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Quest Means Business
; Ford Builds Cars For The Future, Making Record Profits; No Sign Of A Double Dip As British Growth Figures Beat Estimates; Buffett Bets on Combs; U.S. Stocks Look for Direction; Cuba's U-Turn; China's Latest Revolution; Lena Region Economies' Fast Growth; Interview with Qatar's Deputy Prime Minster
Aired October 26, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: In the driver's seat. Ford's CEO Alan Mulally talks to this program about the company's record profits.
No sign of a double dip as British growth figures beat estimates.
And who is next in line for the Buffet throne? Is the Oracle of Omaha revealing his chosen successor?
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
It was the one major U.S. carmaker not to go cup in hand to the U.S. government. And tonight Ford's perseverance seems to have paid off. Ford is announcing record profits. Third quarter net income came in at $1.7 billion. Storming ahead of analysts expectations. That is a massive 70 percent jump in the same quarter of last year. Of course, as the U.S., and its strong product line are behind the growth. The company's high-speed recovery will benefit the wider economy, at least to some degree. On Monday Ford announced it was creating up to 1,200 jobs in its home state of Michigan. That is to ramp up production of more fuel efficient cars, an important part of Ford's new strategy.
(BEGIN VIDEOTAPE)
FOSTER: Smaller, lighter vehicles, one key growth area for Ford, which has reached a younger, global demographic with models like Fiesta. But the company has seen sales rise across the board with cars like the Fusion winning praise its fuel efficiency. It is a long way from the depth of recession in 2008, when CEO Allan Mulally testified before Congress, saddled with billions of dollars of losses. Ford was the only one of Detroit's Big Three auto companies that did not seek, or receive a government bailout.
UNIDENTIFIED MALE: Looking good.
UNIDENTIFIED FEMALE: No, no, you're looking good.
UNIDENTIFIED MALE: Thanks a lot.
FOSTER: Mullaly has sold excess inventory and sold companies like Volvo and Aston Martin, the aim to focus on the iconic Ford brand. The company pioneered the first affordable car back in 1908 and since has produced many American classics like the Mustang.
Ford is now producing new models after borrowing money in 2006. The average price of its vehicles has risen. It's customers are prepared to pay more for a renewed brand.
(END VIDEOTAPE)
FOSTER: Mulally, then, very much the man in the driver's seat at Ford. He's been CEO of the company since 2006, before the financial crisis started. I asked him what part of Ford's performance he is most pleased with?
(BEGIN VIDEOTAPE)
ALAN MULALLY, CEO, FORD MOTOR COMPANY: Well, a couple of things, Max. One is, based on the strength of our product line and having a complete family of best-in-class vehicles now, that the consumer response, because we are now going to post our second consecutive year of increasing market share.
And also, another highlight is the fact that people really do value the products. And we have -- we are now contenting the vehicles with what people really do want. And so they are paying for the vehicles that are fitted the way that they want them.
And, maybe the next thing is, is paying back our -- our loans and improving our balance sheet. And as you saw after we contributed $3.6 billion for the VEBA, for the retiree health care, we will now have reduced $10.8 billion, Max, of our -- of our debt, which allows us to save over $800 million of annualized savings and interest.
And so I think that, and the fact that we were profitable around the world in the fourth quarter and gave guidance that we were going to improve the performance in 2011 are -- are some of the key highlights.
FOSTER: You're not investment grade just yet, though, are you? How -- how confident are you, you can get through this last bit of debt to get you to that point?
MULALLY: Well, I think it will absolutely go with us continuing to deliver profitable growth, because that's what it's allowed us to put us way ahead of the schedule we originally had for paying back our loans and improving the balance sheet.
So the most important thing that we keep doing, Max, is to profitably grow the company, generate free-cash flow and then pay back our loans and improve the balance sheet. And then it's -- it's even more of a plus, because, of course, our cost of capital will be less. And then we'll be fully competitive on the financial side.
FOSTER: You say you have a focus on growth, but how are you going to do that? In the past, acquisitions you've gone into have failed, haven't they -- Volvo, Aston Martin? You've had to deal with that, haven't you? So how are you going to grow in future? Is it just going to be organic?
MULALLY: Absolutely. And with the focus on the Ford brand, of course we're -- we're in a great position with the consumers in the United States, in South America; we're in a very good position in Europe and Russia, and we still have room to grow there. And, of course, we are in a really good position in the Asia-Pacific region in, for example, in India and in China.
And with our "One Ford" vehicles now, where with the Fiesta, the Focus, the Fusion and all of the utilities, and there being on global platforms, we can now serve, with scale, all of our consumers, especially in the high- growth areas like India and China. So that will allow us to profitably grow the company, staying laser focus on the Ford brand.
FOSTER: I'll take issue with one point. You're not in a necessarily good position in Europe, are you? It's the one area of the world where you're actually still making a loss, and yet there are Fords everywhere I look in Europe. So what's going wrong with Europe?
MULALLY: Well, the -- what we talked about today, Max, was specifically the third quarter results over the third quarter last year; and as you know, with the scrapage (ph) program coming to an end, the total volumes in Europe dropped by nearly 2 million vehicles.
We chose, also, to reduce our market share because we didn't want to discount the vehicles and ruin the value for the consumer and residual values. So we took a little bit of a hit in the near term. But we also provided guidance, Max, that we are going to be solidly profitable in Europe in the fourth quarter of this year, and solidly profitable for 2011.
We -- we took the tough action. We have sized our self correctly in Europe. We've got a great product line. So we took the right action for the third quarter and we're going to be growing for the fourth quarter and next year.
