design

Peter Crawfurd: Why Customization Could End Amazon

July 6, 2010

For many years e-tailers have been relying on the Amazon-style model of online commerce, whereby a ready-made, in-stock item is shipped to the customer upon purchase. While other methods – like groupon.com, which allows customers to get together and buy products at a lower price – have come along and become successful, few have really challenged the basic Amazon concept. Over the past two years, online shopping and consumer habits have been evolving. Many shoppers now want products they can say no one else has, and they want them at an affordable price. While online stores can offer lower prices by avoiding certain overhead fees and other expenses, traditional e-commerce sites lack the personal touch today’s customers are craving. In response to this demand, a slew of new start-up companies have rushed to carve out a niche in the expanding market for customized products. With the help of some clever web development, customers now have a never-before-seen level of creative control over the products they purchase. The Start Ups Among Amazon’s extensive clothing range are a great number of mass produced and uninspired dress shirts. ShirtsMyWay.com is one of the clothing companies which have filled the personalization void by allowing shoppers the chance to design their own custom made shirts ; including choice of collar, fabrics, buttons, buttonhole color, monograms and a host of other options. Customers can also input their measurements to ensure a great fit. This model solves two problems shoppers face when buying clothing: the fit and lack of flexibility when it comes to the design and style. ShirtsMyWay.com offers shoppers complete customization at a price well below many off-the-rack brand name dress shirts sold through online retailers. ShirtsMyWay.com has so far sold mens shirts to over 30 countries and has garnered worldwide attention from the press. Another interesting company, focused on food, is Chocomize.com . This site allows customers to design and purchase their own personal milk, white or dark chocolate bars by mixing and matching dozens of ingredients – like chocolate chips, bacon, nuts, sesame seeds, coconut flakes and cinnamon to name just a few. Chocomize.com has received attention from O! – The Oprah Magazine as well as numerous newspapers and food-oriented websites. So far, the same degree of customization has yet to make its way to Nestle’s Kit Kat or Hershey’s Almond Joy. The Giants Of course, some of the world’s largest brands have also embraced customization to branch out to a wider market. This is especially true in the world of footwear. Several years ago, Nike launched Nike ID, their own online store that allows customers to design their own sneakers in minute detail. Other giants like Puma and Adidas followed suit into the realm of customized products. Another company, Zazzle.com , managed to make it big through customization. Of all the companies and websites offering customized products, this one perhaps comes closest to Amazon in terms of the range of products it offers – everything from clothes, mugs, hats, postage stamps, stationary and calendars. Already Zazzle.com has managed to rack up more than 50 million dollars in capital and now visited by nearly 3 million unique visitors every month. When so much is happening in the online customization space, it’s surprising Amazon has not taken a more aggressive stance to this angle of e-tailing (although they have attempted to make one acquisition of a some what customization focused start up). Soon the day may come when the giant e-tailers of the world may need to stop resting on their low-priced/ready-made laurels and respond to ever growing demands for unique, one of a kind goods. If they don’t, they may be loosing out on a big part of the online retailer market and weakening their position as the main player.

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Ferrari Designer Jason Castriota Hired by Saab Auto to Speed Turnaround

June 18, 2010

By Ola Kinnander June 18 (Bloomberg) — Jason Castriota, the U.S. designer known for creating the Ferrari P4/5 and Maserati GranTurismo, will head Saab Automobile’s design team to help the Swedish carmaker take on Bayerische Motoren Werke AG and Audi AG. The first assignment for Castriota’s design firm is to create an upscale version of Saab’s current 9-3 model, scheduled for release in 2012, the 36-year-old said in an interview. Aerodynamics will be a focus of the new design, he said. “It’s absolutely vital we get this car right,” Castriota said from New York late yesterday. “This is Saab returning to its roots, not having to worry about being part of a much larger machine that they were before in the GM organization.” Saab, sold by General Motors Co. to Dutch supercar maker Spyker Cars NV in February, aims to become profitable by 2012. The turnaround strategy includes releasing premium models more distinct and sporty in their design than when Saab was under GM, according to Spyker Chief Executive officer Victor Muller . Castriota will play a major role in fashioning the new 9-3 and other models, said Eric Geers , a spokesman for the Trollhaettan, Sweden-based Saab. “The 9-3 design as made by him is basically done, and I can tell you it is spectacular,” Muller said by telephone, adding that the design will be completed within weeks. “It is truly aircraft-inspired and Swedish-clean.” Benchmark Cars The 9-3 was first released in 1998. The second generation, still produced today, hit the streets in 2002. The new version intends to challenge BMW’s 3-series and Volkswagen AG ’s Audi A4, Castriota said. “Those are the benchmark cars,” he said by telephone. “They’re true premium vehicles and the 9-3 also needs to be a true premium vehicle.” Castriota started his career in 2001 at luxury-car designer Pininfarina SpA in Turin, Italy, where he stayed until 2008. He then worked for Stile Bertone in Italy until September 2009. Last December, he started his own firm, Jason Castriota Designs. The design house has five designers and is based in New York City and Turin. “I literally started sketching Ferraris when I was about five years old,” he said. “For whatever reason, some kids might kick around a soccer ball, I picked up a pencil and started sketching cars.” BMW Talks Castriota will become part of the leadership at Saab and will help “define the strategy for the new models,” he said. Saab is also planning to introduce a smaller car with a tear-drop shape inspired by the 92 model that was in production between 1949 and 1956. Saab is in talks with BMW about using its Mini platform, as well as engines and gearboxes, for that model, two people familiar with the situation said last week. “A small premium car from Saab is a very important vehicle and is something that could truly help the overall production volume of Saab in a great way,” Castriota said. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Andreas Cremer in Berlin at acremer@bloomberg.net

