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QUEST MEANS BUSINESS
Rupert Murdoch Blamed Staff for Phone-Hacking Cover Up; Choppy Session for European Markets; AstraZeneca Issues Profit Warning
Aired April 26, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST: A culture of cover up. Rupert Murdoch says it was there, but he wasn't part of it.
The problem is Europe. Alcatel-Lucent blames the stagnant economy for disappointing results.
And the value of virtue. Richard Branson tells me why philanthropy is good for business.
I'm Max Foster, and this is QUEST MEANS BUSINESS.
Hello to you. Rupert Murdoch admits there was a cover up at the "News of the World" but that he was a victim, not the perpetrator. The founder of News Corp apologized for his handling of the phone-hacking affair, but says he was largely shielded from what was happening there. For that, he blamed one or two people he refused to name.
Murdoch was back in the stand at Britain's Leveson inquiry into media ethics on Thursday. He said if he had known the extent of the problem at the "News of the World," he would have torn the place down. He conceded that he panicked when he shut down the paper, and the whole business was a serious blot on his reputation.
On his interactions with Gordon Brown, he says he stands by every word on his previous statement, that the former British prime minister had declared war on News Corp. Our Senior International Correspondent Dan Rivers has been following the story for us. So, the response from the Murdoch comments have been coming in, right?
DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: That's right, and basically, Rupert Murdoch, for the first time, has used the phrase "cover up." That's something that his enemies have been throwing at him for years, really.
Now, finally, we know, according to Rupert Murdoch, there was a cover up. The question is, who was involved?
Rupert Murdoch today was partly blaming the editor that was brought in after Andy Coulson was fired. This guy, Colin Myler, who he says didn't pass on key information.
(BEGIN VIDEO CLIP)
RUPERT MURDOCH, CHAIRMAN AND CEO, NEWS CORP: -- with specific instructions to find out what was going on. He did, I believe, put in two or three new -- sort of steps of regulation, if you like. But never reported back that there was more hacking.
(END VIDEO CLIP)
FOSTER: Well, the editor, then, in the firing line, but it's a large organization. Anyone else feeling the heat?
RIVERS: Absolutely, yes. Colin Myler, his lawyers have -- have put out a statement this evening to us -- well, not a statement, saying "no comment." But in the past, they've denied that saying they did tell Rupert's son, James, about the widespread nature of hacking.
Tom Crone is the other guy in the firing line. He was the legal affairs manager who'd been there for decades. Also in the past had claimed that he also was in a meeting where he told James Murdoch. This evening, Tom Crone putting out a statement saying, "The assertion that I took charge of a cover up in relation to phone hacking is shameful lie."
This is pretty strong language. These are people who used to work together, colleagues, talking about their boss. It's now open warfare, really.
FOSTER: It seems that a lot of people that were very close to Murdoch before, he's now turning on. Is this -- is this a strategy?
RIVERS: Well, I think that the main thing he is desperate to avoid is to implicate his son James. He wants to put an absolute firewall between people lower down the pecking order and his son, James.
The worst-case scenario for him is that this can be traced, this cover up, by his own admission, there was a cover up, it can be traced higher up the chain of command to his son, although his son denies it. The ultimate nightmare for him is that it comes back to his own doorstep.
FOSTER: A huge week in the Leveson inquiry, big week for British media ethics, a big debate going on there. What have you learned, do you think, from the -- the appearances of the Murdochs this week?
RIVERS: Well, on some levels, I was amazed by how little grip on some details Rupert Murdoch had. He is supposedly the world's most powerful media baron, a man who has tens of billions of dollars of assets at his disposal, yet who couldn't remember key details who, for example, couldn't remember who won the general election in 1992, whose papers it is claimed, decided elections. Yet he seemed to have very little grip of some of the key details of recent political history.
FOSTER: It's been an interesting week. Dan, thank you very much, indeed.
Now, there's a gloomy feeling hanging over Europe, and confidence is dipping. Next, we'll look at what's sapping sentiment.
FOSTER: The numbers for the European Commission confirm it: Europe is feeling gloomy. Economic sentiment in the eurozone fell to 92.8 in April from 94.5 in March, that's the lowest reading since December, the worst the economists were expecting, crucially.
The reading for the wider euro area was stable, but the commission says that's because of a strong improvement here in the UK actually.
Now, stocks suffered. It was a choppy session with the block's major indices ending mixed. The DAX was boosted by an 8.7 percent jump in Volkswagen. Thanks to better than expected earnings, miners and oil companies rallied in London. Dutch -- Royal Dutch Shell jumped more than 3.5 percent. Randgold Resources gained more than 5 percent.
AstraZeneca was the worst performer on the FTSE, down more than 6 percent. The drug maker reported a slump in first quarter profits due to a loss of patents and challenging market conditions. AstraZeneca also cut its full-year outlook and announced chief executive David Brennan is retiring from his post.