FOSTER: You also mentioned China, which obviously is key for any company in your industry. It is going to be the biggest car market in the world, in the long-term. Some people are suggesting that you're not in as good a position as other competitors. What are you doing to really make sure you're -- you've got a proper foothold in China?
MULALLY: Well, I think what people are referring to is that relative to the -- the industry leaders, we're in a little bit less position. But, again, the fact that we now have all of our global platforms and we have the vehicles that the Chinese really do want, and we have a full family of vehicles that are small, medium and large, cars, utilities and trucks, we're in a great position now to bring all of those vehicles to the Chinese consumers.
And so we're bringing on production. We've got great partners in China, so we're just going to accelerate our profitable growth by serving with the best cars and trucks in China, like we have around the world.
(END VIDEOTAPE)
FOSTER: Well, no surprise that Ford's shares are ticking higher in New York right now. They are up by around one-third of 1 percent, trading at more than $14 a share. That is a sevenfold increase since from February 2009, when they sank below $2.00, so those investors pretty happy.
Let's have a look on whether it had any impact on the wider market. Not necessarily. The Dow currently down 0.3 percent. More on that a little later in the program.
Well, with the results slight forwards, it is not secret that we are going to give it a green in our exclusive Q25 Index. This is our quarterly index to help you make sense of the earnings trends. I'll just plunk it on here, as you can see, I'll add it to the others we have had so far in this series. We are, of course, getting green balloons to companies that pass our strict earnings test. And we give red balloons to firms that fall short. We have made a lot tougher to get a green balloon, because this time around companies must have stronger revenue and profit growth than in quarters past.
And if you do take a look the green balloons just have it seven to nine lead, showing that corporate profits remain strong, actually, when last year we thought they'd be pretty miserable this time of year. We have two more balloons to hand out today in our Q25 and for that we bring in Maggie Lake.
Maggie, we have talked about Ford. And you watched that with interest today, but I also know that you got a very different story for us in Kimberly-Clark.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yes, that is right, Kimberly-Clark really getting hurt Max. They didn't manage to pass any of our criteria. And you know, this is a consumer products name, Kleenex, some of those. We know that some of those companies were really hurt during the recession during with the trade down.
But what is happening now, that is no longer the story. They're getting hit with the cost of raw materials, inflation. It is a story that we're hearing across the board in this earnings season. And Kimberly-Clark really feeling the pinch from that. That is going to spell trouble for them going forward as well. So they are a red.
FOSTER: Definitely a red. We can't even argue about that one. But there is a company to argue about today. Isn't there, Maggie? And we've had a discussion about this. We also talked about Dupont today, which you are positive about?
LAKE: Yes, is one of those mixed. So Dupont didn't pass on some respects. Profits were down. Quarter over quarter they had a little trouble. But they did see revenue growing. Positive about the future. And they were also expanding it and investing. The reason I think they get a red is let's zero in on the profits being down. They were definitely hurt by lower earnings in their pharmaceuticals area. They are having patents expiring.
But where they did really well and what offset that was growth in some of what they want to consider their growth areas. Where they are focusing on for the future, and that is electronics and safety. Those areas not only did well, they did really well. I think electronics was up something like 64 percent. Safety materials, things like Kevlar vests, they doubled. So that is really where the company is shifting. They are kind of trying to reinvent itself. So if the growth had come from one of their legacy, older areas, I'd say no, but the sense is it is where they are focusing on the future, I think we have to give them green, Max.
FOSTER: You say they are moving in the right direction, even though it is not sort of perfect right now?
LAKE: Yes.
FOSTER: Yeah?
LAKE: Yes, it is a big company. It takes time to shift. They have been working on it for a while and it seems like it is starting to pay dividends. I think we'll start to see them do a lot better in the next coming quarter.
FOSTER: OK, green is ahead. And if Apple were having results. I thought we'd be a green as well. But at the moment we are talking about Apple today, aren't we? Because there are these rumors which are based on an article, some are questioning the article, but nevertheless. The rumors have had an impact. But they have so much cash that they are going to take other companies over. But some interesting talk here, Maggie.
LAKE: Yes, Sony is the one that everyone is talking about, certainly had an impact on Sony shares. And you are right. It is because Apple is sitting on $51 billion in cash. They have a huge market cap. And Steve Jobs, himself, said on the earnings call that they were looking for acquisitions. Now is Sony going to be the right fit? A lot of people dismissing that. I mean, there are a lot of reasons why Apple probably wouldn't go there. Their TV and digital camera margins are thin. That would need massive restructuring which is something Apple is not known to do. And some of their cut-they have a movie studio, remember, too. And there is some talk about Apple's content partners would really balk at that.
So, I think people are starting to move away from the idea of Sony. But clearly this sort of acquisition talk around Apple is probably going to continue. There is probably not a tech name out there that is not going to come up in the rumor mill in the next few weeks. Only Steve Jobs knows for sure, at this point, Max.
FOSTER: With all that cash he's a lucky man, isn't he? In a very strong position.
LAKE: Yes, that's true.
FOSTER: Maggie, thank you very much indeed, for bringing us up to date with the Q25 and those rumors.
Now, after the break we turn our attention away from companies and focus on two European countries, Britain and Sweden, whose economies have proved far more resilient than many had first thought. A bit of a false (ph) story going on there?