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Tiempo Names EDA Industry Veteran Steve Svoboda VP of Business Development as Company Expands to US to Address Demand for Innovative Clockless Chip Design Technology

June 14, 2010

SAN JOSE, CA–(Marketwire – June 14, 2010) –  Tiempo, SAS, a developer of innovative clockless technology for the design of low power integrated circuits (ICs), today announced it has named EDA industry veteran Steve Svoboda as Vice President of Business Development. Svoboda will oversee the company’s expansion into the North American market, including opening a Silicon Valley-based office to service semiconductor and systems companies requiring next-generation low power solutions.

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BP Increased Oil-Capture Rate to 10,500 Barrels a Day

June 6, 2010

By Edward Klump June 6 (Bloomberg) — BP Plc said it increased the amount of oil being captured from its leaking well in the Gulf of Mexico to 10,500 barrels a day from 6,077 barrels in the previous 24-hour period ending at midnight June 4. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels a day into the Gulf. The spill is the worst oil spill in U.S. history. A “cap” over the well is capturing “probably the vast majority” of the leaking oil , Chief Executive Officer Tony Hayward told the Broadcasting Corp. today in a live interview in London. BP has “a further containment system to implement this week,” he said, adding that a permanent and hurricane-proof mechanism will be in place by the end of the month. U.S. Coast Guard Admiral Thad Allen said yesterday in a news conference that four vents on the cap remained open, allowing oil to flow through the cap and into the ocean. BP will try to close the vents when pressure is stabilized, Allen said. On June 4, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. BP said yesterday that it collected 6,077 barrels of crude in the 24-hour period of June 4. “They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said. Improvement Expected After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said yesterday on its website. “Improvement in oil collection is expected over the next several days,” the London-based company said yesterday on its website . The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.” The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. History Lesson “History has taught us here to be cautiously optimistic, not overly optimistic,” Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said yesterday. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday. Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. Obama, Hayward President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. BP’s Hayward told the BBC he hadn’t spoken directly to Obama since the Deepwater Horizon rig exploded. “There is no need for that,” Hayward said. “I have spoken to his key lieutenants.” BP and the Obama administration are working “hand-in-hand” to resolve the spill, Hayward said. The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. ‘First Call’ Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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BP Increases Capture Rate From Leaking Gulf Oil Well, Trying to Get

June 5, 2010

By Edward Klump June 5 (Bloomberg) — BP Plc increased the amount of oil it is capturing from its leaking oil well in the Gulf of Mexico to thousands of barrels a day as it tries to reduce the damage from the worst oil spill in U.S. history. BP said it collected 6,077 barrels of crude in the 24-hour period ended at midnight last night. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels into the Gulf every day. Four vents on a “cap” over the well remain open, allowing oil to flow through the cap and into the ocean, U.S. Coast Guard Admiral Thad Allen said today in a news conference. BP will try to close the vents when pressure is stabilized, Allen said. Yesterday, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. “They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said. After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said today. “Improvement in oil collection is expected over the next several days,” the London-based company said today on its website . The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said yesterday on CBS’s “Early Show.” “That’s possible with this design.” Jagged Cut The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said. “History has taught us here to be cautiously optimistic, not overly optimistic,” said Dan Pickering , an analyst at investment bank Tudor Pickering Holt & Co. in Houston. He said capturing 90 percent of the flow would be a “huge home run.” The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, according to the Coast Guard. Tar Balls, Patties Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida. The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water. President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped yesterday in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost. More Claims Paid The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said today on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million. BP Chief Executive Officer Tony Hayward told investors yesterday on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August. “In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.” To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net .

