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HP CEO Ousted; New Delhi Plans for Future

Aired August 9, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: So it is the HP way or the highway. The chief exec pouts, investors don't like it.

The U.S. Fed and the flagging U.S. economy; no more exit strategy, maybe more stimulus.

And tonight Saudi Arabia versus BlackBerry. RIMM's instant messaging service, it could be a goner within hours.

I'm Richard Quest. You and I start a new week, because I mean business.

Good evening.

It is an odd scandal, of sorts. At the very heart of Hewlett-Packard. On Friday the highly performing chief exec resigned, out of a job, after those accusations of sexual harassment. Today, this Monday, we learned who the other party was. She is Jodie Fisher, a former reality TV contestant, who disclosed her identity through her lawyers. Ultimately, though, it wasn't the allegation of sexual harassment which was the downfall of Mark Hurd. It was a nasty business with expenses.

On tonight's program, was it right for him to go, or should HP stood by their man?

It doesn't matter the morality and the ethics, perhaps, investors have made it clear this Monday, what they think about the decision of Mark Hurd to resign. If you'll join me in the library, you'll see what I mean.

The shares-look at this-it is one of the largest loser on the big board, if not the, it is the biggest loss for HP in three months. The stock is down 7.3 percent. It came out of the gate down. It has recovered slightly. It was about 8.5 down at its max peak-max drop, I should say. But now it is up still, sharply lower. The investors basically are saying, as we'll get into in a moment, that whatever Hurd did, he was good for HP. And there is no obvious, immediate successor.

This is the lady in-the other party. She is Jodie Fisher. She is an actress and a reality TV star. Now, she has also appeared in one or two-I think, uh, adult movies, of a soft nature, we are told. And there is not accusation-or there was an accusation, but no allegation found of any sexual harassment. Apparently, though, the way Mark Hurd developed a relationship with her, a non-sexual, non-intimate relationship with her while she was working as a consultant for Hewlett-Packard, that was against the principles and the practices, and the standards of practices. Also, apparently, of course, was a bit of fudging of expenses.

Incidentally, Ms. Foster (sic) said today-Ms. Fisher said, I beg your pardon, Ms. Fisher said today, that she was surprised and saddened that Hurd had left his job. She said it was never her intention that that should happen.

As for Mark Hurd, himself, well the Chief Financial Officer Cathie Lesjak, named as the interim chief executive, the interim chief has addressed reporters and staff twice, in the last three days. Saying basically, the company is more than one man. They will have very big boots to fill, incidentally, the interim says she is not interested in the job long-term. So she has ruled herself out. As for who takes over, bear in mind, Mark Hurd, increased the share price of Hewlett-Packard by more than a half, since he took over in 2006. Which is no mean feat, considering, considering, the recession of 2008.

Bruce Weinstein is "The Ethics Guy". He joins me now from New York.

Bruce, I have just given you the important fact. Hurd increased the share price. He made record revenues. Is it right that he should have to go for this?

BRUCE WEINSTEIN, THE ETHICS GUY: Yes, it is right, and I'll tell you why. To be a good manager is not simply to be a good strategist, or to be a good money maker. We expect our leaders, rightfully so, to have the highest ethical standards. And by his own admission, Mr. Hurd failed in that regard. He failed in a very significant way. I mean, we're talking about fudging expense reports and other financial data. And somebody who is making a low-five figures at the company would have been fired quickly for such an indiscretion.

QUEST: But hang on. I can understand the sexual harassment issue would have been an extremely serious one. But by all accounts and I don't want to get into too much the nitty-gritty. He didn't do his own expense accounts. He never claimed that there was a intimate relationship. He did nothing improper. Look, Bruce, surely adults of the world can say, he messed up, but he shouldn't have to go.

WEINSTEIN: Well, you know, here's the ironic thing about this whole sad affair, Richard. If he had been forthright, if he had come to the public and said, you know what, I just want you to know I made a mistake, I made a series of mistakes, it was very poor judgment and I intend to make reparations. If he had done that, he might have held onto his job. I mean, one of the wonderful things about human beings is that we have a great capacity for forgiveness. But what we cannot tolerate, and I think it is right that this is so, we cannot tolerate being deceived.


WEINSTEIN: That's what happened in this case. That is exactly what happened in this case.

QUEST: OK, so Hewlett-Packard, and this has to be seen in a totality, Hewlett-Packard, had two-several ethics scandals, notably of course, the bugging of journalists and the board members. So perhaps that is why the board believes it has to be so strict on it. But they have shot themselves in the foot, Bruce.

WEINSTEIN: Well, I mean, but here's the thing. Because of these indiscretions, as you mentioned at the top of the hour, the stock price fell, considerably. And so the take home message is that ultimately this is not a PR debacle. This is-or even a financial debacle. It is an ethical problem. And it is a PR problem and a financial problem because of the ethical issues at stake. I think that is really important to remember that if companies really want to do well in the long run, financially, ethics have to occupy front and center in all that the company does, starting at the top. This is a perfect illustration of what happens when you don't have ethics at the top.

