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Quest Means Business
Chinese President Visits U.S.; G2 Summit As Economic Titans Meet on Trade, Currency, Security Issues; Apple Investors React; The Q25; Art of Ambition; Golden Globe Gaffes
Aired January 18, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: On a lending spree, China's giving the developing world a boost.
Out of time, Ireland's ruling party is voting now on the prime minister's future.
And a question of succession, will Apple's shareholders have time to change the rules?
I'm Richard Quest. We have an hour together, and I mean business.
Good evening.
In just two hours from now China's President Hu Jintao touches down in the United States and even as he flies east there are more signs of just how powerful China, his country, has become. On this program tonight we are going to be looking at not only does China hold almost a trillion dollars U.S. sovereign debt, not only does China account for nearly two-thirds of U.S. trade deficit, now China is becoming the lender of first resort for the developing world. It is something we covering as our lead story for you tonight.
Over the past two years China has loaned more money to developing countries than the World Bank, according to "The Financial Times" research. At a time when the global credit freeze made cash hard to come by, China stepped in to fill the lending gap, handing out $110 billion in 2009 and '10. The World Bank only managed a $100 billion, which was a record itself.
If you join me here in the library you'll see where the Chinese money went and the sort of influence that it was able to buy. Loans for oil deals with Russia, Venezuela and Brazil; included a $25 billion loan to Russia in exchange for 15 million tons of Russian oil a year. Also, $20 billion loan to Venezuela in return for an agreement to form a joint venture. So very much, of course, energy driven sort of loans. But there was a $12 billion loan to India's Reliance Power, so it could buy $10 billion worth of equipment from Shanghai Electric. Standard, classic, ensuring that you provide the finance so that your home companies get the business and the orders.
Ghana, more than $14 billion for roads, rail and energy projects, in Ghana. Again, pumping more oil for China, at least $10 billion to build Argentina's roads, boost production, and transport of vital resources.
So as you get the picture, China tends to get rich returns from these financial outlays. And what that does, of course, that is the way the money goes. And it is all thanks to China's massive stockpile of dollars. Think of it like this. Beijing has reserves of almost $3 trillion because of all the goods and services it sells. Mainly in America and other developed countries. Those dollars, of course, have to go somewhere. China lends the money and gets paid back and so the system goes from the U.S., into China, to the resources, which of course are then used, once again, to buy Chinese goods and services.
It is almost a perfect system of bringing in cash, circulating it and ensuring the benefits of it. Joseph Nye is distinguished service professor at Harvard University and renowned for his views on soft power. just returned from Beijing. His new book, "The Future of Power" deals with how China will deal with its growing economic strength. Earlier I put it to him that that sort of system of circulating dollars was really crucial to China's future.
(BEGIN VIDEOTAPE)
JOSEPH NYE, PROFESSOR, HARVARD UNIVERSITY: That's true. It is a little bit like what happened with the Arab countries after the oil crisis back in the '70s. But you do have a huge amount of capital sitting in China and demand for that capital all around the world. In the long run the Chinese are going have to-they call it rebalance the economy and to orient themselves more toward internal growth. But in the meantime they are sitting on a lot of capital and they are looking for ways to invest it.
QUEST: There is not much they can really do because on the one hand if they invest too much domestically that will promote domestic inflation, on the other hand they can only buy so many Treasury bonds and euro bonds. So what-where is the scale going to go do you think?
NYE: Well, I was in Beijing last week, and talked to a number of Chinese economists about their 12th five-year plan, which is now coming up. And they are very serious about reorienting growth toward internal demand. Particularly away from the coast export industries to the interior of the country, but it is a slow process. So you are right, in the meantime they have this capital sitting and they are looking for opportunities to invest overseas.
QUEST: To increase or to stimulate domestic demand, what would you say is the single most important policy that they would need to introduce to help out that rebalancing take place?
NYE: Well, one thing is to stop protecting the coast export industries. The other is in fact something that is happening partly with their permission and partly outside it, which is the price of labor is going up. You noticed it last summer the Chinese allowed certain strikes, initially against foreign owned firms. But then against Chinese state owned enterprises as well. As this drives up prices and wages, essentially it not only creates purchasing power, but it also gives an incentive to move away from these export-oriented industries.
QUEST: If you take the current tensions that exist, essentially, between the U.S. and the China over currency valuations. Do you see that abating in the next 12 months? Or exacerbating?
NYE: I think it is going to abate. As a political issue it will still be there. But in practice what is happening is the inflation in China is giving you a real revaluation. Secretary of the Treasury Tim Geithner, said last week that if you add the gradual revaluation which the Chinese are allowing of the Renminbi, and add to that an inflation at the rate of 5 percent or more a year. You are getting some real revaluation.
