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Obama's New Warning to Russia; Economic Fallout for Russia; Tensions Escalate in Ukraine; Pro-Russian Forces Detain 20 in Slaviansk, Ukrainian Military in East; Ukraine Currency Collapse; US Markets Fall Sharply; European Markets Down; Obama in Asia; Exclusive Interview: Malaysian Prime Minister on Relations with US and China; US-Asia Trade Deal; Ford Earnings Disappoint; Ford's Road Ahead; U.S.-Asian Trade Deal; Digital Strategy at "FT"; Key in Your Phone; Rubik's Cube Turns 40; Profitable Moment

Aired April 25, 2014 - 16:00   ET



MAGGIE LAKE, HOST: Markets worldwide fall into the red as fears grow over the crisis in Ukraine. It's Friday, April the 25th.

Tonight, a harder line on Russia, and a harder time for its economy. New sanctions are threatened.

As Ford looks to the future beyond Alan Mulally, its CFO tells me the company will be staying in good hands.

RICHARD QUEST, HOST: And in Malaysia, a super balancing of the super powers. The country's prime minister tells me he needs both China and the United States.

I'm Richard Quest in Kuala Lumpur with Maggie Lake in New York. Together, we mean business.

And a very good evening to you from Kuala Lumpur. Maggie is in New York. President Obama, as you'll be aware, is in Asia at the moment, and whilst he is going around the region talking about trade and improving commercial relations, his mind is very much on events over in -- in Europe and, of course, the issues of Ukraine and Russia.

President Obama has once again threatened to escalate the sanctions against Russia over its military actions towards Ukraine.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think it's important for us not to anticipate that the targeted sanctions that we're applying now necessarily solve the problem. What we've been trying to do is to continually raise the costs for Russia of their actions while still leaving the possibility of them moving in a different direction.


QUEST: The president isn't alone in threatening sanctions. The German chancellor, Angela Merkel, has also been speaking to Vladimir Putin, and Mrs. Merkel has threatened more sanctions by Europe against Russia.

LAKE: As the West prepares to pile more pressure on the Russian economy, Jim Boulden now puts a price on the mounting cost of the crisis.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): The Russian economy is already feeling the pinch from its tense standoff with Ukraine. The Russian Central Bank said Friday, inflation this year will likely overshoot its 5 percent target, so it raised interest rates for the second time in two months.

The ruble continues to lose value. Investors are dumping Russian assets. It's becoming more expensive for Russia to borrow.

The central bank said, quote, "Uncertainty about the international political situation was hurting production and investment in Russia." A sentiment shared by some business leaders, who feel Moscow failed to capitalize on the Winter Olympics.

MARTIN SORRELL, CEO WPP: Sochi was a very successful event, but all of that has unraveled as a result of the Ukrainian crisis. And it is worrying, and developments in the last 24, 48 hours have made people increasingly worried.

BOULDEN: More sanctions to squeeze the Russian economy are imminent. The West has been ramping up economic pressure, as President Obama explained on Friday.

OBAMA: What we've been trying to do is to continually raise the cost for Russia of their actions while still leaving the possibility of them moving in a different direction. And we've -- we'll continue to keep some arrows in our quiver in the event that we see a further deterioration of the situation over the next several days or weeks.

BOULDEN: Ratings agency S&P added to Russia's economic woes by downgrading the country's credit rating, saying more downgrades will likely come with more sanctions. Recession could be on the cards.

ANDREI KONOPLYANIK, GAZPROM EXPERT: That immediately creates additional nervousness in the US-Moscow unity, and there definitely is a risk for my country, for my economy.

BOULDEN: And while the tension may be regional, economists worry the impact could be global, especially if energy prices rise.

MOHAMED EL-ERIAN, ALLIANZ: If both sides go forward with sanctions and counter sanctions, what you'll get is a global recession. If you get a global recession, equity markets will sell of very violently, because we've come a long way. And energy prices will go up.

BOULDEN: The big question: will the threat of all of this in any way affect President Putin's next moves?

Jim Boulden, CNN, London.


LAKE: Ukraine's government claims Russia is trying to start World War III amid a sharp escalation of tensions between the two sides. Ukrainian forces are trying to seize back control of roadblocks from pro-Russian militants who remained holed up in government buildings in and around a dozen eastern cities. The peace pact agreed last Thursday in Geneva appears to have faltered if not failed.

In Kramatorsk, a Ukrainian military helicopter exploded. CNN has conflicting reports: it was hit with a rocket or sniper fire, or simply suffered a catastrophic malfunction. The diplomatic standoff escalates, too, with Russia's foreign minister accusing Kiev of waging war on its own people. Meanwhile, Ukraine's prime minister is taking an even more ominous tone.


ARSENY YATSENUK, PRIME MINISTER OF UKRAINE (through translator): The world has not yet forgotten World War II, but Russia already wants to start World War III.


