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Quest Means Business

Toyota Troubles; UK Car Recalls; Killing of Dubai Hamas Official; NATO Assault against Taliban; French President Visits Haiti; New Search for Flight 447; Greece Debt, Falklands Dispute

Aired February 17, 2010 - 14:00   ET

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

MAX FOSTER, ANCHOR: Toyota bashing. The Japanese get defensive as their top car maker has more trouble this time with its top car.

Euro bashing. Greece's debt so big they could undermine the (inaudible) union. Britain bashing. Argentina obstacles to drilling for oil in disputed waters.

I'm Max Foster, in for Richard Quest. This is "Quest Means Business."

Good evening. While it speeds up are expectedly stop when you hit the brakes and it does not steer straight. Welcome to the all new Toyota. OK, it's easy to (inaudible) on the world's biggest car make just right now, but is it all a by product to being number one?

Tonight on the show, we asked is Toyota being victimized? Now Toyota may have to recall more cars for whole new mechanic defects. The drivers in the U.S. at least are complaining about. Akio Toyoda, the Japanese company's president says, they're looking into reports of a steering problem with the Corolla, which is the world's best selling car.

The reports that Toyota has received say drivers feel as though they're losing control of the steering, but it's unclear whether it's a problem with the brakes or is it with the tires. Toyota has recalled 8.5 million vehicles worldwide in the past four months because of defects ranging from sticking accelerator pedals to faulty brakes.

The company chief told reporters he wants to go to Washington in person to answer U.S. law makers' questions. He's leaving that to the head of Toyota's U.S. operations. The company president also reiterated his promise to revamp quality control.

(BEGIN VIDEO CLIP)

AKIO TOYODA, PRESIDENT, TOYOTA: Toyota is not perfect, but when we find a problem or are made aware of it, we act as quickly as possible. We are sincerely working on that as VP Sasaki said we never covered anything up or ignored any problems. I hope you understand this.

(END VIDEO CLIP)

FOSTER: Well, just about every automaker has to recall cars at some point or another, but because the scale of Toyota's problems right now, every fault that uncovers is making the headlines. I asked Kyung Lah who is our correspondent in Tokyo, what sense is there in the way the leadership is currently handling this latest crisis?

KYUNG LAH: Well, in the first two weeks of the crisis where it really hit a fever at pitch, we didn't see Akio Toyoda, the President of Toyota at all. We didn't hear from him. We saw a very brief 75-second interview that he did with one of the Japanese broadcasters here, but really we never saw him step out in front of the media.

So now he has done that in rapid succession. This is his third time appearing before the news media. Everything is different. They're having a lot of leeway as far as how much time he is spending with the press. He's answering a lot of questions. The tone is different. He is trying to get through all the detailed questions and answer as completely as possible.

It's very different from how it was handled early on, but what analysts are looking at is that a key turning point for this company will be what happens next week. Will the leadership, Akio Toyoda, show up before U.S. lawmakers. According to his words this evening, he's not planning on doing that.

He says the people who are best positioned to answer all the questions about what's happening in the United States are the executives in the United States. And that he is going to handle all the quality issues here in Japan and he is going to allow them to answer the questions of U.S. lawmakers.

But what analysts are saying is that when you have a company this big and you are the CEO, the president of it, you're the one who needs to be there defending your company. But right now that's not the track that he's taking.

FOSTER: There is a cultural difference here, of course, in the way American company executives are expected to react to America and Japanese company executives are expected to react in Japan. But this is a Japanese executive operating in America so it's slightly confused.

But how are Japanese people viewing this? Is there a sense that perhaps Americans are being unfair now on the way they're in a way targeting the head of Toyota?

LAH: Well, remember and certainly this is something that's very clear to Japanese people. The United States is a large stakeholder now in General Motors so what immediately is starting to come to mind is some of that feeling in the 1980s where we saw a lot of Japan bashing coming from Detroit.

There's concern that we're starting to return to that. There's a lot of sensitivity here in Japan about returning to Japan bashing and if you look at the blogs there. They're starting to see a lot of that discussion happening.

Is this Japan bashing? Is it fair that we're talking about the Toyota Corolla where there maybe fewer than a hundred complaints worldwide and we're discussing it. And it's headlining a lot of the international press so certainly there are concerns here within this country that the coverage is not fair and the baton especially from the United States is not even handed.

FOSTER: That's Kyung Lah's perspective there from Tokyo. It gives us an idea of how Toyota's problems compared with what's happening with other manufacturers though. We're going to bring Jim. He's going to give us the context here. Hi, Jim.

JIM BOULDEN: All right, thanks, Max. This is my second time on "Quest Means Business." We've shown you what some other recalls that other car companies are facing. It's not just cars but it's also light trucks and, of course, it's not just Toyota and there maybe more car companies than you expect.

So we start here with Ford in the U.K. since January of last year, Ford has suffered from eight different recalls. The reason? Some of the reasons are hard brake pedal during engine warm up and the ABS brakes not functioning correctly.

So that's one what a U.S. car manufacturer is facing here in the U.K. Let's look over to see how this German carmaker has affected in the U.K. Actually a lot of recalls, some 20 since January of last year. Main reason? The number one was airbags not deploying or inflating correctly. Also possible fire engines fires for the Mercedes.

