: Is there a specific day or time and entrance the first shipment is going back (inaudible)?
(CROSSTALK)
STEPHAN: No, I cannot talk about these things.
(VIDEO CLIP)
ROTH: On the eve of a new "Die Hard" movie, actor Bruce Willis was surprised when informed of Germany's bank withdrawal.
BRUCE WILLIS, ACTOR: They're really going to do that?
UNIDENTIFIED MALE: Yes.
WILLIS: Can you imagine?
ROTH: Yes, I can, and outside the bank, I looked to put my gang together.
Is that why you're here? You're pacing. Admit it.
UNIDENTIFIED MALE: I was looking for some construction equipment, see if there's anything down this street.
UNIDENTIFIED MALE: Tough place to break into. It's impregnable.
ROTH: All right. We're meeting at midnight tonight here.
UNIDENTIFIED MALE: Ha, ha, I won't be here.
ROTH: Huge heists involving Germany have gone down in New York before, as seen in "Goodfellas."
(BEGIN VIDEO CLIP, "GOODFELLAS")
WILLIS: I pity the fool.
ROTH: I needed advice, though, not pity. So I had a secret meeting in Central Park with a former FBI agent and current security risk analyst.
WILLIAM DALY, FORMER FBI AGENT: A theft against this type of shipment is extremely, extremely difficult. And anyone who'd be planning on it is truly taking their life in their hands, because these people are not going to fool around.
ROTH: Are you in with me?
UNIDENTIFIED MALE: Am I in with you? I would be, but I'm kind of busy; I work today.
But if you can guarantee me some gold, maybe I'll hang around.
ROTH: Richard Roth, CNN, New York.
(END VIDEO CLIP)
QUEST: The vaults of the New York Fed's the world's largest depository of gold, around 530,000 gold bars. Half a million gold bars, putting down the world's low gold is not easy. Join me in the vault tonight and you will see what I mean.
These are the countries that have gold that we know of at the moment. Italy has 21/2 thousand. The IMF has nearly 3,000; Germany 3.3 and the United States 8.1 thousand tons of gold.
But the point is central banks, particularly the Chinese, particularly some of the emerging markets, are big buyers of reserve gold in the future. And that is one of the reasons why -- excuse me -- people believe that gold will well and truly be locked up for some time to come.
Plenty of gold. By the way, if you want to know how heavy gold is, it's about 18 kilos and it feels every bit of it when you've got a gold bar, which is why you have to wear the white gloves.
Jenny Harrison is at the World Weather Center, likes a bit of gold herself. Won't be too much gold, but there will be an enormous amount of white stuff falling from the sky.
How bad is it going to be?
JENNY HARRISON, CNN METEOROLOGIST: It isn't going to be one pretty massive disruptive storm, Richard . You're talking of course about the storm heading already up into the northeast of the United States.
Now on the satellite, you can see two main areas of cloud, one in the south and one right now heading towards the Midwest, the two will eventually meet. And that's when we're really going to see a huge amount of snow come down. But you can see in the last few hours, that is where the colder air is.
They're getting some lake effect snow there as well. Meanwhile, the rain, for the most part, continuing to work its way up the southeast, but have a look at the warnings that are in place. So you see the region we're talking about. The Northeast and then the Midwest.
Now this entire region is about the size of the country of France. And a number of people, when you include both big areas, is actually about 65 million. So this is a massive area, and it is one pretty big storm. This is what goes on.
So the two literally eventually merge. All of this energy, all of this moisture being coming in from the water and in that cold air, coming down as some very heavy snow.
Now the concerns are being likened to the great blizzard of 1978. We can show you some pictures from then. So this is, as I say 1978. Now this was a massive storm. It snowed for over 32 hours in Boston. And there were actually 99 deaths reported over 4,000 injuries and illnesses and the winds were so strong that blizzard that, in fact, there were over 3.5 thousands vehicles stranded.
So we can hope that obviously with all this warning, none of this will actually happen. Let me just show you again what we have to look forward to. So we are going to see a lot of snow, particularly along this line here, right up into New England, easily over half a meter of snow.
The winds generally 70-80 kph, some gusts over 100, very, very poor visibility, near to nothing. And it will just be really very treacherous. So because of that, just really obviously they're saying get off the roads, actually, certainly by about midday on Friday.
It is going to be Friday through Saturday. At the moment, no closures, but very long delays, particularly Boston and New York and, of course, expect delays elsewhere as well, Richard.
QUEST: We appreciate that. Many thanks, Jenny Harrison at the World Weather Center.
That's QUEST MEANS BUSINESS. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.