Bob Parker joins us, advisor -- senior advisor at Credit Suisse. Thank you very much, indeed, for joining us.
BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: Thank you.
FOSTER: I just want to look at what's been going on this week on an economic level across Europe, because you've got the Spanish situation, recession -- British recession, you've got what was going on in the Netherlands' politics, but concerned about how to deal with the economy. Lots of politicians talk about growth but austerity at the same time. Are they compatible?
PARKER: I think you've actually got a very interesting shift in policy, potentially, by the European Union, and I think what was critical was the speech made by Mario Draghi, head of the European Central Bank, earlier this week where he said, which I think all of us would agree with, was that so far in dealing with the eurozone crisis, the whole focus has been on fiscal austerity.
Now the problem is, a number of economies, like Spain particularly, but increasingly I think you're going to see a similar situation in France and the Netherlands, that austerity program is a catch-22, in the sense that it is driving the recession to even greater depths, therefore actually it's slowing down the improvement in the fiscal situation.
So, Mario Draghi said, look, we need not just an austerity program to deal with the fiscal problems, but also we need a strategy for growth. Now, obviously, that's been left open, because you have to ask the question, well, what is the strategy for growth? And we haven't seen any detail on that yet.
FOSTER: But explain to me, aren't they conflicting aims, growth and austerity?
PARKER: The answer to that is, structural reform is needed in Europe to deal with these budget deficits. Structural reform is also needed in a number of countries to deal with competitiveness.
FOSTER: Which is a long-term -- it will have a long -- it's got a long-term aim.
FOSTER: But we're concerned about the shorter-term pain.
PARKER: Well, I think in terms of the shorter-term pain, what we'll probably see in Europe over the coming months is a further easing in monetary policy by the European Central Bank.
FOSTER: It's the only solution, realistically, isn't it? Just printing more money whilst the austerity program continues.
PARKER: Well, and also the European Central Bank may cut interest rates. Don't forget, interest rates are still 1 percent, so there is scope to cut them.
I think also on the fiscal side, there may well be an agreement to slow down on cutting the budget deficits, and there may be a shift in policy towards an acceptance that cutting the budget deficits too aggressively is going to make the recession even worse than it is. And as you reported just a moment ago, the economic data out of Europe remains very recessional, indeed.
FOSTER: And are you concerned about all the political eruptions in Europe right now? Not knowing who's going to be president in France and what's going on in the Netherlands. There's a lot -- some instability, some would argue, here in the UK, as well. How much -- how damaging is that economically speaking?
PARKER: Well, a number of times, political factors affect markets. And that is happening at the moment. The opinion polls show that Mr. Hollande has a clear lead. That may change, but frankly, I doubt it. I think we have to assume that Mr. Hollande will be the next president of France.
Mr. Hollande has got a very clear agenda. I think that that may discourage investors by -- from putting money into French bonds or into French equities. Likewise, this political uncertainty in the Netherlands will discourage foreign investment.
And the general rule is that when you have either adverse political developments or political uncertainty, it discourages investment, and that in turn compounds the economic downturn.
FOSTER: It's a bit grim, really, at the moment?
PARKER: I'm afraid I could be -- I wish I could be more optimistic.
FOSTER: OK. We'll keep -- bring you back for updates. Bob Parker, thank you very much, indeed.
PARKER: Thank you.
FOSTER: The CEO of Alcatel-Lucent says Europe is simply not moving at all. Ben Verwaayen says uncertainty in the markets is still high, and his company released some tough figures for the last quarter.
Profits were down more than 50 percent compared to the previous three months, revenues down more than 20 percent, although the company is leaving its guidance for the year as a whole unchanged.
By Ben Verwaayen's own admission, it's a slow start to the year for Alcatel. He told me earlier where he felt the problems lay.
BEN VERWAAYEN, CEO, ALCATEL-LUCENT: There is a 4G market in the US, for example, where we have networks that we deploy. The deployment of broadband is going to happen. The problem is Europe. Europe is not moving.
FOSTER: You've admitted --
VERWAAYEN: That's the summary.
FOSTER: -- that your gross margins aren't really where you'd like them to be right now. You talk about Europe, so this is a pan-European economic problem that companies like yours are dealing with. It's not particularly in reference to your company.
VERWAAYEN: No, the challenge is for the industry. Actually, the challenge is for policymakers, regulators, and industry. If we take it serious what we wanted to do in Europe, which is the 20/20 plan, then of course we must ensure that everybody gets access to what is defined as a high-speed broadband access network.
And we are miles away from that because there is no business model, there is no business plan, there is no investment going on. That is not a technology issue, that's not a supply issue. It's much more an investment issue where companies have to make investment decisions and have to balance what technology can do or what they have to do for the shareholders on dividend.