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BP&rsquos Cap Is Recovering Gulf Oil, May Get 90% of Leak

June 4, 2010

By Jim Polson June 4 (Bloomberg) — BP Plc said its effort to divert oil leaking from its Gulf of Mexico well to a ship on the surface is working, with a goal of capturing more than 90 percent of the spill. Recovery of oil aboard the drillship began about midnight and may have reached a rate of 1,000 barrels a day, based on a BP estimate, U.S. Coast Guard Admiral Thad Allen said today during a conference call with reporters. Government scientists had estimated the well was leaking 12,000 to 19,000 barrels of oil a day, a figure that may have increased as much as 20 percent after London-based BP yesterday cut away a kinked riser pipe to install the cap. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said on CBS’s “Early Show.” “That’s possible with this design. We have to work through the next 24 to 48 hours to optimize that.” The well began leaking after the Deepwater Horizon rig exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. Four valves on the cap BP installed yesterday are venting oil and the continued flow isn’t an indication the effort has failed, Suttles said on CNN. Engineers expect today to close the valves, designed to prevent clogging, he said. ‘It’s Progress’ “It’s progress, that’s for sure,” Robert Bea, a University of California Berkeley engineering professor, said of the oil recovery. “Given that we are now in the hurricane season, and there is high likelihood of seeing tropical storms and hurricanes in the very near future, there should be continuing concern if this system can survive such conditions,” he said. Oil was seen pouring around the cap when it was installed last night because the pipe connecting the cap to the drillship was filled with nitrogen gas to prevent clogging, Allen said. “It’s almost like this: If you were to put your finger over the top of a straw and put it into a glass of water and then slowly lift your finger off every once in a while so that the straw would fill up with water,” Allen said. “They’re trying to fill that pipe with nothing but product that’s coming from the reservoir.” The biggest oil spill in U.S. history has soiled at least 140 miles (225 kilometers) of coastline, halted new exploratory drilling in the Gulf and shut down a third of its fishing areas. The leak is 40 miles off Louisiana’s coast under about 5,000 feet (1,524 meters) of water. Separate Slicks President Barack Obama returns to the Louisiana coast today to assess the latest efforts to counter the spill. Oil from the spill has split into separate slicks that threaten beaches and marshland from Grand Isle, Louisiana, to Pensacola, Florida, as winds shift northeastward, Allen said. “The scope of this thing is expanding to the point that it is rather unprecedented,” Allen said. “We will continue to press for resources.” Florida Governor Charlie Crist asked BP America President Lamar McKay for $50 million in a letter yesterday. The state has already exhausted $25 million provided by the company last month to protect coastline and organize cleanups, Crist wrote. BP Chief Executive Officer Tony Hayward told investors today on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” “My number one priority is to steer BP through this crisis, and that is exactly what I intend to do,” he said. Hayward said he has received “extraordinary support” from the board. BP rose as much as 4.7 percent today. The stock gained 1.1 pence to 433.35 pence at 4:35 p.m. in London. The shares have fallen 34 percent since the rig exploded. To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

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BP Recovers Gulf Oil Via Cap, May Be Able to Capture 90% of Leaking Crude

June 4, 2010

By Jim Polson June 4 (Bloomberg) — BP Plc said its effort to divert oil leaking from its Gulf of Mexico well to a ship on the surface is working, with a goal of capturing more than 90 percent of the spill. Recovery of oil aboard the drillship began about midnight and may have reached a rate of 1,000 barrels a day, based on a BP estimate, U.S. Coast Guard Admiral Thad Allen said today during a conference call with reporters. Government scientists had estimated the well was leaking 12,000 to 19,000 barrels of oil a day, a figure that may have increased as much as 20 percent after London-based BP yesterday cut away a kinked riser pipe to install the cap. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said on CBS’s “Early Show.” “That’s possible with this design. We have to work through the next 24 to 48 hours to optimize that.” The well began leaking after the Deepwater Horizon rig exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. Four valves on the cap BP installed yesterday are venting oil and the continued flow isn’t an indication the effort has failed, Suttles said on CNN. Engineers expect today to close the valves, designed to prevent clogging, he said. ‘It’s Progress’ “It’s progress, that’s for sure,” Robert Bea, a University of California Berkeley engineering professor, said of the oil recovery. “Given that we are now in the hurricane season, and there is high likelihood of seeing tropical storms and hurricanes in the very near future, there should be continuing concern if this system can survive such conditions,” he said. Oil was seen pouring around the cap when it was installed last night because the pipe connecting the cap to the drillship was filled with nitrogen gas to prevent clogging, Allen said. “It’s almost like this: If you were to put your finger over the top of a straw and put it into a glass of water and then slowly lift your finger off every once in a while so that the straw would fill up with water,” Allen said. “They’re trying to fill that pipe with nothing but product that’s coming from the reservoir.” The biggest oil spill in U.S. history has soiled at least 140 miles (225 kilometers) of coastline, halted new exploratory drilling in the Gulf and shut down a third of its fishing areas. The leak is 40 miles off Louisiana’s coast under about 5,000 feet (1,524 meters) of water. Separate Slicks President Barack Obama returns to the Louisiana coast today to assess the latest efforts to counter the spill. Oil from the spill has split into separate slicks that threaten beaches and marshland from Grand Isle, Louisiana, to Pensacola, Florida, as winds shift northeastward, Allen said. “The scope of this thing is expanding to the point that it is rather unprecedented,” Allen said. “We will continue to press for resources.” Florida Governor Charlie Crist asked BP America President Lamar McKay for $50 million in a letter yesterday. The state has already exhausted $25 million provided by the company last month to protect coastline and organize cleanups, Crist wrote. BP Chief Executive Officer Tony Hayward told investors today on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.” “My number one priority is to steer BP through this crisis, and that is exactly what I intend to do,” he said. Hayward said he has received “extraordinary support” from the board. BP rose as much as 4.7 percent today. The stock gained 1.1 pence to 433.35 pence at 4:35 p.m. in London. The shares have fallen 34 percent since the rig exploded. To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