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NINA DOS SANTOS, CNN HOST: Hello and welcome to MARKETPLACE EUROPE. I'm Nina dos Santos in London. Britain has been a member of the European Union for 40 years, but now this country's prime minister wants to renegotiate its position within the union.
As such, he's proposed an in-or-out referendum. In this week's program, we take a look at what being part of the bloc means for British businesses.
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DOS SANTOS (voice-over): Coming up, protecting the pasty, how European food regulation is filling a vital role for Cornish businesses. And the CEO of Diageo tells Richard Quest how the U.K. can stay competitive.
UNIDENTIFIED MALE: I do believe we have to have less regulations and we need more focus on competitive edge. Europe is becoming less competitive in the global scene.
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DOS SANTOS: The humble pasty, a sort of beef stew encased in a pastry shell, is one of the great culinary icons of Cornwall in the southwest of England. In fact, it's also that region's best export. Just last year, the Cornish pasty gained official recognition under the E.U.'s protected food name scheme.
And that means it joins an exclusive club, alongside the likes of champagne, Stilton cheese and Parma ham. And as Isa Soares found out, that status is more than just a title.
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ISA SOARES, CNN CORRESPONDENT (voice-over): Standing at the edge at the very foot of Great Britain, traces of old tin and copper mines dominate the landscape. In the quaint village of St. Just, an aroma recalls Cornwall's industrial past.
UNIDENTIFIED FEMALE: And in here we've got turnip, potato, onion, suet and our own mixture of salt and pepper. And pull it over --
SOARES (voice-over): These are simple ingredients, from humble beginnings.
UNIDENTIFIED FEMALE: Squinching them together.
UNIDENTIFIED MALE: (Inaudible) is where the pasty really developed (inaudible). They used to take the pasty down the mine and have it from their crib, which is their lunch. They used to hold the pasty by the crust, eat it, and then throw the crusts away, because they had arsenic on their hands, so they didn't eat that part. So it was a good interior (ph) (inaudible), very easy.
SOARES (voice-over): Today at Warren's (ph) Bakery, their robust pasty continues to hold its fold, feeding local mouths as well as local industry.
UNIDENTIFIED MALE: The pasty's incredibly important. You know, the whole -- it's just not the bakery's. It's, you know, the farmers are living off this as well, you know. So the high street, you have a lot of pasty shops. And towards an industry, really is being fed as well on pasties.
SOARES: There are around 100 businesses like this one here in Cornwall selling pasties. And they spend 25 percent of their turnover right here, which means that collectively they contribute $115 million to the Cornish economy.
SOARES (voice-over): At Ginster's (ph), where 8,000 pasties are made every hour, produce is brought from farms within a 20-mile radius.
MARK DUDDRIDGE, MANAGING DIRECTOR: We buy about half of our raw materials are very local. So that will (inaudible) take those onions, beef; we grow flour in Cornwall, which is unique.
SOARES: It's easy to understand how this noble snack has turned into a global icon. Recently, the Cornish pasty won official recognition protection under the European Union's protective food name scheme, or PGI. If you're going to call it a Cornish pasty, it has to be made in Cornwall.
UNIDENTIFIED MALE: We have raised the profile of Cornish pasties quite significantly. And I think it has also brought investment into the country (ph) as well. So we have had people bring their custom who perhaps may have had their (inaudible) made elsewhere in the country and brought them into Cornwall to call them a Cornish pasty.
There been a big boom in (inaudible) up and down the country, not just in Cornwall. And nearly all of them have their pasties made in Cornwall.
And I think the other side of this coin is the -- there has also been some European funding, objective (inaudible) funding we call it down here, which has helped some of the businesses and some of our suppliers to invest in their facilities and that has directly generated jobs as well.
SOARES (voice-over): It was an 8-year process for the Cornish pasty to join the ranks of Parma ham, Champagne and Stilton cheese. Being a member of the E.U. made it all possible. (Inaudible) also added to the regulations that business must meet.
UNIDENTIFIED MALE: There's a whole plethora of European guidelines about -- that govern how (inaudible) operate from making sure the food is safe from the hygiene levels, specification of engineering (inaudible). So there's a whole pile of stuff which we do.
I don't think the interest in PGI or PDO type applications protecting local foods (inaudible) add any attraction (inaudible) this country at all, had it not been for the (inaudible) legislation and the amount of applications that happen around Europe.
SOARES (voice-over): So now the humble pasty is ready to conquer new territories far beyond Cornwall.