(END VIDEOTAPE)
QUEST: So, when China's President Hu Jintao arrives in the United States, this will very much be on the agenda. How to-from the U.S. point of view, the dollars that are recycled, via China, into lending, which is then brought back into industry and the whole thing goes around again. Dan Lothian is our White House correspondent and joins me now from Washington. The agenda is very potentially, a very volatile on currency and trade. How is the administration going to avoid it turning into slanging match?
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, I think that one way the administration will avoid that is the way they have done it so far. Is that publicly you don't hear very sort of harsh rhetoric coming from this White House towards China. It is always that the Chinese need to do more on currency, on human rights, on trade, on these other issues, North Korea as well. But no real sort of beat them over the head. That has taken place in private.
And so when you talk to administration officials here, privately they'll tell you that that is exactly the tact that will be taken this time around. Some tough talk on China, that they really need to get moving on a number of these issues. In fact, at the press briefing today I asked Robert Gibbs in particular about human rights. Well, will the president really be hitting them hard and will that be the central issue. And he said all of these issues are important, but that tough talk will happen in private and that publicly it will be more of a, you know, this is a friendship that we're trying to build on because it is important for both of our economies.
(BEGIN VIDEO CLIP)
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: We believe more must be done in terms of their currency. Obviously with inflation there are some impacts on the real value of the currency. They have made some-they have taken some limited steps, despite the answers, to revalue their currency. And our belief is, as you heard Secretary Geithner in here just Friday, say, we believe that more must be done. That is an opinion that is held not just by this country, but by many countries around the world.
(END VIDEO CLIP)
LOTHIAN: Now the big push from the White House, obviously, the president, what you have been hearing now for months is that China presents a major opportunity for U.S. businesses, especially with the unemployment rate over 9 percent, it has dropped slightly, now 9.4 percent. The president is trying to look to the global stage to find jobs here at home and believes that one place that that can happened is in China.
QUEST: Dan, is there a realization and recognition, as seen from the U.S. point of view that sitting down with China, they are now sitting down with the G2? And that China is going to be the country that ultimately will supplant the U.S. in economic importance in future?
LOTHIAN: Well, listen, when you talk to the experts who are watching this from the outside they say that very much that China is really sort of this ball, rolling down a rock, rolling down the hill. Certainly moving to that point of surpassing the U.S. on the global stage, so this administration, very much will have to take that into account. I guess that is sort of what is at the middle or the heart of this debate. Is who really needs to give in here?
And I was talking to one expert about an hour ago and this person told me that how the administration should handle the negotiations is show China what is in their best interest. This is not a negotiation like the U.S. could take with some other country, where they just talk tough, beat them over the head and say this is what we want you to do. China, really will dig their heel in, so the president needs to be able to show China, this is what will be in your best interest. This will be good for your economy. And that is the only way they'll see any movement at all.
QUEST: And unless I'm mistaken, Dan, I could hear the band tuning up behind you. All right. Many thanks indeed, Dan Lothian, joining us from Washington. Just in time before we paid the bill.
Battered, bruised, and hanging by a thread, Brian Cowen's opponents tried to land a knockout blow on the unpopular premier, we'll ask what that could mean for Ireland. QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
QUEST: Brian Cowen's political future is in jeopardy tonight. His own party is deciding whether to keep him as their leader. Right now, members of the Fianna Fail, the ruling party in Ireland. A voting on a confidence motion in the Irish prime minister, as they head towards an election. That if the polls bear any possible relevance to the truth, he will lose.
The Irish public anger at the government has intensified during the crisis. Fianna Fail's approval rating stands a just 14 percent. Now, remember, if you take post Second World War, Fianna Fail has primarily been the party of government, as against Prima Gail (ph).
Mr. Cowen, himself, has been cast as a villain of the piece, because of how he's managed the Irish economy over the years; a humiliating culmination, a $113 billion bailout. Some would say-I just suddenly realized.
Overstepping the mark there, Jim. As I say, humiliating, some would say necessary.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Well, you have to remember he was the finance minister during the good times as well, then he becomes prime minister in 2008, just as we get into this world economic crisis. And then, of course, you have this sort of rebellion inside his own party. And the reason for that, of course, is the taking of this bailout from the IMF, from the EU, all along in the month of November, Mr. Cowen was saying we don't need this bailout, if you remember all of that.
Now, what is this mean? Well, if he loses the authority as the leader of his party, then it is very likely that we would see a snap election and early election with the parliament dissolved. Still no word at this moment whether or not he has passed that test. We are still waiting at any moment, we could hear, if he has been successful or whether he has been pushed out as a leader of his party.
So, if that were to happen, we know there is an election coming anyway, probably in March. The idea is whether or not he would be leading the majority party at this moment, into that early election.
Now, the bailout is-I won't say in jeopardy, but, of course, in order for the bailout to succeed, this government needs to be able to get through all the austerity measures that are very unpopular. But the stipulation is you have to do XYZ, before you get the bailout money. They are part of the way through this and a lot of people are saying the worst thing you could do right now is to have all this political disruption. And that could-could possibly disrupt the bailout. We'll have to see if the markets are very happy about that, or not.