LAKE: Ukraine's deputy foreign minister joins us, now. Danylo Lubkivsky is at the United Nations here in New York. Thanks very much for joining us. First off, I want you to shed light, if you can, if there are any updates on the 20 or so people that we believe have been detained by Slaviansk, some of them members of the OSCE team that was traveling. Do we have any update on the state of those people?

DANYLO LUBKIVSKY, UKRAINIAN DEPUTY FOREIGN MINISTER: Thank you, Maggie. Thank you for having me on air. And yes, we followed this dangerous development, and we strongly condemn the fact that the members of the OSCE mission were taken hostage by pro-Russian separatist forces. This is completely unacceptable and incredible.

We have condemned the fact, but we also demand, and we call upon Russian authorities to exercise all their influence to release the hostages. Because all these negative developments are the responsibility of the Russian side since all provocateurs and all deeds that -- provocative deeds that are taking place in the east of Ukraine, they were inspired or organized by the Russian special agents.

That's why we call upon the Russian authority to fulfill their Geneva obligations. All parties concerned fulfill their commitments, except Russia. We call upon the Kremlin to fulfill their obligations to calm down and deescalate the situation. Unfortunately, we find enormous threat, and that threat is not only about Ukraine.

LAKE: Now, you are pushing or asking Europe and the US to impose further sanctions. Do you feel like the West is doing enough?

LUBKIVSKY: I will tell you, first of all, I would like to support the statement made by President Obama, and we are grateful for the support that Ukraine feels at these dramatic times.

We do believe that by more economic pressure, we can stop the aggressor. That's why we count on the solidarity between American and European partners in deescalating the situation. That's our principal stance, we would like to avoid any casualties, any victims, and any conflicts.

The point is that we have to have peaceful settlement, but no normalization is possible until Russia withdraws its troops from Ukrainian border, as well as from Crimea, from the occupied territory, Ukrainian territory.

LAKE: So, we've heard what you would like Russia to do. What is your government doing? There are many citizens in the east, while they may not support actions, are sympathetic to Russia, they feel a kindred spirit to Russia. What are you doing to try to mend the divide, which seems to be pushing Ukraine towards civil war?

LUBKIVSKY: We have established strong dialogue with all of our citizens. That was our priority task since the beginning. The point is -- and I have informed today about the figures of the recent polls conducted in Ukraine saying that 76 percent of people living in the east and south of Ukraine are for united Ukraine, for strong Ukraine.

And they are against any forms of armed coup d'etat taking place over there. It means that millions -- overwhelming majority of Ukrainians stand for Ukrainian independence and normal life in our country. It means that all these activities are simply provoked and inspired the Russian Federation.

If Russia gets away from our country, it will give us a chance to establish normal life and dialogue between Ukrainians. If Russia cares about any human rights and any minority rights, it must go away from the Ukrainian territory and from our borders.

That's the point. We are doing everything possible to secure our people, to protect them from terrorists. And we call and demand the Russian Federation to stop exporting terrorism into Ukraine.

LAKE: Danylo Lubkivsky, Ukraine deputy foreign minister, thank you so much for joining us tonight.

LUBKIVSKY: Thank you very much, thank you for inviting me.

LAKE: With the latest on the ground, Arwa Damon is in the eastern city of Donetsk. Arwa, what is the situation now, in terms of what's happening on the ground?

ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, the government has said that it is currently in its second phase of what it's calling its "anti-terrorism operations," which is meant to involve encircling the city of Slaviansk with the Ukrainian military to try to prevent anyone from entering that area, although we are hearing that they will be allowing vehicles to leave.

That being said, we haven't really seen, at this stage, any sort of significant military movements by the Ukrainian side. When it comes to those pro-Russian protesters that have been holed up in various buildings throughout the entire country, they most certainly continue to dig in.

Earlier in the day, we were at the Security Services building, which is one of the many institutions held by these pro-Russian protesters, one of the spokespeople there -- and that was in the city of Slaviansk as well -- telling us that they have around 2,000 people that they can call up. They have their defenses pretty well established.

The first line of defense, these barricades that we drive through on a regular basis on the outskirts of the city, should the "enemy," as they're calling it, the Ukrainian military, begin to approach them, those barricades will be set on fire. That then would send a signal to mobile unites that they have.

So they are very much anticipating a more aggressive move by the Ukrainian military. But at the same time, very confident that they do maintain the capability to be able to repel it, Maggie.

LAKE: And Arwa, do you have a sense of how the average citizen views what's going on? We talked with the diplomats about concerns about a civil war. Are people leading -- getting on with their lives in ordinary fashion? We know the economy's suffering. How are they viewing all of this?

DAMON: They are, to a certain degree, as well as one can under these circumstances. When you move away from the various areas that are under the pro-Russian protesters' control, on the surface, yes, of course, things do look normal.

But sit down in a park and speak to a mother with her baby, and she'll tell you that she's struggling with this on a daily basis, because the country, since its existence as an independent nation, has never faced this kind of a conflict.