UNIDENTIFIED MALE: (Inaudible) the next 23 months, we're looking to take it to Northern Europe, to places like Germany and the Scandinavian countries, and also to Canada and all the rest of the states.
SOARES (voice-over): (Inaudible) abroad will be filled with new challenges. Not so hard, say these producers. It seems like generations before them, they are made of a tougher crust.
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DOS SANTOS: Isa Soares, enjoying a taste of E.U. protection there.
Well, coming up, the CEO of the world's biggest tourist producer, Diageo's Paul Walsh speaks with Richard Quest. That's next.
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DOS SANTOS: Hello and welcome back to MARKETPLACE EUROPE here in London.
Prime Minister David Cameron reckons that Britain's best chance of success lies as part of a reformed Europe. And as such, he's taken the bold step of proposing a referendum on E.U. membership, should his party win the next general election.
While some feel that this question mark hanging over Britain's future relationship with its neighbors could be detrimental to businesses here, others (inaudible) have rallied in support of the idea, including the boss of the world's biggest spirit maker.
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QUEST: These are your main products?
PAUL WALSH, CEO, DIAGEO: Yes.
QUEST: The big ones?
WALSH: Yes.
QUEST: It's always invidious to ask somebody to choose amongst their children. Choose amongst your children. Which is your favorite? The bit that you look at and it warms the cockles of your balance sheet? The bit that you think the margins are the best, that you just think, we can never ever lose this one?
WALSH: Well, to be one of our children, you'd better have good growth potential and good margins. But it has to be Johnnie Walker. Johnnie Walker is the highest selling spirit brand in the world.
QUEST: The one thing you do see when you look at your brands is just the household nature, from Johnnie Walker, to Smirnoff, to Pimm's, it's quite extraordinary, the depth and range of your brands.
WALSH: And, of course, if we were in another market, you would see such an emporium populated with local brands as well. So in Turkey, you'd see Mey Icki; in Vietnam, you'd see Halico brands. So we have global brands and we have local brands.
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QUEST: You are in favor of the -- I hesitate to say renegotiation -- but the reappraisal of the relationship between the U.K. and the -- and the E.U. Are you in favor of a referendum that goes with that renegotiation?
WALSH: I think, as a business man, I would have preferred a much more authorization approach. But I suspect that politicians are deprived of that ability. I support our involvement in Europe. I do believe we have to have less regions and we need more focus on competitive edge. Europe is becoming less competitive in the global scene.
To deliver that, if we need a referendum, so be it. Other nations have had referendums. Why shouldn't the U.K.? But as a business person, I'd prefer that we just went down the course that we should go down.
QUEST: If they cannot get the terms that you would believe is acceptable or it looks pretty much the same as it is, you tinker at the edges on the working time directive, they do a few minor things, would you be in favor ultimately of the U.K. leaving the E.U.?
WALSH: I think we should do everything in our power to stay in the E.U. And I think that means inevitably some kind of compromise on the agreements, and I believe some of our friends in Europe would understand and agree to that approach.
I also think that we need to do a far better job in educating our population on the imperative of staying in Europe. And I don't believe that task should just be left to the politicians; business, too, have to stand up.
QUEST: You just took the question from me. What would you do -- I mean, look at your -- look at your products. Your products go into just about every single household in the United Kingdom, at some point, over a 365-day year.
WALSH: Not yet, but we're getting there.
QUEST: More than most. More than most.
So how can you leverage all this to the cause of which you've just espoused?
WALSH: I think we need to engage, first and foremost, with our employees. And explain to them that, you know, many of these brands enjoy their place in the global marketplace because of free trade agreements that are configured via Europe.
QUEST: Was it wise to forecast a referendum five years down the road with all the uncertainty that CEOs will now look at, saying, do I want to be in the U.K.?
WALSH: My view is that you've got less uncertainty today than you had before that speech was made.
QUEST: Well, how can that be? Because you've got the uncertainty that the U.K. may leave.
WALSH: You have that uncertainty. You -- nobody's quite certain where the British government stood on its role in Europe. Nobody was quite certain on where we stood around the bureaucracy that was being meted out. We now understand what our government wishes to happen.
QUEST: Can you see any CEOs saying, I'm not going to spend $100 million in a factory in Northern England when I've no idea if the U.K.'s going to be in the E.U. in 10 years' time.
WALSH: I don't think it's as bleak as that. I believe that the E.U. and the U.K. will continue to have a very positive relationship.
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DOS SANTOS: Paul Walsh there, the CEO of Diageo, bringing this week's MARKETPLACE EUROPE to a close. Join us next week if you can. But in the meantime, thanks for watching and goodbye.
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