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BP Says Cap May Be Able to Retrieve More Than 90% of Crude From Gulf Well

June 4, 2010

By Jim Polson and Jessica Resnick-Ault June 4 (Bloomberg) — BP Plc may be able to capture more than 90 percent of the oil leaking from its Gulf of Mexico well with the cap it put in place last night. “I’d like to see us capture 90-plus percent of this flow,” Doug Suttles , BP’s chief operating officer for exploration and production, said on CBS’s “Early Show” this morning. “That’s possible with this design. We have to work through the next 24 to 48 hours to optimize that.” Oil is now venting from four valves in the cap that engineers expect to close today, Suttles said on CNN. The adjustable valves are intended to prevent clogging by icy gas hydrates that frustrated an initial attempt to contain the leak, he said. The cap was put atop the well to divert oil to ships on the surface. The biggest oil spill in U.S. history has soiled at least 140 miles (225 kilometers) of coastline, halted new exploratory drilling in the Gulf and shut down a third of its fishing areas. President Barack Obama returns to the Louisiana coast today to assess the latest efforts to counter the spill. BP Chief Executive Officer Tony Hayward will hold a conference call with investors today after the company’s failure so far to halt the leak prompted speculation he may be forced to resign. The company’s stock rose 18.7 pence, or 4.3 percent, to 450.95 pence at 12:36 p.m. in London. Before today, the shares had fallen 34 percent since the April 20 explosion on the Deepwater Horizon rig that killed 11 workers and triggered the leak. The well was estimated by a government panel to be leaking at a rate of 12,000 to 19,000 barrels of oil a day. Oil Flow Live video feeds on the BP website show oil still gushing into the Gulf. Suttles said that isn’t a sign the cap has failed. The leak is about 40 miles off Louisiana’s coast under about 5,000 feet (1,524 meters) of water. BP yesterday cut off the riser pipe that used to attach the well to the Deepwater Horizon drilling rig. The company used shears after a diamond-saw blade, which would’ve made a cleaner cut and allowed for a tighter fit for the cap, got stuck. Cutting off the riser might increase the spill’s rate by as much as 20 percent because the kinked pipe may have been constraining the oil flow, BP Managing Director Robert Dudley said on June 1. To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net ; Jessica Resnick-Ault in New York at jresnickault@bloomberg.net

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Gulf Oil Rig Disaster And Mine Explosion Highlight Weak Safety Regulations

