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QUEST MEANS BUSINESS

Tony Hayward Out as BP CEO; Interview With Mayor of Phoenix

Aired July 27, 2010 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Tony Hayward pays the price, change comes to BP, but the costs are astronomical.

Immigrants or tourists, the mayor of Phoenix talks about Arizona's new law and how it could affect business.

And a fistful of dollars, Maggie Lake tests consumer confidence in terms we can all understand.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello.

BP begins rebuilding. There will be change at the top and a pledge to take a new approach to doing business. Tony Hayward is going. In a conference call to investors and analysts, he said his decision to leave was for the good of BP, especially in the United States. BP says Hayward will received a year's salary amounting to $1.6 million. Bob Dudley, BP's first American CEO will take over on October the 1st. I will have an interview, by the way, with Bob Dudley on this program tomorrow night.

Dudley has a daunting task. He has a lot to do. Today the company published its second quarter results; a loss of more than $17 billion. That included costs of $32 billion covering amounts already spent on the Gulf oil spill response and heavy future liabilities resulting from it. But it is really just guesswork at this point.

BP says it is planning to sell assets worth up to $30 billion over the next 18 months to help pay for all of those costs, generating funds to meet those obligations and leaving behind a much leaner company. Now BP shares closed down more than 2.5 percent in London today. They've plunged nearly 40 percent in the three months since the explosion of the Deepwater Horizon rig, reducing the value of the company by a staggering $72 billion. More than twice as much as the costs BP has acknowledged so far, interestingly.

Now, Jim has been following the story for us. He's been at London headquarters of BP, where it has all been going on, Jim. A lot of coming and going, but at least we had some sort concrete information today.

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Yes, so none of it was necessarily a surprise, but you're right, the amount of money I think was a surprise. Some companies like to get all the bad news out of the way once. It looks like that is what BP is trying to do. Replace the CEO and announce a $32 billion fund in order to try to clean up the costs. If this hadn't happened, BP would have had another stellar quarter as they always do. So in that way the company is running fine and profitable, but this huge loss because they have to put that money aside.

FOSTER: And the message, I guess, to investors today was they have cash and they can get cash if they need it. Because these assets they are selling are pretty good. Is that your impression?

BOULDEN: Yes, I mean, they have already announced a $7 billion sale of assets and now a $30 billion kitty in total. We don't know what assets are going to sell. Obviously, they don't want to do a fire sale. They don't have to do it right away, you know, some of the money that they have to give, into the Gulf of Mexico can come over time. I think what was interesting was that when you-during the afternoon, Tony Hayward and Bob Dudley and Carl Svanberg, the chairman, all came out in front of the building for a photo op. And Tony Hayward was still there. And so you can see that the chairman-

FOSTER: He's still in charge, isn't he, until-oh, sorry about that.

BOULDEN: Yes, and he hasn't been fired. And that is important, and of course the chairman has also survived to live-to fight another day. You can see them there, in front of the building. And then we were told not to ask any questions and then questions were asked. And Bob Dudley did answer a few questions. And he talked about what he thinks the new BP might look like.

(BEGIN VIDEO CLIP)

BOB DUDLEY, CEO-DESIGNATE, BP: Well, there is no question we're going to learn a lot from this accident in the Gulf Coast. It is going to be about equipment, people, different companies, and as a result of that we're going to learn a lot, both BP and the industry. And I'm sure there will be changes.

QUESTION: How will you (OFF MIC)

DUDLEY: I've spent the last three months, everyday on the Gulf Coast. And I'm going to focus for the next month and a half on what we're doing in the Gulf Coast, our relationships with the Gulf Coast and Washington. And Tony and I are going to work through a transition between now and the 1st of October.

(END VIDEO CLIP)

BOULDEN: So, you can see there, he is going to not only do this transition, but also go right back to the Gulf for a lot longer; because obviously, that is where a lot of the focus has to be. He's an American. We shouldn't underestimate what that might mean after all the problems in the U.S. And the U.S. is, of course, a huge market for BP. And so putting an American face on this, a man who has been working in the American market for a very long time, and of course, worked in Russia for TNK/BP, is somebody that the board obviously could easily switch over to when they decided that Tony Hayward had to go.

FOSTER: And Tony Hayward? What happens from here, then? Does he stay with the company? What happens?

BOULDEN: Yes, it is interesting. I mean, what we'll see is that he will stay on top `til October 1st. Because he hasn't been fired, he gets to get his salary for this year, $1.5 million. He gets to keep his pension fund. He's been there for 28 years.

FOSTER: Investors are happy with this deal, aren't they, crucially?

BOULDEN: Well, I mean, it is his money. You can't take it away from him. I don't know how you could take it away from him anyway. And then he gets the share options and the shares that he can invest, as well. I mean, some people would criticize that. But he hasn't been fired.

And then, BP said, as we expected, he will be nominated to go to the board of the joint venture, TNK/BP. So he will stay within the BP family, even though he will no longer be on the BP board come November.

FOSTER: OK, Jim. Thank you very much indeed for that.

Now, the question of resigning was put to Tony Hayward by a U.S. congressman, back in June. Peter Welch grilled the BP man about the company's safety record at a hearing in Washington. It was very painful viewing. We had it on this program. Peter Welch actually joins me now.