Let's remember some of the things about Mr. Cowen, during the times that he has been prime minister. He guaranteed the banks, during the economic crisis. That is crucial. The other governments in other countries didn't do that. He guaranteed that bank bailout. He has put a lot of money and effectively nationalized these banks. Because of all that, the deficit in 2010 ballooned to 32 percent of GDP, unheard of numbers; but that is technical because some of the bank bailouts and some of the bank problems were put onto the government's books. Unemployment tripled to 13 percent. You remember during the Celtic Tiger years it was very low. Foreign investment down two-thirds in 2010, compared to 2009, Richard.
QUEST: All right. Many thanks, Jim Boulden. While we are still on air, is there any reaction or response, please come back roaring like a tornado and bring it to us.
BOULDEN: I'll run right in.
QUEST: Well-
(LAUGHTER)
QUEST: I would expect nothing less from a man of your distinction, Jim Boulden.
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You need to know how the markets ended the day. A two year high. Now, you don't get that very often in terms of the markets. The FTSE closed up more than 1 percent. Despite the U.K. having a very worrying rise in inflation rates, both core and the seasonally and adjusted-non-adjusted. Strong gains for retailers. Burberry rose 5 percent and reported a jump in three-months sales.
The DAX was buoyed by stronger than expected German economic sentiment survey. Banks were amongst the best performers, after European leaders pledged to bolster emergency funding for indebted countries. But, of course, as you'll be aware, at their summit meeting, or their economic meeting, they haven't quite decided when or how that mechanism will take place.
When you stretch your brand you have to stretch yourself, too. It is a daunting task for the founder of My-Wardrobe.com. She makes the perfect model on how to handle risk. Fresh insights from the head of FreshDirect; it is "The Boss" after the break.
(COMMERCIAL BREAK)
QUEST: The moral of the tale. You need to believe it, own it, wear it. Now those are not my words, they are the words of Sarah Curran, the chief executive of My-Wardrobe.com. And as you will know, one of our bosses in the series that we have been following, "The Boss".
So, in this week's edition of "The Boss", Sarah is pushing for her perfect customer, and hoping the Mary Claire, magazine reader relates to her brand. On the other side of the Atlantic, in New York, Richard Braddock is the man behind FreshDirect. And is stretching himself along with is brand, "The Boss".
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE (voice over): Previously on "The Boss": Richard Braddock praised his staff for all their hard work in 2010.
RICHARD BRADDOCK, CEO, FRESHDIRECT: When they are doing well, we need to reward them fairly.
UNIDENTIFIED MALE: And in London, Sarah Curran helps ease the flow of communication. By moving her team to an open plan office.
SARAH CURRAN, CEO, MY-WARDROBE.COM: I didn't want to be in an office, locked away. I wanted to be in the team, so I could hear what was going on.
We really have to strengthen the necklaces a bit.
UNIDENTIFIED MALE: Sarah Curran is across every detail of this shoot. She knows what she wants and how she must sell it. After all, it is her brand, and her company in the spotlight.
UNIDENTIFIED MALE: OK.
CURRAN: They're natural, then, nothing too-nothing too stressful.
UNIDENTIFIED MALE: OK.
CURRAN: Nothing too stressful.
UNIDENTIFIED MALE: She's taking part in a photo shoot for Marie Clare magazine.
UNIDENTIFIED MALE: Do you want to start pulling something out and maybe have a look at it?
UNIDENTIFIED MALE: The focus, a photo spread on her personal work wear style.
(INDISTINCT CHATTER, PHOTO SHOOT)
UNIDENTIFIED MALE: For Marie Claire, it is about inspiring readers, but for Sarah, it is much more than that.
CURRAN: I only ever wear, if I'm doing a shoot, I only ever wear really what I personally would select from My-Wardrobe. And I try really to always dress from the collections that we buy into. I think that is really important. You have to buy into it yourself, and believe it and wear it. And own it.
UNIDENTIFIED MALE: It is this belief that has attracted Marie Claire.
HOLLY WELCH, MARIE CLAIRE: Sarah is a very cool lady. She seems a very approachable. She always looks very chic.
UNIDENTIFIED MALE: As the boss, Sarah know her exposure can bring in new customers. To do that, she recognizes the need to connect with the Marie Claire reader.
CURRAN: I think the customers want to see that it is just a faceless site. They want to see someone that they would like to relate to, albeit they might not relate to me, but hopefully they might like me.
(LAUGHTER)
UNIDENTIFIED MALE: Sarah finds it hard to put herself forward, with the lens closely capturing her every move, she is out of her comfort zone. But as the boss, she knows this comes with the job.
CURRAN: Yeah, that's really nice.
There is an expectation that I, you know, that I sort of portray myself or look a certain way. It is sort of a pressure? I can't deny it. But, you know, I love fashion, I love clothes. Brand is so important to me.