May 7, 2010

“I have here before me a pile of news clips collected over the last couple of weeks describing workers, men and women, young and old who have been crushed, electrocuted, burned, or who have died in falls, trench collapses and forklift accidents. These are the invisible relentless daily tragedies of the American workplace.” — OSHA Administrator David Michaels, April 27 Coal miners and oil drillers may not have been on T.S. Eliot’s mind when he penned “The Wasteland,” but April was surely the cruelest month for those who work in two of the most dangerous jobs in America. Last month saw the two biggest disasters in those industries in decades, with 29 miners dying in the Upper Big Branch mine explosion on April 5 and 11 workers killed in the oil rig explosion in the Gulf of Mexico on April 20. In the wake of the tragedies, headlines have been dominated by searing accounts of these workers’ last moments, lawmakers are demanding investigations and the public is looking for heads to roll at the mining conglomerate, Massey Energy, and the oil giant BP. In addition, many have blamed the government agencies that are supposed to regulate these industries for letting the companies get away with safety violations and for not mandating better safety procedures. On a larger scale, these tragic accidents reflect the failure of our regulatory system to protect worker safety and health, according to safety experts and former regulators. In the face of a corporate backlash and lack of media coverage, the current system has been progressively weakened over the last few decades and safety advocates fear that the Obama administration is not doing enough to strengthen such protections. Since it was established almost 40 years ago, the Occupational Safety and Health Administration, which guarantees every American a safe and healthful working environment, has had an immeasurable impact — the job fatality rate has fallen 80 percent since 1970 and injury rates have also fallen dramatically. But many workers are still killed on the job — 5,214 died in 2008, which doesn’t count the number who died from occupational diseases — and the agency has been blamed for failing to keep up with the times. Safety standards for some serious hazards — such as exposure to toxic chemicals — have not been updated since 1971. In addition, the understaffed agency only has 2,218 inspectors for over 130 million workers in the country. “The safety and health prevention system for workers is a dinosaur,” says Celeste Monforton, Assistant Research Professor at GWU School of Public Health. “It hasn’t been updated in 40 years. There is a very strong anti-regulatory bent in this country, and when these types of tragedies take place, people say, “How could this happen?” People don’t realize that without safety and health protections for workers — and an appreciation for what they can do — it’s no wonder that these things happen.” Monforton, who previously worked at OSHA, says that the agency has not been successful over the last 20 years in issuing regulations; the last rules covering refinery workers, for instance, haven’t been updated since 1989. Monforton also cites the agency’s reaction to the 2008 Imperial Sugar refinery explosion, which killed 14 workers and injured over 40 when sugar dust ignited, prompting recommendations to regulate exposure to combustible dust. “There hasn’t been any change,” she says, adding that the firm “hasn’t paid a dime in their penalty.” A spokesman for OSHA did not return an email for comment regarding Imperial Sugar and the combustible dust issue in time for publication. These problems are exacerbated by resistance from many businesses to safety regulations — as HuffPost first reported last week , BP and other oil producers have fought proposed safety regulations for years and Massey Energy challenged hundreds of violations cited by federal inspectors. Describing workers “who have been crushed, electrocuted, burned, or who have died in falls, trench collapses and forklift accidents” as “the invisible relentless daily tragedies of the American workplace,” OSHA director David Michael, in testimony before Congress , blamed businesses that ignore safety regulations. “Too often, we see employers who assess the benefits of refusing to comply with the law and compare them to the costs of complying with the law. If they find that the costs of compliance outweigh the penalties they will face if caught, they opt to gamble with their workers’ lives. This is a “catch me if you can” approach to safety and health. It is what we saw in action at Upper Big Branch and what we at OSHA see far too often in the workplaces we visit.” Michaels conceded that OSHA is hamstrung, since the law has not been updated and penalties haven’t been increased in 20 years, announcing that the agency just launched a new enforcement strategy requiring each employer to implement an injury and illness prevention program. * * * * * Both disasters illustrate unique weaknesses of the regulatory system, according to safety experts and former regulators. Though the Deepwater Horizon oil rig disaster is still being investigated, the rig’s lack of a backup device used in Norway and Britain to prevent blowouts and possible faulty cementing work have been criticized by oil drilling experts. In addition, there has been widespread concern about MMS and its ability to effectively regulate the industry, especially when it comes to worker safety and health issues. Most workplaces are regulated by OSHA — offshore drilling operations are one of the few exceptions. And MMS, which primarily is responsible for collecting royalties from oil and gas producers that drill on federal land and water, seems ill-equipped to deal with safety and health issues, as well as environmental risks. As HuffPost reported last week , MMS did not require BP to file a blowout plan when the company filed its exploration plan for the Deepwater Horizon rig last year and the agency underplayed the impact of a potential spill in its environmental impact statement on that region of the Gulf of Mexico. The agency has been faulted for assessing inadequate penalties, averaging $45,000 over the last 12 years, as reported by ProPublica . In addition, MMS has referred very few potential criminal violations to the Interior Department’s Inspector General, reports the Project on Government Oversight . In general, the oil industry has been allowed to police itself by MMS, with producers and drilling contractors voluntarily abiding by a safety management program devised by the American Petroleum Institute, an industry trade group. When the agency sought to require audits every three years to make sure that oil companies were abiding by the program, the industry fought back and the proposal has yet to take effect. The regulatory system for offshore oil rigs is considered more