And in Europe, there is a different set of criteria than you find in other markets. And the result of that is that we're miles away from getting this broadband infrastructure.
FOSTER: So, what countries -- regions are you really looking at, now? I know that China's interesting to you, Latin America, Japan. Is that where you're focusing your growth?
VERWAAYEN: Our biggest market is the US, and the US is doing terrific for us. And we expect that to continue in 2012 and 2013. The second market we're looking at is China, and as I explained, there is a calendarization issue. And then we have other markets in Latin America that are very promising and growing.
If you look to our product portfolio, some of the -- let's say the legacy products are subdued, but some of our latest, newest technology, our -- our routing business is booming. It's 23 percent up in the quarter.
So, we have a pretty good roadmap, so to say, and we're looking to many of the markets. But we need all of the markets, of course, eventually. And that worry that they have about the climate in Europe is that the unpredictability of the -- what happens will -- may affect the sentiment that you will find in the market, as well.
Not so much for us Alcatel-Lucent on a day-to-day basis, but you talk about companies that have to make long-term investments, capital investment, and they need to have some certainty in what type of market they're going to make those investments.
FOSTER: And with so much uncertainty around, are you able to make profit targets now, or have you given up on that idea?
VERWAAYEN: No, I've not given up at all. We have -- as we said, we have not changed our outlook. We said in our outlook that we will have a robust financial performance on cash, and we will have a robust -- that means better -- financial performance than we had in 2011 in 2012. And we have not changed any of that outlook.
FOSTER: Ben Verwaayen. Now, a Currency Conundrum for you, now. In which of these countries did the currency once have "To counterfeit is death" printed on it? Was it England, Soviet Union, the United States? We'll leave that one with you.
Whilst you're thinking about that, let's take a look at the foreign exchange moves today. It's all quiet on the European front, and the euro and -- the euro -- pound are both holding steady against the US dollar. Right now, a euro will buy you $1.23.
There is a big move with the yen, though. It's currently up by around two fifths of a percent against the dollar, and we could see more big movements on Friday, the Bank of Japan's policy meeting.
FOSTER: The Dow is struggling to gain ground after some disappointing results from one of the world's biggest companies. Exxon Mobile, the largest oil company in the world, made almost $9.5 billion, that's down more than 11 percent, though, from last year and short of expectations.
UPS earnings were up ten percent at a dollar per share, which is one or two cents short of what analysts were hoping for. Better news for the drug makers Bristol-Myers Squibb. Their earnings were up 12 percent, and that was enough to beat the Street's expectations.
So, how is Wall Street reacting to the first big real misses of the year so far? Alison is at the New York Stock Exchange. What did you make of it, Alison?
ALISON KOSIK, CNN CORRESPONDENT: Well, the markets certainly aren't, apparently, bothered by the big misses by these big companies. You mentioned Exxon Mobile, and you'd think that Exxon would be raking in the money with oil prices being so high. But profits actually fell for Exxon Mobile 11 percent from a year ago, and there are a few reasons why.
First of all, production fell 5 percent because -- partly because OPEC trimmed its production output and, obviously, you make less money if you produce fewer barrels of oil. And Exxon's expenses rose. Costs at its exploration and production business rose 10 percent.
But want to put this in perspective for you. Exxon still posted a huge profit because of those high oil prices. Exxon pulled in about $9.5 billion during the quarter. The thing that Wall Street is seeing and the reason why you're seeing the stock down about 1 percent right now is just that Wall Street was looking for more out of Exxon Mobile.
We're also keeping any eye on UPS shares, which are falling 2.5 percent after it missed on profits and sales. And as you mentioned, Max, profits did rise from a year ago, but still came in shy of Wall Street's expectations. Slowing Asian exports hurt results. Shipping volume was pretty flat between US and Asia and Europe and Asia.
And inside the US, though, shipping volume did rise, but the average revenue per package rose just 1.6 percent. And UPS says that's because of the rapid growth in online sales, where packages tend to be light, and therefore not that expensive to ship.
Of course, UPS is often seen as a barometer of the bigger economy, so its miss could be taken as a troubling sign, but the company looks like it was fairly optimistic going forward in its guidance, in fact, affirming its full-year guidance. Max?
FOSTER: OK, Alison, thank you very much, indeed, for that.
Well, you don't have to be in Wall Street to understand earning season. You just have to follow our Q25, 25 companies, 25 sets of results, two colors, red and green. We decide which companies deserve what color. It's been a surprisingly good start so far. Let's see if the red chips will catch up.
As always, Maggie Lake is here to guide us through all of these numbers. And Maggie, let's start with Exxon Mobile, because surely it should be capitalizing from these prices of oil.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: That's right. And we don't have to spend too much time. Alison just went through the details. But if you cannot make money hand over fist when you have oil trading well above $100 a barrel, people are not going to be happy about it.