QUEST: All right. You are putting me in the position of trying to sort of be Mr.-as if morality has gone out the window. But I'm going to go for it anyway. With you-the reality is that sometimes we're not all perfect.

WEINSTEIN: That's right.

QUEST: It is a heavy price to pay-

WEINSTEIN: That's right.

QUEST: -in this regard.

WEINSTEIN: That's right. No one is perfect, but the thing is, Richard, we expect more of our leaders. We expect more of someone making $10, $20 million a year, we expect that person, we expect him or her to hold to the highest ethical standards, to set the standard of the company not to be just like everybody else.

And, yes, we all make mistakes. And as I said before, one of the great things about being human is we have the ability, and the capacity to forget other people's mistakes. But here is someone who didn't even come forward. It had to be discovered from an internal investigation, that it happened. And I'm suggesting, in the future, for a CEO to come forward first, to be the first person to say, I made a mistake. Imagine what might have come from this case?

QUEST: Bruce, you-


QUEST: Bruce, you book is called, we can see it on the screen. We can see now the title. It is called, "Is it still cheating if I don't get caught?"

Many thanks for joining us and putting the perspective on that. Bruce Weinstein, joining us from New York. You'll here more from Bruce, I have no doubt, in the weeks and months ahead.

Now, shares in Apple are trading, some 2.5 percent higher in New York, right now. Over the weekend the man in charge of the design of the iPhone 4, left the company. It is not clear if the phone's antennae problems had anything to do with his departure.

I can smell smoke, there must be a fire somewhere, at least in Apple's case.

Internet telecom company Skype, is planning to go public in a bid to raise up $200 million. Skype shares will be traded on the Nasdaq. Skype allows users to make free voice and video calls on line. But if you are watching us around the world, you know that anyway.

In a moment Wall Street, it is all about the Fed. Investors are waiting to hear what will come out of this building tomorrow. We'll have the latest from New York. Maggie Lake, no doubt, will light a fire under the Fed. In a moment.


QUEST: There is only one thing on the mind of the markets and that is what the Fed is going to do. This time tomorrow we will know. The pressure is on policymakers. The U.S. economy is showing signs of stalling; although no one believes interest rates will be moved in any particular direction. The question, of course, the focus will be on that all-important statement. Maggie is in New York.

Maggie, I'm assuming you agree they're not going to move on rates. But what do we think they might do in terms of the easing policy?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yes, this is it, is that easing. That quantitative easing policy where we thought we were not going to have to use after awhile. And the Fed really does not want to be in this position, Richard. Remember, when we started 2010, the recovery was clicking along. And you and I were talking about when is the Fed going to start to signal that it is going to raise rates, even just a little bit.

Now that is certainly not the case. If you take a look at what is happened with the economy. We have been talking about it the last few weeks. It is really stalled, growth is moving in the wrong direction. So once again, everyone clambering, or a certain camp out there, sort of clambering for the Fed to start getting in there and start getting in there and start buying assets again, Treasury, mortgage-backed, to try and stimulate the economy. But this time around, there is an awful lot of push back from a whole other group of people who say more stimulus is not what we need. It is actually the wrong direction to move in and those people include some former Treasury secretaries, Bob Rubin, among them. Have a listen.


ROBERT RUBIN, FMR. U.S. TREASURY SECRETARY: I wouldn't do a major second stimulus because I think we run a risk that it could be counter- productive in creating a lot of additional uncertainty, and undermining confidence. But at the same time-and what I'm about to say is easy to say and very hard to do. At the same time, I would try over the next six months to put in place a very serious beginning of deficit reduction that would take affect at some specified time in the future and, I would guess, in something like two years.


LAKE: Now, Bob Rubin talking there about fiscal stimulus coming from the administration or Congress. But it is the same argument when you talk about Fed stimulus that a lot of people are saying. And it is that idea, especially that Rubin mentioned about creating uncertainty and undermining confidence. There are people out there who say, that more action from the Fed would confuse things. This is a time they need to stay out now. They don't want them in there manipulating the market.

So it is a real divide here, Richard, between those two. Bob Rubin, during his time as secretary was known, of course, for having a real sense of how markets react. So, we are going to have to look through the statement, see if the Fed signals, whether they are going to do any more quantitative easing. And then, importantly, see whether the market thinks it is going to help, or whether they actually will be spooked by that.

QUEST: They've got no choice, Maggie. The economy is slowing at a faster pace than they had previously thought. Don't shake your head.

LAKE: There is always a choice, Richard. And especially when you talk about this idea of deflation, right? If you think that things are going to get worse, that rates are going to stay low forever. There are people who argue that that is going to create a sense where people just continue to sit on the fence. Why should I go get a mortgage today when the rates might be-

QUEST: Because-

LAKE: -even lower next week?

QUEST: Because the jobs-

LAKE: That is the real argument.

QUEST: The jobs number on Friday on was so worryingly weak.

LAKE: A second round of quantitative easing isn't going to do anything to put people back to work. The other person who is on Fareed's show was Paul O'Neill, who said when I was CEO of a company there wasn't an incentive in the world that was going to make me hire another person. I could have all the money I needed on my balance sheet, I'm not going to hire until there is demand. That is all out of the Fed's control. And that is what some people in the market, why they are saying, that this is not a problem the Fed can solve. They needed to do what they did during the crisis. Now is the time to try to sit back and let the market and the economy heal itself.

QUEST: The moral of the tale, never ague with Maggie, when she's wearing that red jacket.


QUEST: Fires her up. Maggie, we'll talk tomorrow on that subject.

Maggie talked about the market. Let's find out what the market believes. Felicia Taylor is at the New York Stock Exchange.

I'm hoping your black jacket isn't a sign of doom and gloom. Before we talk Fed, before we talk Fed, I just want to go back to HP, down 7 percent. Whatever Mark Hurd did, or did not do, investors would still like him as chief.

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: There is no question about it. You are absolutely right about that. Listen, he had, according to one trader, kind of a little bit of a cult following in a sense. I mean, he was able to get the numbers, as you mentioned, up and actually very good considering the market place that we're in right now. He-it is questionable what the man did. I mean, he wasn't accused of sexual harassment. But he certainly wasn't necessarily honest about his bookkeeping.

Now, should he have been asked to step down? Clearly, investors do not agree with that. I mean, they would like him to stay in place. They have been-listen, these are shareholders. They are concerned with what the company does. Not with what he does on his own private time.

QUEST: Well, yes, some would say of course, it wasn't his private time. He was on the company's dime. But anyway, look, I really don't want to get into-yeah, I know, I know, I know, people will go in opposite directions on this.

Let's stick with the Fed where we-Maggie, thinks it is not a done deal on anymore QE or further monetary easing. I came to the view that probably they are going to at least signpost some willingness to do something. Where do you come down on this?

TAYLOR: Well, I happen to agree with Maggie on this one.


TAYLOR: I mean, at the moment-well, you know what, she's not wrong. What the market would like to see is some more of that quantitative easing. There is no question that that would be great. It would help stimulate the economy. But you have to remember this is very tricky. This is a very fine line. If the Fed does this again, it would signal great concern over whether this recovery is actually real. It wouldn't be good for the housing market as it is. You guys talked about this. Low rates are not enough to stir demand for property. People are not going out and buying new houses, even with the low mortgage rate.

Then you have this concern about deflation. If the Federal Reserve initiates some kind of stimulus in the economy, it could be sending a signal to the marketplace that things are actually worse coming down the road. So much so that the Federal Reserve was compelled to do something now. That could spark a massive sell off in the market. Housing market needs to be stabilized. Mortgage rates can't go much lower. Even if they did, it is not enough for people to go out and buy. Banks aren't really lending anyway. You practically have to offer your first child to go out and get a loan. It is likely that they're not going to do anything tomorrow just yet.

The most worrisome trend this summer is despite those weak economic reports, the market hasn't sold off. You can see it today, after last week's employment number, things have been churning in a tight range.

QUEST: All right. We'll find out this time tomorrow. I still believe, I don't think they'll do anything tomorrow, but I think the statement will suggest that-look, they're all shaking their heads. They're all shaking their heads.

TAYLOR: He's already said, Bernanke has already said that they're willing to do something if there is enough sign. But he's not going to actually do it. The statement, they're willing, is very different than actually putting in to play any amount of stimulus.

QUEST: I think we may have found some common ground, or at least, thicker ice.


It will be in the statement. Felicia, we will see you tomorrow. And we'll go over this in more detail.

I have a feeling I might be eating quite a bit of humble pie, before this week is out.

The markets, let's look at the European, the euro bourses, where all the markets, the major indices closed in the black. Banking shares were the biggest gainers. Bargain hunting after Friday's losses. Those Barclays of mine are doing rather nicely, up 3.2. Paribas was up 2.25, mining shares gained on rising metal prices.

BP says the cost of its Gulf oil spill has now topped $6 billion. That is an all in figure, that is includes containment, federal costs, and compensation claims. It is a great deal of money. The numbers look set to grow. It says it has made an initial $3 billion deposit into the escrow trust, for related. Now that $3 billion, remember it is $20 billion in all; $3 billion has now been put into the escrow account, which will be administered by two independent trustees. Administered, not by BP, but they are independent. The fund will eventually total $20 billion. You might want to know how they are going to get there. They are going to put $3 now, $2 by the end of Q4, and then $1.25 each quarter, for the next three years.

Take it from me. Shoes and socks came off, toes and fingers we worked it out, it will be around three years.

When we come back-


The struggle for clean water. It is India's wealthiest city. It is amazing how few people actually have access to good clean water. And yet, that is what you need if you are going to be a "Future City".


QUEST: Eight weeks from now they will fire the starting gun for the Commonwealth Games, being held in New Delhi. The city is not going into the competition in peak condition. Many of those who live there lack the most basic of needs. Obviously, clean, running water is high on that agenda. In "Future Cities" we look ahead to a time when even sewage could be turned into something that is safe to drink.


QUEST (voice over): Water is a hot topic in India's capital, New Delhi. India's in its ascendancy, asserting itself as a global power, pushing for growth. And yet, in this country's wealthiest city, they still struggle for the most basic service, fresh water out of the tap.

In this part of Delhi residents have no piped water supply. They rely on tankers which arrive every five days or so.

GIRISHI KIMARI, DELHI RESIDENT (through translator): It's very difficult. On one hand I carry my baby, and on the other a pipe. The situation is very bad. From morning to night we stand here and wait around.

QUEST: It's a daily hustle for water. A recent World Bank report said, India stood on the edge of an era of severe water scarcity.

RAMESH NEGI, CHIEF EXECUTIVE, DELHI JAL BOARD: If the population doesn't, the population rolls doesn't become static, or doesn't get control, the time may come when we will have to ration the supply.

QUEST: So, as a result water has become Delhi's priority for the future.

SHEILA DIKSHIT, DELHI CHIEF MINISTER: Our priorities have been changing. First the priority was the terrible power situation we had. We were have overcome that. The next thing we have to do is water.

NEGI: Our main challenge is first to have our house in order. We would like to bring down the losses, the line losses. For that we are changing the pipeline system.

SUNITA NARAIN, DIRECTOR, CENTER FOR SCIENCE & ENVIRONMENT: All the water we get we will literally loose 40 to 50 percent of the water, in what is known as distribution losses. Nobody knows where it goes. But it is just leaking pipelines. Now, this is really where we are asking the Delhi Jal Board, we are asking the government. Let's rethink our water future. Because this water future will not work for us.

QUEST: Fixing leaks is a short-term solution. Improving distribution looks to the long view. This is a matter the authorities here take very seriously. State of the art water treatment plants have been built, like this one. It is one of the largest in the region.

And to understand what the authorities are up against. Look at the river Yamuna. Water here is everything. Religious devotees take a dip in this holy water, as a purification ritual. But Delhi gets almost half its daily water supply from this very river. And the water itself is far from pure.

NARAIN: Today Delhi's shame is that its river, the Yamuna, is an open drain. It is actually dead. It just hasn't been cremated.

QUEST: Millions of gallons of sewage are pumped into the Yamuna every day. Officials at the water board are laying a new system. It will intercept the sewage before it reaches the river, and protect the fresh water supply.

NEGI: The Yamuna has a very high level of pollution, because around 60 percent of Delhi's population is staying in uncivil (ph) areas.

QUEST: Future hopes for clean water rest on this new plan to connect more homes to sewage lines. But it is an untested solution.

Delhi has other new schemes already in action. Across the city, in preparation for the Commonwealth Games, the authorities have invested in advanced water recycling facilities. It will treat dirty water so it can be reused for irrigation and by industry. It is moving Delhi towards an idea the city may have to embrace in the future, turning sewage into drinking water. A step other countries are already making.

NEGI: The ultimate aim is to use treated with water for drinking purposes, like Singapore is doing. By either pumping it to somewhere, like 30 to 40 kilometers up in the Yamuna, and then it gets cleaned by a natural process. And the we will treat it again. So we are going to appoint a consultant on how to use waste water for drinking purposes in the long term.

NARAIN: That's really to me, the new water future of Delhi. I mean, I don't think it will happened tomorrow. But the fact that we are beginning to think it, the fact that we are beginning to articulate it, is very, very important.

QUEST: With even ground water supplies running low, Delhi is a city working furiously to safeguard and deliver clean, fresh water. Among the needs of a "Future City" it doesn't get much more basic than that.


QUEST: If you are a BlackBerry user in Saudi Arabia, there is a bit of confusion about what might happen in the next few hours. At midnight will the plug be pulled on messaging? We're going to talk about that in a moment.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

The actress Mia Farrow and another witness today contradicted Naomi Campbell's testimony at the Hague, saying the supermodel was, indeed, aware that a gift of diamonds came from Charles Taylor. Prosecutors are trying to link the former Liberian president to so-called blood diamonds. And they've accused him of using precious stones to finance the civil war in Sierra Leone.

A U.N. spokesman is describing the flooding in Pakistan as nothing less than catastrophic. More than 1,200 people are confirmed to have died so far in more than a week of widespread monsoon floods and continual rain. All told, it's now believed 14 million people have been affected by the worst monsoon floods in decades.

China's state-run news agency says at least 337 people have now perished beneath mud slides in the northwest of the country. Some 1,100 people are still missing since heavy rains triggered the landslides on Sunday. Premier Wen Jiabao is urging rescuers to move quickly to find survivors.

And there's more grim news from the wildfires raging in Moscow. Thick smoke is blanketing the capital and it's now causing serious health issues. Authorities say the city is experiencing about 700 deaths a day as a result. That's twice the number usually recorded at this time of the year.

Before we finish on the top of the hour, Jenny Harrison will be with us at the CNN World Weather Center to give an overview of what we can expect in the 24 hours ahead.

We continue, though, a big story for those of us who use BlackBerry. The maker, Research in Motion, has hours to comply with a demand from Saudi Arabia to allow access to its messaging data. The tech company will face similar problems in other parts of the Gulf Region.

I was joined a short while ago by CNN's Stan Grant in Abu Dhabi to clarify what would happen with Saudi Arabia.


STAN GRANT, CNN CORRESPONDENT: I think everyone is confused in this - - especially confused if you have a BlackBerry, because as of last Friday, you wouldn't have been able to use the instant messenger service in Saudi Arabia. That was the plan. They shelved that plan and they offered a 72 hour window, until Monday, to try to get a resolution.

Now, the problem is this. Saudi Arabia, United Arab Emirates, other countries in this region, want to get access to the material -- the material that is sent on a BlackBerry. At the moment, it's stored mainly in Canada, where Research in Motion, or RIMM, is he said.

They want to get access to it here. What Saudi Arabia has been doing over the past couple of days is trialing other servers within the country using their existing mobile networks.

Now, what they hope to do is come to an arrangement where they can have a server in their own country and they can access that material. That, then, potentially opens the floodgates, because the United Arab Emirates and others are going to say, right, you're doing it there, we want to do it here. And remember, the UAE is holding this sword of Damocles over BlackBerry users and saying, as of October 11th, no instant messaging but also no e-mails and no Web browsing.

The stakes are being raised -- Richard.

QUEST: Is there -- to clarify -- is there an agreement on locating a server in Saudi?

GRANT: If you listen to some of the comments in the media today, you would think that they are getting close to an agreement. One Saudi has been quoted saying they are putting the icing on the a deal. We haven't seen any -- any really hard information on that yet. Then, of course, we mentioned the implications are there.

And it raises the question -- and these are the questions that have been raised throughout -- why do they want to access information?

Well, are they looking for something more than other countries get?

Other countries say that they're able to work with BlackBerry and their regulations. BlackBerry says that it's actually -- Research in Motion says that their security is among the best in the world and it's a selling point.

The big fear here is that they want to get the information not just for security, as they're saying, but some analysts are saying to peep into people's private lives.


QUEST: Leslie Harris joins me now from Washington, the chief executive of the non-profit organization, the Center for Democracy and Technology.

Whichever way this falls down, it's a fascinating tussle, if you like, that, to some extent, was always inevitable, wasn't it?

LESLIE HARRIS, THE CENTER FOR DEMOCRACY AND TECHNOLOGY: It it's absolutely inevitable. What's happening to RIMM in Saudi Arabia and the UAE is really no different than what technology companies are encountering all over the world. We've got a global Internet. We do not have global Internet public policy. And although we think about the Internet as a single network, countries all over the world, whether they're authoritarian or democratic, want to establish their power over it.

QUEST: But countries -- let's take, for example, the United States.


QUEST: We don't know with any certainty what RIMM has been grant -- or has granted or has been forced to hand over to the U.S. government, do we?

HARRIS: Well, what we do know -- we don't -- you know, the problem with the RIMM situation is that we have different problems for the communications that are somehow encrypted, as compared to some more publicly available information. We don't know.

But we do know this -- and, that the United States is a rule of law country and that whatever is happening here, when they ask those information -- ask for information, they're going to be asking for it with a subpoena or a warrant or a -- or a wiretapping order that comports with rule of law.

The biggest difference with some of the countries we're struggling in is that they're just looking for a back door. They're just looking to be able to reach in and take that data for a lot of reasons, a lot of it having to do with human rights activity.

So these countries are using...

QUEST: Well, hang on...

HARRIS: -- what they do...

QUEST: -- hang on, hang on, hang on. I know -- then let's -- I can't let that go completely unchallenged, Leslie. I mean, you know, if you speak to the authorities in those countries, they will say, no, you know, they want -- they -- they will go through their process of law in those countries, but the servers shouldn't be in another country.

HARRIS: Well, lots of technology services operate out of a single country. Google keeps most of its servers in the United States. It is -- it is perfectly legitimate for countries to access information, if possible...

QUEST: Right.

HARRIS: -- through legal process. But a lot of these countries do not have a formal legal process. They don't have an independent judiciary...

QUEST: But...

HARRIS: -- they don't have an established law that you're enforcing. They don't have a way. They just make it...

QUEST: Do you...

HARRIS: -- up. And I'm not saying that all the countries that are at issue here, but this is a problem that every...

QUEST: Well, do you feel...

HARRIS: -- technology...

QUEST: Do you...

HARRIS: -- company is dealing with.

QUEST: Forgive me. We -- we have a poor connection.

Do you fear...

HARRIS: I'm sorry.

QUEST: Do you fear that, ultimately, RIMM, Research in Motion, will, unlike, make an concessions -- concessions greater than you would be comfortable with to keep the business in those countries?

HARRIS: Of course I do. And what -- and what I find unfortunate is what's happening is completely foreseeable. And very few companies think about the risk, either human rights risk in really risky places or just whether or not they're going into a country where they are going to be comfortable complying with local law or whether it's going to be a challenge to their values and the rights of their users.

And, you know, the problem here is that once Research in Motion says yes to any country, they're going to be able to speak -- they're going to have to say yes to everybody. And I think it's -- they're thinking about this. It's just coming too late in the process. Business...

QUEST: Right.

HARRIS: -- the business development happens and then, at the point that they get challenged, they're up against the wall...

QUEST: Leslie...

HARRIS: -- with very little to do.

QUEST: We will leave it there.


QUEST: We thank you for joining us.

Leslie Harris, who is in Washington, at the Center for Democracy and Technology.

Many thanks, Leslie.

Now, when we come back, we have much more. We're all going on a summer holiday. The travel industry is hoping to cash in. We'll ask the head of online travel company, Orbitz, where you're heading and what it says about the economy, in a moment.


QUEST: Cathay Pacific announced today that it was returning capacity of the airline to pre-recession levels. It comes as the airline industry body ARTA says it expects the industry to make a profit for the first time in several years. As the industry recovers, Orbitz Worldwide now says it's enjoying a 17 percent rise in the value of its travel bookings.

Is this all a coincidence or is recovery well and truly transmitting itself to how we spend our holidays?

The president of Orbitz is chief executive, Barney Harford, joins me now from Chicago.

Those numbers that I just gave really tell the story, don't they, that -- that the recovery is here, people are prepared to spend.

But what is different this time around, do you think?

BARNEY HARFORD, PRESIDENT & CEO, ORBITZ WORLDWIDE: Well, you know, we saw really strong results in our second quarter. We grew, as you said, gross bookings, by 17 percent. And we grew room nights by 9 percent. Some of what's driving this is really strong growth in air fares. In the second quarter, we saw air fares up 20 percent. We've seen that increase moderate slightly in July. And currently, we're seeing domestic U.S. air fares up around 10 percent and international air fares up 17 percent.

QUEST: Yes, you see, that...

HARFORD: But one of the key things to know is this...

QUEST: The devil is in the details, there, Barney. The devil is in the details, isn't it?

The -- well, you've proved the point. It's a 17 percent rise in the value of the bookings. But the question, of course...


QUEST: -- is whether the recovery...

HARFORD: Exactly...

QUEST: -- is entrenched within the industry.

HARFORD: Well, what we're seeing is, in particular in the hotel area, which is where our focus is, we're seeing 3 percent growth in the daily rate that you pay for your hotel. And that may seem that things are going in the right direction and things are getting more expensive, but you have to remember that rates are still very low compared to where they were in 2008.

I'll give you an example. Las Vegas, which is our number one destination, we're seeing rates up 5 percent. But they're still down 23 percent from what they were in 2008.

So while things are starting to recovery, there's still some great deals out there for consumers.

QUEST: There are. And there is still far too much nickel and diming going on by hotels -- over priced breakfasts, in many cases; overcharging for Internet access; mini bar costs that should be taken out and shot. You know these as well as I do.

HARFORD: We do. We are very aware of the frustrations that consumers have. And, in fact, we just launched today a totally transformed, new search experience for hotels on Orbitz. One of the things that that's doing is emphasizing the way that we show you the total price up front. Unlike most of the other sites out there, which show you only the base rate and force you to select the hotel...

QUEST: Right.

HARFORD: -- before telling you how much it's going to cost, at Orbitz, we're showing you the total price, including all of the taxes and the fees up front before you select your hotel.

QUEST: Barney...

HARFORD: That's just one of the things that we're doing to make sure that consumers are well informed.

QUEST: This is a really unpleasant question for the end, my last question -- a really nasty one for you.

What's your favorite hotel in the world?

And I'll let you plead the Fifth if you want to.

HARFORD: Well, you know...


HARFORD: -- I think the favorite hotel that I like to stay in is a guest house that I stay -- stay at in Japan in one of my favorite ski -- ski villages, up -- up in the mountains there. But in terms of great hotels, we've got such a variety...

QUEST: Yes. Right. Right.

HARFORD: -- right now, the deals on Orbitz Istanbul and Prague, our two hottest destinations.

QUEST: Lovely.

Many thanks, Barney.

A totally unfair question freely admitted, but I thought I'd give it a run anyway.

Many thanks, indeed, for joining us.

Jenny Harrison is at the World Weather Center.

She's been known to stay in a -- in a well-heeled hostelry before now -- Jenny, haven't you?

JENNY HARRISON, CNN METEOROLOGIST: I have stayed in all sorts of places, Richard. Yes, I've camped, as well, under canvas...

QUEST: Oh, oh...

HARRISON: -- and I've camped in the...

QUEST: Oh...

HARRISON: -- yes, I've...

QUEST: Oh, I'd -- I'd -- I'd pay -- I'd pay good money to see Jenny Harrison with a primer stove and a sleeping bag under canvas.

HARRISON: I'll have to send you the pictures, the proof of it, Richard. I will, indeed. But...

QUEST: Tomorrow we'll see them.

HARRISON: Yes, all right. Then I'll get you the pictures.

Now, then, I'm going to talk about, of course, rain where you don't want to be camping out at all. Some very serious situations across the central areas of Europe. You can see in the satellite over the last few hours where all that cloud has been. That is where we've seen this system sitting consistently for the last few days, blocked by that area of high pressure, of course, into Russia. And this is where we're seeing yet again the threat of severe weather as we go Monday into Tuesday.

But let me just show you the actual area in particular that has been so affected. This is the Neisse River. And either side of here, both of these towns in Eastern Germany and also Poland, have been inundated with water. Look at these pictures, because it is just staggering to think how deep this water actually is. This rain has been coming down, I'd say, for the last few days. And this is the result of that.

And at least several people -- as many as seven people are feared dead because of these rains. And you can see the destruction and the force of the water when it actually came through here and the water came across its banks.

Now, let me show you, though, what's going to be happening next, because there is, believe it or not, a bit of a change taking place as we head toward the middle and the end of this week. So we've got a very, very strong area of low pressure pushing in from the north. That beginning to finally actually flatten out almost this area of high pressure.

So it's going to make a little bit of headway. It's going to push this high pressure further south. And we should see these rains beginning to take a slightly different track. But still, there will be some rain across those central areas of Europe.

Meanwhile, of course, across in Russia, because of the extreme heat, the dry conditions now for over a month, we have, in some cases, got extreme drought in place. And that is another reason why the fires have been so extensive.

Now, when you look at this particular Google image, you can see, obviously, this is the latest from Motors (ph) showing you where the fires are, where all the smoke is. But you'll notice the smoke here coming up to the northeast. And here, there's smoke in a different direction. Literally, those winds are going around that area of high pressure.

But because there's no real wind closer to the cities and the towns, that is the situation with the smoke cover across in Moscow.

Temperatures are still very high, well above average. It should be beginning to ease a little bit toward the end of the week. And, of course, remember, they've not been getting quite that high because of the smoke. It's actually stopped the sun from really penetrating through.

There is more rain, though, as you can see, across central areas of Europe. But as I say, a bit of a change, certainly, with that heat across in areas of Russia, as we head toward the end of the week.

Twenty-six in Vienna and 25 in Paris, so still pretty warm across those areas.

Meanwhile, across in areas of China, still, the rains, of course, continuing here. All part and parcel of what we see this time of year. This is the location of that, actually, landslide. And this is, again, of course, in a critical location -- very, very mountainous. And it came down, blocking a recovery. And that is why, again, it is, of course, causing problems.

Also, Richard, in terrain like this, that's why it's so difficult to actually get to people and rescue them. But there's just an image of the town.

QUEST: Jenny Harrison at the World Weather Center.

Our own Jenny with us this week.

We look forward to seeing you tomorrow.

Coal is making a comeback. In a moment, the U.S. chief of Siemens on why fossil fuels will be the power source of the future whether we like it or not.


QUEST: The markets in New York have just over an hour and 10 to trade. And this is how they're trading at the moment. It's a strong session after what happened on Friday. But even Friday's very heavy losses were largely reversed by the close of play. And now we're seeing the market 10718.

Do you know, I think with a good week or two, 11000. I'm being optimistic. Much depends on what the Fed happens -- says tomorrow in its statement. Some views of the Fed give an indication of a -- of interest rates remaining low for the foreseeable future, which they will, no doubt. But then that will give a boost to the market.

Now, you might think coal has had its day. Certainly the critics would happily be -- have us believe that. The U.S. head of Siemens doesn't agree.

Poppy Harlow has been talking to Eric Spiegel.


ERIC SPIEGEL, CEO, SIEMENS U.S.: Renewables are going to be a big part of our world going forward. But in terms of a percentage of the overall energy sector, it's going to be relatively small, even when you look out 10 or 20 years.


SPIEGEL: I mean so...

HARLOW: Even with all the government's (INAUDIBLE) at this point?

SPIEGEL: Yes, it's going to take us a long time. I mean, in fact, I think if you take a look, by 2030 in the world, we may be using more coal by 2030 than we're using today.

HARLOW: Really?


HARLOW: Why do you think that is?

More people?

More of a demand?

SPIEGEL: Well, if you take a look not in the U.S. so much, but if you take a look at the places like China and India, they're still building a lot of coal units.


SPIEGEL: I think, also, clean coal technology -- there's a lot of development ongoing. I think people are going to find a way to use coal. So I think renewables are going to have an impact. But as a percentage of the U.S. energy supply and as a percentage of the world energy supply, it's still going to be relatively small over the next 20 or 30 years.

HARLOW: So looking at your latest earnings, I thought sales increased 14 percent in China, 23 percent increase in India, 9 percent increase in Germany, despite all of the debt issues across Europe, and only 4 percent growth here in the U.S. So, obviously, China and India is where the major growth is.

Is that in the fossil fuel sector?

SPIEGEL: You know, some of it's in the fossil fuels sector. Some of it's in the -- the industrial businesses are growing there. They're scaling up a lot of new businesses. Also, the health market is growing quite a bit there. I think, look, those economies are growing much, much faster than the U.S. The U.S., I think they're forecasting about a 3 percent GDP growth. And we're up 4 percent year-over-year, which is -- which is pretty good, which is faster than a market.

If you take a look at a lot of those economies, they're growing 6, 7, 8, 9 percent. So. You're going to see much faster growth. And -- and we're making big investments in those markets.

HARLOW: Do you think that the U.S., in any way, can keep up with China when it comes to high speed rail? You've got China planning to spend some $300 billion in -- on high speed rail in the next 10 years; Russia, Siemens just signed a $2.8 billion high speed rail deal in Russia.


HARLOW: It seems like those countries are moving far ahead of the U.S. when you talk about high speed rail.

SPIEGEL: Yes, I mean there's -- there's no doubt -- I mean the U.S. is way behind in high speed rail. We'll...

HARLOW: And it seems like we're trying to catch up. The president talks about it a lot.

SPIEGEL: Right. I mean and he's put some stimulus money. Talks about $8 billion or so that's going in. And, as you said, other countries are moving out very first. And one of the reasons our numbers are up, as well, is -- is our mobility, our rail business globally is -- is doing very, very well -- as you said, big orders in Russia and China. And, look, the rail business really makes a lot more sense as you extend it and expand it. The economics get better and better as you link more markets together. And that's, I think, where we need to get to.


HARLOW: Interesting take, Richard, from him on both how he thinks more coal will be used in 2030 than now and also on high speed rail, the attempt to push it forward in the U.S., but not being able to do so on the scale that we see in Russia and the scale that we see in China.

I did ask him what Siemens needs from the U.S. government to put more money into projects in the U.S. He says, look, it's clear we need more clarity from Washington on energy reform. We need to know if there will or won't be a price on carbon, if there will be cap and trade, essentially, in the United States or not. He said businesses have billions and billions of dollars sitting on the sidelines. They want clarity from Washington before they put that money to work here in the U.S. -- Richard.

QUEST: There is a reality about this, isn't there?

The president of Shell USA was on this program last year talking about it. Whether we like it or not, fossil fuels -- carbon -- carbohy -- carbons -- hydrocarbons are going to be with us for the foreseeable future?

HARLOW: Absolutely. But I don't think it's very often that you hear an executive admit to that. They will want to push and push and talk about all of their green energy initiatives. But he said, look, yes, green energy is a small part of our portfolio. We care about it.

QUEST: Right.

HARLOW: But the big business is coal -- Richard.

QUEST: And, quickly, I've been arguing all program with Felicia -- Felicia Taylor, Maggie Lake. They all seem to think that the Fed is going to just sit on the sidelines tomorrow...


QUEST: I -- I mean I don't think they're going to do anything.

But do you not think -- are you prepared to come on my side of the fence, that they might give more of an indication of concern?

HARLOW: I don't -- I'll -- I'll tell you this, Richard. I don't think they're going to move rates. But what I do think that they're going to do is, I think they may be more outspoken than they have been before...


HARLOW: -- looking at Bernanke's comments just three weeks ago, talking about the extreme uncertainty, I think we're going to see more explicit language from the Fed on Tuesday afternoon than we have in the past.


HARLOW: That's what I think.

QUEST: Great. You're always welcome on this program, Poppy. You agree with me. That's...

HARLOW: Right.

QUEST: That's your -- that's your gold-plated invitation to QUEST MEANS BUSINESS.

Poppy, we'll talk to you tomorrow.

Many thanks.

Now, I need to tell you about a brand new part of QUEST MEANS BUSINESS. We're calling it Q&A. It's Quest and Ali. I'm the Quest bit. Ali Velshi, of course, you know very well. It's every Thursday. Ali and I will talk about what you want us to talk about in the realms of travel, business innovation. and you choose the topics. And in one minute, we'll tell you everything you need to know. And then, there's a nasty quiz.

Back in a moment.


QUEST: Tonight's Profitable Moment.

The Hewlett Packard case is a tricky one, indeed.

Has the company shot itself in the foot by accepting the resignation of Mark Hurd, who has performed so strongly?

Mr. Hurd has been cleared of the most egregious accusation -- that of sexual harassment. And when you look around at all the allegations swirling, what remains sounds like a nasty bit of nastiness in the expenses department and becoming too cozy with a consultant.

Serious stuff, to be sure, but worth losing a successful CEO over?

After all H.P.'s -- bearing in mind H.P.'s ethical problems, perhaps it was inevitable that the chief exec's behavior had to be whiter than white. But the way in which the board of directors exerted its influence makes me wonder whether they haven't been overzealous, because if you lose a CEO over this, what happens when something really serious happens?

The market has given its reaction, down 8 percent.

Now, talk about it -- they're challenging times and companies need all the top talent they can get.

And that's QUEST MEANS BUSINESS tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I do hope it's profitable.

"WORLD ONE" starts now.