If there is one thing that people can agree on, no matter which side of this their opinions may lie on, and that is that they do want to see stability. They don't want to see their country descend into even greater warfare. But many will tell you that they do fear that that might be, at this stage, inevitable.

LAKE: It's certainly a critical juncture. Arwa Damon for us, thank you so much.

Now, turning back to the economic fallout of the crisis, let's show you the damage being done to the currencies of both sides. Since the start of the year, the ruble, as you can see, has been on a downward trend, losing over 8 percent against the dollar since the start of the year.

Now, Ukraine's currency, if you take a look at that, has also tumbled during the crisis. There was a slight rebound last week after its central bank raised rates. It remains the world's worst-performing currency, though.

Meanwhile, markets here in the US are also paying very close attention to the crisis. They have fallen sharply on the latest escalation in tensions. Take a look at the Dow Jones Industrial average, and you can see what I mean.

This had been a pretty good week. We're on a winning streak. But the Dow down 140 points. There was also investor concern about whether key companies, like Amazon, are growing fast enough.

It was a similar story in Europe, with markets closing lower straight across the board. Frankfurt's Xetra DAX lost over 1.5 percent. The Paris CAC 40 ended the day eight-tenths of a percent weaker.

QUEST: When we come back in just a moment, President Obama is in Asia. Malaysia is one of the places he is visiting. The Malaysia prime minister tells me what he expects from a trade deal after this. QUEST MEANS BUSINESS in Kuala Lumpur in Malaysia.


QUEST: President Obama left Japan without reaching agreement with the prime minister on a breakthrough for the so-called Trans-Pacific trade partnership. Before the big, multilateral talks can reach fruition, Japan and the United States had to reach their own agreement. That was unsuccessful.

It's all part of the president's Pivot to Asia policy, as he's trying to get the United States to be more engaged in Asia, especially on the question of trade.

The president has now been in South Korea, and today, this Saturday -- it's already Saturday morning in Kuala Lumpur -- he will be coming to Malaysia. It's the first visit by a sitting US president in some 48 years. So, not surprisingly, they are very much looking forward to it.

But trade, once again, will be on the agenda, and this time, the Malaysian prime minister told me what he expects as he balances a very tricky diplomatic relationship, because Malaysia is friends with China and the United States.


NAJIB RAZAK, PRIME MINISTER OF MALAYSIA: We want to be friendly with both United States and with China, and we expect the two super powers to play a productive and positive role in the region.

QUEST: Good luck. They both want you on the side, perhaps to the exclusion of the other. You know that.

RAZAK: Well, that's life. You just have to manage the two super powers. Do we need to choose? I don't think we need to choose. We need both. We need America's market, technology. America is the strongest super power.

And we need China. China is our largest trading partner. And mind you, the economic relations between the United States and China is also quite strong. So, we have to be realistic about it.

QUEST: You're dancing a very --

RAZAK: No --

QUEST: No, no, no, no. Not you're -- in adopting that policy, that is an extremely tricky policy to execute.

RAZAK: It's a policy adopted by ASEAN as a whole, too. We believe that we must engage in a positive sense with both super powers.

QUEST: Yes, but that seems a bit of a waste of time.

RAZAK: It's not. I disagree with that statement, Richard. I think ASEAN is given a set of circumstances. It's quite successful as an organization of nations, actually.

QUEST: You're talking trade, the TPP. I've lost too many nights' sleep covering the Doha Round and the WTO. I freely admit, Prime Minister, my cynicism at the ability to do a deal. Why am I wrong?

RAZAK: I know you're not entirely wrong. I think it's -- it's a very complex deal. And you know why it's complex? Because it goes beyond trade and investment.

There are elements like intellectual property, investor-state dispute settlement, government procurement, et cetera, et cetera. Which impinges on domestic policies. That is the reason why the TPP is more complex than normal free-trade agreements.

QUEST: So, the president can't get a deal yet with Japan. That deal is a precursor to the TPP going any further. Each of you comes to the table demanding different things. As a -- it's almost multilateral on a bilateral basis, the TPP, it's so big. Realistically, you don't expect this to be done.

RAZAK: It's the frame of mind. If we want a deal, the essence is we must be flexible and creative.

QUEST: That sounds brilliant, Prime Minister, but with trade talks, it falls apart.

RAZAK: I know. But we must try, Richard. We never got other free-trade agreements worked out. It is not impossible, but it's going to be tough.

QUEST: Can it be done in the time scale?

RAZAK: Well --

QUEST: The president hasn't got fast track anyway, so none of you are really terribly happy to sit down and do a full-scale negotiation whilst it could be unpicked by the US Congress.

RAZAK: Let me say, it's going to take longer than we anticipated. But I think we need to work at it. I'm a great proponent of free trade. I believe the world needs free trade. It's good for the world. It's good for the global economy. So, we need to work towards it.


QUEST: That's the Malaysian prime minister talking about trade and the relationship with the United States and China.

There were more protests against the potential trade deal here in Kuala Lumpur. The United States stands to gain an estimated $123 billion in exports each year from the deal. Critics say it will give the US too much control over Asia's economy, including Malaysia.


UNIDENTIFIED MALE: We are from the people of this Malaysia to express our non-acceptance of Barack Obama in our country to sign the TPP. It's completely nonsense. Our economic stability, we should decide ourselves, not the West.


QUEST: Now, Hwok-Aun Lee is a senior lecturer at the University of Malaya. Good too see you, sir, thank you.


QUEST: I know it's very early in the morning, half past 4:00 in the morning, so we're very grateful for you coming in. Thank you.

LEE: Thank you.

QUEST: This arrangement, this trade deal, how important is it for Malaysia to get a deal like this with the United States, do you think?

LEE: I think Malaysia does want to be in the US good books, although at the same time, it's also a regional issue, and in terms of the importance of the US in Malaysian trade, that is not once what it used to be.

QUEST: But Malaysia -- I'm thinking about the days of Dr. Mahathir, was very -- it wasn't anti-American, maybe, in defense, but the rhetoric was very anti-American. That's different today, isn't it?

LEE: Yes. Yes, I think the stance towards the US, now, is a little bit less adversarial than it once was, especially under Mahathir.

QUEST: And what about -- what is the big opposition to a trade deal? What do people fear is going to happen if such a deal takes place?

LEE: I think in thinking about the Trans-Pacific Partnership agreement, we have to recognize the spirit of the times, not just in Malaysia and Asia, but I think around the world. And this growing awareness that economic policy, trade policy, should sever the interests of society and the common person first before corporations.

QUEST: Right, but -- the people don't believe that such a big deal like this would serve the common purpose, do they? Ordinary people do not like the idea of a trade deal of this size.

LEE: Yes.

QUEST: Why not? What do they fear here?

LEE: Well, there's various stances or angles to it. I think one is regarding for the consumer and cost. And again, this is an international issue, with health costs rising and so on. So there's concerns. And it's still shrouded in some mystery. What are the terms as well? So, it's not helping that, with all these negotiations, there's a certain veil of secrecy.

QUEST: Veil of secrecy. And can the prime minister, do you think -- I know from what he said to me, it's quite important to get this deal. Do you think he will play a major role in this? Will Malaysia play a major role?

LEE: Yes, I think Malaysia is trying to position itself, and maybe get back on the global stage. And this would be one opportunity.

QUEST: Hwok-Aun Lee, thank you very much, indeed. Thank you, sir.

LEE: Thank you very much, Richard.

LAKE: Ford's earnings miss expectations for the first time in three years. We'll tell you what's behind it.


LAKE: For the first time in three years, Ford's earnings have been a letdown for Wall Street. It was, in fact, the first drop in earnings since 2012. And investors certainly reacted, shares down around 3 percent today.

Now, profits were dragged down by slower sales due to bad weather. We know how tough the winter was. And also, increase warranty costs. Results were improving, though, in Europe and Asia, and that European news especially welcomed by investors.

Now, CEO Alan Mulally told reporters he will stay on through the end of the year. That is contrary to reports that he would leave within months. No matter when he goes, though, he'll be OK. He has built up a nest egg worth nearly $300 million. A lot of fans say he's worth every penny of it.

Earlier, I spoke to Ford's chief financial officer, Bob Shanks, and I asked him if rolling out new models was more difficult with speculation of change at the top.


BOB SHANKS, CHIEF FINANCIAL OFFICER, FORD: We have a lot of great new models, and I think the beauty about our One Ford plan and just the whole way that we're structured is that the team is very aligned throughout everything that we're attempting to accomplish in the business, and I think our track record is very strong. And we feel great about where we're heading as a team.

LAKE: And that's regardless of who becomes CEO?

SHANKS: I think we've got -- Alan's a wonderful leader and still is leading us forward into the delivery of our plan. And we've got great succession plans. And I feel very comfortable in terms of what the future holds for us. But clearly, the company's not said anything new, and so there's nothing really to report or talk about, in terms of succession.

LAKE: When you roll out new models, it's extensive up front to do that. Are you confident that the demand is going to be there to make back that investment?

SHANKS: Yes. We're clearly in a cyclical business, but if you look at North America, we've seen increasing industry sales for a number of years. We think this year will be yet another one.

If you look at Europe, the exciting thing that's happening there from an external perspective is the euro economy is starting to grow, and industry sales are growing, perhaps, even faster than what the overall economy is because of replacement demand that was pent-up over the last number of years.

Clearly, Asia-Pacific continues to boom. I think the one area where we're seeing a little bit of weakness is in South America, driven by what's kind of broadly happening with emerging markets around the world.

LAKE: And how do you handle that? Are you going to change your strategy there, given that? They don't seem like very temporary issues there.

SHANKS: Well again, I think it's cyclical. I don't think it changes the strategy. We're certainly going to be accelerating as much as we can actions that we were already taking around our structural costs, our infrastructure, logistics, material costs including localization. And in fact, with weaker currencies, that makes that even easier to do.

But we're continuing with our strategy to replace our entire lineup of what had been legacy products with very modern, up-to-date One Ford products. And the customers just love them. And you saw that with a share increase in Brazil that occurred in the quarter, compared with a year ago.

LAKE: And Bob, that turnaround in Europe, a lot of investors are looking at that as a positive development. Do you feel like it's sustainable and can accelerate from this point? Especially since the fact that -- given the fact that we do have these geopolitical tensions once again coming to the fore?

SHANKS: I think that's interesting question. Because the thing that's exciting to me about what's going on in Europe for Ford is we're very much on track to earning a profit in 2015. It was a great quarter. Our losses improved by more than half.

And that's despite the headwinds that we certainly experienced in Russia and Turkey, which are the two kind of large emerging markets within that region. So it just shows the strength that we're seeing in largely Western Europe, in terms of our operations.

And so I think we're in a great place and clearly moving forward. And we are accelerating towards that better result in 2015.


QUEST: Now, President Obama is in Asia trying to drum up support for the massive trade deal that the countries are putting together, or at least attempting to. When we come back, we're going to point out that back in the United States, the president doesn't enjoy total support for what he's trying to do. It's QUEST MEANS BUSINESS in a moment.



QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment from Kuala Lumpur and New York. This is CNN, and on this network, the news always comes first. And Maggie has the details.

LAKE: Russian president Vladimir Putin is facing the prospect of fresh sanctions from the U.S. and Europe. He's been accused of failing to deescalate the crisis in Ukraine.

German Chancellor Angela Merkel made a similar threat after a deal last week to calm tensions has apparently failed to materialize.

Speaking on this program, Ukraine's deputy foreign minister again urged Russia to step back.


DANYLO LUBKIVSKI, UKRAINIAN DEPUTY FOREIGN MINISTER: If Russia gets away from our country, it will give us a chance to establish normal life and dialogue between Ukrainians. If Russia cares about any human rights and any minority rights, it must go away from the Ukrainian territory and from our borders.

That's the point. We are doing everything possible to secure our people to protect them from terrorists and we have called and demand the Russian Federation to stop exporting terrorism into Ukraine.

LAKE (voice-over): Divers off South Korea are breaking windows of the sunken ferry to reach the lower decks in hopes of recovering more victims. They've discovered a room with the bodies of 48 girls wearing life jackets; 117 people are still missing.

Twin car bombs in Baghdad have killed at least 31 people and injured dozens more. The explosions targeted the rally of a Shiite political group just days ahead of Iraq's parliamentary elections. An Al Qaeda splinter group has reportedly claimed responsibility.

Former Barcelona coach Tito Villanova has died. He was diagnosed with throat cancer in November 2011. He'd led the Spanish club for one season and won the league title. Villanova was 45 years old.



QUEST: And good morning from Kuala Lumpur, here Saturday already here in Asia. And President Obama will be coming to Malaysia to Kuala Lumpur later today. It's part of his four nation trip around Asia. Trade is the big issue besides various regional other bilateral matters. He's trying to put life into the transpacific trade partnership. The partnership is facing not only opposition here in Asia but in the United States.

Lewis Alexander is the chief U.S. economist at Nomura. He joins me now.

Everybody says they are in favor of free trade, though it's the only problem is when they actually have to do something about it. And it's not popular in the U.S., too, is it?

LEWIS ALEXANDER, CHIEF U.S. ECONOMIST, NOMURA: No, I think both sides have their issues with it. Obviously it's gotten caught up in partisan politics in the U.S. Congress. It's prevented the president from having trade promotion authority to negotiate this deal.

I think it's very hard for the other partners on the Asian side to make commitments when it's tough for the U.S. to actually be confident that they can implement them.

So there's a long way to go on this one.

QUEST: Why will the Congress not give the president a so-called fast track or the ability to do a deal so that others will sit down with him?

Is it just pure U.S. politics?

ALEXANDER: That's part of it, I think. I think there's an element of that. But look, these deals have been controversial. There's no question that there are losers as well as winners. We haven't done as good a job at protecting the people who are adversely affected by trade in the past.

I think that's a part of why we've had seen these trends of widening income distributions. We need to do a better job of taking care of the people who are adversely affected before we can get broader support.

So I think that's part of the challenge as well.

QUEST: If we look back, though, I mean, whether it was NAFTA, which was painful to get through, but was only got through because of fast track authority. And then you look at the Doha Round, which is a shambles, whichever way you look at it.

And they're trying to get a European trade agreement together. One's left wondering why they bother when clearly it is so difficult.

ALEXANDER: Well, I think -- look, I think you have to keep trying. And while trade promotion authority clearly makes things easier, I think the notion that you would just stop trying if you don't have it, I don't think makes sense as well.

There's no question that the bar is higher here and obviously the political calendar is problematic. But when you go into these negotiations, you inevitably make progress and you may not get success as quickly as you'd like.

But I think you have to keep trying. These things are important. It's important on the Asian side; it's important on our side; it's important for Europe.

QUEST: So if you were a betting man, will they get a transpacific trade partnership?

ALEXANDER: Eventually, yes. Is it going to come soon? I'm skeptical on that.

QUEST: Can't say fair eventually yet.

Thank you very much, sir, for joining us.

ALEXANDER: My pleasure.

LAKE: The "Financial Times" says it has reached a major milestone in its 126-year history. Find out what it is with our interview with the CEO just ahead.




LAKE: Some headlines for the "Financial Times," and they're actually good news, not necessarily the case if you read the real paper today. The "FT" says it has the most paid subscribers in its 126-year history. The company's CEO told Jim Boulden mobile has been a game-changer for the company.

Jim Boulden began by asking him how to balance revenue from subscribers and to advertisers.


JOHN RIDDING, CEO, "FINANCIAL TIMES": Well, we don't think it's an either- or. I mean, I think our principle, the foundations of our model, our business model increasingly content and digital subscriptions.

But what we find is actually that also supports the advertising because our advertisers like and appreciate the fact that our readers are prepared to pay for the content.

So they work pretty well together. But fundamentally, the real driver, the real machine at the moment is that content and subscriptions engine and model.

JIM BOULDEN, CNN CORRESPONDENT: And that's given you a record number of subscribers in 126 years, I think it is.

RIDDING: Absolutely. Yes, we've been around a while.


RIDDING: We're now at about 670,000 daily paid-for readers, which is a record over that period. And we're seeing a good steady growth driven really by digital and mobile.

BOULDEN: But you have had a German version; you have other versions. You have joint ventures in places.

Are you continuing to do that?

Or do you think refocusing down to what you do best, English language is the best way to go?

RIDDING: Yes, we're really focusing mainly on the English language edition. Obviously English is the language of global business and that's our audience.

We do have a very successful operation in China, too, which has something like 2 million registered users. It's in the Chinese language and that's very successful for us as well.

BOULDEN: You mention mobile. Now a lot of people have only been doing that for a year or two. But where are you in the mobile space as far as that compared to the digital?

RIDDING: Well, mobile for us is a game-changer. I think that's a term that's often over used in business life. But for us it is, because it enables us to reach readers globally with an effective business model straightaway. Obviously building a worldwide network of print sites is tricky and expensive business. And mobile liberates us and enables us to reach people immediately.

And so now mobile is getting up for 50 percent of our traffic. And it's overtaking desktop traffic. So it's really the driver for our business.

BOULDEN: So newspaper, especially in the U.S., are dropping print altogether. You're nowhere -- you're not even thinking that, are you, no way?

RIDDING: No way. We're believers in print. We think it's very important part of our portfolio. Clearly the role of the traditional newspaper is evolving. But just in the same way that TV didn't kill radio, we think that what happens with the new technology is at the other channels adapt across the spectrum.

And we think print is still a very powerful medium for the "FT."

BOULDEN: Is there some successful U.S. newspapers are managing to climb. They are slowly but surely getting rid of journalists.

Are you even -- are you consolidating? Are you cutting back a little bit or...?

RIDDING: No, at the core of our model and it will always be the core of our model, is the newsroom. Everything we do and however we deliver, our journalism is important. But the necessary condition of success for us is a robust global news team and news operation. So we've been very clear about that. And we've maintained investment in our newsroom.

BOULDEN: You have a joint venture in Russia. Are you concerned that those kinds of joint ventures get disrupted when we're in a period like now, where we have so much tension between Russia and Ukraine?

And have you seen any impact because of that?

RIDDING: No, I mean, our principles in operating in Russia are the same as anywhere else, editorial independence and delivering a business model, multichannel, that works for our readers. So we're focused on that. And it's going -- actually working quite well for us.

BOULDEN: And you think you've been able to keep that editorial independence?



LAKE: Well, imagine doing away with hotel cardkeys, those pesky little things you're always looking for. Well, Starwood Hotels has an app for that. It's trying out a system to allow guests to unlock room doors with their smartphones. Take a look at how it works.


UNIDENTIFIED FEMALE (voice-over): Introducing the new keyless key for your smartphone. From Starwood.


LAKE: Starwood, whose brands include W Hotels and the Sheraton saw record occupancy in the first quarter, thanks to growth in business travel.

CEO Frits Van Paasschen told our Paula Newton that innovation is a big driver.


FRITS VAN PAASSCHEN, CEO, STARWOOD HOTELS & RESORTS WORLDWIDE: Well, one of the things we did and this is industry history in the making, we've now made it possible for people to use their mobile device as their room key and to check in, not only check in, but get their key without going to the front desk.

So this is something we've now piloted at the Aloft in Harlem and the Aloft in Cupertino in California. But the goal is to take that worldwide. At the same time, one of the things that we're doing through our app is keeping track of what your preferences are. So no matter where you go in the world, we make sure that our associates know what you personally want and where to deliver that.