And French carmaker Peugeot has suffered 12 recalls in the U.K. since last year. Main reason? The light switch may turn off unexpectedly and also brake performance not up to standard. Now this is just the U.K. I went back and looked at one of the U.S. web sites to see what happened in August, September, October, November and December of last year.

I saw at least 24 cases of recalls. Now, Toyota was number one. (Inaudible) that one is the floor mats and one was the brakes, but also GM, BMW, Ford, Hyundai, Nissan, also Jaguar, Volvo, Mitsubishi, Honda, and Chrysler. I think the point here is, Max, that a lot of car companies suffer recalls.

It `s important to note, they can't recall these cars until they know the problem and they know how to fix it. So now there are a lot of questions on Toyota about did they do it quickly enough? No point having to bring a vehicle into getting fix if they can't fix it. So it does take these car companies time to get a fix and get it to the dealership.

FOSTER: And there's no criticism of the way they've been fixing the cars, right? It's just the PR.

BOULDEN: I haven't heard of any problems of the new cars being fixed but it certainly (inaudible) to that as well. But the point is, of course, a lot of cars get recalled. We know as owner of these cars that it's annoying you get the letter in the mail, but it doesn't make news.

FOSTER: Jim, thank you so much. All the latest developments on this story on our web site, go to Quest Means Business' blog. We're asking readers there for their views. We want to know, do you think everyone is being too tough now on Toyota?

So far the voting is going like this, 67 percent think yes, we are, 33 percent say no, we're not being too tough on them. To get your voting, go to cnn.com/qmb.

Now let's get you up to date with the news headlines. Fionnuala joins us now from the Newsroom. Hi, Fin.

FIONNUALA SWEENEY: Hello, Max. The investigation into the killing of a top Hamas official in Dubai has taken a new turn. Authorities in Dubai have issued international arrest warrants for 11 people in connection with last month's death of Mahmoud al-Mabhouh.

But at least three countries now say passport details attributed to some suspects do not appear genuine and some of those named in the warrants are expressing shock saying their identities were stolen.

The joint NATO Afghan assault against Taliban fighters in Marja is in it's fifth day. Operation Moshtarak is the biggest defense system that started the war but it's been slow going. Many bombs are heading around the town and the Afghan official says Taliban fighters are using women and children as human shields.

Nicholas Sarkozy is visiting Haiti. The first French president to do so in what is once promises the richest colony. He promised $400 million in aid for the country. Many were grateful for it, but some people handed out flyers in the street protesting his visit.

And finally, a new search for the remains of Air France flight 447 will begin in the next few days. The four-week operation will cost more than $13 million and covered 2,000 square kilometers of the Atlantic Ocean. It's billed as the one of the most complexed undersea operations ever. Two hundred and twenty eight people lost their lives in the crash last June.

And those are the headlines. Don't forget to tune in for more on the day's biggest stories on "World One" at 8:30 p.m. London time. In the meantime, Max, back to you.

FOSTER: Fionnuala, thank you so much. Now continued crisis and trying to ease up on the Euro. An ex-finance minister tells us what can be done about Greece's debt crisis? Next in just a moment.

(COMMERCIAL BREAK)

Welcome back. Greece has until the end of this week to explain a series of financial transactions that hid the true size of its government debt. From 2002 onwards, Greece is reported to use contracts known as currency swaps to generate funds and reduce the apparent scale of its borrowing.

The deals which were brokered by top banks including Golden Sachs were illegal at the time according to the current Greek prime minister who was not in charge when they were carried out of course. He says the government doesn't use them now.

The EU says it wasn't aware of them until recently but it wants all the details by Friday. The revelations are doing more to damage Greece's credibility in an already jittery market. It's also got people wondering if other countries went in for the same kinds of deal.

The European Commission has told the Wall Street Journal that two years ago, Greece denied it was then using transactions of this sort. According to the paper, Eurostat, the statistics agency, met Greek officials in 2008, they discussed whether the country was using currency or interest rate swaps to make the budget deficit appear smaller.

The Greek government Eurostat then that it didn't use such instruments. While Greek stocks continue to slide the session at the fourth down day in a row for the composite index in Athens and most Greek bank share lost ground with Alpha Bank off by 1 percent of the National Bank of Greece shedding around 0.9 percent.

The future is bright elsewhere in Europe. All the main markets made solid gains after (inaudible) up some good results. Bank stats responded with some good gains, Lloyd, Barkleys, Deutsh Bank and BMP itself all rose. And with Swiss Banks rising, the SMI in Zurich (inaudible) six consecutive gain.

But the Euro took a heavy tumble. Reversing Tuesday's gains as Greece continue to cast the shadow over the currency is now trading at $1.36 as risen in December, one Euro is worth more than $1.50.

Lord Normal Lamont was the Chancellor of the Exchequer of the British, the Finance Minister from 1990 to 1993. He is opposed (inaudible) opting the Euro. He joins me now to talk about what's happening to the currency at the moment.

Thank you so much for joining us. Looking back (inaudible) Wednesday, you were intimately involved, of course, there. Are there any parallels to what happened to the U.K. then to what possibly could happen to Greece?

LORD LAMONT, U.K. FINANCE MINISTER 1990-1993: Well, I think there are some parallels. The ERM became increasing unsuitable for Britain, but someone put it, the difference between being in the ERM and being in the single currency is being in a house that is burning and the door being locked or the door being open. We were able to get out of the ERM. It is very difficult for Greece to get out of the Euro.