And the reason is that drop in production. That's what oil companies do. So, Exxon Mobile, two out of five. It was up for debate, but we're going to give this one a red.
FOSTER: OK, and in the red goes, then. And UPS, it's always disappointing, whatever the results are. It's about expectations, isn't it? And that's the problem here.
LAKE: Yes, that's right. And this is not up for debate, an automatic red, one out of five. And the thing to really take away here, what I'm watching is this isn't just bad news for UPS, this is bad news for the global economy. This is a barometer because it ships everywhere. It's a good gauge of economic activity.
Big slowdown in Asia, which you could read as China. And you know, Max, a lot of the green colors that we had -- that we had before riding the high, the wave of China strength. So we're going to -- it's going to be interesting to see if companies can readjust and make up that growth elsewhere. Certainly not helping UPS this time around.
FOSTER: OK, Maggie. Another red there, then. Let's talk about Pepsi, because Pepsi's a company that can do well whether it's a recession or not, right? So, how's it faring at the moment?
LAKE: Not great. It's another red. We're sort of on a theme here and catching up quickly. This one again, not up for debate at all. They didn't meet one of our criteria. And the problem here is a Pepsi problem, as we know, it is a challenging environment, emerging market growth has been pretty strong, they did OK.
But they're losing the cola war to Coke, which is not great. They're trying to change that, but they're not quite there yet, so it gets a red.
FOSTER: Another red. Maggie's being ruthless today. Bristol-Myers Squibb, always interesting to look at them, but they've -- they did better than the analysts expected, so that's the -- that's the main thing for them, isn't it?
LAKE: It is, and this one was up for debate. They did do better. It's only a two out of five, it's not a terrible story all around, Max. You know with the drug companies, it's all about those patented drugs, those lucrative drugs they have exclusive rights to. They're losing Plavix, which is a big seller for them.
Analysts do like what the pipeline looks like. It looks like they're sort of replacing that. They've got some promise of cancer drugs, but it's not feeding into results yet, and it always comes down to show me the money.
So, two out of five, all things considered, though, I think we're going to have to wait before we give them a green today. Get a red this time, but maybe they'll get out of it next year.
FOSTER: We're going to run out of reds at this rate, Maggie Lake. Deutsche Bank, I mean, they're terrible results, aren't they? They're just doing so badly, but explain the thinking behind the red here.
LAKE: Europe. Do we have to say anything else? Deutsche Bank has its problems. They're doing a little bit worse than some other peers in the field, especially when you look at some of the global behemoths.
But everyone sort of hurt in the financial sector which, by the way, was a really good performing sector stock-wise in the run up we saw through the end of last year, catching up.
But Deutsche Bank really, really plagued by the uncertainties that are facing Europe. I don't believe that they got any of our criteria -- no, they got one out of four. But that's not enough to get them a green, Max.
FOSTER: It's not redeeming enough. Maggie, off day, all reds today. How representative is that of the earning season?
LAKE: You know, it's -- we're going to have to check, because we started out doing really well, at least on the US side here. Remember, it's some US, some Europe. So, maybe that's where we're seeing the disconnect in our Q25 versus what we're seeing in the S&P 500.
In general, companies were doing pretty well, beating. It looked like a much better earning season than people had expected. But today, the tail really turned, as you heard Alison saying, as well. We had a lot of disappointments coming from some big companies.
So, we're going to have to wait until tomorrow before we stack it all up, but globally may be a different picture, Max, then when you just focus on the US which, although isn't going gangbusters, is holding up the economy here. But Europe a problem, and slowing China feeding into this quarter, which is very interesting.
FOSTER: Good stuff. Maggie Lake, thank you very much, indeed. Let's look at the tally then. The red slightly ahead, but as you can see, as Maggie was saying, it's pretty finely balanced at this point in the season.
Now, we may be talking a lot about numbers, but some leaders think there's more to business than just the bottom line. We'll talk to Richard Branson next, about how he hopes to make a positive change.
FOSTER: Welcome back. I'm Max Foster, these are the headlines this hour.
An international war crimes tribunal has delivered a guilty verdict against Charles Taylor. The former Liberian president and warlord was convicted on 11 counts for aiding and abetting rebels in Sierra Leone during that country's civil war.
Anti-government activists say fresh clashes in Syria have claimed at least 20 lives this Thursday. Video posted online appears to show tanks and troops patrolling the city of Duma. Meanwhile, Syrian state media report that terrorists are behind bombings this week in Hama and Aleppo.
There have now been at least three bombing attacks in two Nigerian cities on Thursday. Police say two of them targeted the Abuja and Kaduna offices of a popular newspaper. Seven people died in those attacks, including a suicide bomber. Later, a third blast was confirmed in Kaduna that injured three people.
Pakistan Supreme Court has convicted prime minister Yousuf Raza Gilani of contempt, but he doesn't seem too bothered by it. He walked out of court smiling and waving, vowing to appeal and to remain in office. The justices convicted him of refusing their order to restart a corruption investigation against Pakistan's president.