That's something that we're rolling out as we speak as well. And of course the whole shift in mobile booking for us is a big change. Today in just the last three or four years, we've seen growth now to where half of our mobile -- half of our Web bookings and half of the contacts to our sites are coming through mobile devices. That's a big change.

PAULA NEWTON, CNN CORRESPONDENT: In terms of those changes, though, materially, as a guest, what do you say to people who have stayed at your hotels or are thinking of staying at your hotels in the future, in terms of what their guest experience is going to be like in the year coming?

VAN PAASSCHEN: Well, it depends on what brand you're looking at. So one of the things that we want to do is not just give great experiences but make sure that they fit with the positioning of each of our brands.

So if you're at a Westin, we want to make sure that we do things to make you feel better with the foods that you have, with the bedding that we have, with the way we take care of our guests so that they feel better when they leave.

The same thing at a St. Regis, where you might have a butler take care of your needs in a more extravagant way.

NEWTON: In terms of the global economy, do you see any problems that really keep you up at night right now in terms of the recovery?

VAN PAASSCHEN: In our business, of course, something major, if it happens, could have a pretty significant effect on our business in the short run. The situation in Russia and the Crimea and the Ukraine today is not a big issue for us as a global business. It's clearly a big issue for people in that market.

But should there be some other conflict or some disruption, that could affect our business. Watching what's happening in China, we see good signs today. But if that changes, that could derail some of the growth and demand.

But today, as we see the marketplace, we've seen a continuation of a trend now for the last almost five years.

So it would have to be a pretty big event to disrupt the growth and demand that we have continued to see.


LAKE: So if you are traveling, are you going to be inside that hotel room or are you going to be able to get out and enjoy some decent weather? Jenny Harrison is at the CNN International Weather Center with the answer to that.

Hi there, Jenny.

JENNY HARRISON, CNN METEOROLOGIST: Hey, Maggie. I think unfortunately it depends on where you are. But if you're in Europe, probably inside this weekend, that unsettled thing that's been with us now for over a week, it really does continue some heavy amounts of rain, particularly across more central areas. But we've got three main areas of weather, the southeast, the central Med soon to be the central Med and then also the northwest of Europe.

But the rain's been coming down rather heavily. Look at this in France, there are 24 mm, 66 across in Serbia. And just the day before it was very heavy rain further towards the southeast. So this is what we've got to look forward to throughout the weekend. This really northern and eastern Europe where we've got high pressure and fine, dry conditions.

It's beginning to push in that high across into the southwest, so maybe pushing into southern Portugal, southern Spain, but apart from that, it really is a case of widespread showers and also some fairly strong scattered storms from time to time. In fact, there's some warnings in place as we continue through Friday into Saturday.

Heavy amounts of rain through the Low Countries up into the southeast of the U.K. and also you can see here across much of southeastern Europe as well, particularly across areas of Austria.

So what about the weather this Sunday at the Vatican? Well, the forecast is not particularly good. Look at this, Saturday, Sunday and Monday, but if I break it down for you on Sunday into more of an hourly forecast, you get to see that we will actually have a bit of a break and hopefully there's Rome, hopefully on that Sunday morning. But there's a really narrow window when we've got these fine, dry conditions.

It should be OK in the morning but there's quite a bit of cloud around the wind will be picking up as well throughout the morning hours. And really quite variable in terms of direction and then anytime after midday we are expecting to see more in the way of cloud and rain. And it will be quite persistent.

But the temperatures meanwhile have been good, still very mild, more of this as we continue through the weekend. Budapest and Berlin both at 22 Celsius. The average in Berlin just 15 degrees for this time of year. And more of the same over the next few days, cold air across the east wherever you've got high pressure and good clear conditions.

And a little bit cooler across the north and the west, too, as that next system comes in, a lot of cloud cover. So just taking the top off the temperatures, but Berlin for the next few days around 20-21, 21 in Budapest and getting to that in Warsaw on Monday.

So temperatures elsewhere on Saturday, 13 in Copenhagen, a little bit cooler there, just 12 in Dublin and 20 Celsius down there in Athens.

Now meanwhile in the United States, if you're traveling here throughout the weekend, be prepared for some pretty strong thunderstorms. We've had this tornado watch area up to the last several hours and pretty strong thunderstorms, warnings in place, too, as we continue through Friday into Saturday. More large, damaging hail, strong winds, maybe as well some isolated tornadoes.

And the delays at the airport have been variable throughout the day. But an hour over there in San Francisco, Newark, an hour and 45 minutes. But be prepared for more of these delays. We've got this long line of storms working eastward as we continue through the weekend, fairly slow-moving, some very strong storms. And always a threat of those tornadoes.

So this is what it looks like Saturday, Sunday, Monday and Tuesday. The colors are the indication of the severity of the weather, but really just an indication of the different day and where we expect to see those storms.

So just be prepared for that. There's more rain out across the west, mostly to the mountains but even so we have got some snow in the forecast. And then temperatures here on Saturday very warm, 27 in Atlanta, 19 in New York but 31 in Dallas. Have a good weekend, Maggie. You're out of the way of the storms, so you're not faring too badly up there.

LAKE: That's good news for our Little League player. Thank you so much, Jenny. Have a good weekend as well.

When we come back, we are celebrating the 40th anniversary of the Rubik's Cube. A speed cuber will solve the puzzle with one hand. This you got to see. Stay with us.




LAKE: The Rubik's Cube has been challenging and puzzling people around the world for 40 years now, if you can believe it, an exhibition is opening in New Jersey this weekend to celebrate the anniversary.

Paul Hoffman is the exhibition's creative director and the CEO of the Liberty Science Center.

Also with us, speed cuber Anthony Brooks, who holds the North American record for solving the cube in 6.93 seconds, which is absolutely unbelievable.

Welcome to both of you.

Paul, this is really bringing me back to my childhood, seeing this.

What is it about the Rubik's Cube that makes it so enduring?

PAUL HOFFMAN, CEO, LIBERTY SCIENCE CENTER: I think it appeals to us in so many ways. It's tactile; you can touch it. The colors are popping. And there's extreme contradiction in it. It looks simple but it is so mathematically complex that no one should feel bad if they can't solve it.

And it's languageless, OK? There's no instructions. It comes solid. You start playing with it; you go, uh-oh, how do I get it back? And it's crossed every border in the world. Even Amazon kids, our tribal kids have it. So what we've done is captured this all, Liberty Science Center, in the traveling exhibit that will go around the world for seven years after it leaves Liberty Science Center, where it opens tomorrow.

LAKE: That is amazing. Now I thank you for giving me that little bone, saying it shouldn't be bad -- feel bad if you can't solve it because I can't. Never could.

But you hold the record, absolutely amazing. We got to see this in motion.

Can you give us a little sample?



LAKE: No pressure. No pressure at all, Anthony. I'm live television; no pressure.

ANTHONY BROOKS, SPEED CUBER: OK. So I'll start with this one.

Can you say go for me?

LAKE: OK, ready, one, two, three, go.

BROOKS: This is the one I do, because I could always get it right, you know.

LAKE: Oh, my God. That is amazing.

How on Earth did you -- with one hand, now with one hand.

How are you able -- were you born like this?

BROOKS: No, absolutely not. I could never actually solve the cube on my own growing up. I love the puzzle, love the Rubik's Cube. But I couldn't do it on my own. Six years ago in high school, a friend taught me how to solve the Rubik's Cube on a long bus ride. And it's taken me all around the world since.

LAKE: Well, you've got it down and showing off pretty good.

Is this -- do we see this continuing? I see that there's lots of different ones. You have --


LAKE: -- people have gotten --

HOFFMAN: -- all sorts of puzzles that didn't exist. And we bring them altogether into this exhibit. And Rubik's Cube is involved with everything, robots. Robots were taught to solve Rubik's Cube. So in our exhibition, you just hand an unsolved cube to it. The robot will solve it.

People have taken Rubik's Cubes and made huge mosaic portraits. So on the side of a building in Japan, a couple thousand cubes, you stand back and it's President Obama.

LAKE: So it's sort of -- is this also -- we want so many kids to get interested in math and science. This is easy access for them to do that?

HOFFMAN: Absolutely, because the beauty is there's a mechanism inside that's really ingenious that Erno Rubik invented, a Budapest inventor, that allows this to move in so many dimensions without falling apart.

So we have a 3,000-pound Rubik's Cube, a gigantic one, that you can see inside to see that mechanism.

LAKE: At least there's one you can't do one-handed. I'm so impressed with your skills and it sounds like such a fun exhibition. Thank you so much for coming on and sharing it with us.

Anthony Hoffman -- Paul Hoffman, rather, and Anthony Brooks, thanks to both of you.

BROOKS: Thank you.

HOFFMAN: Absolutely.

QUEST: I could never do it. I still couldn't do it and I never will be able to do it. But I will have a "Profitable Moment" after the break.



QUEST: Tonight's "Profitable Moment" from Kuala Lumpur in Malaysia where President Obama arrives here in just about 12 hours from now.

The president is going around Asia trying to talk up and trumpet the trade partnership for Asia, the Trans-Asia Partnership. These long titles and difficult agreements, it seems these days it's almost impossible to try and get a trade deal without an enormous amount of gnashing and wailing of teeth (sic) and for good reason, because in all trade talks, there are winners and losers.

And whilst the negotiators trumpet up the winners, it is the losers that you never hear about again, the jobs that get lost, the people who get forgotten, the industries that simply move from one continent to the next.

And so that is why we have had the ridiculous situation of the Doha World Trade talks being stalled for more years than I care to remember. They won't have a transpacific trade deal anytime soon. A European deal is still a long way off. In short, the sooner they realize it's time to forget -- to remember those who are forgotten, not those who these deals are made to serve.

And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in Kuala Lumpur. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you in New York on Monday.