FOSTER: Do you think the Euro is being undermined by the way Greece has handled its finances?

LORD LAMONT: Yes, I do. I think the revelation is particularly shocking and to be honest, I am certainly staggered at what is being said.

FOSTER: But in layman's terms, we're basically saying that Greek had more debt than it was revealing to the EU right?

LORD LAMONT: Yes, that is right. But if I could make another point, one of the things has noticed about the single currencies, in the run up to when the single currency was created. Countries tried to meet the criteria for joining the Euro. Immediately after they had joined the Euro, the criteria appeared to be abandoned. Lots of countries, not just Greece, in the Euro today were not qualified for membership of the Euro because they have not observed the rules.

FOSTER: But you think, Greece has the criteria for entering the Euro, who was to blame if perhaps it wasn't quite ready? Was it the European Union encouraging it in and perhaps turning a blind eye on some things or perhaps Greece being (inaudible) and not exposing all its debt?

LORD LAMONT: Well, I mean, I don't know the facts, but it would appear that there was some deliberate deception by Greek officials and Greek politicians, and that is truly, truly scandalous.

FOSTER: And can we confirm that? Do we know that or is it just sort of hearsay and now we're looking back at all these financial transactions and putting it altogether in one big lump.

LORD LAMONT: Well, I haven't seen the detail, but I listen to what you were saying, and that sounded pretty fraudulent.

FOSTER: Yes, the government, of course in Greece is completely different. They say they were being honest, but the fact is they probably wouldn't qualify now as you say to enter the Euro.

LORD LAMONT: Yes, but several other countries wouldn't qualify as well based in terms of inflation differentials or in terms of deficits. And that was by the stability and growth fact was introduced quite separately and later off to the framework for the Euro had been established because the Germans were worried that they would end up bailing out countries like Italy.

Italy was a country they feared at the time. Greece wasn't on the horizon. Of course, Italy is an embarrassment in some ways to the Euro, but the rules have simply not being observed. You can write them all down. You can say you can't exceed this deficit or that deficit. It's not worth the papers written on.

FOSTER: Some concern mostly about countries within the Euro, but Britain has (inaudible) escapes this by not being in the Euro because people are talking about Britain going the same way.

LORD LAMONT: Well, Britain has problems and I think the government (inaudible) that we have such big deficit, but Britain has one big advantage. (Inaudible) has two big advantages. One is being able, in the past two years, to set an interest rate appropriate to conditions in this country.

One of the problems with Euro is the interest rate can't be appropriate for everyone at the same time. That's one, but the other very, very big advantage Britain's had is it has been able to allow its currency to depreciate, to help manufacturing, to help exporters.

Not all that effect has yet come through, but I think it will come through and I think Greece really needs the same medicine. I mean it's quite interesting in this morning's Financial Times, the Noble Prize winning economist, Martin Feldstein advocates that Greece should temporarily leave the Euro. It's not going to happen of course.

FOSTER: You're not pro-Britain joining the Euro, but do you think this is the best justification yet that -- that was the right decision?

LORD LAMONT: Well, I think it's always been clear that it wouldn't suit us. Even if you take the view of it, Germany and France could have a currency union. I've always held a view because of the single interest rate problem. That other countries on the (inaudible) of Europe with different trade patterns, different mortgage markets, different housing markets.

The impact of one single interest rate on these different conditions can be extremely different and so the conduct of (inaudible) policy just looking at the average inflation rate over these very diverse economies is very, very difficult. And of course, you don't have mobility of labor as you have mobility of labor within the single currency of the United States of America.

FOSTER: OK, Lord Lamont, thank you so much.

Now we're going to have a look the Wall Street figures now because it's just coming in to (inaudible). The U.S. stock showing what its gains. Investors welcoming better than expected housing reports.

As you can see the big board currently up 0.2 percent. The best is also looking at the (inaudible) from the federal reserves last week as well that's just come out. We'll have reaction from Wall Street on that later this hour.

Up next, the Publicis, one of the largest advertising firm on the crisis in Europe and how it's affecting business.

(COMMERCIAL BREAK)

The worst thus far, so says Publicis, a company that used to getting its message across pretty loud and clear. The French company is one of the world's largest advertising group. It says the financial crisis hits its 2009 earnings. Net profit felt around $550 million, a drop of 10 percent.

The company works for some of the biggest businesses in the world, from Procter and Gamble, and Nestle to Lorielle and General Motors. Earlier I spoke to Maurice Levy, he is the CEO of Publicis and I asked him if the momentum he saw last year seems to be continuing in this year's figures.

MAURICE LEVY, CEO, PUBLICIS: There is a good momentum. It's not yet the best of what we have seen in the past, but it looks like there is a positive trend. IT and everything which has to do with innovation. Telco are doing quite well and investing seriously.

Geographically, U.S. has been quite resilient as a matter of fact, at least for us, and when we look at the picture of the U.S., much more (inaudible) than maybe (inaudible) my competitors. We see also that Brazil and China are firing all engines and they are really moving very fast.

We see the Russian market lagging behind and we don't believe that Russia will take off before the middle of the year, but they will eventually had a positive year. The most worrisome market are (inaudible) Europe. We have from Portugal to Greece, a situation which is pretty negative and I don't believe that this market will be back on growth before 2011.

FOSTER: One of your biggest clients is General Motors so it's no wonder that you suffered a bit last year because of that. But that might actually be a huge opportunity for you this year because General Motors is on the way back of course, and it's going to be able to capitalize with all these problems at Toyota. Well, it's probably going to be number one next year, right?

LEVY: I'm not sure that they will be number one, but one thing is sure is that General Motors has a very good offering in terms of new cars. There is also a lot of innovation which has been created and we are developing our relationships with General Motors. I believe that they have the wind which is very much in their favor and that they reinvest more in 2010.

FOSTER: OK, and finally, just looking ahead to this year then what you are making about your predictions about the industry that you're in? Are the way companies spending their money changing now and are they going to be putting it onto different media formats increasingly?

LEVY: Everything which is on their net, which will go much faster where we will see a good growth and a very positive growth. And so I am seeing that you have to watch a social media and I think that social networks will start to bite a little bit more on the pie of advertising.

FOSTER: So watch social networking these days, isn't it? Now, Falkland Islands are once again at the center of a dispute between Britain and Argentina. Nearly three decades since the two nations went to war. We'll bring you the latest on the rising tensions?

(COMMERCIAL BREAK)

Welcome back. I'm Max Foster in London and this is "Quest Means Business" here on CNN. Nearly 30 years since the war over the Falkland Islands in the South Pacific. Tensions between Britain and Argentina are rising once again.

British Army says it won't all ships to sail from its ports to the islands (inaudible) Malvinas without a government permit. The announcement comes as oil prospectors begin bringing in equipment needed for test drilling.

(BEGIN VIDEO CLIP)

ANIBAL FERNANDEZ, ARGENTINIAN CHIEF OF CABINET: It has been decided that any boat or naval vessel that proposes to transit between ports on the Argentine Continent and ports located in Malvinas, South Georgia and South Sandwich Islands or across Argentine waters in the direction of these islands and/or carry merchandise to be transported directly or indirectly between these ports must solicit a previous authorization from the competent Argentine national authority.

(END VIDEO CLIP)

FOSTER: Britain's foreign office says the decree will not affect shipping through the area though. Nobody knew there was oil to be found around Falkland Islands when tension between the U.K. and Argentina rolled over 28 years ago now.

Located in the south Atlantic, Argentina has long claimed the British owned Falkland Islands as part of its territory. Argentine forces invaded in April 1982. Capturing the islands within days. British Navy ships and troops arrived on May the 21st, but fighting mostly at sea lasted less than a month.

June the 14th, Argentina had surrendered and the Falklands were returned to British rule. Around 650 Argentinian troops and 250 British troops were killed. Despite the defeat, Argentina still claims the Falklands.

Jude Webber is the Argentina correspondent of the Financial Times, and earlier, I asked her to tell us how the press are covering the story in Argentina.

JUDE WEBBER, CORRESPONDENT, FINANCIAL TIMES: There hasn't been (inaudible) lots of media coverage. I think that changed a little bit this week. There'll be more reports in the press (inaudible) drilling platform which is going to be conducting this exploration.

(Inaudible) on Friday (discussing) close to people getting more interested and yesterday, the president announced that she had signed the decree basically banning shipping between Argentina and the folks (inaudible) elected House, a particular new source of authorization.

So it's has been getting increasing (coverage). I think we've seen a steady build up, but we're not seeing the kind of (inaudible) or even the kind of (inaudible) rush height that I think the British media - we're seeing in the British Media.

FOSTER: Is that a sense amongst the public that they should - that the government should stick to its guns and make sure it does a sovereignty over these islands, which the British of course claim they have.

WEBBER: You know, absolutely, I mean, public opinion is completely behind the government on this. Everybody believes the Falklands belong to Argentina and you can see that here there is streets named after the Falklands.

There are shops and all sorts of things, (inaudible), ice cream parlors, all sorts of things. The name is Malvinas (inaudible). It's the Argentine name for the Falklands and it's just - it is (inaudible).

And so I think everybody believes that what the government is doing, which is pressing its claim through the (dramatic) channels is highly the right way.

FOSTER: Why don't you get the sense that the public are going out and it's time to demonstrate on behalf of the government? Why are they feeling more strongly about this?

WEBBER: I think it's a little bit abstract. I think that they might change if there are discoveries. I mean, basically, the drilling platform which is arriving on Friday, will be here for about six to eight months. It's going to drill up to 10 wells for different companies.

So if any of those wells have very positive indications of oil or gas then I think that really will escalate and become much more of an issue here because what Argentina - the congress here passed a law at the end of last year saying that the continental shelves around the islands belongs to the Province of Tierra del Fuego, which is right in the south of Argentina.

So basically if anyone (inaudible) Argentina says these are still within us so I think if (inaudible) discoveries, I think that really will ignite things. But again, it's time to see what will happen because Britain is sticking by its position, which is the Falkland Island as have the right to self determination.

So it's -- it's -- it's still this very tense stand-off. But I think in -- passions will become much more inflamed if there is a big discovery.

(END VIDEO CLIP)

FOSTER: Now, the Norwegian aluminum producer, Hydro, says cost cuts helped it to reduce its losses in the fourth quarter of last year. The quarterly deficit at $100 million, compared with a loss of $1 billion one year ago. But analysts say the results were significantly behind expectations. The company estimates it has laid off 4,500 employees since the middle of 2008.

Well, earlier, I was joined by the CEO of Norsk Hydro, Svein Richard Brandtzaeg.

And I asked him -- I started by asking him, at least, what he made of these latest results.

(BEGIN VIDEOTAPE)

SVEIN RICHARD BRANDTZAEG, HYDRO CEO: In this fourth quarter, we see a better development in some of the downstream businesses that we are operating. First of all, in oil products, we saw a better second half in 2009 than the first half. That is opposite to the normal situation, because in oil products, the first half year is always better than the second half.

The fact that the fourth quarter was also better than the third quarter in oil products, which is also opposite, shows that there is a sign of growth now in different markets.

We see the same situation in automotive, better performance, better volumes in automotive businesses in the fourth quarter than in the third quarter.

FOSTER: And that reflects your business, so you're selling more to those businesses that rely on your product?

BRANDTZAEG: Yes. And that is also based on the fact that the oil customers who want more energy-efficient solutions. In automotive, aluminum has the benefit with a low weight and also in the flexibility with regard to different products.

FOSTER: OK. You're opening this absolutely -- or you've opened this huge smelting plant in the Middle East, haven't you?

It's absolutely enormous, the biggest single project of its kind ever in your industry.

BRANDTZAEG: Yes.

FOSTER: So just describe what you've got there, how much it's going to produce and why you're so confident you're going to be able to sell all this aluminum it's going to come up with.

BRANDTZAEG: Qatalum makes a good example of research -- of research and development creating value. We have developed our own smelting technology. And Qatalum, that is now finished, more or less, where we are -- we have started the smelting in December, ramping it up gradually through the first week or so of this year.

FOSTER: How much is it going to produce every year?

BRANDTZAEG: I total, we are going to produce about 600,000 tons of aluminum products (INAUDIBLE).

FOSTER: That's absolutely enormous.

BRANDTZAEG: This is a huge smelter. It is not only the biggest smelter that has ever been built in one step, it is the most energy efficient smelter. It's the most energy efficient smelter and also one of the most cost-efficient smelters that have ever been built.

FOSTER: I presume you're setting up in the Middle East because your energy costs are a lot lower there and you say it's energy efficient, but this is an industry that consumes huge amounts of energy. So that's your biggest cost, isn't it?

BRANDTZAEG: Energy cost is one of the main reasons why we are in Qatar. We have been in Qatar for 40 years, so we have a good relationship with Qatar Petroleum and the Qatari government. And this is a 50-50 joint venture between Hydro and Qatar Petroleum. And it's such a huge investment -- $5.7 billion U.S. We are building that according to plan and field production in the fourth quarter.

FOSTER: Your big competitor, as it were, is steel, isn't it?

That's the market you're trying to eat into.

BRANDTZAEG: Yes.

FOSTER: What makes you come -- it seems bizarre that you're selling yourself as a greener product than steel, when they're very similar products and actually neither of them are particularly green, because of the amount of energy that you use.

BRANDTZAEG: The advantage with the aluminum is that it is energy solid state. Seventy-five percent of all aluminum that has ever been produced since the early days of the industry is still in use due to the fact that aluminum can be recycled an infinite amount of times. And when we recycle aluminum, we use only 5 percent of the original energy content. So the metal is in, many ways, as I said, energy in a solid state that never gets lost.

(END VIDEO TAPE)

FOSTER: That was the head of Norsk Hydro speaking to me a little earlier.

Now, after the break, a live update from the New York Stock Exchange.

Plus, South Africa lays out it -- lays out its budget for the new year. The markets are pleased, but as the country's finance minister tells us, many challenges remain.

(COMMERCIAL BREAK)

FOSTER: And to the New York Stock Exchange now for a look at what's happening on Wall Street.

Alison Kosik joins us with the very latest -- Alison, it's turning out to be a pretty good week.

ALISON KOSIK, CNN CORRESPONDENT: It is, so far doing pretty well, Max, though the gains aren't as big as we saw on Tuesday, but investors are certainly focusing on some better than expected economic reports that came out earlier today.

Now, earlier in the hour, we got the Federal Reserve minutes released from its latest meeting. The Fed is expecting that unemployment will remain high over the next two years, saying it will take "some time" for the economy and the jobs market to get back to normal.

Switching gears now, the latest read on the U.S. housing market shows new construction starts in January rose 2.8 percent compared to a 4 percent drop in December. That lifted housing starts to their highest level in six months, but the number of new permits issued for future construction projects dropped almost 5 percent.

It's a sign that builders are going to be cautious over the next few months.

Winter weather is a big factor in these reports. It can wind up hurting the number of home construction projects, as it did in the future - - as it can -- it can hurt home construction projects. That happened back in December. And that's likely to be the case again this month, after a series of devastating snowstorms in many areas.

We also got word that industrial production rose almost 1 percent in January, showing that the sector continues to rebound. And December's reading was revised higher.

All right, let's go ahead and check the market number right now. The Dow Industrials is higher about 25 points. The NASDAQ Composite up by about 7. And the S&P 500 higher by about 2 -- Max.

FOSTER: Alison, it doesn't seem like a year, but it's a year, I understand, since the stimulus bill.

What's the latest status on that?

Is that being talked about down there?

KOSIK: It is. It's definitely a topic in the news today. Vice President Joe Biden released the administration's annual stimulus progress report today, saying that from here on out, the pace of the spending should pick up. And that means more money for projects like the high speed rails instead of payments to states and individuals. According to Biden's report, Max, the government is going to distribute $32 billion from Recovery Act funds per month. And the administration says it's on target to reach its goal of disbursing 70 percent of the funds by the end of September.

Now, the Congressional Budget Office recently revised the cost estimate of the Recovery Act to -- to $862 billion.

But the administration, Max, is still using the original $787 billion figure. And the administration is rejecting the higher cost figure of the Congressional Budget Office -- Max.

FOSTER: Alison at the Stock Exchange.

Thank you so much.

Now, South Africa is treading a cautious line when it comes to its budget projections for the year ahead. Finance Minister Pravin Gordhan has announced a smaller than expected budget deficit of 6.2 percent of GDP for the year to March 2011. That is smaller than some economists have expected.

South Africa's central bank is holding its target inflation rate at between 3 and 6 percent. Some investors fear the deficit will be allowed to grow or the government will move to peg the currency to the U.S. dollar. Those fears proved groundless, though, and the South African rand rallied immediately following the announcement.

Well, South Africa's economy is still struggling with some meaty problems, like unemployment of nearly 25 percent.

Richard Quest caught up with Pravin Gordhan at the World Economic Forum in Switzerland last month and asked him about the challenges that he's facing.

(BEGIN VIDEOTAPE)

PRAVIN GORDHAN, SOUTH AFRICAN FINANCE MINISTER: Consumer confidence is rising. Business confidence is rising. PMI is rising. All of the GDP and other figures are all bottoming out and coming into positive territory.

So the recovery is there. But like the rest of the world, the question is how long will it take the real economy to catch up with the recovery?

RICHARD QUEST, HOST: That dis -- discrepancy between the real economy and the financial economy, if you like, or the stock market, is really what's now starting to annoy a lot of people -- ordinary people.

GORDHAN: Yes.

QUEST: They see markets rising, bonuses being paid and they want to know when jobs are going to be created.

GORDHAN: In terms of where the G20 is going, in terms of where the world is going economically, if we don't solve the problem of the real economy and give people real jobs all over the world and do something extraordinary to -- to put that onto the agenda, I think all of us are going to face a lot more difficulty.

QUEST: Doing things differently is a wonderful slogan and I'm sure management consultants could come up with some magnificent ways of doing it.

But I wonder, how do you put it into practice?

GORDHAN: Well, you change behaviors. You set your specific targets and outcomes. You actually monitor people on whether they're actually delivering. And if they are not, there must be consequences for that. So in any normal business, that's what you would actually do.

In government, we are embracing that particular philosophy and saying that if South Africa wants to sit at the G20 table and wants to be more influential in Africa and elsewhere, we will and must together.

QUEST: The new formulations that are taking place that put South Africa at the table, like basic, are really quite important for the future role of South Africa in the world. You've got a seat at the table -- at most of the tables, now.

GORDHAN: We have. And we -- we're very happy that we -- we are there. But the important thing is not just for South Africa. It's that the world needs to hear a diverse set of voices and share a diverse set of experiences. That's the lesson of this crisis.

And if we don't understand this diversity and if we don't respond appropriately to it...

QUEST: Yes.

GORDHAN: -- what -- what we commonly call imbalances, then we won't find a formula for -- a growth path for the world that actually is, in fact, inclusive.

(END VIDEO TAPE)

FOSTER: There you are, the South African finance minister speaking to Richard.

Plenty of snow there in Davos, of course.

Jenny Harrison is going to tell us how much there is at the Winter Olympics.

It's pretty crucial.

JENNY HARRISON, CNN METEOROLOGIST: It is crucial, Max, you're right. Yes. In fact, you know what today, for the women's downhill, there should be pretty good conditions because we had all that snow Monday into Tuesday, about 10 centimeters up along Whistler itself, along the mountain. And, of course, no one has skied on it since. And we've got some very nice weather going ahead.

Now, this is the forecast for the next few days. Look at that -- just a little bit of cloud. There is one or two little light flows of snow, but actually nowhere near any of the Olympic venues.

You can see current conditions not too bad. We've got temperatures below freezing up at the top and just a few degrees above the lower levels. Winds are fairly light. And, as I say, the main thing is some really good, clear sunny skies over the next few days.

Having said that, of course, temperatures just a little bit above advage -- a little bit above average. Minus two is the average. And by Friday, look at this -- we should be up to about 6 degrees Celsius. But at least in the overnight hours, it does dip to below freezing. And then Cypress Mountain again, we haven't really had a great deal of snow here. There was some again on Tuesday. But as you can see, by Friday, those temperatures continuing to climb. And, of course, the skiers will tell you they like different conditions for actually doing their particular events. So what suits one doesn't suit another.

And then Vancouver itself, if you're actually heading there or you're in Vancouver and are going to some of these events, well, look at it, you won't -- you're not even (INAUDIBLE) over the next couple of days. Temperatures getting into double figures.

Not double figures, really, across in Europe. Look at these current temperatures -- minus one in Copenhagen; we're at plus three in London; minus 17 in Moscow. The wind is making it feel a little bit colder, not a huge amount, but there's some very unsettled weather conditions again heading into Europe, in particular. A new system pushing into the southwest and a lot of rain recently across into Southern Portugal, the southern areas of Spain. And another system coming in.

And we're going to see a fair amount of snow across the Alps, but also into the U.K., of course, Scandinavia,. You're going to see more in the way of snow, as well.

And look at all this rain coming in. And, again, we've got some snow to central areas of Spain. And you can see the accumulations. The heaviest probably around the line at the Alps into the southeast of France. But across the U.K., again, there are warnings in place. You can see, again, it's fairly widespread this snow. A lot of it is coming down with some sleet and a little bit of rain. So whether it actually sticks, but there could be as much as 10 centimeters and maybe 30 centimeters up into the Highlands.

Now, travel delays as we go through Thursday, you can see they tend to kick in later in the day, certainly the lengthy delays into Brussels, into Amsterdam because of this snow. And you can see Vienna, as well, though delays not expected to be particularly long there. We've got some strong winds in the mix, as well. And then Milan Thursday morning, you've got a mix of sleet and snow.

Temperature wise, we should reach about seven degrees in London and Paris on Thursday. Still a bit later colder across Central Europe, but mild in the south. Look at that, 19 degrees for you there in Athens.

Now, we're following our latest tropical cyclone. This one in the South Indian Ocean. It's a powerful storm, as well. Already, the winds up to nearly 150 kilometers an hour and set to continue to strengthen. But the good news you can see, at the moment, it looks as if that forecast track has it heading well to the south. And so staying to the east of Mauritius, Reunion and Madagascar. But the rains are being particularly heavy across in Australia.

We'll keep you posted on the flood warnings there as we go through the hours.

Now it is time for a short back here during this hour.

Max is back with you when we come back here.

(COMMERCIAL BREAK)

FOSTER: Research in Motion has been showing off the new browser for its BlackBerry. The company calls it the Web Kit and days -- and says it's faster and easier to use. RIM has its work cut out to take on the new Apple iPhone, as well as new Smartphones powered by Google's Android system. There's no date set for the Web Kit to be released just yet, but you can expect to see it later this year.

Now, at the World Mobile Congress in Barcelona, there are lots of fancy new devices, including some real power players -- the telephone chargers.

Our Jim Boulden is in Barcelona or has been to Barcelona to give us a quick look.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT: You would expect a mobile convention to be all about wireless, of course. But there is one issue that isn't wireless, and that's the recharging of the mobile device and the batteries.

But one company thinks it's solved that problem.

RAN POLIAKINE, FOUNDER AND CEO, POWERMAT: We say seeing is believing, right?

BOULDEN: Yes.

POLIAKINE: So I have an iPhone case here. I have a truly wireless (INAUDIBLE).

BOULDEN: Yes, no wires.

POLIAKINE: When I place it here, it charges. The same with my BlackBerry. When I place my BlackBerry on the mat...

BOULDEN: So you can charge two devices at one time...

POLIAKINE: Right.

BOULDEN: -- with a mat that's been charged itself and then you can bring it to an event like this and it's wireless and you don't have to worry about plugging it in anywhere?

POLIAKINE: Correct. We just (INAUDIBLE) we started in the U.S.

BOULDEN: Right.

POLIAKINE: -- launching two product lines. The first one was for BlackBerry users. Basically, we requested from BlackBerry users to take off the old battery bed and buy this kit, which has the technology inside...

BOULDEN: OK.

POLIAKINE: -- put it on and once it's on, that the phone could be charged on the mat (INAUDIBLE).

BOULDEN: Right.

So what's the next generation, then?

POLIAKINE: We came up with a power pack. A power pack is the ultimate way to upgrade your phone to wireless charging.

BOULDEN: OK.

POLIAKINE: We've inserted our technology into the battery. And basically what we're asking the consumer to do is simply to take out their old battery from the phone, put in the Powerpack by Powermat and when you do that, you can immediately wirelessly recharge your phone. In essence, we have 10 batteries covering like 100 different types of Smartphones and that's the way we go later on, with the workman's device maker to integrate the technology into the phones themselves.

(END VIDEO TAPE)

FOSTER: Well, there may -- their name may not ring any bells with you, at least not until your phone rings. Qualcomm is one of the world's biggest makers of wireless chip sets, the technology embedded in every cell phone.

Jim asked Qualcomm's CEO about mobile technology that's now going well beyond the mobile phone.

(BEGIN VIDEOTAPE)

PAUL JACOBS, CEO, QUALCOMM: There's a lot of really interesting things happening. Obviously, we all know about things like the Kindle and the e-Book Reader. And we've been working very hard on new display technology to make that be color and video so you'll carry around a bigger screen that you can read on, but also get onto the Web, maybe manipulate attachments and things like that.

And then there's a whole other area of health care. So mobile health is...

BOULDEN: Yes.

JACOBS: -- something that we're very excited about. You'd save a lot of costs in the health care industry, improve people's health, manage chronic disease conditions. There's a lot of censor work going on there. So it's very exciting.

BOULDEN: So it's the same technology that we have in our mobile phone or our cell phone, but you're using it in -- in a much more critical way, if you're talking about health care.

Can you show us some of them?

JACOBS: Sure. So, for example, we have these wireless band-aids. Now, this one from a company called Corventis, you wear this on your body. It monitors your heart rate, your respiratory rate, fluid status, posture. It can detect cardiac arrhythmias. And it's got wireless in here so it talks from this now to another wireless device off into the network to monitor.

This one is actually a continuous glucose monitor, so if you have diabetes, you would wear one of these. And it continuously monitors your blood sugar levels.

BOULDEN: And here we are with TV -- mobile TV.

I've got to say, mobile TV hasn't really taken off the way I think some people had predicted.

JACOBS: Right.

BOULDEN: You've got slow TV.

Do you think we're getting to a critical mass now where people will actually watch they've on a mobile device and take it with them?

JACOBS: The people who use mobile TV love it. We see people using it more per day than they actually talk on their phone per day. But it's really getting the message out to people. And then it's also other functionality. So we can do video on it with they've. We're also going to be caching content. So you might be caching episodes that you'd be interested in. Or we can send down data, as well.

We're showing some demonstrations here of even downloading things like magazines onto a reader over this network, because the amount of data that's used to send a magazine, at the cost of that, sending it over the cellular network, you might as well mail it in the mail.

BOULDEN: Well, we're all -- everyone is talking about the shortage of the networks and the -- the networks are getting full and it's becoming harder and harder to put all this stuff down into people -- is that an actual fear?

And what -- what -- what can you do to solve that?

JACOBS: Yes. So you're really seeing tremendous growth in data traffic on the networks. AT&T was talking about 5,000 percent growth in the last three years.

BOULDEN: Wow!

JACOBS: So it's really tremendous.

BOULDEN: Yes.

JACOBS: Now, there's a lot of things we can do. We can offload some of the traffic onto other networks like wi-fi or onto a broadcast network. Obviously, the government has been trying to expand the amount of wireless spectrum that's available and there's always a fight, because somebody else is using it now and they don't want to give it up.

BOULDEN: Sure.

JACOBS: But that -- you know, that goes on, too. And then, from a technology side, we're continuing to introduce new technologies, although that rate is slowing now. So it's a little worrisome from a technology standpoint...

BOULDEN: Yes.

JACOBS: Now, we do have other ways of doing things, which is to build the network out much more densely, meaning that you as an end users may go to the store, buy a component of the cellular network and install it in your house yourself. And then you'll get high data rates that way.

So there's a lot of things that are going on.

(END VIDEO TAPE)

FOSTER: That was the head of Qualcomm speaking to Jim in Barcelona.

Let's check on the U.S. markets right now. The Dow Jones Industrial Average up .2 percent. There was some welcome news on those better than expected housing figures. Also, during the last hour we have had the minutes from the Federal Reserve's last meeting. Just to tell you what they said in highlights terms, the U.S. Government posted a $42.6 billion deficit in January. The Treasury marking -- says it marks the 60th month in a row the U.S. Government operations have been in the red.

And driving the fiscal 2010 deficit is the fact that tax revenues actually have fallen faster than government spending.

We'll get a check on the rest of the European markets and the euro when we come back. But do stay with CNN.

(COMMERCIAL BREAK)

FOSTER: OK, there are developments on a story of the American missionaries jailed on kidnapping allegations in Haiti.

John Vause is in Port-au-Prince.

He joins us now on the phone for us now -- John, what have you got?

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, hi, Max.

We spoke to the judge in this case, Bernard Saint-Vil, a short time ago. He did say to us quite emphatically that some of the American missionaries would go free today. But, they still need to follow this legal process, which means that the attorney general, who was here, and just walked into the judge's office a short time ago and, is, in fact, now leaving, that attorney general needs to hand the judge this brief, which is said to be his recommendation on whether or not the 10 Americans should be allowed to receive bail. So we're just waiting for that process to start.

It's a little unclear now whether it has. We keep being told here that it actually has not started yet, that the judge has yet to receive the brief and until he does, no decision can be made on whether or not bail will be granted next.

FOSTER: All right. Just take us through the actual charges that they're facing, which may suggest why some of them are being released and others not.

VAUSE: Well, what they're looking at here is some of the group are saying that they basically had no idea that Laura Silsby, who is the head of the group, came over here to try and collect orphans and take them out of the country through this orphanage in -- in the Dominican Republic. So -- and there's been actual tension within them, some saying that they were just here to work as construction, to help rebuild the country, they knew nothing of this plan to do with orphans.

And some within the group have actually hired their own attorneys to represent them, which is why there is this theory now that Laura Silsby and, if fact, her deputy, if you like, Charisa Coulter, they will be the ones who may -- if anybody stays behind, they may be staying behind in jail. The rest may be set free on bail. But it will still be bail, which would allow them to leave the country.

But all of this, at this point, is still just speculation about what may or may not happen -- Max.

FOSTER: OK. And briefly, just explain how Haitians are taking this news. Obviously, communications are pretty bad. They may not be getting the full story.

But is this something they really care about?

VAUSE: Well, it -- it's difficult to know what Haitians care about, because right now, they're just kind of struggling to survive. You know, there's a million people who don't have a house to live in and people are just struggling day to day to have food.

But what I can tell you is that the government here certainly does care about this case and they're very determined to show that this is a sovereign, independent country and, in fact, President Preval turned up at the jail where the 10 Americans are being held. And he was emphatic that this country has an independent judiciary, that the legal system will, in fact, run its course without any interference from the Haitian government and, I guess, more importantly, from the U.S. Government.

FOSTER: John Vause in Port-au-Prince.

Thank you so much for joining us.

We'll keep you updated on this story as developments come into John and to us.

Right now, though, "AMANPOUR" starts.

END