The former legal manager of the defunct "News of the World" says allegations that he helped cover up phone hacking at the tabloid are a "shameful lie." Tom Crone was responsible -- was responding, rather, to testimony by Rupert Murdoch. The News Corp chief told an independent inquiry into journalist ethics that one or two individuals at the tabloid participated in the cover up.
A force for good, not just for profit. The US government is getting serious about how businesses can make a positive impact on the global economy. It asked 250 top leaders from around the world to come together to collaborate on the Global Impact Economy Forum in Washington.
Richard Branson was one of the guests there. I spoke to him a little earlier and started off by asking him how he would define the impact economy.
(BEGIN VIDEO CLIP)
RICHARD BRANSON, FOUNDER AND CHAIRMAN, VIRGIN GROUP: That's an interesting question. I think the -- that most businesses should be impactful and making a difference on other people's lives. Otherwise, there's not much point in actually setting up a business. But having said that I think there are some businesses that make enormous amounts of money that are not necessarily making an enormously positive difference in other people's lives.
And I think those businesses need to try to see if they can actually get out there, use their entrepreneurial skills to tackle some of the intractable problems in this world and not just leave it up to politicians and social workers.
And I think that, by doing that, they'll then have a highly motivated workforce who will be much more committed to their -- to the brand and the company they're working for than if it's just a moneymaking scheme.
FOSTER: We're not talking here about philanthropy, are we? We're talking here about a commercial investment but playing into that decision is a community or a society. So perhaps it would be a factor in one area rather than another. Am I reading it correctly?
BRANSON: Yes, it can be both. I mean, you know, at Virgin we've got organizations like The Elders or the Carbon War Room that we set up on a non-profit basis. We run them like businesses. One is going out to try to help conflicts in the region, in the world. The other one's going out to try to get on top of global warming.
But we also have a lot of for-profit ventures, which are trying to help with issues like health prevention issues, getting people healthy, tackling a whole range of problems around the world, and what we as a company try to do is think, you know, you've only got so many hours in the day.
Let's use our money to make a difference in the world, not just to make more money, but to really try to solve some of the problems of the world.
FOSTER: Secretary Clinton seems to be suggesting that it's also about going out, perhaps poorer areas, and investing in those areas, so creating businesses in those areas, which might be purely commercial, but allowing that local community to feed off the business at the same time. Is that the impression you get? Is that what she's working towards?
BRANSON: Yes, I mean, I think if people can just get out and -- I mean in Africa is a good example. They, you know, the Chinese and Indians are investing in Africa. Europeans and Americans are not, I think, investing enough in Africa.
And so we've got to be braver. We've got to be bolder. We've got to get out there and help get people employed. If people get out of the poverty trap, if they get employed, they'll have less children and then in the long term, obviously that would be good for the world.
So we must get out and -- out and invest more. But also I think as business leaders we have entrepreneurial skills, and we need to try to use those entrepreneurial skills to try to tackle some of the major problems in the world and not just the politicians or social workers should do that. And I just -- but I have a book called "Screw Business as Usual," and that's -- we're trying to encourage people to do that.
(END VIDEO CLIP)
FOSTER: Always plugging things, Richard Branson.
Now carmakers at this year's Beijing Auto Show have tried to impress the crowds with an emphasis on big, bold and flashy. The show features more than 1,000 vehicles from over 100 manufacturers are going beyond horsepower and turning, would you believe, to Chinese astrology to impress the petrol heads.
(BEGIN VIDEO CLIP)
EUNICE YOON, CNN CORRESPONDENT: I'm Eunice Yoon at the Beijing Auto Show. Now while the U.S. and Europe are stalling, many carmakers the world over are looking to China to drive their sales. And in this Year of the Dragon, many are hoping to entice Chinese customers with icons of the mythical creature.
After a turnaround in fortunes, Chrysler is marking its comeback to the Chinese market with a new Jeep Wrangler emblazoned with a dragon. The animal, a symbol of luck and power here, wraps around the side and the hood of the all-American car.
MIKE MANLEY, CEO, JEEP: What we're finding is that many of the Chinese customers are looking for vehicles that they're, you know, are tailored or customized for them.
YOON: Luxury automakers Rolls-Royce and Ferrari say some of that magic has already spread to their high-end cars. Rolls offered a line of dragon-logoed Phantoms, which sold out in weeks.
So you don't think that it's more like a stereotype or something, that Chinese would like a dragon?
TORSTEN MULLER-OTVOS, CEO, ROLLS-ROYCE MOTORCARS: No, no, no. I would say it is very much about the beauty of the dragon.
YOON: Ferrari is unveiling 20 limited edition Marco Polo red gold- rimmed (ph) cars with the legendary dragon blended with the prancing horse.
UNIDENTIFIED MALE: He is the dragon and the horse, which is our logo.
YOON: Aston Martin, the maker of James Bond's famous wheels unveiled the mystery around its dragon (inaudible). The Dragon 88 features some special dragon details. There's an embroidered gold dragon on the headrest and on the dashboard, special gold inlay. But not all Chinese consumers want a dragon on their car.
UNIDENTIFIED MALE (through translator): It's too unfashioned (ph). Traditionally Chinese don't put dragons on their personal belongings.
YOON: More evidence that car brands need to do more to find out what gets the Chinese fired up.
(END VIDEO CLIP)
FOSTER: Next, don't bin it, bring it. The CEO of Marks & Spencer tells us why we should be "shwopping," not shopping. (Inaudible).
FOSTER: Earlier, we asked you our "Currency Conundrum," and which of these countries did the currency once have "To Counterfeit Is Death" printed on it?
England, the Soviet Union or the United States? The answer is -- well, it's not straightforward, actually, it's both A and C, in England and the United States counterfeiting was once punishable by death. It was probably quite a bit easier to do that then as well.
Now you make think your old wardrobe is past it. But Marks & Spencer thinks it's absolutely fabulous.
(BEGIN VIDEO CLIP)
FOSTER: She was the star of that show at one time, if you didn't know it. Today, actress Joanna Lumley joined the retailer's CEO in London to launch "Shwopping." Marks & Spencer says every five minutes the U.K. throws out enough clothes to completely cover a street, building, pavements and all.
To highlight that fact, that's exactly what they did. "Shwopping" is all about parting with unwanted clothing when you buy new stuff. Marks & Spencer CEO Marc Bolland says it's about giving your old wardrobe a second life.
MARC BOLLAND, CEO, MARKS & SPENCER: Consumers are worried about waste. That's the number one item that people are worried about. So what we have shown you here on the background -- and that's why we're here in London in the rain, is that this are 10,000 garments that we've put down, 10,000 items go to landfill every five minutes.
So what we are actually hoping to do is to get people to shop with us and to bring a garment that they don't use any more when they buy something new. And every garment a customer brings to us will be going to charity through Oxfam and will be either resold, reused or recycled. And all the benefits will go to charity. So not to Marks & Spencer's.
So what we want is want people to walk in and with their left hand, they just hand over in a box that we have there, where they will be shwopping, because that's the new word -- we launched the word this morning -- shwopping is what people do.
So they'll bring actually a garment. They'll drop it in a box. And at the same time, they're buying something. So at every checkout of Marks & Spencer's you will find a box where you can shwop. When we talk about the seriousness of the environment, it's about acting today.
It's not about looking at the economy when it's better tomorrow or yesterday. You and I know that 15 years ago, we didn't know how to recycle our bottles. That became habit now. We all know how to do that. We need to do it with clothing exactly the same.
Our dream is that any garment that we sell, we'll get a garment back. Yes, it will give us 350 million garments back a year, but they'll all have a second life. We'll have to give these garments a second life.
FOSTER: Did he say that twice? A second life twice? That was ironic.
Jenny Harrison is at the weather center.
Jenny, I want to talk to you about the rain, because there you have the chief executive of Marks & Spencer's having his day ruined by it.
And I've heard this ridiculous phrase, the wettest drought in British history. What does that mean?
JENNY HARRISON, CNN METEOROLOGIST: That's actually that's very interesting. I guess that's been in your tabloid press or something. You know, I think I know where that's -- I've not heard that till you just said it.
But I think it's because, guess what, there are still a (inaudible) ban across parts of central and southeastern England, despite the fact the last few days we've actually seen the average total April rain in literally the last couple of days. So that is probably where it's coming from. And it just seems incredible, doesn't it?
When you have this amount of rain and these strong winds, but the rain in particular, that you've still got a drought in place. So you've got to bear in mind, the drought is not just top of soil. It goes way down there and it is going to take a lot of rain to actually really bring the water table back up. That is probably what they're talking about.
But I get that phrase. I can just imagine as well it being said. But so you can see the wind gusts. They have been pretty strong. And again, you know what, you get strong winds, the wind really pulls -- dries up the soil and the land as well. So then the water has to replenish all of that.
But look at this, 119 kilometers an hour up in the (inaudible) of course, but even so, pretty strong wind gusts. The winds are easing, still pretty strong along the east coastal areas, along northern France and the south of the U.K., of course, there in along the English Channel.
So the winds not as strong as they were, but the system is still very much in evidence, just sort of blustery conditions really over the next couple of days. And there it all goes. There is that rain we've seen pretty heavy rain and persistent rain for the last couple of days, but really, we're probably week two now of this same weather pattern.
So the last 24 hours, here are some of the totals that have come down, rather huge amount. But of course, it has been adding up over the last several days. This is what's going on.
We're in this sort of -- this deep trough going on and all these areas of low pressure, just sort of sitting here and tending to not really move very far, because they're being blocked by the high to the east, and also say the jet stream is very far south. But it is allowing those systems to plunge southward.
Meanwhile, across the east, we've got some pretty hot air in place. The temperatures are rising as well. It does mean because see one or two scattered thunderstorms. Meanwhile, the systems still continue in the northwest.
But look at this on the temperature trend for the next couple of days. The average across the far northwest of Europe, but well above average across east central Med and central and eastern Europe. That means the temperatures are well above average.
Berlin, for example, by Saturday and Sunday, mostly sunny, temperatures a good 10 or 11 degrees above average, Warsaw getting even warmer by Sunday and Kiev, my goodness, you have some fluctuation in your temperatures this year, 25 Saturday and Sunday, 10 degrees above average.
Delays at the major airports, there are pretty few and far between really on Friday. The really bad weather is, of course, easing all the while. There is the rain coming in again to all those drought-ridden areas and there are the temperatures, 14 in London. I hope that answers your question, Max.
FOSTER: It does, Jenny, but I don't think you should become a weather term, the wettest drought, doesn't really make sense.
HARRISON: No, you're absolutely right. But --
FOSTER: If it does make sense.
HARRISON: It doesn't make sense. No, I agree with you, but I think that's where it's coming from, because it's been so wet but there's still a drought. People don't get it, but yes, you're right.
FOSTER: Jenny, thank you very much.
Just some news in from AFP, the news agency quoting parliamentary group leaders, the Dutch parliament has reached austerity budget deals, so a big moment in European politics, actually, this week. More later. That is QUEST MEANS BUSINESS for now. I'm Max Foster. "MARKETPLACE EUROPE" is next.
RICHARD QUEST, CNN HOST: From a wet and windy Heathrow Airport, this is MARKETPLACE EUROPE. I'm Richard Quest. Heathrow is the world's busiest international airport, 65 million global passengers a year go through the airport terminal. And this week, there's a special visitor, Boeing's 787 Dreamliner.
So on MARKETPLACE EUROPE, we're looking at Americans doing business in Europe.
Don't even dare.
Coming up, I get the dream view from the flight deck of Boeing's latest plane on its whistle stop tour of Europe.
And we hear why Microsoft's business is also up in the clouds.
JEAN-PHILIPPE COURTOIS, PRESIDENT, MICROSOFT INTERNATIONAL: I'm Jean- Philippe Courtois here at Microsoft International, and I'm talking to Julia Mann about the future of technology (inaudible) success.
QUEST: So the Boeing 787 Dreamliner, Boeing calls it an aircraft of firsts, the first all-new midsize long-range plane of the 21st century, the first plane made of composite and the first plane with a lower altitude feeling inside and large picture windows.
But the really important point about this plane is its importance to Boeing.
QUEST: Fifty-nine customers from around the world have already ordered more than 850 Dreamliners. It's not the United States, which has a vested interest in this aircraft.
From the tires to the braking system, the lighting to the seats, Boeing is buying parts from 19 major suppliers across Europe.
RANDY TINSETH, V.P. MARKETING, BOEING: Twenty-five percent of the value of this airport will be U.K. based. So great supply base here, great supply base in France and Germany as well. It's very important that we keep connected with the markets that we serve.
QUEST: Much of the Dreamliner's enhanced performance comes from the Rolls-Royce Trend 1000 engines, helping to make it cleaner, more efficient and quieter aircraft.
MARK KING, PRESIDENT CIVIL AEROSPACE, ROLLS-ROYCE: This engine is 15 percent lower fuel burn as the first generation with the front engine. It's 3db, three decibels quieter than previous engines, which doesn't sound much, but it's half the noise to the human ear.
QUEST: After numerous delays and production problems, which put the project three years behind schedule, the Polish airline LOT will the first European carrier to take delivery of the 787. The U.K.'s Thomson Airways will have its first Dreamliner in service in early 2013.
CHRIS BROWNE, MANAGING DIRECTOR, THOMSON AIRWAYS: We decided to buy the aircraft way back in 2005. It had to do a few things for us. It had to be economically viable, obviously. It had to create an environment (inaudible), but most importantly, it had to have everything that would improve the customer experience aboard.
QUEST: That customer experience promises less turbulence and a lower cabin altitude, which will make it more pleasant to be on board. We'll feel less tired and jet lagged. For a midsize plane, it's all about what's bigger on board from the overhead bins to the windows.
TINSETH: Not only are they larger, but they're higher. So as I sit, even in the middle seats in an economy class cabin, I can look out and really enjoy the horizon.
The other thing, Richard, is that these are electronically dimmable. It takes about 90 seconds. It's a new technology. But I'll tell you the one thing that you'll notice --
TINSETH: -- yes, there it goes. The cool thing is, you can still look out and enjoy the horizon, even when the airplane windows are completely dimmed. This bin has actually been designed for roller bags. It's really, really nice.
QUEST: They go in like this.
TINSETH: They go in like this. The bin goes up, it latches. And notice that one of the things when you go into an airplane, you have a little stress, it's -- some people say how do I even open the bins? Thing about this latch, I can pull it from the bottom, I can push it. No matter how I address it --
QUEST: Well, that's clever.
TINSETH: -- it's going to open up.
QUEST: Well, that's very clever.
TINSETH: Yes, absolutely.
QUEST: So there's no --
TINSETH: It'll take the anxiety out of your flight.
QUEST: That is very clever.
Whatever new ideas and gadgets are put on planes, Boeing has to fight hard for each and ever order, usually against its main competitor, Airbus of Europe.
Soon, though, this won't just be a Boeing-Airbus battle.
TINSETH: The duopoly is over and it's really starting from the bottom of the market and moving up. So, you know, with new competition they bring in new technologies, they bring in new ideas. They make everybody better. But at the same time, they put pressure on you as well.
QUEST: With new planes and new technology coming from all the major planemakers, the passenger has never had a better ride.
QUEST: This is the way to travel, up in the roof of the plane, in the crew quarters. Coming up after the break, the president of Microsoft International tells us why the future for his company is up here in the clouds.
QUEST: Welcome back to MARKETPLACE EUROPE on the Dreamliner, where we're now in the air and above the clouds.
Talking of clouds, that's where Microsoft sees the company's future, remotely storing data and allowing us to access our information from anywhere in the world. Europe is playing a big part in Microsoft's development as Julia Mann heard from the president of Microsoft International.
JULIA MANN, CNN CORRESPONDENT: You talk about cloud technology as being the biggest change in I.T. over the last few years. How has it changed the way business works?
COURTOIS: You don't need to buy any more of those huge I.T. equipments because you actually can use the services, similar to the way you use when you pay your electricity bill, right?
We actually call it new world of work because people don't actually all to come together physically, which is a big deal for CO2 as well, reductions, by the way. And also people don't need to produce all those tons of documents, paper maze. We lose a lot of limitations that never get connected to each other.
MANN: Well, consumers are very quick to queue around the block for the latest gadgets and tablets. Aren't companies slow on the uptake?
COURTOIS: We expect the overall economy -- so not only I.T., but all the economy to use cloud technologies to enable more than 1 trillion -- trillion, so a lot of zeroes -- dollars of revenues across many sectors, manufacturing, services, retail, communication media by 2015, because number one, you don't have to buy actually all those server equipments and I.T. on top of that.
You are using the device you have in your hands and then you pay as you go. So you just pay the service you use when you need it and for the usage you need.
MANN: But during these tough economic times, aren't small and medium- sized companies thinking, you know what, we're going to make do with the technology we've got, and when we need to (inaudible), then we'll look at the next best thing. It's almost like you're saying they need to do it now.
COURTOIS: Yes. We actually see many more, in a way, small businesses jumping on the cloud bandwagon right now as opposed to the large companies, because they can just pay a few euros per months, a few euros to be visible on the Web and be much more efficient, and number two, be able to compete with some of the bigger players using an incredibly advanced technology for a few euros per month.
And that is making (inaudible) change even in particular in countries where recession is actually pretty tough.
MANN: What would you say the biggest challenges are out there to doing business, to really selling your product at the moment?
COURTOIS: You know, first of all, the global landscape is quite diverse. As I travel the world, you know, I was just in Asia last week, visiting India, China, as an example. Well, I can tell you, there is going very fast. When I got back to Europe, visiting Spain, very depressed economy.
We see (inaudible), as I said, to help governments (ph) to actually rationalize their business and small business to invest more. But if you look at the (inaudible) of the European economy, it's not -- doesn't look great at this point.
But I'm very convinced again that the work we do as an enabler of economy transformations of the way people can work differently, of the way actually companies can sell their products and services globally, using the cloud to scale globally, even if you are a very small company, today you can have the presence on the planet much more visible, much more aggressive than anyone else or any of the big, large conglomerates, international, than ever before.
Europe is going through some challenges for sure. And yet Europe needs, I think, some strong political and economic leadership.
I think what has been accomplished, which is not as simple, the concept of the single market, which needs to go and grow to a single digital market, by the way, which is a next step, where you can make actually goods, products, services, flow across boundaries in a (inaudible) way, in a well-defined way with one common policy across Europe.
That will have tremendous (inaudible) and you can be more competitive with our friends in Asia and some other parts of the world.
(END VIDEO CLIP)
QUEST: Microsoft in the clouds, the Dreamliner on the ground. And that's MARKETPLACE EUROPE for this week. I'm Richard Quest. Whatever market you're in, I hope it's profitable. I'll see you next week.