UNIDENTIFIED FEMALE: And so the green beans have to be properly cooked.
UNIDENTIFIED MALE: In New York City, the chief executive of FreshDirect, Richard Braddock is taste testing a new product. A line of frozen meals, created by Chef Tina Balboa.
UNIDENTIFIED FEMALE: Whether you have the shells with a Grier (ph) cheese sauce, Berkshire bacon, Italian roasted tomatoes, and roasted butternut squash.
UNIDENTIFIED MALE: Richard is excited about their new offering, but he knows it is a gamble. FreshDirect has never sold frozen food before. And Richard has many questions.
BRADDOCK: So, effectively all of these are less than 10 minutes, or less, from the freezer to the table?
UNIDENTIFIED MALE: Not exactly, some of these meals almost completely, the denser ones, so for example the turkey and cornbread stuffing, uh, it is more in the style of a traditional grocery store meal. There is a defrost cycle on it about seven minutes, and then it cooks for -I'm sorry, eight minutes, and then it cooks for three. So that is just over the top of 10.
BRADDOCK: That's close enough.
UNIDENTIFIED MALE: The new product offers a new challenge to FreshDirect and its chief executive. He says the company prides itself on delivering fresh produce. Frozen foods are a deviation from that.
BRADDOCK: What can we say, responsibly, about tastes like fresh?
UNIDENTIFIED FEMALE: We cannot talk about fresh ingredients, (INAUDIBLE) tastes like fresh ingredients. But the line that we use, which is, "Frozen entrees, fresh ideas". We are hoping for it to indirectly talk about FreshDirect.
UNIDENTIFIED MALE: Richard believes they have an exciting product on their hands.
BRADDOCK: There is a big frozen market out there and I think the quality of these offerings is at least relative to what I've tasted, substantially better.
UNIDENTIFIED FEMALE: I'm kind of amazed at how juicy the chicken was in this dish.
UNIDENTIFIED MALE: A marketing challenge, no doubt, Richard will soon find out whether their gamble has paid off.
Next week on "The Boss": Sarah Curran is once again in the spotlight. This time facing her investors. And we catch up with Michael Wu, in Hong Kong, as he makes time for a worthy cause.
(END VIDEOTAPE)
QUEST: Of course, if you have missed any of the episodes of "The Boss" you can catch up with them on our Facebook page. And the Facebook page can be found at Facebook.com/CNNQuest.
Now, here's the thing. If you run a business and you would like to become one of our bosses, because as the year moves on, we will, of course be adding new people to our series, of "The Boss", then please why don't you think about-well, seeing if you would like to join us. Send me an e-mail to Quest@ CNN.com. And we will, of course, look and see exactly how-well, we'll be in touch with the people that might take over as the next selection of bosses. That is Quest@ CNN.com.
(DESK BELL CHIMES)
Apple's shares have reacted to the news that the chief exec is taking medical leave and is prompting a closer look at chief executive succession planning at other companies. We'll look at why so much more seems to be at stake, when leaders with the magic touch leave the seat.
(DESK BELL CHIMES)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN, and always the news here, comes first.
(NEWSBREAK)
QUEST: Protests took to the streets, rejecting any elements of the old regime. And at least three politicians withdrew from separate positions on a labor union's demand, trying to save the new government, the interim president and prime minister have resigned from the ruling party.
From his hotel room to the courtroom -- the former Haitian dictator, Jean- Claude Duvalier, is in custody while authorities determine whether he will be arrested. A source close to the man known as Baby Doc has told CNN that isn't likely to happen. More than likely, Duvalier could very well be back in his Port-au-Prince hotel room sometime today.
A cowardly act -- that's how Iraq's vice president is describing the suicide blast at a police recruitment center that killed at least 65 people and wounded a further 160 in Tikrit. The bomber, who wore an explosives packed vest, blew himself up when he was surrounded by hundreds of recruits. Most of the victims were young men wanting to join Iraq's police force.
Protests are demonstrating outside the White House ahead of the Chinese president's visit. They're holding signs that say, "Free Tibet!" and "Tibet is not Part of China!" Hu Jintao is expected to arrive in Washington in about 90 minutes from now. He'll have a private dinner on Tuesday night with the president and the first lady. Official talks will begin on Wednesday.
So, Apple is the stock that everyone is watching on Wall Street. At one point, the shares fell nearly 5 percent in the early part of the day. Right now, they're off the session's lows. They're still down more than 2 percent. And the reason, of course, investors are reacting one day after the world's most valuable tech company announced another medical leave for the chief executive, Steve Jobs. It's the third time in six-and-a-half years that his health has forced him to take a hiatus from the company.
Apple's stock could also move in Wednesday's trading. Q1 results are due out after Tuesday's Wall Street finish in just a short time from now.