Thank you very much indeed for joining me.

Are you glad to see the back of Tony Hayward?

REP. PETER WELCH, (D) VERMONT: Well, you know, there will be few tears shed in the Gulf Coast at his departure. But the big question obviously is not about people, it is the BP culture did establish that they cut corners on safety that resulted in the loss of lives of their own workers. And then, this tragedy is going to continue to unfold in the Gulf Coast, for the families whose lives have really been destroyed, their livelihoods taken away. And the environmental damage from the clean up that is going to take generations. So, in Tony Hayward is the least of this.

FOSTER: He made a comment today on the conference call, which I thought you might find interesting, and that was that BP should be held up as a great example of corporate social responsibility. What do you think of that?

WELCH: Well, pretty absurd, actually, because the record for BP on safety, when you compare it to the other oil drilling companies, was pretty bad. And the record that we have established so far is that there was one corner cut, after another, when it came to running that drilling operation. This was a preventable event, and social responsibility, corporate responsibility, you should put safety first. So, I'm not ready to give out a gold medal to BP or Tony Hayward, yet.

FOSTER: Bob Dudley, the new man in charge then, do you think Americans can now move forward a bit now, because Tony Hayward is gone and Bob Dudley is now the man in charge?

WELCH: Well, I tell you really what is the best news and that the well has been capped. And we don't have the oil continuing to gush into the Gulf Coast. So that gives people some piece of mind. Also, you know, there are folks in the Gulf Coast who are very much involved in the oil industry. And BP let them down, because they didn't run this operation in a safe way.

And the challenge for us, I think in Congress, is to make certain that our oversight is done in the right way. I mean, there were some governmental faults here and we have to reform the way we extend leases to oil companies, not just BP, and the way we monitor safety, particularly with these blow out preventers, when we're doing drilling in the ocean.

FOSTER: We heard today that the company will be putting aside, or has put aside, some thing like $30 billion to help with the clean up. But also, crucially, for the penalties that they'll face from the American legal system. It is all pretty much guess work, because we don't know how much has been leaked or what the penalties are likely to be. As someone that works within the American system, what sort of penalties do you think there will be and will $30 billion be enough?

WELCH: Well, it is not penalties actually, in the American legal system what they are going to be paying, in court, is disputed claims about how much losses fisherman and the tourist industry suffered. So, if you caused the harm-and this is where BP did step up and we'll see if they deliver-but they have acknowledged that they will not cap their liability for economic loss to folks in the Gulf Coast at $75 million. They'll pay the claims. And that is what Mr. Feinberg is now involved in. But those claims are based on actual loss. So, it is good that they are setting money aside. And time will tell whether they fair and reasonable in the compensation that injured folks in businesses suffered.

FOSTER: The chairman kept on going back to this term, "grossly negligent". They are going forward on the basis that they weren't grossly negligent, but that they were responsible. Were they grossly negligent, because that would have a huge impact on whether or not they have got enough money to pay one back?

WELCH: Well, as I would understand that term, as a layman, really, I would say yes. I mean, they had warnings that they should have used 21 rather than seven stabilizers, that the mud that they were using was less secure and wasn't going to get the job done, but they used the cheaper mud rather than the more expensive mud that would have been safer.

They had several advance warnings from members-you know, if they had just taken three more days on this drilling rig, which I guess they were renting for $500,000 a day, they would have avoided this whole thing. So, the gross negligence here, really was that every time there was an opportunity for BP to make a choice, for safety or save money, they choose to save money. And of course, the consequence is what we're going to continue to deal with for a long time. That is a legal term, they're lawyering up on that, because they do want to minimize their liability. But bottom line, the folks on the Gulf Coast have really suffered a significant injury. And even the money that BP is willing to put into it isn't going to turn their lives right side up. There is a lot of suffering down there. That is going to continue for generations and BP is going to go on. They have made the changes at the top level. They have capped the well, but life for those folks in the Gulf Coast is not going to go on in any normal way for a long, long time.

FOSTER: Peter Welch, thank you very much, indeed, for joining me from Washington. And we're going to get the view from the Gulf Coast after the next break.

Up next, Tony Hayward may blame events in the Gulf of Mexico for driving him out of his job. We'll find out how people in the region feel about his downfall. That is in just a moment.

(COMMERCIAL BREAK)

FOSTER: BP Chief Tony Hayward is on his way out and as a symbol of the company's determination to change it is replacing him with an American, Bob Dudley. As David Mattingly tells us, on the U.S. Gulf Coast it is hard to find anyone who feels sorry for Hayward.

(BEGIN VIDEOTAPE)

DAVID MATTINGLY, CNN INT'L. CORRESPONDENT (On camera): Reaction around the Gulf Coast to Tony Hayward's departure might be what you expect. His departure as CEO of BP does not come as a surprise to anyone here. And public officials say now regardless of who is in charge of the company that actions on the ground will speak more loudly than any change at the top.

BILLY NUNGESSER, PRESIDENT, PLAQUEMINES PARISH: I think it is the right thing to do. I think it is a positive move for BP, in the right direction. He did absolutely nothing to help the situation, in the clean up, in the response, and in PR for the image of BP. No matter what he said from this point out, anything short of apologizing and admitting they made major mistakes, it was going to be-it was not going to be a positive image for BP.