rigorous in Norway, Britain and other major oil producing countries. The safety record of U.S. offshore drilling does not compare well with overseas companies — over the past 5 years, an offshore oil worker in the U.S. was more than four times as likely to be killed than a worker in Europe, and 23% more likely to sustain an injury, according to a Wall Street Journal analysis of data . “We have seen platforms in the Gulf of Mexico that would never have been allowed in Norway,” says Dr. Urban Kjellén of the Norwegian University of Science and Technology. The safety philosophy for the design of these installations is very different in Norway — one of the things is that you segregate hazardous areas from non-hazardous areas by distance or explosion walls. That way, if you get leakage, if you get gas clouds and if they ignite, you are likely to limit the consequences and avoid a total loss of the platform. It’s a barrier.” Both the oil rig disaster and the mining tragedy illustrated the weaknesses of the US regulatory approach, which involves a checklist of prescriptive requirements, as compared to the European approach, which is more oriented towards reducing the risk to a tolerable level, focusing on making sure that workplaces are designed to function in an optimal way and to minimize human errors. One interesting difference is that the Norwegian system actually involves a more self-regulatory approach on the part of companies, but the enforcement is very strict with frequent audits. Former MMS head of regulatory affairs, Elmer Danenberger, disputes those criticisms, calling it a “cheap shot” in an interview with HuffPost and claiming that the agency is qualified to regulate the industry. “I think that MMS has done a pretty good job in that regard, it’s a quality organization,” he says adding that the job involves “waking up every day knowing that I may have had 5,000 perfect days but anything can happen today, every little operation, this could be the one that takes the whole company down, takes the whole offshore thing down.” He added that part of his job – and part of the rationale for the proposed safety regulations — is to “hold bad players accountable.” Danenberger also disputed the idea that a performance-based system is necessarily preferable to prescriptive regulations when it comes to safety regulation of workplaces. He notes that the Piper Alpha incident, the worst offshore oil disaster in the world in which 167 people died in an explosion and fire on a production platform in the North Sea in 1988, prompted recommendations for Britain to change from a rules-based system to a performance-based one. Yet, Danenberger adds, last year’s oil spill off the coast of Australia was blamed on a performance-based program. “So, you have the worst of both worlds.” One longtime safety and health official in the oil industry says that regulations would not have prevented the Deepwater Horizon explosion and oil spill, contrasting the industry with mining operations, “where disasters are a hell of a lot more common.” “This thing happened in an area where the industry is applying the best-available technology, the regulatory agency has some influence, but I think the influence on the big companies is limited to the extent that for these companies, it’s in their vested interest not to let this happen – look at how many billions BP will lose.” The former industry official, who declined to be named, dramatically pronounced that the oil rig disaster could have the impact that Chernobyl did on the nuclear power industry, freezing new projects for years to come. “More stringent regulations wouldn’t help prevent this from happening again — unless you said, ‘Don’t drill.’” * * * * * One of most-cited problems with the Upper Big Branch mine was that Massey Energy had racked up thousands of violations, including withdrawal orders for serious violations, yet none of them resulted in the closure of the mine. After Congress raised penalties for safety violations in 2006, the mining industry reacted by contesting more and more violations in order to delay the fines and prevent regulators from establishing the “pattern of violations” that might lead regulators to shut down unsafe mines. The number of citations contested has skyrocketed, from 7,200 in 2005 to 46,526 in 2009, creating a massive backlog for the Mine Safety and Health Administration. Massey Energy contested nearly all major citations issued against the Upper Big Branch Mine in 2009 and paid less than 20% of the fines levied against it. The company’s combative CEO, Don Blankenship, has butted heads with MSHA, saying that safety rules are “difficult to comply with” and “nonsensical.” Like its sister agency, MSHA also has had difficulty with its enforcement operations — 14% of the country’s underground coal mines were not inspected in 2006, according to a report by the Department of Labor’s inspector general. Monforton, who used to work at MSHA, says that the agency does not enforce its violations enough and that its financial penalties are minimal — for mining companies like Massey Energy, it’s just cheaper to pay those fines that to come up with a real plan [for worker safety and health].” The current regulations are essential, she argues. “We see deaths in all kinds of mines and 95% of the time, when the probe is done, what the agency finds is that the regulations were not followed. Regulations are designed to prevent these types of things, whether it’s certain amount of ventilation in a coal mine – it’s violating those things that lead to these deaths.” Critics of MSHA cite the fact that agency has only used the “pattern of violations” rule once since 1977 to shut down an unsafe mine. “They have institutionalized the concept that violations of law, whether serious or minor, are acceptable,” says Patrick McGinley, a professor at the West Virginia School of Law. In particular, he is troubled that after the Sago mine disaster in 2006, the agency failed to follow through on its promise to enforce the “pattern of violations” rule but instead allowed mines that improved their safety records to avoid penalties. “The goal should be compliance and not embracing operations that violate or rewarding the least-bad operator — just because you’re better than average doesn’t mean you’re good.” MSHA, which recently announced that it is expanding its investigation into the Upper Big Branch disaster, has vowed to improve its enforcement program. At a congressional hearing last week, MSHA director Joe Main admitted that the agency “has limited tools to hold bad actors accountable and to try to force them to change their behavior.” Both disasters highlight the fact that these high-risk resource-extraction industries have taken a high toll and that their unique regulatory cultures may need to be reexamined and updated to protect the safety and health of workers.