So, as Apple's Tim Cook steps up to the Apple's leadership for a third time. Now, we'll look at three other companies where CEO succession swept all before it. At American International Group, AIG, the chief executive, Robert Benmosche, is gearing up to welcome new investors, even as he undergoes cancer treatment.
Then, think back to last August, when Hewlett Packard was left looking to fill its top job. Mark Hurd was forced to leave over a sexual harassment allegation. He left H.P. in limbo.
And go back to March of 2005, when Boeing just about fired the then chief executive, Harry Stonecipher, over an affair with a coworker.
Fast forward to February 23rd. That's when Apple's shareholders will get to vote on a proposal to make its succession planning more transparent. The move is supported by the Laborers International Union of North America -- a long name, a big group, nearly half a million members. And they say they represent unions with a whopping 145,000 Apple shares.
Liu's David Miller joins us now from Washington, DC.
Your fundamental point, Mr. Miller, is that Apple's succession, whatever happens where Steve Jobs is concerned, actual Apple succession planning is simply either non-existent or not good enough.
DAVID MILLER, COMMUNICATIONS DIRECTOR, LIUNA: Yes, or non-existent or -- or at least undisclosed. And what we're trying to do is we're trying to protect the investments that our members make into their pension funds. These are men and women who work hard all their lives building highways and bridges. They put their money into these pension funds and, you know, hope -- and, basically, that's their retirement security.
So what we'd like to see, we'd like to see -- we think it would help those investments out if Apple would public -- make public a -- a succession policy dealing with internal candidates for the CEO position.
QUEST: All right, you accept, as I know you will, that they won't name a name and they would never name a name and you wouldn't expect them to name a name.
MILLER: Right.
QUEST: So how can you be sure that a vague there's a succession plan underway will suffice?
MILLER: Well, we think that, you know, by putting these requirements into place, that it has to be subject to shareholder scrutiny that has to be put out there, that there will, in fact, be a plan put into place.
Apple is in a very bright spotlight and we are -- we're confident that...
QUEST: Right.
MILLER: -- those -- those requirements will be held to if the company adopts them.
But Mr. Martin, really, aren't you as -- aren't you saying what you want is an heir apparent and you want that heir apparent to be apparent?
MILLER: Well, we want it to be apparent if there is an heir apparent. We don't really. It could be Tim Cook. It could be Johnny Ive (ph). It could be any number of corporate people.
QUEST: Now, you know that's not going to work. You know, that's not going to work. The moment a board says we have an heir apparent, the market becomes a free -- a feeding frenzy of who that person is.
MILLER: We don't even need them to say that this is an heir apparent. We want them to say listen, we -- this is in the event of an emergency or a non-emergency, this is our plan for figuring out internally who that person is going to be.
Why do you think companies are so dreadful at the secession process?
I mean, General Electric, after Jack Welch or Jeff Immelt, they got it right, whether you agree with Immelt or not. But they did actually put in place a strong policy, arguably, my own company, Time Warner, got it right.
But why do so many companies get it wrong?
MILLER: Well, I -- I -- I think that there is a sense of a -- an unwillingness to -- to submit themselves to some sort of period of tumult or change. But the fact is, a lot of companies have actually adopted these proposals that our pension plans have offered without even putting them to a shareholder vote. We've seen this happen at Verizon, Wells Fargo, other large Fortune 500 companies.
Once us and other long-term shareholders raise these ideas, the companies really see it as a no-brainer. And we hope Apple sees it that way, as well.
QUEST: David Miller, if you fell under a bus, who would take over from you?
MILLER: If I fell under a bus?
Well, we have a pretty good communication team that's in place and I'm pretty sure that they could fill the gap nicely.
QUEST: Well, there's bad weather on the horizon.
We trust you'll get home safely.
Many thanks.
David Miller joining me from Washington.
MILLER: Thank you.
QUEST: And we will discuss Apple's profits report in-depth as part of the Q25 tomorrow. Apple is one of the companies -- 25 companies exclu -- in our exclusive Q25 index that helps you make sense of the earnings season.
Now, you are familiar with the Q25. We pick 25 companies from a wide variety of industries and we debate whether to give their profits the thumbs up or the thumbs down. It's not just a whim and a prayer. Corporate earnings must meet a number of crucial tests to pass a grade from our production teams. So let's come and show you something of the tests that we expect from them.
Sales growth -- to get a green, companies must report sales growth of 5 percent or higher compared to the fourth quarter of last year, in other words, Q on Q numbers need to actually show good sales growth.
There also needs to be profit growth of 15 percent or higher compared to the previous quarter, Q on Q sales growth. That's revs (ph), earnings, profit growth and, of course, there needs to be higher profit growth quarter over quarter. Profits must beat Wall Street earnings expectations by 10 percent. And companies must have an elm of optimism about it. There are five criteria that we get this.
To get an automatic green, companies must meet at least four of the five, five and four. Anything less is open for debate.
So in our first day of Q25, we handed out three chips. And you'll see this is our new barometer for doing it. These are the three that we've already handed out -- all of them green.
To weigh into our next selection, Maggie Lake joins me from New York -- Maggie, we've explained the criteria. We know how many we've got.
What our first company?
MAGGIE LAKE, CNN CORRESPONDENT: Yes, let -- Richard, let's take a look at Citigroup, big global investment bank, a lot of people watching this one, one of the sickest of the group during the financial crisis. They didn't do too bad. They got three out of five of the criteria. They did well on sales growth. Year-over-year, they were good. They were sounding pretty optimistic about changes they continue to make and put in place.
But here's the problem -- they missed. And where they missed, they missed big. They didn't achieve quarter on quarter and they missed the estimates by a lot. They got trounced when it came to trading revenues. They were really, really disappointing.
Let me give you this little statistic. Less -- fixed income trading was 20 percent less than JPMorgan did. We heard from them just last week. And equity trading, 28 percent lower. That is really underperforming your peers and I had a problem with that part.
QUEST: All right, but Citi admits, Maggie, Citi admits that this year was turnaround year. Pandit said in the statement this year was critical to the future to -- of -- of the company. And -- and, of course, the U.S. government is no longer a shareholder, has flogged off its Citi...
LAKE: Yes.
QUEST: You're -- you're looking weary at this.
LAKE: No, no. I think -- listen, long-term, you forgot international, right?
Citi has great international...
QUEST: No...
LAKE: -- prospects. Long-term, it's a good story. But it's like turning the Titanic. They're turning, but they're still turning and especially when you see how well their peers are doing, I think it's hard to give Citi a green, still. They're making progress, but it doesn't seem like they're there yet to me -- Richard.
QUEST: All right. We had a vote. We had a vote on Citi because it was a close run thing -- a green or a red. And tonight, Citi gets our first red of the Q25.
Delta Airlines was our next little gem. I came out quite strongly on Delta. We'll get to the results of which way we came out. I think Delta has got competition from the new and enlarged United. Oil at over $100 or heading toward a hundred dollars a barrel. In pre--- IATA, only yesterday, said the premium traffic might be starting to get a little bit slower -- Maggie, you can see where -- you know, which way this train is going for me.
LAKE: Yes. Yes, certainly, Richard. It's hard to go toe to toe with you on airlines, that's for sure. But -- but just for our viewers, it's not -- it's not all negative. Delta did do well on two criteria, year-over-year looking a heck of a lot better. Not hard comparisons to beat, mind you. But still, revenue was good, which usually counts a lot. But as you mentioned, there were some misses. Quarter on quarter they missed estimates. Fuel costs a big problem. And we couldn't find a lot to be excited about the guidance. I mean usually people put a pretty positive spin, even when things are -- are not great. And there wasn't a whole lot to hang -- hang the hat on there.
I wonder, though, Richard, one thing is we -- we've had awful weather, the snowstorms.
QUEST: Right.
LAKE: You know, should we cut them a break...
QUEST: No.
LAKE: -- based on the fact that...
QUEST: No.
LAKE: -- they had that...
QUEST: No.
LAKE: -- really big blizzard?
QUEST: No. Absolutely not.
LAKE: Why?
QUEST: Because we know, we can factor that into the accounts. For example, British Airways told us that the Heathrow closure at Christmas will knock 50 odd million off its numbers. We know from Virgin Atlantic it will knock $15 million off it -- or $60 million off its numbers. That is a quantifiable cost and does not go to -- in fact, I'm going to over -- go on -- no, go on.
LAKE: Well, well, fuel costs are -- are -- they're going to be tougher, too.
Is this going to be an industry problem or -- or are some hedging better?
I mean do you separate the winners and losers and (UNINTELLIGIBLE)...
QUEST: They are hedging...
LAKE: -- falls in that.
QUEST: It's your hedging, it's your -- it's the way you use your fleet management, it's the routes, it's all -- it's capacity. Delta is expanding capacity. I'm overruling here.
LAKE: Yes.
QUEST: Delta got a red from me tonight.
We're day two. We -- we've got a barrage of results tomorrow. And it's three and two. It's going to be an interesting Q25.
Maggie, many thanks.
Maggie Lake is in New York.
Just to remind you, if, on the criteria, you get four or five, you get the color. If it's a three or two split, then we have a debate.
The business of art or the art of business -- when we come back, we find out which world capital could be picked as the location for the next Guggenheim Museum. And you're in for a surprise.
(COMMERCIAL BREAK)
QUEST: An announcement today was made in the Finish campaign, Helsinki, which could be a change for the skyline. Helsinki is being eyed up by the world famous Guggenheim Foundation to perhaps house its next international museum. The two have agreed a one year, multi-million dollar study to decide whether or not Helsinki will be the next home for a Guggenheim Museum.