(COMMERCIAL BREAK)
FOSTER: Now economists were expecting a sharp slow down, but the news from the U.K. today wasn't as bad as many had thought. In fact, it was an awful lot better. Britain's GDP grew 0.8 percent in the third quarter. Twice the expected pace. Still a slow down from the 1.2 percent seen in the second quarter. Standard & Poor's view of the U.K. is improving. It has raised its credit rating from negative to stable. Exactly what the government was hoping for.
Now, in Sweden the central bank has raised interest rates for a second straight month. It is upped the repo by a .25 of a percentage point, to 1 percent, to stabilize inflation. As the economy recovers there, a very strong story in Sweden.
Now Europe dominates the top 10 of the Legatum Institute's Prosperity Index. And that ranks countries based on criteria such as freedom, health, economy, and happiness. Norway and Denmark and Finland hold the top spots. Sweden is sixth, and the Switzerland and the Netherlands come in eighth, and ninth. Britain just missed out on a top 10 place on that Prosperity Index coming in at 13. But today's GDP figures left some economists pleasantly surprised.
As I was just saying, they show that the U.K. economy grew by 0.8 percent in the third quarter. Double what most economists were predicting. Earlier, I spoke to Colin Stanbridge. He's the chief executive of the London Chamber of Commerce. I put it to him whether the thought it was realistic for the private sector to pick up the slack as the government is expecting it to do?
(BEGIN VIDEOTAPE)
COLIN STANBRIDGE, CEO, LONDON CHAMBER OF COMMERCE: It is absolutely realistic. I think the private sector. Certainly our members, the London Chamber of Commerce, are up for filling that gap, filling that hole, and getting us out of the economic mess that we're in. I think the quid pro quo on behalf of the government is they have to make it easier for businesses to do business. Especially, the small businesses, because they are the people that are going to add the one or two extra jobs that is going to make a real difference, because of there are thousands of small businesses across Britain, across the capital.
So you have to make it easier for them to recruit people and, if necessary, fire people. That doesn't mean getting rid of workers' rights altogether. It means making it easier to run a business.
FOSTER: You're talking about flexibility?
STANBRIDGE: Absolutely. We're talking about quid pro quo. We're talking about-if you want us to grow, as businesses, well don't put a wall in our way. And a lot of people, a lot of our members, especially the smaller ones, feel that there is this huge wall that means if you give someone a permanent job, you know, the next step is going to be tribunal, and it is going to cause real problems for your business. We have to lower that wall, a bit. So they think, ah, I can see the top of that wall. I can get over it. I can give permanent jobs.
FOSTER: OK, we got some positive news then, haven't we, today? We have had these very strong GDP figures. The economic growth in the U.K. is much stronger than everyone had expected. I ask you (ph), are things fine?
STANBRIDGE: I don't think things are fine. I don't think that growth of naught .8 percent compared to-
FOSTER: That is a very strong rate.
STANBRIDGE: What did China have last week? 10 percent? And that was-
FOSTER: For the Western world it was a very strong rate.
STANBRIDGE: And that was slowing down. Right, and we don't expect the 10 percent. But it is obviously very positive news and we're very pleased that their isn't a sign of the double dip. But we have just released some figures today talking about business confidence, in London. And after a steady increase we've seen a relatively dramatic fall. Now whether that is pre-the comprehensive spending review, and people are worried about that. I don't know. But it is worrying that still the confidence levels aren't up to the stage where people want to get out there and expand their businesses.
In fact, well to borrow-lots of talk about the banks, and people, you know, they're not lending. Well, one of the problems is, people aren't borrowing. And that is about confidence. And that is where governments come in again. About making the environment something where small businesses especially want to borrow, want to expand.
(END VIDEOTAPE)
FOSTER: Sweden was No. 6 on the Prosperity Index. And in response to its rapidly growing economy the Swedish central bank today raised its key lending rate by a 0.25 point to 1 percent. For the government's perspective on the Swedish economy and where it goes from here I spoke to the Swedish Finance Minister Anders Borg. And I began by asking him what he expects from the Swedish economy.
(BEGIN VIDEOTAPE)
ANDERS BORG, SWEDISH FINANCE MINISTER: Well, we are expecting strong growth. Both we and -- and the Riksbank are looking for almost 5 percent growth. Basically driven by strong domestic demand due to both that we have a very high credibility for fiscal policy, but also quite a lot of structural reforms, so a strong domestic recovery in Sweden.
FOSTER: How have you managed to avoid all the problems that your neighboring European countries seem to be going through right now? They've got massive austerity plans and they're suffering pretty badly. How has Sweden managed to avoid all of that?
BORG: Well, we tried to be very cautious when we were in the good years. So we went into the crisis with a very large surplus. We've been both able to have a very expansionary fiscal policy and also to start to implement gradual fixed structural reform at the same time.
And we're actually expecting our body (ph) to be back, or very close to balance, already next year. So we can actually continue with expansionary policy rather than starting to do the cutbacks.
FOSTER: There will be a lot of envious government ministers around Europe, because, also, you've managed to retain a very large welfare budget, haven't you? Of course, Sweden is famous for strong welfare. But how have you managed to keep benefits high whilst, you know, not being entirely immune from the economic problems swirling the world?
BORG: Well, I mean we've tried to combine our welfare state with an increased market dynamism. And I think the combination -- a modern society with a welfare state that is also oriented toward strong work ethics and entrepreneurial countries (ph) is something that I think is a very, very strong concept.
(END VIDEO TAPE)
FOSTER: That was the Swedish finance minister. And after the break we do speak to the head of the central bank as well, for his perspective as an independent central bank. So, he's got an independent view.
Now, crisis-what crisis? Like Sweden, is boom time for the German economy. After the break we'll tell you why the German economic juggernaut is also back on track.
(COMMERCIAL BREAK)
FOSTER: Now the French senate today passed President Nicholas Sarkozy's controversial pension reform bill, which means all political hurdles have now been cleared. The bill, which raises the minimum retirement age to 62 from 60, now heads for a final vote at the national assembly, which is expected tomorrow. On Monday Finance Minister Christine Lagarde estimated that nearly two weeks of rolling strikes have cost the country between $280 and $560 million a day. But today she said it wasn't enough to change the country's growth forecast of 1.6 percent, a level that has held steady since August.
We'll continue to monitor the response to austerity programs across Europe, but for one of France's neighbor's the picture is very different. As Diana Magnay now reports, the economy in Germany is booming in spite of austerity measures put in place by the government in Berlin.
(BEGIN VIDEOTAPE)
DIANA MAGNAY, CNN CORRESPONDENT (voice over): Concerns that austerity would derail Germany's economy now appear slightly off track. Growth this year is forecast at well over 3 percent. And the government says unemployment could fall below the politically sensitive 3 million mark next month and stay there.
Crisis? What crisis? Germany is bouncing back from its worst recession since World War II.
LARS-HENDRIK ROELLER, PRESIDENT, ESMT: Germany has come around and provided stimulus packages, pretty sizable ones. And then, of course, trade has helped Germany that the pick up of world trade, which has sort of made Germany very competitive again and helps also create domestic demand by lowering unemployment.
MAGNAY: The pick up in world trade certainly help Fuss-EMV they make filters which get rid of electromagnetic interference between electrical components. Selling to companies with automated assembly lines, and increasingly to the solar panel industry.
Fiddly (ph) work, much of it hand crafted, most of the staff two years ago were working part time because demand had fallen away. Now all of that has changed.
CHRISTOPH KEDDIG, FUSS-EMV: We doubled our sales figures. And we increased our count of employees so we have, actually, 75 employees. One year ago we were 35 employees.
MAGNAY: The government-subsided part-time working scheme meant companies could hold on to skilled staff even through the bad times. Now that productivity is back up, unions are calling for better pay for German workers.
DORO ZINKE, GERMAN FEDERATION OF TRADE UNIONS: We have to have higher salaries, of course. And domestic, what is domestic spending on the one hand, is higher salaries on the other hand.
MAGNAY: Whether the unions get what they want will depend on the next round of wage bargaining. What worries German exporters more in the long term is the shortage of skilled workers. Mostly in the fields of engineering and IT.
ROELLER: Top international workers don't necessarily got to Germany. They go to other countries. That Germany needs to rethink its immigration policy allow for more diversity at home. And also of course, grow their domestic human capital.
MAGNAY: Measures the government has a bit more breathing room to mull over, now the economy is back on track. Diana Magnay, CNN, Berlin.
(END VIDEOTAPE)
FOSTER: Earlier this hour you heard from the Swedish finance minister. He told me that Swedish growth was on track. The Swedish central bank, the Riksbank, agrees. But it is playing down the extent of further tightening due to a weak recovery overseas.
We're joined now by the governor of the Swedish central bank, Stefan Ingves.
Thank you very much, indeed, for joining us, Governor.
You are the first central bank in the European Union to start tightening monetary policy. Do you see that as a brave move or is it just a reflection of what's going on in Sweden?
STEFAN INGVES, SWEDISH CENTRAL BANK GOVERNOR: No, that's, actually, a reflection of what's going on in the Swedish economy presently, because times are actually quite good -- quite good here.
FOSTER: But you are also a country dependent on an export market which is in real trouble. The European and U.S. export markets are your main export markets. So how much are you focusing on those countries and looking at what's going on there?
INGVES: Yes, but that -- that's part of it. But part of the -- the other part of the story is that our exports are up and exports are good. And that's because global growth is, in the next year, going to be between 4 and 4.5 percent. And we really, really benefit from that.
FOSTER: OK. And in terms of the domestic economy, what is driving the growth there, would you say? What does your analysis say? Because it seems extraordinary that you could have a domestic economy that bounces back so quickly.
INGVES: Consumer confidence is very high and part of the story is the fact that we expect the government to run a budget surplus next year. And it's also the fact that our banking sector is in pretty good shape compared to many other banking sectors in various parts of the world. And all this - - all this adds up to a very good sentiment.
FOSTER: So will tightening continue, do you think, as the economy continues to recover?
INGVES: Yes. As far as we can -- as far as we can see, this is not the last interest rate increase.
FOSTER: And if there is one thing you're watching abroad, what is it? Just concerns about the Euro Zone, for example, and the extreme -- the extremities of what's going on there, if you compare Greece and Germany, for example?
INGVES: Well, what really matters to us is what happens in Europe broadly and also what -- what is going on in the U.S. But it's also a fact that we aren't so dependent on what's going on in the southern parts of Europe. So it's more what's going on in Germany. And they have a good story to tell, as well.
FOSTER: OK, Stefan Ingves, thank you very much, indeed, for joining us on the line from Stockholm.
Now on the European markets across the board, stocks closed lower actually, that was after disappointing earnings from UBS, largely which is Switzerland's biggest bank. It saw a surprise pre-tax loss in its investment banking division. Also weighing on the market sentiment was a cautious outlook from the steel maker Oslo Metal. But all three markets closed off the days' lows, lifted by an increase in U.S. consumer confidence for October.
Now is a succession plan taking shape? Warren Buffet, the Midas of the markets, has hand picked a new golden boy, it seems, to oversee Berkshire Hathaway's investments. Is there more to the move than meets the eye?
(COMMERCIAL BREAK)
FOSTER: Welcome back.
I'm Max Foster.
You're watching QUEST MEANS BUSINESS and these are the headlines this hour.
We're getting a clearer picture now of the disaster unfolding in Indonesia. Officials now say at least 112 people are dead after a 7.7 magnitude quake triggered a tsunami off Sumatra. Witnesses report seeing a six meter wave strike the coast. More than 500 people are missing. Other large waves have hampered rescue efforts and made it difficult to asses the damage.
The tsunami is not Indonesia's only worry. Mt. Merapi has erupted at least three times today. Indonesian media reports that 50 people have been killed. Some of them were journalists staying in a guest house to get close to the volcano. Mt. Merapi near Jakarta lays in one of the world's most densely populated areas. Thousands of residents have fled.
Iran says it's taken a big step toward producing nuclear energy. Officials say the core of the Bushehr nuclear power plant is now being loaded with fuel and it could be operational by next year. The U.S. secretary of State says the United States does not object to the Bushehr plant, but still believes Iran is conducting a secret weapons program in other locations.
The lawyer of a close adviser to Saddam Hussein says the death sentence for Tariq Aziz is wrong, illegal and unexpected. Iraq's high tribunal court says the former foreign minister will hang. He was convicted of persecuting rival religious parties. And Aziz is also blamed for the deaths of 42 merchants. He surrendered shortly after the U.S.-led invasion of Iraq back in 2003.
Plucked right relative obscurity and, at the age of 39, hedge fund manager Todd Combs is picked to take the prize position in the world of finance, as Warren Buffet's successor.
Who is the new kid in the Berkshire Hathaway block?
Well, we're joined by CNNMoney's Poppy Harlow from CNN New York.
I mean on one level, it's a great job to have.
On another, would you really want to step into Warren Buffet's shoes - - Poppy?
POPPY HARLOW, ANCHOR, CNNMONEY.COM: Talk about a great deal of pressure here for a 39-year-old of any caliber. Obviously, he has proved himself, Todd Combs, time and time again, as an -- as an investor -- as a wise investor. But now, we're a step closer to finding out who will eventually or could eventually succeed Warren Buffet as the chairman of Berkshire Hathaway whenever he does decide to step down. I think that will be in many years from now. But, of course, the company has hired Todd Combs. This is a relatively unknown hedge fund manager. And what he will do at Berkshire Hathaway is he will manage a significant portion of their investment portfolio.
Now, to give you some background on him, according to "The Wall Street Journal," his hedge fund, which is called Castle Point Capital, had about $400 million in assets under management while Berkshire Hathaway's assets are roughly $100 billion. So a much, much larger portfolio here. But, of course, succession has been a big question at Berkshire Hathaway. Warren Buffet recently turned 80. He said his responsibilities will be split either when he dies, or, if he ever does retire.
They have three strong candidates, he says, for CEO, to run the 70 plus companies, Max, that make up Berkshire Hathaway.
But the question has been, for a number of years, who would run the investment portfolio?
Now we know.
But we sat down and talked with Warren Buffet a few weeks ago in Washington, D.C. and asked him what excites him when he wakes up. And he said it's all about going to work. So I don't think he's leaving his job any time soon.
Take a listen to what he told us.
(BEGIN VIDEO CLIP)
WARREN BUFFET, CEO & CIO, BERKSHIRE HATHAWAY: I -- I can hardly wait to get into the office. No, I -- I am having fun every day. I mean I -- I can hardly wait to get there. I -- it's -- it's like -- it's like a movie where I'm going to get to see one more episode, you know, and -- and -- before the ending. There will never be an ending, but it's a -- it's a fascinating movie. And I -- and I get to do -- I get to interact with people that I've -- I've been able to select in life. I love them, you know. And they, you know, like me.
So -- so I couldn't have better conditions for work. I couldn't have a more interesting line of work. And it doesn't diminish with time. So I -- I -- I jump on a bed.
(END VIDEO CLIP)
HARLOW: So clearly, a job Warren Buffet still very much enjoys. But now a new colleague at the table, Max, when it comes to managing those investments.
FOSTER: A name we're going to come to know very well.
Thank you very much, indeed, for that, Poppy.
Now, we're going to head to Wall Street, where stocks are trading to the down side. Warren Buffet's team might have something to do with that. We never know. He's got a huge amount of power.
Alison Kosik is stand by at the New York Stock Exchange -- Alison, a different mood from yesterday.
ALISON KOSIK, CNN CORRESPONDENT: Yes, pretty much. You know, it's been a very quiet day. We've got light volume today, Max, at the New York Stock Exchange. Stocks have been hovering near the flat line most of the session. But, you know, they're still close to those highest levels that we saw yesterday, close to almost six month highs. You know, they climbed off earlier lows today thanks to solid -- a solid reading on consumer confidence, showing that we had an up tick in September.
We've also got more earnings reports that have been rolling in. Dow component, DuPont, reported a decline in quarterly profits before the bell this morning. But it still managed to top analysts' forecasts and boosted its outlook. Right now, shares of DuPont are down almost 2 percent.
We're also keeping our eye on Bristol-Myers -- Bristol-Myers' shares. They're also lower after the pharmaceutical giant posted a dip in earnings.
You know, overall for the third quarter, though, earnings season has been pretty good. And it's definitely given a nice boost to the market overall. But that's being offset by a rise in the value of the dollar and lackluster figures on home prices -- Max.
FOSTER: Alison, we were talking a bit earlier with Maggie about this rumor that Apple was on the lookout for a take over target. Sony in the mix. Everyone's denying it, though. But I wondered if that's had any market impact.
KOSIK: I'm not seeing a huge amount of impasse on the market. You know, right now, it is really just a rumor with many experts referring to it as pure speculation. Of course, this is all being fueled by a report that everybody saw in "Barron's" over the weekend that Apple may be on the prowl for an acquisition.
Sony's shares jumped 3 percent in Asian trading, but right now, here, at the NYSE, they're only up about 3/4 of 1 percent.
Now, the big question is, though, just how realistic is this report that Apple wants to make a deal?
Keep in mind that Apple has more than $51 billion in cash and analysts are pressing the company for answers.
They want to know, what you going to do with all that money, Apple?
So during Apple's quarterly earnings call last week, CEO, Steve Jobs, suggested the cash will be used for "big moves." That's what he said, possibly hinting that a deal could be in Apple's future.
Now, a lot of people say a Sony-Apple deal does make sense because of Sony's strong position in the video game market, where Apple has virtually no presence.
However, there is no indication that Sony is interested in a deal yet. I'd say to be continued, Max. I wouldn't close the book on this one -- Max.
FOSTER: We'll watch that. They've got to do something with the cash, I guess.
Alison, thank you very much, indeed, for that.
Now, Cuba is no California, but it's legalizing what has formerly been forbidden in its biggest economic overhaul since 1990. We'll have details for you, coming up.
(COMMERCIAL BREAK)
FOSTER: Hugo Chavez is upping the ante. Another nationalization in the works and this time, the armed forces came knocking at the gates of the U.S. glass company, Owens Illinois, after the president called for its expropriation.
(BEGIN VIDEO CLIP FROM OCTOBER 25, 2010, COURTESY GLOBOVISION)
HUGO CHAVEZ, VENEZUELAN PRESIDENT (through translator): We will build up our missions. We will build the revolutionary Bolivarian socialism. Elias (ph), by the way, the expropriation of the glass company is ready.
What's it's name?
Owens Illinois. Let it be expropriated. It's a company with American capital that has been operating here several years, exploiting workers and destroying the environment in Trujillo. Go, take a look at the hills that they have destroyed, taking away the money that belongs to the Venezuelan people.
(END VIDEO CLIP)
FOSTER: Owens Illinois have issued a public statement saying they were surprised to learn of this decision and are prepared to work with the government officials to better understand the situation. The company says it remains committed to complying with all laws and regulations in Venezuela.
While Venezuela wades deeper into socialism, Cuba, meanwhile, is stepping closer to capitalism. In a massive restructuring move, Cuba is creating private sector jobs to help boost the company's coffers. The Cuban economy was hit in these years not only by the global downturn, but also by Hurricanes Ike, Gustav and Paloma, impacting exports and hurting the economy. Cuba has already cut half a million people from its workforce and expects to shed an additional half a million in the next five years.
The communist country is legalizing 178 private sector jobs in the hope that they will alleviate the need for state-funded employment, as well as boost the country's income from taxes.
Let's get more from the ground.
Shasta Darlington joins us now from Havana -- Shasta.
SHASTA DARLINGTON, CNN CORRESPONDENT: Well, that's right, Max. The Cuban government has just published an elaborate set of rules for these new entrepreneurs that get into the nitty-gritty of taxes, which is a completely foreign concept for most Cubans. And under the sliding scale, those who earn the least, which would be under about 5,000 pesos a year, or $200 a year, wouldn't pay any income tax at all.
But those in the highest tax brackets -- and in Cuba, that means earning more than $2,200 a year, would pay an income tax of about 50 percent.
Now, you know, one interesting thing, we went out onto the streets to look for this supplement, to get the details. And it was actually very hard to find. It had already sold out at the newsstands in many places.
And we discovered that it's because it's not just the unemployed who are curious.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): No, this isn't only for people in the private sector. It's also for state workers, who don't know if they could be laid off. We need to know what the laws are to be concerned about the new rules.
(END VIDEO CLIP)
DARLINGTON: Now, the other reason that people are curious, of course, is because the average state salary is only $20 a month and they think that perhaps they could make more going to the private sector.
But just keep in mind, these are not always going to be glamorous jobs. Of those 178 occupations that Cubans can now hold in the private sector, most of them will be barbers and taxi drivers. They also allow for birthday clowns and salsa dancers.
But the tax equation is pretty complicated. It's not just income taxes. Some people actually pay only a flat fee every month. Others will have to pay a payroll tax, Social Security. It's going to be something that's going to take a while for everyone to get their head around -- Max.
FOSTER: Yes. And one thing that would help the Cuban economy is if it did more trade with other economies. And it seems that the European Union might be an option now, because they're exploring closer ties with Cuba.
Have you got any more detail on that?
DARLINGTON: Well, that's right, Max. I mean it was mostly diplomatic relations that have -- have been affected in recent years. And that's because back in 2003, there was a Cuba crackdown on dissidents -- arresting 75 of them in what's known as the "black spring."
But this -- this week, the European Union foreign ministers met to see if they would drop some of the diplomatic sanctions on Cuba, the so-called "common position," which basically prevents them from developing bilateral relations with Cuba unless human rights are addressed.
Now, they didn't go so far as dropping that common position, but they did ask that their top E.U. diplomat, Catherine Ashton, forge closer ties with Cuba. And that's because Cuba has, in fact, started releasing jailed dissidents. It's released 42 so far. And this is really shaping up to be the biggest release of political prisoners in more than a decade -- Max.
FOSTER: OK, Shasta in Havana, thank you very much, indeed, for that interesting stuff.
Now, you might say China is undergoing its latest revolution, one fueled by the country's rising economic activity.
And as Stan Grant now reports, one probably never anticipated by its legendary communist leader.
(BEGIN VIDEOTAPE)
STAN GRANT, CNN CORRESPONDENT (voice-over): Move over Mao, welcome to China's consumer revolution -- young, trendy Chinese cached up and ready to shine.
(on camera): Raymond, what are you wearing?
RAYMOND WEI, CONSUMER: OK, I'm wearing my jacket (INAUDIBLE) OK.
GRANT: (INAUDIBLE).
WEI: Yes.
GRANT (voice-over): Raymond is the epitome of Beijing bling. He says he spends thousands every month on clothes and -- that's dollars, not renminbi. With the other glitterati, he's turned out out at a show by high end Italian fashion house, Tubbs (ph) -- big brands, big money. They love it.
WEI: Actually, I can say I'm a fashionista because I really love all the designers. The favorite (INAUDIBLE) and appreciate the designers.
GRANT: And the designers love the sound of those Chinese cash registers.
DIEGO DELLA VALLE, CEO, TOD'S GROUP: When you speak about luxury, you need to grow, but don't forget what there is being luxury -- exclusivity, dream, quality.
CURRIE LEE, DESIGNER: This is actually onion skin.
GRANT: Currie Lee is living that dream -- once an attorney in the U.S., now chasing the riches of China's fashion scene.
LEE: And so many of my girlfriends said, you know, Currie, you always complain about practicing law, how, you know, the hours are tiring; how, you know, you can't really express yourself creatively.
So I thought hmmm, maybe I should switch.
GRANT: Currie designs handbags, all made from natural materials, like snakeskin. She calls it upcycling -- perfect for the up market Chinese -- people looking beyond labels to unique products.
LEE: What they buy is who they are. And so it depends how you want to design yourself.
GRANT (on camera): The motto of the new rich in China seems to be if you've got it, flaunt it. And retail sales figures are up more than 18 percent this year from last year. But the government still has a way to go to turn a nation of savers into a nation of spenders.
DONNA KWOK, ECONOMIST, HSBC: Can it be done?
Definitely.
Can it be done overnight?
No.
GRANT (voice-over): China is well on track. Its economy continues to leave the West in its wake. But consumption still only contributes about a third of China's GDP. The government needs to get it to 50 percent. But wages are rising and analysts say all the more money to spend, spend, spend.
KWOK: We have a $600 million to $800 million potential future of luxury goods spenders.
GRANT: That's 600 million potential fashionistas like Raymond.
Stan Grant, CNN, Beijing.
(END VIDEO TAPE)
FOSTER: What a dresser.
Now, we'll be heading to Marrakech next, as the World Economic Forum for the -- the Middle East and Northern Africa gets underway.
And we'll hear from Qatar's energy minister on the growing importance of natural gas.
(COMMERCIAL BREAK)
FOSTER: The 2010 World Economic Forum on the Middle East and North Africa kicked off this Tuesday in Marrakech. The so-called Lena Region economy is growing fast.
And as John Defterios found out, oil is the driving force.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN CORRESPONDENT: From Morocco in the west to Iran in the east, business leaders gathered here in Marrakech to a much rosier outlook. With oil prices hovering around $80 a barrel, the Middle East is bringing in more than a half a trillion dollars in revenue each year. The IMF is forecasting growth of 4.2 percent this year, even higher for 2001.
MASOOD AHMED, IMF MIDDLE EAST DIRECTOR: Last year, the region as a whole grew at about 2.3 percent. And next year, it will be growing about 4.8. That's a big increase. But a lot of that increase comes from what happens in the oil countries, and within them, as to what happens to the oil part of their economies.
(END VIDEO TAPE)
FOSTER: Eleven months ago, Dubai stunned the regional markets by asking for a standstill on up to $100 billion of its debt. As a result, the property glut remains a challenge, with prices down 30 to 50 percent. Throughout the Middle East, unemployment remains a huge problem. It's at 11 percent, double that amongst its youth.
John Defterios, CNN, in Marrakech.
(END VIDEO TAPE)
FOSTER: Well, the emir of Qatar, Sheikh Abdullah Bin Hamad Al- Attiyah, has arrived in London for a three day state visit. The emir could be doing a bit of big name shopping whilst he's here, as well, if we believe what we read in the papers. He told "The Financial Times" he might be interested in acquiring Christie's auction house.
Trade ties between the U.K. and Qatar are strong, supported primarily by Qatar's supply of natural gas.
John Defterios spoke to Qatari deputy prime minister and energy minister, Abdullah bin Hamad Al-Attiyah.
(BEGIN VIDEOTAPE)
DEFTERIOS: Yes, I saw the IEA report and the OPEC latest monthly report pointing to long-term demand of oil growing 24 percent between now and 2030. But it's natural gas that's really going to see up to a 41 percent surge.
Do you agree with these projections?
ABDULLAH BIN HAMAD AL-ATTIYAH, QATAR DEPUTY PRIME MINISTER AND ENERGY MINISTER: We always, you know, believe that the gas, you know, it's one of the main resources, you know, for -- for the demand in the future, because that is the fair -- is the solution for the reduction of emissions and is the best, you know, for environmental and is the friendly, you know, energy to even especially to generate power.
DEFTERIOS: How is this going to be affected, this market, by the real emergence of shale gas in North America?
AL-ATTIYAH: Shale gas will be very competitive inside the United States. And we've seen that the gas dropped, you know, the price of gas dropped very dramatically for -- in the United States market.
DEFTERIOS: So you have this flexibility in the L&G market if the shale gas comes on strong in North America, to go to Latin America, to go to Africa, to go to Asia.
You have that flexibility?
AL-ATTIYAH: Yes, because today, Qatar, as the biggest energy producers, our total production, we've reached now, 77 million tons. Also, we are operating the biggest gas shipping company.
Now, our fleet consists of 54 ships. Today we are sending gas to Canada. We are so -- already we're sending some -- you know, some cargos to Mexico, to Chile, to Argentina and even to other parts in the -- in Asia and Europe.
So we can now, today, we -- because of this flexibility of the production and the transportation, we can reach any new customers even the next day.
DEFTERIOS: I want to put it into perspective for our viewers. But we're looking at the equivalent of five million barrels a day in natural gas or L&G shipments. I mean this is sizeable for Qatar.
AL-ATTIYAH: Yes. Everyone remembers that 15 years ago, the total production of Qatar was 350,000 barrels a day. We are very proud and we are very happy that, you know, we will soon reach the equivalent of barrels to five million barrels a day.
(END VIDEO TAPE)
FOSTER: There are.
John Defterios speaking to the Qatari deputy prime minister.
Now rain in the U.K. and the severe weather expert in Southern Europe, as well. And America is not -- well, it's only got its problems, tornadoes, I think, isn't it -- Guillermo?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes. And also we have a typhoon in the Pacific. We have a volcano in Indonesia. Also, we had a tsunami. A lot going on.
Let me start in Europe, because it's even -- evening hours there right now. It's 8:52 in Central Europe. And we have more rain in Britain. It's not going to be as bad as today, I think, but we will see some more rain there. You see a lot of it before, then we're going to get light rain. I think your best shot, if you're watching from England, is Thursday and Friday. Then you will have to be patient for tomorrow. It's going to be another rainy day.
In the south, we have bad weather and also in Italy and Southern France, we were reporting of -- reporting on winds of 150 kilometers per hour. That's also very strong winds. In Iceland, these are the temps that we're going to see. We have some snow in the forecast. Vienna, seven degrees. Winds in Amsterdam, Dublin, London -- I mean it's not -- it's not looking very nice right now and especially at the airports. So you will have to pick up some patience, because Copenhagen also will be a little bit breezy; Rome will be breezy, with the chance of rain showers. So it is uncertain what's going to happen in airports. Maybe we'll see some delays.
Below the broad -- the intense winds in Southern France is moving into Corsica, Sardinia and into Italy, as predicted, we must say. So severe weather expert in the south of Italy and into Greece, as well.
I said that there was a typhoon. We have it here, very close to Taiwan and the Philippines. We do not expect a direct impact over there. I'll elaborate in a second.
Let me tell you that the cold air is coming down into the proximity of Shanghai now. We were getting that cold into Beijing before now. Shanghai, the Korean Peninsula and also Japan. It hasn't reached Japan yet, but it's going there.
Minus one in Seoul, as we speak; minus two in Beijing. It is almost three in the morning and we will see 12 degrees max during the day.
Let me tell you about this typhoon that we have in here. It's going to take general aim at Okinawa and the southern islands of Japan. So we are going to see a direct impact with this. It's going to be a significant typhoon. So this -- we are going to see delays there, as well, all those people traveling to the southern islands of Japan. For the time being, the winds are going to affect Taiwan, as well. The rain is mostly in the open waters, but we will see an impact on travel operations or on airport operations, especially at Taipei, you see, for tomorrow, Wednesday, or today already, because it's three in the morning over there. And Hong Kong with some windy conditions, as well -- Max.
FOSTER: OK, Guillermo.
Thank you very much, indeed, for that.
ARDUINO: Thank you.
FOSTER: Now, this just in to CNN.
BMW North America has announced the recall of more than 150,000 cars. The vehicles may have fuel pump problems that could cause engine failure and loss of power steering. Again, BMW just announcing that recall of more than 150,000 cars just in North America at this point.
Now, this Thursday on QUEST MEANS BUSINESS, the Q&A with Quest and Ali. In Q&A, you choose the topics, they give the answers. Watch Ali Velshi and Richard Quest battle it out. See whose explanation you like the best, as they unravel your subject in one minute flat.
There will even be a little quiz for them. Just go to CNN.com/qmb and send them your talking points.
The markets after the break.
(COMMERCIAL BREAK)
FOSTER: Well, the Dow doesn't seem to know what it's doing this session. It's been seesawing in and out of positive territory throughout its -- totally flat, as you can see, down just .04 percent. It's been weighing all sorts of economic data, some consumer confidence figures and housing figures, but also some earnings reports.
Ford doing extremely well, as we heard from the CEO earlier in the show. It posted record third quarter profit.
Can it keep it up?
We'll see.
On the European markets, stocks closed lower. That was after disappointing earnings from UBS, Switzerland's biggest bank, which saw its priced pretax loss in its investment banking division.
Also weighing on market sentiment was cautious outlooks from the steelmaker, ArcelorMittal. But all three markets closed off the day's lows, lifted by an increase in U.S. consumer confidence that I was talking about for October.
That is QUEST MEANS BUSINESS tonight.
I'm Max Foster in London.
Stay tuned. "WORLD ONE" starts right now.
END
