04/11/2015 BBC Business Live

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.