04/11/2015 BBC Business Live


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This is business live from BBC News. BW veers further off course,


the German car-maker admits another 800,000 Kashi inconsistencies, this


time relating to carbon dioxide emissions with petrol engines. That


is our top story on Wednesday the 4th of November. From diesel to


petrol as the VW scandal spreads, so does the costs. A breach of carbon


dioxide regulations could hit the car giant to the tune of $2 billion,


we will have the very latest, also in the programme, another scandal,


Takata will be paying $17 million over its failure to disclose in


summation over exploding airbags and hundreds of injuries around the


world. And in the markets, there is a mixed picture emerging, we will


discuss the winners and losers. And how do you run a business amid


riots, protests, economic collapse and volatile politics, we will speak


to a man, whose job, is to keep businesses on track despite that.


And as the VW crisis deepens, we want to know would you ever buy a


false bargain again? Is the brand is damaged beyond repair. Vaults


a very warm welcome to the programme, another day, another


twist in the Volkswagen emissions gamble, the German car giant has


discovered what it calls inconsistencies in 800,000 of its


cars in Europe which are in breach of carbon dioxide regulations, this


time it is both diesel and petrol cars that are involved, that the


company has yet to give a breakdown. VW is saying that it is looking at a


$2.2 billion bill to fix this problem at BMW, Audi, bolts bargain,


and others. That is largely because it is more costly than doing a


software update, which is the case with the so-called emissions


cheating software. This has to do with the way that the fuel is


consumed by the car, which means that the cars are not as


fuel-efficient as they claim to be. Joining us now is our business


editor, they call them irregularities but it gets worse and


worse for VW? It does, Sally's point is correct, this is a bad fuel


efficiency, the claims that the cars make to them and inns of customers


about what Miles per gallon this car does, it also said last night, that


this could affect a far wider range of car types. Not just the two litre


diesel engines but the 1.4 litre engines, diesel and possibly also


petrol. That opens up a whole new category of engine for VW. They have


also spoken about the issue of how, petrol, and carbon dioxide emissions


could affect the way that those cars operate and the fact that it will be


a lot more costly to fix these cars. ?1.4 billion is set aside for this,


it is far higher per car to fix this car. I think it does stretch the


credibility of the notion that this was down to a Hugh Rogue engineers.


This has moved on from the issue of nitrogen, monoxide, pollution


levels, into the whole way that carbon dioxide and fuel efficiency


issues, happened. Then that means that it could be more systemic


within VW. As you said, VW putting a figure on what they think it will


cost, we have seen in previous scandals, that cost just grows and


grows, this is very much an initial estimate? If you remember back to BP


when the crisis happened, that he initially was put at a few billions


of dollars, in terms of the cost of that crisis, it ended up being $50


billion. Nobody knows where this problem will go for VW, but this


notion that it is starting at $5 billion and will stay at that number


is difficult to believe, some people have put the estimate as high as $60


billion. Whether it will be that high, nobody yet knows. 400,000 cars


it started with in America, it then became the 11 million cars worldwide


and now a further 800,000 cars, each announcement says that the problem


is not getting better, it is getting worse. White briefly, the thing that


we cannot put a value on, is the cost to the damage of the reputation


of the brand, and to the company, it is difficult to see how they can


rebuild trust? It is, the new chief executive has said that he wants


absolute honesty and transparency now, but the more honesty and


transparency they have, the bigger the damage to their brand. VW so


far, there does not seem to have been an effect on the sales, it is a


very strong brand, it is going from a high base but every bit of bad


news undermines trust. There has also been a broader issue, how many


other manufacturers have been looking at CO2 emissions issues, and


trying to make sure that their cars look a lot better in the laboratory


than on the road. Thank you. Let us look at another car company that is


in dire straits, it is actually a car parts provider, Japanese


company, it is displaying $70 million over its failure to talk


about exploding airbags. It could face another fine of a if more data


is found, 20 million of the airbags have been recalled since 2008 and


have been linked with AIDS deaths and hundreds of injuries throughout


the world. And the electric car maker Tesla, have jumped 75%, after


reporting better than figures. 11,600 cars in the second quarter as


it rolled out the model X SUV, the loss was $230 million. The biggest


loss in ten quarters. And the battle by some San Francisco residents


fighting the move to reduce the number of days that they can rent


out their homes using Head B Votes are in, they have defeated the


controversial bill but it was very close, 55% voted against the rules,


campaigners expected the figure to be much higher. Let us take you to


the business live page. The story we have just mentioned, an update on


that air B victory, proposal to ban the site, being defeated --


AirB Check out the business live page, you will notice that it is


dominated by news from Marks Spencer, one of the biggest


retailers in the UK, expansion around the world, but it is a


familiar story, sales of food rising slightly blocked clothing sales down


once again. It is expanding its food offering, but womenswear remains


particularly one of the biggest issues for the firm. Now onto a big


success at least a day for the Japanese government because shares


of Japan Post jumped nearly 26% on the trading debut, after the company


and the banking insurance unit, raised 1.4 yen trillion in dollars,


about $12 billion in the world's largest initial public offering this


year. We have got the details. A success story as Sally was saying?


Indeed, in fact, shares in the banking unit were hired by as much


as 40% at one point today, so it has definitely been a very successful


trading debut, we will monitor if this kind of hype is sustainable but


not only was it the world's biggest share sale, it was also the biggest


asset sale by the Japanese government in three decades. It has


taken more than ten years since the former Prime Minister decided to


privatise Japan Post. It was a very controversial move, partly because


it is a very wealthy institution that has been used by a lot of


politicians as a piggy bank to fund their projects which resulted in


Japan's huge debt, it is controversial but it is finally


going ahead. Thank you so much. Let us look at the numbers now, what has


been going on overnight. Japan up by 1.3%, the big winner is Japan Post.


Takata shares were hit very hard, also Hong Kong up, 2.5%. And there


has been a bit of confusion about what the People's Bank of China had


to say on some of its comedic Asians about future stimulus for the


Chinese economy, actually it was a very old announcements, but it was


felt through the market because it was thought to be a new announcement


but it wasn't. Your tix pectic to trade much higher. As you can see,


it is quite a mixed day -- Europe expected to trade much higher. VW


shares will be trading today in a very volatile manner, because of the


latest about VW. We are now in the US, looking ahead to the day on Wall


Street. Usually when federal chairman Janet Yellen, speaks,


people are looking out, but on Wednesday she is likely to grab


attention for another reason. While testifying at the house financial


affairs committee, almost sensibly to come up, is that financial


information was leaked from the Fed ahead sensitive moments. Janet


Yellen has handed over documents to the panel of lawmakers. And despite


increased spending on its Mobot haps, and data is expected to show


that the trade deficit is expected to narrow sharply. That was New


York. We have now got somebody who is an investment direct at Aberdeen


asset management. Staying with that American theme, we have got a lot of


jobs data on Friday, manufacturing and the services update. The Fed did


say that all of their decisions would be data


Dependent. We are never short of data in the United States, Janet


Yellen in her last Conference said that they would watch carefully the


data coming up in the next few weeks. Thinking about their


deliberations on the rise in US interest rates, the price of money


in the world's largest economy is extremely important, when that price


rises it is also important. Expectations have been for the


interest rates to increase next year but recent utterances from Janet


year and his suggests that it might be into December rather than next


year. Just briefly, European markets, what is on the minds of


investors? Probably like the US, running through the Q3 results,


investors are microscopically focused on how companies are doing,


they are trying to learn on what is going on throughout the world and


whether companies are making any money on the possible use like the


difficult market conditions, over the last quarter 's. I know you'll


be back to talk us through some of the business pages later. Still to


come, how to manage a business in turbulent times, economic


stability, feigning economies, wild weather and volatile politics, how


do firms plan? We will speak to a man who is charged doing just that,


in a few minutes on business live with BBC News. First let us get some


more details on Marks Spencer, sales down in the six months to


September, like-for-like sales fell by 0.4%, general merchandise


includes coving, they were down 1.2% but food sales rose by 0.2%. The


underlying profit figure is up by 6%, 280 formerly in pounds. Let us


now speak to our business unit. Just reading between the lines, how good


or bad is this? As ever with Marks and Spencer it is something of a


mixed picture, yes underlying profits are up, profit margins are


up, but those key women where sales are down. Mark Bolland, the Chief


Executive, I spoke to him this morning, you said this is good news


for Marks Spencer. Yes, they might be selling fewer things but every


item they sold they sell at a greater profit and it must be said


that investors like what they have seen. You can see from the share


price, up 19p this morning, that is something like 3.5%. It has been


going up today after these results, they have had quite a positive share


price run over the whole year, that is because Marks Spencer have made


a virtue out of necessity. Whatever they do, they cannot get those women


where sales up, but what they can do is make sure that the profit margin


is higher which increases the profit margins for the company and the cash


flow, and that means that Mark Bolland can say to investors that we


are doing a very good job in a tough market. Final thought, food sales


are up in a tough market, investors are saying so far that they like


what M are saying this morning. Thank you. Staying with that theme,


just one story to bring to you, Burberry, the fashion retailer is to


open a further factory in Yorkshire, the factory will be opened near


Leeds, completed, by 2020. The company already has two factories in


York, and it employs about 800 staff currently, Burberry is one of the


big UK success stories around the world. A real turnaround for the


company of late. Yorkshire, a vote of confidence. For the county. This


is business live, our top stories, the Volkswagen emission scandal has


taken another dramatic turn, they have admitted irregularities in a


number of carbon dioxide used by 800,000 cars in Europe. Yes that was


found while the previous problems were involved with diesel, the


problem seemed to get worse. Is the brand VW damaged beyond repair? Lots


of comments for you? Looking at the news you would be forgiven for


thinking that the world is a much more date was placed than it was say


ten years ago. Chances are that you are poultry right, according to the


World Economic Forum, geopolitical tensions still dominate the risks of


tensions in 2015. They list the four other most likely global risks as


extreme weather events, failure of national governance, state


collapse, and then, unemployment, or underemployment. So what do you do


if you are a multinational company or a business thinking about


expanding global footprint? How do you manage those risks? The man who


can answer that, is the chief executive of the risk advisory


group, nice to see you. We outline some of the issues that businesses


face when they look to expand throughout the world, it is a bit


mind-boggling, you start looking at the global market, where do you even


start? Clearly opening a factory Yorkshire is very different to


buying in Kazakhstan, but most business decisions need to be based


on the most credible evidence that you can take. Depending on the type


of business, the type of facility, on whether you are an extractive


industry or a telecoms industry, the amount of resorts, you are going to


have two transfer it can be very different. You have two match the


environment against the resource requirement, look at the funding


around those issues and make some pretty clear determination. We were


just looking at some of the key elements in terms of risk, when I


was talking to you earlier, about what is most on the minds of those


who are running businesses when they are thinking about business, they


were saying that regulation is one of the big issues, and your


background as a barrister and then working for various government


agencies, gives you that insight into how that all operate? Clearly


there is a tension because all businesses now seeking to look for


new market opportunities, they have got to go to difficult and dangerous


environments to Strat all new markets to sell, Indonesia with a


population of 250 million. You want to be there. But at the same time


the government has imposed more and more regulations, more policy and


procedure around bribery and corruption and money-laundering, it


has transferred the responsibility to corporate is to insure that those


policy decisions are complied with so there is an internal conflict, so


that you can drive new business growth, complying with the


regulatory risks around that. We talk about planning for risk or


planning strategies for expansion overseas as if it is something that


we can quantify, I would imagine that there are a lot of events that


nobody can see. Even things like Ukraine and Russia, nobody


necessarily saw that coming, how do you prepare? It is difficult because


the terminology is Black Swan, how do you prepare for it? It could be


the Russia-the Ukraine situation, how do you actually plan for that?


If you look at those circumstances, essentially companies get it wrong.


I would advocate, that Volkswagen have got it wrong by


going very quickly to the newspapers as saying that it is a small issue.


There is a lack of thought and planning process as to how you


respond to that, probably because a lot of CEOs are not interested


improper is, they are interested in how they grow their business. In MBA


courses they spend a lot of time about -- they don't spend a lot of


time about what happens if there is a very bad happened. On other things


on the mind of global business leaders is Iran opening up to future


business, it is something that many of your clients are talking to you?


Iran presents a fascinating opportunity, they have got 140


billion in cash that will become free, they have got a very educated


population, they have got a young population that is consumer


oriented, they have got a very old infrastructure, they have got huge


natural resources, companies are queueing up literally, there is


clearly a difference between European businesses and US


businesses in terms of different sanctions which is creating tension.


So what are the risks, if I was to try and launch my business in Iran?


One of the problems in Irani is that it has been essentially a police


state for a number of years, so the access to information to make


informed business decisions is just not there. Working through the


intersection between politics, religion, business environment,


working through who controls assets, how you manage those transactions,


against a background of a lack of critical data, is quite a difficult


question. But it is a market and people will take risk. We will watch


closely, thank you, really interesting stuff. That was the


Chief Executive of the risk advisory group. In a moment, we will beat


taking a look through the business pages but this is a quick reminder


of how you can stay in touch and keep across business stories. The


business live pages how you can stay ahead with the breaking business


news, we will keep you up-to-date with all of the latest business news


with insight and analysis from the BBC News editor is right around the


world and we want to hear from you too. Get involved on the BBC


business live web page. You can find us on Twitter and Facebook. Business


live, on TV and online whenever you need to know. Richard is back. There


you are, to talk about some of the stories in the papers but before we


do that let us mention some of your tweets. So this is James Newman who


has been in touch" growing up, VW whenever a strong brand for me, this


reaffirms that, why have VW when you can have a Merc or an Audi?". "Yes I


would still buy VW, there are various things that can have an


effect but this is just one problem for a business and they will get


over it". Another one "clearly they need to dig down and find out who is


responsible, or can they really just blame rogue engineers? People at the


company clearly knew what was going on". Would you still buy VW? As the


Chinese economy slows, consumers pick up some of the slack. Which is


exactly what the government wants? Yes they have been trying to move to


a consumer led economy, people have been concerned, it is to growing


strongly, without a move to a consumer led economy, there are


still a lot of people happy to spend the money. Particularly the


youngsters and that will lead to a solid growth figure. Yes, I will try


and make it bigger, we are talking about the power of the purse


strings. Clearly, demand for flights is increasing, movies, Samaras. Even


though the overall economy is falling slightly and it is that


growth in that middle class which is so important for China. Huge


burgeoning middle class? If you are focused in the Chinese economy on


exports and things are properly a bit tough at the moment.


Particularly if you are young and you have fewer liabilities then you


have got money in your pocket. Some of these growth figures in cinema


attendances and flights, would suggest that there is a desire and


willingness to spend that money. This is one for you, it is about a


Scottish craft beer company, brew dog, in the Financial Times. He is


talking about his guide to being a business upstart? From personal


experience a very good product which is always a good start for any


company. Inoperative marketing, one of their efforts was to park a tank


Bank of England. Which other companies would be quite interested


in doing. They have been quite lucky in the sense that the craft beer has


been a sweet spot, as the bigger companies have been merging and also


pretty noted in the way that he is raising money for his company. --


pretty and that it. His top tips, he said no networking, do not network.


A lot of more staid companies might applaud that attitude. But


nevertheless, he is trying, to access capital and money. In order


to grow what is a very successful business. We did not mention his


name, James Watt. We are up to date with the business headlines. Have a


good day, goodbye.


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