MATTINGLY (voice over): There has always been the general sense on the ground throughout the Gulf, particularly among fishermen, that Tony Hayward just didn't get it, when it came to what they were going through. And they believe that it was his comment, that he wanted his life back, that caused some irreparable damage.

TONY DANOS, FISHERMAN: I think a business makes decisions based on the perception of the people and the people disliked Tony Hayward because of his ridiculous statements. So, it is probably good that he goes.

SCOTT WALTERS, FISHERMAN: He wants his life back, he shouldn't even be the boss of the company, you know? I mean, you going to take on the responsibility, you take on the responsibility. If you don't want that responsibility, don't say you want your life back, you know? I mean, quit if you can't handle it. If you can't handle the heat, get out of the kitchen. You know what I mean? That's how I feel?

MATTINGLY (On camera): And regardless of any change at BP, whoever is leading that company in the future, has a long way to go, to win the trust of the people of the Gulf. David Mattingly, CNN, New Orleans, Louisiana.

(END VIDEOTAPE)

FOSTER: BP's incoming CEO, Bob Dudley, says he is sure there will be changes in the oil industry, and that the company will have learned lessons in the aftermath of the Gulf of Mexico oil spill. David Weaver is the CEO of Ultra Green International, a renewable energy and clean technology company. He's also a former BP executive.

Thank you very much, indeed, for coming in. One of the points made by Tony Hayward today was that the whole industry needs to reconsider how they deal with safety and standards need to be raised. Do you think that is true?

DAVID WEAVER, GROUP CEO, ULTRA GREEN INT'L.: I think possibly it is. I mean, BP when I worked there were always very, very cognizant of safety. And it was always the highest priority. But there is also a feeling that maybe it would never happen to us. But I think the whole oil industry has to reconsider what has happened this time, and that is not just BP.

FOSTER: Well, that would suggest that perhaps other companies were lucky not to have a spill like this.

WEAVER: There have been other incidents. This isn't an isolated incident. I mean, I can tell you about incidents with Shell and ExxonMobil, and the Exxon Valdez, for example. That was quite a catastrophe in its time.

FOSTER: OK, so when we talk about raising safety standards, we're talking about money. So they're talking about investing a lot more money in very expensive projects, which in the past, perhaps, they've been cutting back on?

WEAVER: Well, it is possible. But you have to bear in mind that oil is becoming a much scarcer resource and you have to go to greater lengths to find it and it is costing more because it is in more difficult territory to find it and extract it. And BP, at the end of the day, is a big resource oil company. That is how they make their money. And they are still making quite a lot of it. But maybe they just have to invest a little bit more in, you know, some of the safety features that they cut out, to what they're doing.

FOSTER: Do you share the view that Americans, perhaps, should share some responsibility in this, for having an insatiable demand for oil, and perhaps pushing oil companies to dig deeper to find it?

WEAVER: What is it that George Bush said? That the Americans have an insatiable appetite for oil? So maybe you are right. But at the end of the day there is an awful lot of ownership, American ownership, in BP. It is not the pure U.K. company that it used to be.

FOSTER: And since you left BP you have been working under renewable energy.

WEAVER: That's right.

FOSTER: But also on an interesting clean up project. Which is directly related to the Gulf of Mexico spill?

WEAVER: Indeed.

FOSTER: And you've got this project, basically going, where you are going to clean it up and reuse it?

WEAVER: That's right. We spoke last time about this. We have a three-level clean up going on in the Gulf at the moment. There is actually going out there, they are commissioning trials right now. And we have a collection device that picks up oil from the surface and reuses it, which puts a very scarce, high-value resource back into the energy cycle. But more importantly, BP says that a lot of the oil has disappeared. But where has 4 million barrels of oil gone? It has not just disappeared, so a lot of it must be on the ocean bed. And part of what we are doing is neutralizing what is on the ocean bed, because-

FOSTER: How do you do that?

WEAVER: We have enzymes that we put over the side of the ship. It goes down. And the enzymes live off the oil that has collected on the ocean floor, and neutralizes it and makes it into some safe, so the oil doesn't go into the food chain.

And the other thing that is very, very bad, is that BP is paying Waste Management to landfill and awful lot of the solid oil that they are picking up, and nine landfills are being corrupted-if I may use the word-by this method. We have an advanced pyrolysis (ph) system that comes in fortified containers that can convert that from the ticking time bomb that it will be, in a landfill, to usable energy.

FOSTER: At $32 billion effectively being put aside, to deal with the clean up costs and the subsequent, sort of fines and penalties, they'll have to pay, do you think that is enough?

WEAVER: No, I don't.

FOSTER: Because we don't know how much has been leaked and what the penalties will be?

WEAVER: You don't know. That is an estimate as we stand now. But look at the experience of the Exxon Valdez, for example, that I mentioned before. The lawyers got a lot of experience on medical claims in that disaster. And the medical claims, they could go on for a long, long time. And they're experience, history tells us that the clean up crews actually do get affected by this. So, medical claims, other clean up claims, the oil has gone somewhere, it has to be recovered. And the oil going into landfills is a definite bad thing.

FOSTER: They'll be paying for a very long time.

WEAVER: Yes, they will.

FOSTER: That is why they can't put a price on it. David Weaver thank you very much, indeed for joining us.

WEAVER: Thank you.

FOSTER: Now, tomorrow on QUEST MEANS BUSINESS I will be talking to the man chosen to replace Tony Hayward, at the helm of BP, CEO designate, Robert Dudley.

Bob Dudley, the American will be the first ever non-British chief executive at BP. We'll get his thoughts on the oil spill in the Gulf of Mexico, and much more. That is QUEST MEANS BUSINESS, Wednesday, 1900, London time, 2000 Central European Time.

Still ahead, another important reading on the mood of the U.S. consumer. It came out today, Maggie Lake is live in New York.

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: That is right, Max, after a decent spring, we are moving in reverse. Consumer confidence sank for the second straight month. We went out to talk to people about their concerns and asked how they are spending their money. Details, coming up.

(COMMERCIAL BREAK)

FOSTER: To U.S. consumers it feels like one more summer of discontent, according to a private survey, consumer confidence in the U.S. fell in July, to its lowest level in five months, slipping to a score of 50.4 on the Conference Board's index. A big drop compared to June. Maggie Lake hit the streets of New York to ask consumers what we call the $500- question.

(BEGIN VIDEOTAPE)

LAKE (on camera): Economists are worried the U.S. consumer is pulling back. Businesses have been slow to hire, housing is still under pressure and consumers are buried under debt. Yet for all the worrying signs, we see evidence that they are willing to spend on expensive electronic gadgets like iPhones and iPads, and some upscale departments stores are doing quite well. So to try to understand the disconnect, we hit the streets of New York to take our own consumer sentiment survey.

How are you feeling about the economy these days?

UNIDENTIFIED FEMALE: I'm very confused. I think it is a very confusing economy. I hear we're in the middle of a recession and yet, everything I go to do, I have to wait, because I can't get in, or I can't get tickets, or I can't get reservations, so I'm not sure.

LAKE: Let me ask you a question: If I gave you $500 how would you spend it?

UNIDENTIFIED MALE: I'd probably buy gold.

UNIDENTIFIED MALE: Save it for maybe a rainy day, rather than spend it on something that two years ago, I thought I needed.

UNIDENTIFIED FEMALE: I own my own business and we have withstood real hard times, but it really hasn't affected us that much.

LAKE: That's great.

If I gave you $500 today, how would you spend it?

UNIDENTIFIED FEMALE: How would I spend it? I would spend it frivolously.

UNIDENTIFIED MALE: Bills.

(LAUGHTER)

UNIDENTIFIED MALE: Yeah, bills.

UNIDENTIFIED MALE: I have a student loan, I'd probably put it towards that.

LAKE: If I gave you $500 how would you spend it?

UNIDENTIFIED MALE: I would pay my rent. Or I would buy some shoes.

LAKE: Your rent or shoes?!

UNIDENTIFIED MALE: Right.

(LAUGHTER)

LAKE: That doesn't sound like-explain that to me.

UNIDENTIFIED MALE: Well, you know, I've done that in the past, you know? Every time I've got some money. New York is the place, if you see some shoes in a magazine, you can find them in New York.

(END VIDEOTAPE)

FOSTER: Maggie joins me now from the streets of New York.

Maggie, why are consumers so unwilling to just take this 500 bucks and have a good time?

LAKE: Yes, it is interesting, isn't it? It really comes down to jobs, Max. That is what is-that is what continues to really worry people and, interestingly, not their jobs. All of the people that we talked to, for the most part, had jobs. They weren't particularly worried about losing theirs, but they are concerned about the fact that the economy doesn't seem to be adding jobs. It is almost like a barometer of confidence for them.

If businesses aren't hiring, they are afraid there is going to be another downturn. And if there is, they have to personally be prepared. They don't seem that confident that the government or anyone else is going be there to help them out. So, sort of a bunker mentality that still seems to be very pervasive, among almost everyone we talked to.

FOSTER: Yes, Maggie, it is interesting that the people behind you, around you, they're not very confident. But companies are confident, so where are they getting their confidence from? Don't they get it from consumers?

LAKE: No, they are getting their confidence from the fact that they have really good earnings. Remember, they have been cost-cutting, productivity is high. They are starting to see business pick up. They are confident about the future. But consumers aren't. It is this dichotomy that is really problematic. And companies-we're going to get a GDP report coming out at the end of the week. And this is what we're really going to look for.

Are companies starting to walk the walk, not just talk about being confident. Are they spending? Business spending is going to be a key component that we're going to look for to see whether or not this recovery is still intact. And importantly, are they spending it on hiring? So far, they have been spending it on software, on technology, things that make them more productive. Are they going to spend it on personnel? That is the kind of missing link that I think we'll then see back to the consumer and maybe sort of bring that disparity closer together. But it is a big divide, once again, between corporate America and Main Street, Max.

FOSTER: Interesting. We'll see what happens. Maggie Lake, thank you very much, indeed.

We're going to stay in New York. We are going to go to the other side of the city and Wall Street and see what figures are coming out from there. Let's see, what the Dow is doing, up a 0.23 percent, 10,549.

As anger rises over a new immigration law in Arizona, we'll look at life for one man who says his American dream has been shattered.

(COMMERCIAL BREAK)

FOSTER: Welcome back. I'm Max Foster in London. More QUEST MEANS BUSINESS in just a moment, but first here are the main news headlines.

(NEWSBREAK)

FOSTER: It's being called the final stretch of an 800-meter race. The opening ceremonies of the 2012 Olympics in London are set to take place two years from today. The organizing committee chiefs wants to make sure everything goes off without a hitch. He says he's preparing for two very rough years to make sure London can deliver the games.

A controversial new law in the U.S. state of Arizona is scheduled to go into effect on Thursday. It would mean being an illegal immigrant a state crime. But leaving isn't always so easy.

Soledad O'Brien takes a look at how some families are struggling to go home.

(BEGIN VIDEOTAPE)

SOLEDAD O'BRIEN, CNN CORRESPONDENT (voice-over): Edwin Andrade first came to the U.S. from Ecuador because his daughter Dominica was dying. Her heart ailment could only be treated here. When their visas ran out, his family stayed, illegally.

EDWIN ANDRADE, TRYING TO RETURN TO COUNTRY: I made a decision to stay here. I left everything for coming here to save her life.

O'BRIEN: Even after Dominica got better, the Andrades continued to stay. They had good jobs. They had a second daughter with U.S. citizenship.

(on camera): You want to go home?

ANDRADE: I want to go back home. In my country, I'm a citizen. I got to go whatever I need to go. I have like afraid -- I am afraid in there.

O'BRIEN (voice-over): After 13 years, the Andrades are doing the unthinkable -- trying to leave. But they say they feel trapped. Unable to find work in a recession, they're part of an estimated half a million illegal immigrants who are struggling to go back home.

(on camera): Are you stuck?

ANDRADE: Yes. I'm -- I'm stuck. I don't have -- I don't have hands. What I have is like a tie on my hands.

O'BRIEN (voice-over): If Andrade tries to fly out using his Ecuadorian passport, officials will discover he's overstayed his visa. He'll face potential fines and expulsion from the U.S. for years. Leaving isn't so easy.

PABLO CALLE, ECUADORIAN GOVERNMENT OFFICIAL: We have a -- a case of an Ecuadorian that went to ICE. And they said, listen, I have nothing left in this country. I have no money for my air ticket. I just want to go back to the country. And they tell him no.

O'BRIEN (on camera): Are you saying that some people say, I'd love to go home but I can't?

CALLE: Yes, that's their reality.

O'BRIEN (voice-over): Some illegal immigrants even face detention if they try to leave.

JOHN DE LEON, MIAMI IMMIGRATION LAWYER: If you want to stay, they get you out very quick. If you want to -- if you want to leave, they try to make it hard for you to leave.

O'BRIEN: Immigration authorities declined to be interviewed on camera. They say people facing deportation orders may be detained while they're processed. The only way to come and go without a penalty -- sneak back across the border.

At a center for day laborers in Los Angeles, undocumented immigrants can't fathom paying a coyote thousands of dollars to go backwards in their American dream.

He says, "I've been wanting to go for a long time, but I make the decision and I don't even have enough money for a ticket."

And if they aren't Mexican citizens, it's more complicated. For example, Guatemalans face arrest if they enter Mexico illegally. Guatemala is one of the countries that helps its citizen get back home -- giving two people each week a bus ticket and negotiating safe passage.

PABLO GARCIA SAENZ, GUATEMALA CONSUL GENERAL IN LOS ANGELES: This year, 50 people is take a ticket for return to Guatemala.

O'BRIEN: Edwin Andrade says the immigration crackdown has made it hard for him to get any work, but once he raises the money, he's taking his family back to Ecuador.

ANDRADE: I say thank you very much for the opportunities what I have in -- in this 13 years in the United States. I want to see my country again. I want to start at zero again.

O'BRIEN: For "In America," Soledad O'Brien, CNN, New York.

(END VIDEOTAPE)

FOSTER: Well, there is intense speculation about the impact Arizona's new law will have on business in the state. In less than 48 hours, we'll start to see how that pans out. And that's when the law goes into effect, of course.

The mayor of Phoenix, Phil Gordon, says it could cost the city $90 million in lost hotel and convention business.

Mayor Gordon is also chairman of the U.S. Conference of Mayors' Immigration Task Force.

He joins us now live from Phoenix.

And you have strong views on the law in the first place, don't you?

So just put us in perspective, as it were, on your view of this law.

PHIL GORDON, MAYOR OF PHOENIX, ARIZONA: Well, first, with respect to the law itself, it was poorly written. It does not accomplish any of the security issues that -- that it claims to have addressed and, in fact, actually creates more of a safety issue with the diversion of police resources and money throughout the state, including our department, the largest in the state.

I also believe it's unconstitutional and very, very vague, which will create lawsuits on both sides.

Having said that, the real focus still has to be at a federal government level, to correct that the system -- the immigration system that really has not been addressed since the 1930s in terms of a modern state, a modern nation and the reality of immigrants and both the need by a country for both inexpensive labor, on one hand, and new, high, educated labor on the other side.

But we're able to track today. We're able to share. And what we ought -- need to do is push the federal government for a secure border, comprehensive immigration reform and not this knee-jerk reaction which will create hundreds of different laws throughout the United States, and, in effect, actually, the world economy, just not Phoenix or Arizona's.

FOSTER: And you've been talking about the -- the costs for the public institutions, the police, for example.

Can you sort of figure on the -- the price for the private sector, as well, because whilst the price initially might be higher, over time, actually, the system would work its way through, wouldn't it?

GORDON: Well, I -- I really don't believe and I think the experts don't believe that -- first of all, you have more than just undocumented illegal immigrants moving, whether back south of the border or to other states. You have, like you heard on your -- on the television -- citizens of the United States or legal residents, but because of family, because of fear that a brother or a sister or a son or a daughter may get arrested and deported, then they also leave.

Number two is, the immediate effect today has been some cancellations of conventions, some businesses that are not expanding here. But the long- term effect is that if this state is redlined, effectively, what we call companies that don't want to get in the middle of a controversy, then it will have implications for decades in -- in terms of new resources, new companies, new type of jobs. And therefore, the housing market won't expand as rapidly, the -- the need to...

FOSTER: Yes...

GORDON: -- build and incent (INAUDIBLE)...

FOSTER: I just want to ask you how you think this -- obviously, with -- the -- the local issues are pretty apparent.

But how, then, can you translate this into an impact on the global economy, one state law?

GORDON: Well, one example is -- and, again, it's not just one state law. Now you have about 20 other states proposing it.

But just an example is Phoenix is in the process of building an automated train system at our airport, the seventh busiest airport in the United States. It's a Canadian corporation that is building the cars, employing Canadians, Pennsylvanians, individuals from Europe, as well as the -- the Far East in terms of designs and electronics assemblage. The cars are made in Japan. If that system now, because of less passengers coming to Phoenix, has to slow down or we don't build the next phase, that means less production in Japan, less income in Canada...

FOSTER: OK.

GORDON: -- and that's just one example.

FOSTER: OK.

Mayor Gordon, thank you very much, indeed, for joining us from Phoenix.

We'll speak to you again as the new law comes into effect.

Now, we are devoting a special week of coverage to the worldwide debate over immigration and conflicts that arise because of it. It's an issue that knows no specific borders. And we'll look at all the viewpoints. And that is Immigration Beyond Borders all week on CNN.

Now, in the thick of earnings season right now, up next, we take the temperature in the metal sector with the CEO of Norsk Hydro.

(COMMERCIAL BREAK)

FOSTER: Well, stock markets in Europe finished in the fast column on Tuesday, although a drop in consumer confidence in the U.S. took the shine off the gains, really. The FTSE 100 banked, pretty much leaning away. Lloyd's and Barclays gained more than 7.5 percent there. There were -- there were good bank results elsewhere in Europe, as well, and signs that new rules requiring banks to boost capital reserves won't be as tough as bankers had actually feared.

Now, the DAX -- the shares in Deutsche Bank actually advanced more than 4 percent in the end. So that had a really big impact there. Germany's largest lender surpassed expectations with a 6 percent rise in second quarter profits. That was a big story, really, in Germany today.

And the CAC 40 in Paris, well, gains for banks there, too, lifted the CAC 40. Societe Generale surged 10.5 percent. Credit Agricole also ended the day, up more than 10 percent. So an amazing week, really, for financial stocks in Europe and around the world.

Whilst most stocks in Europe are having an upbeat day, Norway's Norsk Hydro reported rising profits but saw its shares actually fall. The aluminum producer said second quarter profit more than doubled, coming in at $81 million. Analysts were predicting a bigger rise than that, which was the problem in the share price.

I asked Norsk Hydro CEO, Svein Richard Brandtzaeg, for more detail on the results for the latest quarter.

(BEGIN VIDEOTAPE)

SVEIN RICHARD BRANDTZAEG, CEO, NORSK HYDRO: Hydro is operating in 40 countries in the world. So we have a gravity in Europe, but we are present in all important pockets globally.

FOSTER: And what you're experiencing is an increase in demand for aluminum. What -- so you're a really strong barometer of how global industry is performing right now, is that correct?

BRANDTZAEG: This -- that is correct, yes.

FOSTER: So how would you judge the state of global industry right now?

BRANDTZAEG: We have seen improvements now in the European market, mainly driven by increased demand in Germany. We also see good development in the U.S. market coming from a lower level and now on the right track, in the right direction. In emerging markets, we hardly saw any downturn at all. And we have good demands in Asia and good demands in Brazil.

FOSTER: It's interesting that you're -- you're seeing a bit of a comeback in Europe, because other multinationals are seeing it as a very stagnant inter -- stagnant economy.

But are you one of the first sort of industries to notice a comeback?

BRANDTZAEG: We have seen a good development in several market segments. In packaging, good -- a good increase in demand; in automotive, more aluminum is going into transport, into cars to reduce fuel and energy consumption. And we're also seeing a development in buildings.

Well, we have developed energy efficient building solutions based on - - on aluminum.

FOSTER: Are you concerned that government cutbacks across Europe are going to kill off this slight recovery?

BRANDTZAEG: We are concerned about the development in Southern Europe, because we haven't seen the recovery stopping, really, in the southern part of Europe. But Germany has developed very good during the last couple of quarters.

FOSTER: But you're not concerned that government cutbacks in spending, for example, in countries like Germany could choke off that recovery for you?

BRANDTZAEG: That could happen. But we also see that Germany has some very healthy export industry that is also supporting the demand picture.

FOSTER: What about the US?

Do you see a double dip recession there?

BRANDTZAEG: So far, we have seen that the U.S. is now on track and has developed positively during the last couple of quarters. And we see that, also, in the beginning of the third quarter of this year.

FOSTER: Do you expect that to continue for the next year or two?

BRANDTZAEG: We expect that and that is what we are hoping for, too.

FOSTER: You've also got involved in the Brazilian market, because everyone is talking about Brazil right now.

It's the country to invest in, isn't it?

And you're going in in quite a big way. So just explain what you're doing there and what you hope to -- to get from Brazil.

BRANDTZAEG: That is also related to what we are doing in the second quarter now. And the second quarter has truly been an eventful quarter for Hydro. We have announced the acquisition of Vale's aluminum assets in Brazil, which means that Hydro will now be in the position of owning the biggest -- and one of the biggest bauxite mines in the world and the biggest aluminum refinery in the world, in Brazil; one of the most cost- efficient raw materials system that you get -- can get hold of.

We also get Alva's, one of the biggest smelters in South America, 51 percent ownership there as part of the deal. So we have really done an important deal in the second quarter that...

FOSTER: And what sort of growth are you expecting from Brazil?

Are you -- are you hugely optimistic, like other companies seem to be, about the economy there?

BRANDTZAEG: We are very optimistic about the development in Brazil. I think Brazil will be a very important market going forward; also, with regard to aluminum consumption.

FOSTER: More -- more so than India and China right now?

BRANDTZAEG: China is definitely the country with the highest consumption of aluminum. And, I think, also, India will be quite important. So we are also looking to India in -- in the coming years, definitely.

(END VIDEO TAPE)

FOSTER: That was Erin Maer Rizi (ph), the -- the head of Norsk Hydro.

And we're going to check on the weather now, because Europe is experiencing a bit of a heat wave, would you say -- Guillermo?

GUILLERMO ARDUINO, CNN METEOROLOGIST: Not only Europe, Japan, too, and the United States, too. But in Europe, it's bad, especially Moscow.

But I want to tell you that Madrid is under some serious heat, as well. Look at this picture, trying to enjoy themselves. This is a water park -- amusement park in Madrid. A hot summer day today. Moscow, Russia, there, cool water, please. It is really hot. You're going to see why. We have the storms that are not moving. They are over Poland now here, parts of the Czech Republic, Slovakia, Hungary and then they go into the Balkan Peninsula, the Baltics, too.

But Russia doesn't get any. And as long as we continue with this pattern -- and we have seen this for more than two weeks -- the change is not coming to an end. You see there, even parts there near the Caspian Sea with temperatures about 34 degrees; 24 for tomorrow in Paris; 24 in London, though we saw a system descending there through England and it's not changing the temps by much.

So this is the pattern. The high here, it doesn't move. The storms stay over there. The heat will continue to dangerous levels especially. So be very careful in Russia. You know, for weeks, we've been talking about this. We'll continue to touch on that story throughout the night.

At the same time, the heat wave in Spain -- Barcelona very hot, too. And there are some games there. But we don't see any problems at airports, let's say. In general, sunshine, partly cloudy. In fact, Vienna, that's where we start to see some windy conditions associated with that system that I was talking about. Amsterdam, Dublin and Brussels, the same system that went through Britain there. You see it here. So it's departing now England and it's moving into the Low Countries. And that's where we're going to see the rough weather conditions ahead.

Let's see what's going on. Also here in parts of Asia, we see that we have some intense rain in coastal parts. To the south, we see some rain showers, as well, especially Taipei there, with some delays, probably; Hong Kong and India with significant rain. It's the monsoonal flow.

You know what?

I want to see this. See Pakistan, the last 24 hours, totally covered in rain. That's the monsoon. It has arrived there. It has covered the country. India is completely covered in rain. And this will continue until we start seeing the -- how the monsoon recedes and starts moving backward into the south. That process is going to take -- is going to take weeks.

Also, a system is moving in the Northern Plains here close to Michigan, but we see the heat here into the south; some warnings in Georgia and South Carolina; more than 40 degrees. That's what it feels -- Max.

FOSTER: Unbelievable.

Guillermo, thank you very much, indeed for that.

ARDUINO: Thank you.

FOSTER: Now, what's it like doing business in China these days?

Well, it's a vast market, but some companies say they're dissatisfied. We'll talk to someone who sees the situation from inside China's capital.

(COMMERCIAL BREAK)

FOSTER: A number of multinational firms operating in China say they are being overlooked for government contracts. Their complaints are raising questions about Beijing's attitude toward foreign competition.

CNN's John Vause discussed it with Myron Brilliant from the American Chamber of Commerce in Beijing.

(BEGIN VIDEOTAPE)

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: In the "Financial Times," the -- the commerce minister, China's commerce minister has -- has written an article essentially refuting the complaints coming from a number of CEOs of multinationals. He's essentially saying that China is open for business. It will remain open for business.

Do you -- do you agree with him?

You know, essentially, is China open for business right now?

MYRON BRILLIANT, U.S. CHAMBER OF COMMERCE: The question is whether China is beginning to protect certain sectors of the economy from foreign competition. And would have concerns that whether it's in the I.T. sector or in the service sector, that there are carve outs, that there are inclusi -- increasing regulatory barriers that are creating disadvantages for foreign investors in the marketplace.

And that's what you're hearing from chief executives of major multinational companies. And certainly, we've taken notice when it comes to issues around innovation, around intellectual property, around standards, around the regulatory environment.

There are troublesome signs.

VAUSE: Do you think there's been this -- this shift here in China?

The theory goes that they -- they don't need the direct foreign investment as much as they did, and that's why there's been this shift in the business environment here.

BRILLIANT: Now, when I hear people say that China does not need the foreign...

VAUSE: As much?

BRILLIANT: I'd say hogwash. I mean the bottom line is China needs our foreign direct investment, just like the United States needs investment from abroad. It's a two way street. We need to keep our doors open to investment from China, from Europe, from elsewhere. And China needs to enacting investment.

And if you look at the trends, they are attracting foreign direct investment in this country, because it is the largest growth market in the world. But at the same time, we have definite concerns about them carving out some sectors of the economy to protect them against foreign competition. And we're going to continue to raise our concerns in this regard.

VAUSE: What do you think about this theory that the Beijing consensus is now the winning formula for a -- for an economy?

BRILLIANT: Well, I give China a lot of credit for how they've come out of the financial crisis. Certainly, they have maintained growth rates that are very strong and -- and while they have some uncertainty in their marketplace, they have come out of this much stronger than the United States and Europe.

Having said that, a more confident China is a good thing. A cocky and arrogant China would not be a good thing.

VAUSE: Are they walking this fine line, you know every -- is it -- is it sort of lending itself more toward being, you know, cocky and -- and arrogant?

BRILLIANT: Well, I think it is a fine line, because China is confident about its position. It is on the rise and we all know that. It is now an economic superpower. Just five or six years ago, China's economy was one eighth of the United States. Today, it's one third. So the trend lines are clear. China's rise is inevitable.

The question is, how does it become a responsible stakeholder in the economic house?

(END VIDEO TAPE)

FOSTER: Well, that's one giant of the developing world. The other is India, of course. The central bank there is doing what it can to rein in inflation. On Tuesday, it raised two key interest rates. The cost of borrowing rose a half a percentage point, to 4.5 percent. That was the fourth time this year the RBI has actually increased rates.

The reserve bank has been trying to keep a lid on the soaring cost of living, which is being made worse by rising food costs, as Mallika Kapur in Mumbai explains.

MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT: India's central bank, the Reserve Bank of India, has increased interest rates in a serious effort to tackle inflation. Inflation is a huge problem for the Indian economy. It's currently at 10.5 percent.

Now, this is the fourth time the RBI has raised interest rates this year. The reason it hasn't worked, the reason it hasn't been able to bring down inflation so far, one of them is because inflation used to be confined to the agricultural sector, but it has spilled over into other sectors.

Take fuel, for example. Around a month ago, the Indian government decided to deregulate petrol prices and increase fuel prices overall, leading to massive inflation in that area, as well. So we have seen inflation spilling over into other sectors.

Also, until now, the RBI has made rather moderate increases in interest rates. And it is hoped that today's rate hike, which is a little -- a little bit more aggressive -- will actually tame inflation and bring it down to 6 percent by the end of the year. That is the government's goal.

But inflation does remain a huge problem for everyone in India. Everyone is complaining about the high prices of pretty much everything. And it's even got Bollywood talking about it.

We are now waiting for the release of the new Bollywood blockbuster. And in the movie, there is a song which complains about the high price of diesel and it says inflation is stealing our happiness -- Max.

FOSTER: Mallika Kapur, thank you very much, indeed, for joining us from India.

Well, U.K. prime minister, David Cameron, is heading from Turkey to India for a three day visit. He's anxious to deepen trade links with the world's second fastest growing economy. Earlier today, Mr. Cameron made the case for Turkey to -- to join the European Union in his first visit to that country as prime minister.

You're watching QUEST MEANS BUSINESS.

After the break we'll -- we'll check the numbers on Wall Street and right here in Europe.

(COMMERCIAL BREAK)

FOSTER: Let's have a recap of the closing numbers on Europe's main stock markets this session. There were plus numbers right across the border. Bank stocks pulled out big gains after some strong earnings from UBS and Deutsche Bank in particular and signs that the banks won't be forced to increase their capital reserves as much as the industry feared.

Look at those gains for the CAC and the DAX. That makes it five winning streaks now -- sessions in a row -- sessions in a row for those, too.

Let's have a look at the big board. It's been fluctuating a bit, the Dow. So let's have a look at where it is right now. It is up marginally. So it's been falling during the program and it's (INAUDIBLE) around there. Not much movement in the Dow Jones today.

Now, tomorrow on QUEST MEANS BUSINESS, I'll be talking to the man chosen to replace Tony Hayward as CEO of BP. Robert Dudley -- Bob Dudley will be the company's first non-British chief executive. We'll get his thoughts on the oil spill and much more -- how is he going to deal with the company going ahead?

That is QUEST MEANS BUSINESS, Wednesday, 19:00 in London, 20:00 Central European time.

That is QUEST MEANS BUSINESS.

I'm Max Foster in London.

Up next, "WORLD ONE".

END