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FDIC Selling Busted Bank Loans on Terms That Make It `Hard to Lose Money’

April 14, 2010

By Jonathan Keehner and Phil Mattingly April 14 (Bloomberg) — Starwood Capital Group LLC, Colony Capital LLC and TPG, whose leaders profited from the 1990s savings and loan crisis, are among firms buying assets from the Federal Deposit Insurance Corp. for as little as 22 cents cash on the dollar, according to data compiled by Bloomberg. The sales, some including no-interest financing from the agency, are part of an FDIC effort to clean out $40 billion of loans that regulators seized from failed banks. Starwood Chief Executive Officer Barry Sternlicht told potential investors in February it’s “very hard to lose money” on the deals. The government, which was faulted two decades ago for letting bank assets go at fire-sale prices, is planning to profit along with investors. Instead of selling the loans outright, the FDIC kept stakes of 50 percent or more in at least five loan portfolios sold since September. It’s also demanding as much as 70 percent of any gains. “They are doing a much better job this time around,” said John Bovenzi , the FDIC’s chief operating officer until last year, who also helped unwind the S&L crisis. “They have learned a lot, and they aren’t making the same mistakes.” Loan sales planned or completed so far this year total more than $8 billion by book value, compared with $10 billion in all of 2009. The FDIC arranged at least $860 million in interest- free financing this year to support deals, according to statements from the buyers. Failed Banks The sales involve packages of loans acquired by the FDIC from 182 banks that failed since the start of 2009. The loans typically are tied to commercial real estate and residential development, and can include debt on which borrowers stopped making payments or property seized by the bank. Terms entitle taxpayers to a share of any money that private investors squeeze from delinquent borrowers or any profit earned reselling the assets. The FDIC-backed debt has to be repaid before the private-equity firms can take any cash generated by the loans. Financing doesn’t go directly to investors. Instead, the FDIC is creating limited liability companies that hold the loans being sold and receive the financing. “It’s very hard to lose money on a transaction like that,” Sternlicht said on a Feb. 11 conference call with potential investors, according to a copy obtained by Bloomberg News. “That’s the kind of asymmetric risk profile you love in a deal.” ‘So Distressed’ Financing is made on a deal-by-deal basis and won’t necessarily continue, said agency spokesman Andrew Gray . “The financing helps pricing,” FDIC Chairman Sheila Bair said in a March 19 interview. The packages include hundreds of loans where borrowers aren’t making payments. Some “may be so distressed that a healthy bank just does not want to deal with them,” Bair said. Linus Wilson , a finance professor at the University of Louisiana at Lafayette who has written more than a dozen papers on government bailout programs , said the FDIC’s zero-percent financing artificially inflates prices by as much as 20 percent and leaves the agency’s insurance fund vulnerable to losses. The regulator may have to write down the value of its holdings if private-equity managers can’t recover as much from the loans as they expect, Wilson said. The agency could also lose money if its partners don’t make enough to repay the FDIC’s financing, he said. “A better structure would not subsidize high levels of leverage, and it would eliminate the government’s stake entirely,” he said. That would also allow the agency to collect cash more quickly while reducing risk, according to Wilson. Resolution Trust Things have changed since Sternlicht, 49, oversaw a fund that bought assets from the Resolution Trust Corp., the government agency that sold loans and property of failed lenders in the 1990s. The RTC disposed of $394 billion of assets from 747 banks between 1989 and 1995, according to an FDIC review published in 2000. Back then, a fund Sternlicht managed earned about a 94 percent return on purchases including those from the RTC, he said in the February call. This time when Starwood and its partners won a stake in a company holding $4.5 billion of unpaid loans, the FDIC added an “equity kicker.” It increases the agency’s stake to 70 percent from 60 percent once the Starwood-led group makes back twice its initial investment and earns a 25 percent internal rate of return, according to the regulator. The loans Starwood will help oversee were once held by the failed Chicago lender Corus Bankshares Inc. ‘Real Partnership’ “Structured loan sales benefit both investors and the U.S. taxpayer,” Sternlicht said in a telephone interview. “There is real partnership between the FDIC and investors in these deals, so you better be good at managing the assets.” Homebuilder Lennar Corp. also bought into two limited liability companies holding loans seized from failed banks. The Miami-based builder paid $243 million for a 40 percent stake in two LLCs with $3.05 billion of unpaid loans, according to data compiled by Bloomberg. Lennar’s cash contribution comes to about 19 cents per dollar of book value for its interest in one of the limited liability companies and about 23 cents for the other. In a February regulatory filing, Lennar valued the deals at about 40 cents on the dollar after taking into account $627 million in interest-free financing that went to the holding companies and the equity stake the FDIC is keeping. Book value refers to the unpaid balance of the loans. Lennar spokesman Marshall Ames declined to comment for this story. The Starwood-led group including TPG and developer Richard LeFrak bought a 40 percent stake in the company holding Corus’s portfolio for 31 cents cash on the dollar as measured against its share of the book value of the assets. The FDIC covered half of the deal’s $2.77 billion purchase price with an interest-free loan. Flats at Loft 5 Prospects for properties backing the FDIC assets are mixed, according to LeFrak , who visited a Corus property called the Flats at Loft 5 while in Las Vegas for his son’s wedding in October. About half of its 272 units are for rent, according to the leasing office . That’s because the condos didn’t sell, said LeFrak, whose holdings include 15,000 New York City apartments. “It was kind of like in the middle of nowhere, and the design was kind of unusual and you went: ‘Why would anyone do this?’” he asked. By contrast, LeFrak halted what he called “dirt cheap” sales at the Carlos Ott-designed Artech condominiums in Aventura, Florida, so that his group could raise prices. The Artech’s floor-to-ceiling windows overlook the Intercoastal Waterway, and buyers have access to boat slips, a beach club and a chartered yacht, according to marketing materials. The FDIC pledged up to $1 billion in working capital and to complete construction on unfinished developments, Starwood said in an October statement. ‘Enormous’ Risk “These are complex portfolios that face construction, litigation and performance issues,” said Colony Capital CEO Thomas Barrack , whose Santa Monica-based firm offered about 20 percent less than Starwood in the Corus bidding, people familiar with the sale said at the time. “They come with an enormous amount of risk, and bidders are betting to a degree on when the market corrects itself.” Colony returned to the FDIC auctions in January and won, paying 22 cents cash on the dollar for a 40 percent stake in a company holding $1.02 billion in unpaid commercial real estate loans. The FDIC retained a 60 percent interest and provided zero-coupon notes to finance the deal, Colony Financial Inc. said in a regulatory filing. Colony valued the purchase at 44 percent of the unpaid balance of the loans. Barrack, Bonderman Colony’s Barrack, Starwood’s Sternlicht and Fort Worth, Texas-based TPG co-founders David Bonderman and James Coulter all have experience buying bank assets dating back to the savings and loan crisis. Barrack, Bonderman and Coulter worked for Texas billionaire Robert Bass before starting their own private-equity firms. Bass oversaw the purchase of American Savings & Loan in a government- assisted rescue in 1988, at the time one of the biggest S&L failures . Representatives of Colony, TPG and Starwood Capital declined to comment about whether they are participating in pending auctions by the FDIC. FDIC sales scheduled this month included a $610.5 million package of real estate debts assembled from 19 seized lenders, including IndyMac Bank, Silverton Bank and New Frontier Bank. Regulators are also preparing to sell $3 billion of loans from AmTrust Bank, the Cleveland-based lender seized in December. Reluctant Banks Private buyers are taking a bigger role in FDIC disposals because banks are glutted with commercial property and reluctant to buy more, said Chip MacDonald , a partner with Jones Day in Atlanta who specializes in deals among banks. U.S. banks had $119 billion of non-performing commercial real estate loans on their books as of the fourth quarter, according to Foresight Analytics, a bank and property research firm in Oakland, California. Defaults are expected to pile up through 2011, and lenders have written off only 30 percent of the bad commercial mortgages they’ll ultimately face, according to a March report from Moody’s Investors Service. “They just don’t need more exposure to real estate,” MacDonald said. To contact the reporters on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net ; Phil Mattingly in Washington at pmattingly@bloomberg.net .

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Apple Says It Sold More Than 300,000 IPads in First Day on the U.S. Market

April 5, 2010

By Ville Heiskanen April 5 (Bloomberg) — Apple Inc. , trying to revive demand for tablet-style computers with its iPad, said it sold more than 300,000 of the devices on the first day of their debut weekend. The number includes preorders, sales at Apple stores and deliveries to channel partners, the company said in a statement today. Users downloaded more than 1 million iPad applications from Apple’s site and bought more than 250,000 electronic books from its online store during the first day. The product builds on the success of Apple’s iPhone and iPod, staking out the middle ground between smartphones and laptop computers. Apple is betting the design is enticing enough that consumers are willing to pay a premium over low-cost notebooks. Rivals such as Microsoft Corp. have failed to turn tablet computers into popular consumer devices. “It’s going to be a game changer,” Apple Chief Executive Officer Steve Jobs said in the statement. “iPad users, on average, downloaded more than three apps and close to one book within hours of unpacking their new iPad.” Apple rose 23 cents to $236.20 in trading before U.S. exchanges opened. The stock, which has more than doubled in the past year, closed at a record $235.97 April 1 in Nasdaq Stock Market trading. U.S. markets were closed April 2 for the Good Friday holiday. Analysts’ Estimates The iPad sales may have fallen short of some analysts’ estimates. Sanford C. Bernstein & Co.’s Toni Sacconaghi had projected sales of 300,000 to 400,000 for the first weekend. Piper Jaffray & Co.’s Gene Munster projected initial sales of at least 600,000 units, after boosting his forecast from as many as 300,000 over the weekend. As of March 30, Munster was one of the few analysts with a projection for iPad sales. Rivals had said they didn’t have a good sense of how consumers would respond to the iPad, an untested category of computer. The device, which starts at $499, went on sale April 3, drawing crowds to stores across the U.S. and rivaling the frenzy seen when the iPhone was introduced in 2007. Lines at five stores surveyed by Piper Jaffray were longer than expected, yet Apple had iPads available late in the opening day, signaling the company was able to produce enough devices to fulfill initial demand, Munster said in an interview yesterday. To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

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Apple IPad’s Debut-Weekend Sales May Reach 700,000, Surpassing Estimates

April 4, 2010

By Connie Guglielmo April 4 (Bloomberg) — Apple Inc. is likely to sell more than twice as many iPads in its debut weekend than some analysts estimated, an early sign that Chief Executive Officer Steve Jobs may succeed at reviving demand for table-style computers. The iPad’s initial sales may have reached 700,000 units, Piper Jaffray & Co.’s Gene Munster said in an interview today. The Minneapolis-based analyst previously predicted sales of 200,000 to 300,000, while Sanford C. Bernstein & