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Quest Means Business
Toyota Execs Testify on Capitol Hill; More Worker Strikes in Europe
Aired February 23, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST, QUEST MEANS BUSINESS: Hello to you.
The president of Toyota, tonight, admits life in the fast lane lead to dangerous mistakes. Akio Toyoda, president of the company, and grandson of the founder is set to appear before U.S. lawmakers on Wednesday. He'll tell them the pace at which Toyota has expanded may have been too quick and the dash for growth resulted in safety issues.
Hearings into Toyota's outbreak of technical faults began today. On Capitol Hill, Brianna Keilar has been listening in. She joins me now.
Hi, Brianna.
BRIANNA KEILAR, CNN U.S. CONGRESSSIONAL CORRESPONDENT: Hi there, Max.
Right now we are awaiting the head of Toyota U.S., James Lentz, he is about to be seated as the second panel of witnesses before this house sub- committee, and he is going to testify. Certainly he is going to be on the hot seat. They are going to be asking him questions about what Toyota knew, when Toyota knew it, and exactly how big these problems could be with Toyota vehicles.
But in the meantime, I just want to show you a little bit of the scene that is playing out here. These are many members of the Japanese media. They are actually preparing to go in and maybe shoot some of the pictures of Lentz being seated. But also, it is really interesting because we've been watching as well, employees of Toyota, American employees of Toyota, who have been talking to journalists, and almost kind of lobbying them and saying, hey, American jobs are at stake, let's not jump to conclusions.
We saw some really emotional testimony from a woman named Rhonda Smith. She is just a regular American woman from Tennessee. She was driving her Lexus, one of the cars that has been recalled under this Toyota recall, when she experienced that sudden acceleration. She said she was scared for her life. She was sure she was going to die and because of that she actually called her husband on her cell phone headset. Here's what she said.
(BEGIN VIDEO CLIP)
RHONDA SMITH, TOYOTA CRASH VICTIM: I knew he couldn't help me but I wanted to hear his voice one more time.
(SOBS)
After six miles, God intervened, as the car came very slowly to a stop. I pulled it to the left median. With the car stopped and both feet still on the brake, the motor still revved up and down at 35 miles an hour. It would not shut off. Finally at 33 miles per hour I was able to turn the engine off.
We have never wavered from our belief that our problem is electronic, not wandering floor mats.
(END VIDEO CLIP)
KEILAR: And Rhonda Smith's suspicion there that the this doesn't have anything to do with the floor mat and it has to do with Toyota's actual computers in the car, is the suspicion that I can tell you is shared by many of the American lawmakers in the doors behind me. They are concerned that it is not the accelerator. That it is more than the floor mats. And certainly that is a question that they are going to be asking James Lentz, the head of Toyota U.S., when he is seated. And I have to tell you we have gotten a hold of some of his testimony. He is going to say that he is confident it has nothing to do with the electronic throttle control systems of these cars. But I can tell you these lawmakers are doubtful, Max.
FOSTER: We wait to find out. Brianna, in Washington. Thank you so much for that.
Well, let's bring in Maggie Lake now, who has been covering this for us from her perspective in New York.
Because, Maggie, you have been looking over the documents which basically tell us what to expect from the president, the top man, tomorrow.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: That's right, Max. The draft of all of the statements have been released. And we already had a little bit of a sneak peak, because these president of Toyota, himself, wrote an op-ed for "The Wall Street Journal". And he's going to take a very personal tone in the op-ed, and as well as in his draft statement. He says that all Toyota vehicles bear my name, when cars are damaged, it is as though I am too (sic)."
It is a sentiment he's going to repeat tomorrow in front of congressmen. He is also going to be honest and admit that the pace at which they have grown may have been too quick, contributed to these problems and then set a broad landscape of what Toyota is doing to fix the problem, setting new standards in transparency and response to safety problems.
He's got his work cut out for him. He is going to have to repair Toyota's reputation. It is going to be a tough job. Very interesting, Max, Brianna touched on this lightly. Also in the statement, and it has been running through their advertisements on television as well, is the repeated idea that 200,000 team members-dealers, employees-that work in the U.S., that phrase comes up several times in Toyota's statement, reminding everyone that this is not some international company headquartered far away. That these are workers here in the U.S., that they are ingrained and entwined in the communities and the constituencies of the lawmakers that are going to be facing him tomorrow, it is a very interesting current running under all of this, Max.
FOSTER: We got a real sense, though, from Brianna in Washington, how this is very much seen as a Japanese company executive, though. With that huge Japanese press bank, following all the testimony. Is it very unusual to have a big sort of foreign exec appearing in Washington like this?
LAKE: It is very unusual. Remember, they are not bound by law, by those subpoenas to come and testify in front of Congress. In fact, most avoid it. These events are full of political theater, of grandstanding and frankly shame and blame. That is what the game is about. And if you don't play it well, it can do more harm than good. But clearly, in the court of public opinion, Toyota felt it was necessary to come. It is going to be tough. There are language and cultural differences here. He is expected to make a prepared statement. It is expected that some of the other executives will answer the really specific questions. But it is going to matter how he comes across.
And you know, Max, we saw how the U.S. automakers CEOs were treated when they were in front of Congress over the period of the last two years. And there is a little bit of a precedent to this. About 10 years ago, "The Washington Post" reminding us in the case of Bridgestone/Firestone, a Japanese executive came over and it was considered 13 hours of grueling testimony and it was a PR disaster. So this is so important for Toyota tomorrow. I'm sure everyone's nerves are going to be on edge. A very important appearance for Akio Toyoda.
FOSTER: And before you go, Maggie, just your thoughts on how honest, really, the president of Toyota is now being that his expansion was so rapid, the company may have put safety at risk. That is an extraordinary thing to say, isn't it? Does it make his position untenable, do you think?
LAKE: Yes, it is an extraordinary admission to make, because it is something that a lot of analysts were pointing out. But remember the thing that they-they are being honest about that but they are sticking very much to the script that these are sort of technical problems with the floor mat. The real issue is going to be forthcoming honesty about when they knew about the problem and what exactly the nature of the problems are. That is complicated not only in front of Congress, but there are legal implications, there are lawsuits and court cases that are also resting on this. So they are likely to be honest and forthcoming in some parts. And it will be very interesting to see how they walk the line when it comes to some of these problems.
FOSTER: OK, Maggie, thank you so much. And we are waiting to hear from the top U.S. executive from Toyota in the coming hour. We'll bring that to you, as soon as we have it.
Now, meanwhile, in economic news consumer confidence in the United States has fallen sharply. Stephanie Elam has that story, also, in New York.
Hi, Steph.
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Hi, Max. Yes, we are seeing a sell off here in the U.S. on the heels of a very disappointing report on February consumer confidence. Consumer confidence fell more than 18 percent in February, in January, and that was far worse than what analysts were expecting. In a separate index, it is known as the "present situation" index. It gauges current conditions exclusively. Well, it fell to a 27-year low.
What is the culprit for all of this consumer gloom? You can sum it up in one word, "jobs." Despite the fact that the government reported the job market got better in January, consumers are feeling much worse about their jobs prospects. In fact, 47 percent of those surveyed by the Conference Board said jobs are hard to get. That is up from January.
And the number of people who think jobs are plentiful fell from 4.4 percent in January, to just 3.6 percent in February. This report also showed people are worried about their earnings. More than 17 percent expect their incomes to fall over the next six months, while less than 10 percent expect an increase.
I realize that was a lot of numbers I just threw at you, but the bottom line here is that consumers are still feeling anxious about earnings and jobs. That is leading them to hold on to their cash, instead of spending it. And as we always talk about, Max, consumer spending is two- thirds of our economic activity, here in the U.S.
FOSTER: But what you just said there seems to conflict with what the U.S. retailers are saying in their results, doesn't it? What's going on?
ELAM: Yes, somebody is spending somewhere, Max. That is true. There is a disconnect. Retailers are upbeat about their outlook after better than expected fourth quarter results. They are looking at numbers from the last three months of 2009 and see that consumers spent more and therefore they are predicting a comeback in 2010.
Specifically, today, we heard from Home Depot, which posted its first quarterly sales increase in four years. Home Depot says people are starting to spend money on home renovation projects again. Rival, Lowe's said the same thing on Monday. So, they are not alone. And department store operators, Sears and Macy's also raised their 2010 outlooks. Sears got some help from its discount chain, K-Mart. Rival discount chain Target beat Wall Street expectations with its profits as well.
So, despite all the good news from retailers, Wall Street is placing more weight on what the consumer is saying. And they may be reluctant to spend until jobs and earnings recover.
That also may mean we may see a pullback in these outlooks that we are getting from some of these companies as we get later in the year, Max.
FOSTER: OK, Stephanie, in New York. Thank you so much. We go across to the newsroom now. We have some breaking news from Fionnuala, who is sitting at the there.
(NEWS BREAK)
FOSTER: Now, on the roads and in the skies, two strikes are having an impact on travel in France. We'll get you all the information you need when we go live to Paris in just a minute.
(COMMERCIAL BREAK)
FOSTER: Now, an epidemic of protests action is sweeping across Europe. In a moment we'll hear from Al Goodman, who is in Madrid. But we start in France where to major disputes are affecting consumers. A strike by oil refinery workers and a stoppage in air traffic control, all in one country, all in the same week. CNN Senior International Correspondent Jim Bittermann joins us now from Paris with the latest.
And you have some new developments, Jim?
JIM BITTERMANN, CNN SR. INT'L. CORRESPONDENT: Exactly, Max. In fact, just in the last few minutes the head of the largest union in the refinery strike that has been going on here has said that he is going to call for a suspension of that strike. After nine hours of talking to the company, Total, today, he said there have been significant advances.
Basically, he's gotten guarantees from Total that they are not going to close, for the next five years, five of the six refineries in France. The sixth one, which was the subject of the strike and began the strike in the first place, up in Dunkirk, may be closed. It is still undecided how that is all going to work itself out.
However, this still has to go to the union membership and the union leaders said from the very beginning that they weren't going to take any action to end the strike until they talked with the union members. So that will take place, overnight tonight, and in the morning tomorrow to see if that strike will be ended. But there were some shortages beginning to develop, especially at Total's gas stations across France, Max.
FOSTER: And in terms of the strike affecting air traffic, where are we with that? How much problem is that causing?
BITTERMANN: Well, it is not causing as big a problem as you imagine. In fact, the -at Orly airport today 50 percent of the flights had to be canceled. Those are short-haul flights and a lot of those flights can be rescheduled. Because some of the flights, for instance, the Paris Nice run, the Paris Nice run is practically a commuter flight, so half were gone, but they were able to put people on other planes. So, they were able to at least east the problem a little bit.
Air France says that tomorrow 100 percent of their long-haul flights will be up in the air tomorrow. So they will be able to guarantee the long-haul flights It will still be the same problems, though, in the short and the medium haul. Had about 50 percent of the flights at Orly and about 25 percent canceled at Charles De Gaulle, Max.
FOSTER: Jim, in Paris. Thank you so much.
Now, in Spain, they are having some headaches' of their own. Trade unions there launched protests this Tuesday over plans to raise the retirement age. The government says the moved is needed, though, to prevent the nation's pension fund from going bust. Our Al Goodman is in Madrid with the latest.
What is the picture, there, Al?
AL GOODMAN, CNN MADRID BUREAU CHIEF: Hi, Max.
There are thousands of people here in the center of Madrid, at the end of this march, which is really the first major union demonstration against the socialist government in Spain, since they took power six years ago. The issue, raising the retirement age from 65 to 67. I can tell you I just saw my son's primary school teacher in the crowd. He's a union member by his buttons. And he clearly doesn't want to be working until he is 67.
Now, we caught up with another man, from another union, just the other day. He is at this march as well. Here is story.
(BEGIN VIDEOTAPE)
GOODMAN (voice over): If you car gets towed from the streets of Madrid for improper parking it could well end up here; 60 cars a day impounded to this city owned garage. Manuel Del Monte, the foreman, has worked this job for 28 years. He's 57 and now and worries he won't be able to retire soon, as planned, because the Spanish government wants to raise the retirement age to 67.
MANUEL DEL MONTE, FOREMAN, CITY IMPOUNDMENT GARAGE (through translator): Each year it gets harder to carry out your job. You feel it. And I think 67, it is too old to retire.
GOODMAN: Spaniards are living longer and more are collecting government pensions for more time than ever before. The prime minister and his team worry the pension fund might crack, as fewer workers have to support an increasing number of pensioners.
CELESTINO CORBACHO, LABOR MINISTER (through translator): We have a responsibility that when someone retires in the year 2025, they can do so with the same peace of mind as someone in 2010.
GOODMAN: Right now, Del Monte finds peace of mind at home, before working the afternoon shift at the garage. A union members he says he'll join street protests on Tuesday against the proposed retirement age increase.
DEL MONTE (through translator): Workers have fought hard to achieve economic benefits and we are not about to loose them to some unrealistic proposals.
GOODMAN: But it is not just the unions, a half million Spaniards have joined FaceBook pages which sprung up against the retirement plan. Back at the garage this doctor agreed, after getting his car out of impoundment.
ALVARO VELA, NEUROLOGIST: I think it is enough to work until 65 years old. So, I-making the longer, the working time is I think it is too much.
GOODMAN (on camera): You have to pay the city $200 to get your car off this lot and most people do so almost immediately. But Spaniards won't have it so easy, many economists say, when it comes to collecting government pensions in the future.
(Voice over): Spaniards rely too much on the government, this economist says, and don't save enough on their own.
GAYLE ALLARD, IE BUSINESS SCHOOL: In most countries people have gotten into the habit of either saving through their company, or saving themselves, to have a pension in the future. And Spaniards are not there yet.
GOODMAN: Germany's retirement age already is 67 and Holland is considering the same. Now, Spain debates whether working a few more years to pay in, might save the pension system.
(END VIDEOTAPE)
GOODMAN: Now, Max, even before this march began the government was indicating it was willing to talk to the unions about trying to find a solution to the looming pension crisis. They clearly, here in Spain, at the government level want to avoid the kinds of strikes we are seeing now across Europe, Max.
FOSTER: OK, Al, thank you so much for joining us from Madrid, with that.
Now, I understand that we can cross to Washington, am I correct? Yes, we are going to go to the Toyota hearings where the head of the U.S. part of Toyota is speaking. Let's hear what he has to say.
(BEGIN LIVE FEED, IN PROGRESS)
JAMES LENTZ, CEO, TOYOTA USA: -into the future, even as we pave the way for the next generation of electric vehicles and hybrids that our society needs.
In recent months we have not lived up to our high standards our customers and the public have come to expect from Toyota. Put simply, it has taken us too long to come to grips with a rare but serious set of safety issues, despite all of our good faith efforts.
The problem has also been compounded by our poor communications within our company, and with regulators and consumers. While all auto companies have recalls and all major auto companies have experienced complaints about unintended acceleration, Toyota's recalls have caused concern among our customers.
I would like to assure the committee, and the American people, that nothing is more important to Toyota than the safety and reliability of the vehicles that our customers drive. We're committed to not only fixing the vehicles on the road and ensuring that they are safe, but making all of our new vehicles better, even more reliable through strict quality controls, enhanced communication and redoubling our focus on putting the customer first.
Our 1,500 dealers are making tremendous efforts to complete our recalls as quickly as conveniently as possible for our customers. Some dealers are staying open 24 hours a day, seven days a week, and they are repairing vehicles at the rate of about 50,000 a day. Thus far we have repaired nearly 800,000 vehicles.
We rigorously tested our solutions and we are confident that these repairs, to Toyota vehicles, will make them among the safest on the road today. Our engineers have identified to specific mechanical causes of unintended acceleration covered by recalls. We currently address these through our open recalls. One involves floor mats that when loose or improperly fitted can entrap the accelerator pedal. The other concern is the accelerator pedals that can, over time, grow sticky with wear and humidity. The solutions that we have developed are both effective and durable.
We are confident that no problems exist in our electronic throttle systems in our vehicles. We have designed our electronic throttle system with multiple fail-safe mechanisms that shut off or reduce engine power in the event of a system failure. We have done extensive testing on the system and we have never found a malfunction that has caused unintended acceleration. Additionally in December, we asked Exponents, a world-class engineering and scientific consulting firm, to conduct a comprehensive, independent analysis of our electronic throttle system, with an unlimited budget. Their interim report confirms that it works as it is designed. Toyota will make the results of this comprehensive evaluation available to the public and to Congress as soon as it is completed.
So, why did it take so long to get to this point? With respect to pedal entrapment, Toyota conducted investigations of consumer complaints which focused too narrowly on technical issues without taking full account on the way consumers used our vehicles.
In the case of sticking accelerator pedals, we failed to promptly analyze and respond to information emerging from Europe and in the United States. We acknowledge these mistakes. We apologize for them and we have learned from them. We now understand that we must think differently when investigating complaints and communicate faster, better, and more effectively with our customers and with our regulators.
Our recent voluntary recalls of certain 2010 Prius and Lexus hybrids, and certain 2010 Tacoma trucks illustrate this approach. We are also going further. Our President Akio Toyoda has announced a top to bottom review of our operations, that he will personally lead with the support of a new chief quality officer from North America, and our other principle regions.
We will ask independent outside experts to evaluate the findings to make sure that we meet or exceed industry standards. We are expanding our network of technical offices in the U.S. so we can gather information faster and respond more aggressively to incident reports. And we will install advance brake override systems in all of our new models, making us one of the first full-line manufacturers to offer this customer confidence feature as standard equipment.
Additionally, we are announcing that we will install this system on an expanded range of vehicles, including Tacoma, Venza and Sequoia models, that are capable of accepting this new software. We have previously announced this system would be installed in Camry, Avalon, Lexus ES and IS models. These actions underscore that Toyota is going above and beyond what is necessary in terms of vehicle modifications and repairs to ensure that our customers can be completely confident in the safety and reliability of their cars and trucks.
Chairman Waxman, Sub-Committee Chairman Stupak, and ranking members, as well as members of the committee, these are only some of the steps that we are taking to earn back the confidence of Congress and the American people.
Our 200,000 team members, dealership employees and suppliers in the U.S. are the backbone of that effort and I'm confident that we will succeed in restoring customer trust in our quality, safety, and reliability of our vehicles. Thank you very much. I'm ready for your questions.
UNIDENTIFIED MALE: Thank you, Mr. Lentz.
Chairman Waxman for questions, please.
REP. HENRY WAXMAN, (D) CHAIRMAN, ENERGY & COMMERCE CMTE: Thank you, Mr. Chairman.
Mr. Lentz, thank you for your testimony, your cooperation with this committee's investigation.
These past few months have not been a happy time for your company or for your customers. (AUDIO GAP)
People have been very anxious about what appears to be a rare situation, but it is a -
(END LIVE FEED, IN PROGRESS)
FOSTER: You are listening there to testimony from the head of Toyota U.S. on Capitol Hill. Highlights of his testimony are that he reiterated the cause of the safety problems on those Toyota models. They were pedals growing sticky over time and floor mats chapping those accelerator pedals. There were no problems, though, with the electronic throttle systems. And they are putting all of their problems right.
There will be a top to bottom review of Toyota operations, overseen by the president of the company. There will be a new chief quality officer for North America as well, and a new expanded network of technical offices across the U.S. They insist they are able to put the safest cars back onto the roads of America.
We'll have more on that as it comes through to us.
Now, the world is pulling out of recession but not all economies are emerging at the same pace. China shrugged off the downturn sooner than most, now Beijing is already working to prevent overheating. We'll look at Asia's future as an economic superpower after the break.
(COMMERCIAL BREAK)
FOSTER: Welcome back.
I'm Max Foster in London and this is QUEST MEANS BUSINESS on CNN.
Now, the stock markets in Asia pulled in two directions on Tuesday. Investors in Tokyo were in a cautious move before the Federal Reserve chairman, Ben Bernanke, gave testimony to the U.S. Congress. That comes tomorrow.
The Nikkei 225 ended down around .5 percent. It's now down by a couple of percent compared to where it started the year. But in Hong Kong, strong interest in the property sector sent the Hang Seng up just over 1 percent, to its highest close in nearly three weeks. Singapore's Straits Times Index also had a winning session, adding nearly 1 percent.
Now, Asia's economies, led by the powerhouse that is China, have been leaving their European counterparts in the dust. But the growth figures have been stronger than expected, as Asia's manufacturers emerge from the global recession.
I'm joined now by Fred Neumann.
He is senior Asian economist at HSBC.
Thank you for joining us here in London on a visit.
First of all, we've been talking about Toyota today.
You've seen that testimony on Capitol Hill. Well, it's an interesting story, isn't it?
But I'm just wondering, is there something more broadly we can learn from all of this for the Japanese economy, for the Asian economy?
FRED NEUMANN, SENIOR ASIAN ECONOMIST, HSBC: Well, the car sector has really been one of the bright spots for Japan for many years. And with Toyota in particular now having challenges in the U.S., I think generally that does not bode well for the recovery in Japan.
And you could actually draw wider conclusions, and that is that Japan does lag the Asian neighbors. We see other competitors, such as the Korean automakers, now pull ahead of the Japanese, for example.
So it does hold a -- a lesson for the wider prospects for the Japanese economy relative to the Asian competitors.
FOSTER: Generally, Asia is doing well and we keep hearing from the United States and European countries that they're apprehensive about 2010.
Are you seeing two different economies emerging around the globe right now?
NEUMANN: It is really becoming a two speed global economy. Just coming from Asia, I'm struck at how pessimistic the mood is here in Europe, and certainly the U.S., as well. If you look at the economic data coming out of Asia, we see continued acceleration of growth. Consumer demand is exceedingly strong. And consumer confidence is very strong, as well. Today in the U.S., we had another pullback in consumer confidence. So that's another interesting contrast. Whereas the Asian shopper is opening his wallet, I think in the U.S. and Europe, it still remains to be seen whether we have a lasting recovery in household consumption.
FOSTER: And one of the big issues, of course, in Western markets is the fact that so much debt has been built up as governments try to get through this financial crisis. And we've got lots of leading economists suggesting that this could potentially be a time bomb, if these countries can't keep up with these debts, then there's worse to come.
Do you agree?
NEUMANN: In the West, yes. Certainly, it does appear that certain economies are struggling with a debt load and potentially the issue could get larger. But in Asia, really, it's striking that we have virtually no sovereign debt issues in the major economies. And whereas the -- the West is trying to deleveraging, Asia is really entering a re-leveraging cycle. We had very little by way of debt buildup in the last few years. And that's now benefiting Asia and will probably put it on a lasting recovery. And the low interest rates helped to put on debt, but it's such a low level that it's really just benefiting growth and that we have no concerns about the sovereign sustainability curve.
FOSTER: Long-term, people do look to Asia to see the big sort of massive economic superpowers really emerging over time.
Do you think what we're going through right now, this global recession, is actually speeding up that process, because they're catching up faster to the Western economies than they would have done without this, aren't they?
NEUMANN: I think there's something to that. In particular, last week, as Asian policymakers needed to start to focus on the domestic economies, away from exports. Many Asian officials have realized that exports are no longer really a path to sustained productivity improvements and economic development. It's really the Asian consumer that is carrying the day and governments are actively trying to encourage that process.
So Asia is starting to look inward. And I think that's accelerating the -- the process of Asian -- Asia becoming more mature, and, therefore, a two speed global economy.
FOSTER: Are you expecting multinationals who have to sort of make money this year, then, to ditch a lot of their operations in the Western world and just head toward Asia en masse, because that's where the opportunities are?
NEUMANN: And that's already been in process. If you look, for example, foreign direct investment in last year from the West, it has held up quite well regardless of the crisis, because multinationals are realizing they need to tap the Asian consumer.
The trick, though, is to learn how to market to Asian consumers, that not everybody has figured that out yet. It is a different realm, it is a different culture and so you have to learn the tricks and probably be on the ground for quite some time until you learn how to market your products properly.
FOSTER: Fascinating stuff.
Fred Neumann, thank you very much for joining us from HSBC.
And this time on Monday, Lufthansa pilots said they were suspending their strike to get back around the negotiating table. But it's going to take a while for the airline to straighten up and fly right.
We'll have the latest on the uncertain travel situation in Europe ahead.
(COMMERCIAL BREAK)
FOSTER: Now, Greece is bracing itself for a general strike due to begin in just a few hours time. Services across the country are expected to come to a standstill. Walkouts are planned in several sectors in protest of planned spending cuts. E.U. officials are in the country right now to check that government belt-tightening measures are up to scratch.
Our Jim Boulden joins me now from Athens -- Jim, how bad is it looking?
JIM BOULDEN, CNN CORRESPONDENT: Well, Max, it hasn't started yet and things are pretty quiet at the moment. But this is a very interesting time for Greece. Tomorrow is supposed to be the big one, the big strike.
Let me show you in this square behind us here in Central Athens, where this is expected to take place. By lunchtime tomorrow, this is supposed to be packed with thousands of workers. The point is, it's not just public sector workers, those that have already been told they're going to have pay freezes or that their pension system is going to change. It's also private sector workers.
And that's an important point to note, because many private sector workers now feel that any more cuts in -- in the budget that is mandated by the European Union onto Greece will fall onto them. And many say that they already have it very hard here in Greece.
Now, earlier today, I spoke with Ilias Christakis.
He's a business consultant and he doesn't usually take to the streets. But he said he will be here all day tomorrow because he wants to make a point that he thinks the middle class in Greece is being unfairly targeted with these budget rises -- the budget cuts and the tax rises.
(BEGIN VIDEOTAPE)
ILIAS CHRISTAKIS, BUSINESS CONSULTANT: Just changing the numbers is - - or -- will not fix the problems. The problems are, as we say here in Greece, is a structural problem.
BOULDEN: Structural, yes.
CHRISTAKIS: Especially -- especially in the public sector. It is not that we have too many public servants. Maybe there are many. I don't know exactly. But they're not managed -- the human resources are not managed well. The funds are not managed well by all governments.
BOULDEN: Why do you personally feel nece -- it's necessary to march on Wednesday?
CHRISTAKIS: Because taking tough measures on people that they don't get so much -- so much money won't fix any problem. Already, the market is struggling to survive. I think they all say that they're struggling for oxygen. If you talk to any store owner -- little store owner, small -- small business...
BOULDEN: Right.
CHRISTAKIS: -- they're -- they're trying their best not to fire people.
BOULDEN: Greece needs to cut its budget deficit. It's very clear it needs to do that, no?
And the -- and the European Union says it must be done.
So what do you think should be done then, if it's not about raising the pension age, if it's not about cutting wages, if it's not about raising taxes?
CHRISTAKIS: Well, raising taxes toward where we already have it escalating up to 40 percent. Maybe, yes, they should tax people that have more wealthy.
BOULDEN: That's one of the issues, isn't it?
CHRISTAKIS: Yes.
BOULDEN: The rich seem to not pay as much taxes.
CHRISTAKIS: Yes, this is -- yes. This is -- this is a bad management. The -- the burden for all the restructuring of all fiscal measures are always to go to the -- what's the middle end...
BOULDEN: The middle classes.
CHRISTAKIS: The middle classes and...
BOULDEN: Yes.
CHRISTAKIS: -- the poor classes.
BOULDEN: But you think most people in Greece would actually contribute some and have some pain if they thought it was more widely spread?
CHRISTAKIS: Yes. If they're reassured that this time it will be better -- the proportion will be better managed.
BOULDEN: Right.
But now that the European Union will be watching very carefully and wanting updates, including one coming on March 16th, would that not help, the fact that Greece will have to actually answer to Brussels with very detailed specifics?
CHRISTAKIS: Maybe. But we have -- but I don't think that we would like the European Union playing the role of...
BOULDEN: Policeman?
CHRISTAKIS: -- of policeman or the dad...
BOULDEN: The father.
CHRISTAKIS: The father of (INAUDIBLE).
(END VIDEO TAPE)
BOULDEN: But, you know, Max, it's very important to point out that recent polls indicate that many people here actually support what the prime minister is doing, if not most people, who -- it could even be the majority. It's also important to point out many people here actually say they realize that they -- that the painful cuts are coming and that there should be some sharing of this burden.
And so it's very clear that a lot of people do not support the -- here in Greece -- do not support these strikes tomorrow and I wanted to make sure that people realize that.
FOSTER: OK, Jim.
Thank you so much for joining us with -- from Athens with that.
Well, as we explained then, this avalanche of protest action that's sweeping large parts of Europe whilst Asia and the U.S. remain -- or seem to remain relatively untouched.
I'm joined now by Chizu Makajima.
She's director of the Center for Financial Regulation at the Cass Business School here in London.
Thank you for joining us.
CHIZU MAKAJIMA, CASS BUSINESS SCHOOL: Thank you.
FOSTER: Am I wrong in thinking that there seem to be a lot of strikes in Europe right now, and more than other parts of the world?
MAKAJIMA: I think it was a question of trust. Any successful relationship has got -- has got to be a two way process based on trust. And if you can't trust each other, then, you know, problems start to arise. And it's a manifestation of the breakdown in, I think, you know, a relationship -- a successful relationship based on trust.
FOSTER: So workers in Europe don't trust their employers right now?
MAKAJIMA: I think they're very unnerved by the situation, by the fact that the governments -- various different governments are also running scared. And there have not been real decisive actions, perhaps, you know, that have been taken, which would actually calm the workers.
Also, I think there is a question of the relationship between management and the employees. In other words, there's this kind of confrontational relationship that is probably neither there in a lot of, as it were, Western countries.
FOSTER: But that's a cultural thing here in Europe, isn't it?
There's a history of industrial action and a history of public demonstration which sort of comes through at times like this. But the suggestion from some in America and Asia looking at this is that actually, European workers are outdated in what they expect from their employees.
Do you agree with that?
MAKAJIMA: That's, in some ways, they have been somewhat spoiled by virtue of the fact that their rights have been so well protected under the law. And -- and yet, at the same time, they actually are realizing that the duties that they owe, perhaps, to their employers.
FOSTER: Do you think they've got unrealistic expectations in the current economic environment of keeping certain benefits and certain hour limits on the -- the amount of hours they do in a -- in a week?
Do you think that's true?
MAKAJIMA: Yes. I think that there's an amount of sort of expectation of management that hasn't quite sort of succeeded, perhaps on the part of the management, as -- as well. And at the same time, I think there is definitely this kind of division between the management and the employees, whereas, perhaps, in -- in Asia, although one could not generalize too far. I think there's definitely the -- that identification of, you know, belonging to the same company and at the time of difficult, you actually, you know...
FOSTER: Rally round.
MAKAJIMA: Yes, indeed.
FOSTER: You feel more...
MAKAJIMA: And...
FOSTER: You feel more part of the company.
MAKAJIMA: I think the -- there is that feeling, I think, amongst -- generally speaking, amongst perhaps more -- more amongst the Asian companies. And also, the fact that, you know, as it were, employees can actually climb up the corporate ladder to be part of the management. So there's never been that real division between the management and the rest.
FOSTER: I wish we had that here in Europe. It's long been there.
MAKAJIMA: I think that that's definitely something historical, as well, perhaps.
FOSTER: OK, Chizu Makajima, thank you very much for joining us.
MAKAJIMA: Thanks.
FOSTER: From Cass Business School.
Now, today's blog, we are asking, does Europe have an outdated work ethic?
Well, right now, the results are roughly 50-50. And do join our vote and we'd love to hear your comments, as well, on the blog that goes with that.
Right now, we're going to cross to Jenny Harrison, who is at the Weather Center.
What have you got going on there -- Jenny?
JENNY HARRISON, CNN METEOROLOGIST: A lot of snow, Max, a bit of it, of course, heading into the U.K. But in particular, I want to show you the satellite for the last hour or so. Of course, it's been about the snow for the last few weeks. We've seen some rain across the southwest portion of Spain. You can see another area of low pressure pushing in here toward the Bay of Biscay and then elsewhere, a (INAUDIBLE).
Now, the temperatures, of course, playing a part. But that system coming in from the southwest continuing until Wednesday morning. This will bring the chance of some strong winds, large, damaging hail and they'll see more flooding rain into Portugal and Spain.
Temperature wise, look at these temperatures right now. We're at minus 10 in Moscow; minus 15 up in Oslo. You factor in the wind and, in most cases, the temperatures go that much lower. Look at this -- London at two degrees. Moscow at minus seven.
Now, we're still seeing the progress of this area of low pressure across the north, through Scandinavia in particular, some strong winds, very heavy amounts of snow.
But have a look at these images, because Moscow, you're now at a bit of an all time record -- 67 centimeters of snow fell over the weekend. And that now means that in Moscow, all the snow totaled up over the last few weeks among the deepest snow depth actually ever recorded.
Now, on the up side, it actually fell throughout a holiday weekend, so there were fewer cars out there.
Let me show you what's going to be happening next, because, of course, a snow like that does cause some travel disruptions. So there's more snow working its way gradually across more Central and Eastern Europe. Rain, of course, pushing into the southwest and quite a bit of snow really beginning to pile up along the line of the Alps. But also, you'll notice, up into Scotland. We're looking at possibly 25 centimeters or more to the highlands again.
When it comes to the delays at the major airports, well, not generally because -- caused because of the snow. We've got some strong winds picking up at Amsterdam, Dublin. A system pushing in from the west. And then at Copenhagen, we have got some long delays expected Wednesday, mostly because of the snow.
But you notice, a lot of the delays are going to be caused by the winds.
Temperatures much milder out toward the west. Double figures, 11 in Paris; 10 in London. It's a little cold in Berlin.
Now, in the U.S., we've got a lot of snow working its way through Texas at the moment; also up into the Northeast.
But guess what?
This system is going to push through and then the next system from Texas working its way all the way around and bringing a lot more heavy snow. So, again, more travel problems as we go through the week. You've heard it all before, but my goodness, winter continues.
As does this show. We'll be back in just a moment.
A short break now.
Stay with us.
(COMMERCIAL BREAK)
FOSTER: Two of the biggest brewers in Europe squeezed bigger profits out of 2009, even though drinkers actually downed less beer. Heineken made around $1.4 billion last year, underlying profit growth of 18 percent there. The volume of beer sold down about 5.4 percent. But prices were actually up, so revenue was actually up 2.7 percent, to nearly $20 billion. So some big numbers. The brands that they have are Heineken, obviously; but, also, Amstel, Foster's, New Castle Brown Ale.
Heineken the biggest brand in Europe and Amstel the third biggest. And it's a very big company here in Europe.
Now, both brewers are looking to market beyond Europe, though. Cash- strapped Europeans are drinking less beer, hoping to win more customers in emerging markets.
Now, earlier, I spoke to the CEO of Heineken, Jean-Francois van Boxmeer.
And I asked him about the results, first of all, and then about the emerging markets.
(BEGIN VIDEOTAPE)
JEAN-FRANCOIS VAN BOXMEER, CHAIRMAN AND CEO, HEINEKEN: We were quite pleased with the results we have been announcing. On -- on the volume side, we have been back 4.5 percent, which is largely due to the recession that is ongoing, but, on the one hand, on our net profits, we could organically improve them by 18 percent, which is -- which is a pretty good result. And on the one hand, in the last year, we have set a number of important strategic steps. Sealing our deal with Dr. Mallya for -- for United Breweries in India and on the second leg we did a -- a fantastic deal with -- with Femsa, opening us for us the markets in Mexico...
FOSTER: In Mexico.
VAN BOXMEER: -- and Brazil.
FOSTER: Why are competitors doing better in emerging markets, then?
VAN BOXMEER: Well, I think it's a little bit out of history. We were born in Europe. And at a time where globalization was not really the -- the world of the day, we were doing that already by doing two things. We - - we -- we bought breweries in -- in neighboring countries in Europe. That's how our position was built over the (INAUDIBLE) in -- in Europe. And, on the one hand, we exported the Heineken brand in 170 countries across the world, making it the leading premium beer in -- in the world. And you have to consider that we are twice the size of our immediate competitor.
So we always pursued a -- a dual strategy. And then the globalization came somewhere in the '90s and -- and we participated into that. And we went into Central and Eastern Europe when the Soviet empire collapsed, if I can say so. And we invested a lot in -- in Southeast Asia. We continue to invest in -- in Africa. And so we -- we absolutely also invested in the developing world.
FOSTER: But that's the direction of future expansion, isn't it, the emerging markets?
Because effectively, people are drinking more beer there, or the -- the quantity of beer they're drinking is increasing faster?
VAN BOXMEER: Look -- look at the bright side of -- of -- of the -- of the current (INAUDIBLE) and that is -- that is the fact that you have demographic growth and growth of spendable income in all these countries. And that is (INAUDIBLE)...
FOSTER: It's just because they're getting richer, is it?
VAN BOXMEER: It's just because they're getting richer and, in some countries, they've discovered beer. Take the example of India. People drink 1.2 liters of beer, which is -- which is very minute. But that's what the Chinese were consuming 35 years ago. So that is offering a growth potential for the coming next 20 years.
FOSTER: And yet in Europe and America, the recession has hit your business hard.
Why, in layman's terms, break this down for us so people not drinking as much -- because some people would suggest that perhaps they'd be drinking more beer in a recession to drown their sorrows.
VAN BOXMEER: No, I think that that is a common view, which is -- this -- this is a false view. I think consumer confidence is dented and so people go out less than before. They trade up...
FOSTER: Yes, but you've got a higher...
VAN BOXMEER: They trade up less frequently as they did before. And that has all to do with -- with confidence in computer -- consumer confidence. That is -- that is one factor which is due to the recession.
And the other thing to consider is that in the developed world, i.e. Certainly in Europe, you have a -- the graying of the population. So the demographics are not that strong. And so the name of the game is not so much to increase the size of the pie, but to increase the share of the pie that you operate.
FOSTER: Sustain the market and grow what you do have?
VAN BOXMEER: And grew -- grow your brands and -- and grow your market share. And that is exactly what we are doing in -- in Europe. And we are doing that quite successfully, because despite the volumes are under pressure for now, a number of years, we have been able to increase our profitability coming from these markets year after year.
(END VIDEO TAPE)
FOSTER: The head of Heineken speaking to me.
And Heineken does have a few major rivals here in Europe. Carlsberg is one of them. It made around $655 million over a similar period, up around 38 percent on the previous year. It makes Tuborg. It makes Carlsberg and Kronenbourg beers. Volume is down around 4 percent until you take account of acquisitions, which actually pushed them up 6 percent. Net revenue down 1 percent, to $10.8 billion. It would have been higher, but it was affected by exchange rates.
Now, you're watching QUEST MEANS BUSINESS.
We'll take one more look at where the markets are standing in just a moment.
We'll be back after the break.
(COMMERCIAL BREAK)
FOSTER: We had some pretty negative consumer confidence figures coming out of the United States today and that has an impact on the market. Let's see the latest figures for you, down .75 percent, as you can see, down 77 points, the Dow Jones Industrial Average there.
Here in Europe, the stock markets closed lower for the second day in a row, as well. The Frankfurt DAX dropped 1.5 percent, as bank stocks there went into reverse. London's FTSE closed down 2/3 of 1 percent. The France CAC fell 1.3 percent. And the Zurich SMI sank half of 1 percent.
So a grim day for the markets today.
That is QUEST MEANS BUSINESS.
I'm Max Foster in London.
"AMANPOUR" is next, after the news headlines.
END