(BEGIN VIDEOTAPE)
QUEST (voice-over): Say the name Guggenheim and you think iconic museum buildings in New York and Bilbao, soon to be joined by the vast new Frank Gehry designed Guggenheim being built in Abu Dhabi. Now, Helsinki is paying $2.5 million for a study to show why this capital city should become the northern outpost of the Guggenheim Group.
JANNE GALLEN-KALLELA-SIREN, DIRECTOR, HELSINKI ART MUSEUM: The possibility of envisioning the future in collaboration with the Guggenheim is a unique opportunity, one of the most historic cultural opportunities that Finland has had in its -- during it's -- during the course of its independence, in my opinion.
QUEST: The Guggenheim receives lots of requests from cities seeking a museum -- roughly one inquiry every three months. For the museum, Helsinki is different.
RICHARD ARMSTRONG, DIRECTOR, GUGGENHEIM FOUNDATION & MUSEUM: We thought it was an interesting city, a nation well placed at a new crossroads in the north, a highly literate population and lots of ambition.
QUEST: The one year study will extreme what sort of museum would be right for Helsinki. Ever the optimist, Helsinki's mayor is already thinking about where a famously designed building might be put.
JUSSI PAJUNEN, HELSINKI MAYOR: Having witnessed Bilbao and seeing the -- the combination water and the museum, it's very natural to study different locations at the waterfront. And this is a very potential place.
QUEST: With five facilities worldwide, the Guggenheim has been accused of over stretching its brand, becoming the museum equivalent of McDonald's.
ARMSTRONG: Well, that might be one way of looking at it. We'd say enhancing the capacity for contemporary and modern art to reach a large audience.
QUEST: This is only a study so far. If the project goes ahead, it will be at least 2018 before any museum opened its doors.
(on camera): Bearing in mind what the name Guggenheim has done to other satellite cities, here in Helsinki, they believe a Guggenheim, possibly on the harbor, is just what they need.
Richard Quest, CNN, Helsinki, Finland.
(END VIDEO TAPE)
QUEST: And the only thing I can tell you about that, wish I was in Helsinki yesterday, is that it was very cold. But it's amazing, isn't it, what long underwear can do. I never thought we'd be discussing long underwear at this time in the proceedings on QUEST MEANS BUSINESS.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes.
QUEST: Well, listen, I'll tell you, you need your thermals...
ARDUINO: Wait a minute...
QUEST: -- in that sort of (INAUDIBLE).
ARDUINO: I wore long underwear when I was in the military, mandatory military service in Argentina, of all places, in the winter, eh?
QUEST: I think that's just put me off my dinner tonight...
(LAUGHTER)
QUEST: -- the thought of
(LAUGHTER)
QUEST: -- the thought of you.
All right, listen -- listen, so what's -- but I have to tell you, they know how to handle snow in Finland...
ARDUINO: Oh, no doubt.
QUEST: When the snow falls, they know.
All right, what have you got for me tonight?
ARDUINO: Well, Helsinki is going to continue to be extremely cold. And now, that wide area of cold air is expanding all the way into Southern France. So the cold is coming back, unfortunately.
Let's see, parts of England are going to be affected by this and especially Germany. Ramstein was reporting some snow. This is the change that we see and it's going to start now dipping the temperatures even lower. So this is the scenario we're going to see.
Look at Berlin, for example. It's going down from four to zero on Friday. Then we have Brussels from six to three. And in some places, we're talking about below average. Dublin stays the same because it is far away from England with respect to the mops -- the maps. So you see that we have it here.
London stays, also, cooling down, but not significantly, especially if we compare that with other places; and Paris, also, it's going to get cold.
The snow is going to be in the Alpine Region, parts of France, Germany again, and the east. So the west gets a little bit of a break. But we see the winds. They are not going to complicate significantly travel plans, but if you are in Paris, if you are in London, you're going to see the fruit -- the breeze. All the other airports are going to be OK for the next 24 hours. So we don't see big problems.
Also, the cold air continues for China and the snow continues for Japan, because when you compare the temperatures that we have in Japan with China, you probably see like 10 degrees in Tokyo, for instance, seeing a lot of snow. Now, China is really cold. We see minus 11 at this hour in Beijing.
You know what time it is in Beijing?
2:49 in the morning into Wednesday, right?
And we are going to see, also, snow there in China, bringing the -- the Arctic conditions that will remain in here, so the Korean Peninsula and Japan with cold and snow and then some more snow in central parts of China and rain on the coastal parts of that country, as well -- Richard.
QUEST: Many thanks, indeed.
ARDUINO: You're welcome.
QUEST: We will watch that cold weather closely. It's nearly spring.
OK, Guillermo at the World Weather Center.
We are not amused -- Ricky Gervais ruffled lovey feathers in Hollywood at the weekend. He was giving, of course, the Golden Globe Awards. It just shows you can't be too careful when making a speech.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, COURTESY HOLLYWOOD FOREIGN PRESS ASSOCIATION/DICK CLARK PRODUCTIONS)
RICKY GERVAIS, HOST, 68TH ANNUAL GOLDEN GLOBE AWARDS: Also not nominated, "I Love You, Philip Morris," Jim -- Jim Carey and Ewan McGregor, two heterosexual actors pretending to be gay. So the complete opposite of some famous Scientologist then.
(BOOS)
GERVAIS: Probably.
(END VIDEO CLIP)
QUEST: So, you could hear the sort of laughter. Some say it was forced -- but the groans. Viewers at home enjoyed it, perhaps, Ricky Gervais' Jones did not -- Ricky Gervais' jokes did not go down well, like the proverbial lead balloon -- at the Golden Globe Awards on Sunday.
What's the right way to handle a lucrative public speaking gig?
In Southern California, John Vorhaus is the author of the book, "The Comic Toolbox: How To Be Funny Even if You're Not."
The temptation is always to push the envelope in a speech. Tell me once and for all when should you not.
JOHN VORHAUS, AUTHOR, "THE COMIC TOOLBOX": When you don't want to lose the audience's alliance and allegiance.
QUEST: Do you...
VORHAUS: When you want to keep them on your side.
QUEST: Do you think he did that last night, Ricky Gervais?
VORHAUS: He -- you could hear it. That was the sound you heard. It wasn't laughter, it wasn't groans. It was the sound of the audience mentally leaving the building.
QUEST: It was a risk, but it could have gone his way. He could have been thought of as edgy, exciting, different.
VORHAUS: Well, I'm not nearly as smart and sophisticated as Ricky Gervais. I can only assume that he knew exactly what he was doing and that he had an intent -- an intent and set out to achieve it.
If I were in that room, my intent would be to win the audience's loyalty, get them on my side, get them in concert with my goals and -- and work -- have them work with me to achieve those goals. So the last thing I'd want to do is add -- alienate them.
QUEST: Let's talk more generally, then, about this, because it's a fascinating -- those of us who actually have to, you know, occasionally give the odd speech, whether it's after dinner or at a conference, I mean you do walk this narrow line. You want to be different, you want to be imaginative, but you want to be liked.
VORHAUS: Well, there's one trick you can always use and it never fails, and that is make a joke at your own expense. I'll give you an example. I was giving a speech in Romania. And, of course, I didn't want to come across as a -- an imperialist American. So I made the point -- and I think it's a valid one -- that most Americans couldn't find Romania on a map of Romania.
(LAUGHTER)
VORHAUS: Thank you. Thank you for the laugh.
I mean it made the point to the audience that I was aware of our cultural relationship, that America has a reputation for being both culturally imperialistic and culturally ignorant. And in that moment, I really won their loyalty. They -- they came away from that moment with a thought of hey, this guy is on our side. He understands what we are -- what we are in the eyes of Americans.
QUEST: John, you pandered to the audience and they liked you.
But did you push any boundaries?
Did you actually -- did you actually move -- move the needle, if you like?
VORHAUS: I have been in circumstances where pressure is necessary, but only as a last resort. I think it's a matter of style.
QUEST: Right.
VORHAUS: It's a matter of what -- where your strengths are. I'm not good at pushing the needle, so I don't do it.
QUEST: Finally, if you had been Ricky Gervais last night and you had sensed that the -- the room was going against you, what would you have done?
VORHAUS: Acknowledged it immediately. Simply said, well, that didn't work or, you know, in -- in funny terms. This is something that standup comics know very well and international speakers know very well. Sometimes you make mistakes. Sometimes you go too far. Sometimes you tell a joke that doesn't work because you don't have the right cultural references.
If you feel the audience disconnecting from you, if you feel that you're losing their loyalty, that's the time to say, well, I really went too far. I really stuck -- stepped...
QUEST: All right...
VORHAUS: -- stepped on -- who my -- my mouth.
QUEST: We thank you...
VORHAUS: (INAUDIBLE).
QUEST: -- you certainly didn't do that for us tonight.
Many thanks, indeed, for joining us from California, where, as John and I were just saying a moment ago, they're not wearing thermal underwear. Well, not because of the cold, anyway.
In a moment, back.
(COMMERCIAL BREAK)
QUEST: As always on QUEST MEANS BUSINESS, we like to hear from you, the viewer. This Thursday, Ali Velshi and I will be competing with our knowledge on a subject you choose. It's the weekly segment, Q&A, Quest and Ali. And we'll tell you what we know about in one minute flat and then we go through our paces in the grueling quiz.
So, please, let me know what you'd like us to talk about in the realms of business, travel, innovation. You can go to CNN.com/qmb. You can send a Tweet with the hashtag, CNN.qanda. And that, of course, is every Thursday on QUEST MEANS BUSINESS.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
As always, whatever you're up to in the hours ahead, I do hope it's profitable.
"PIERS MORGAN TONIGHT" launches in a moment with the first episode after the news headlines.
END
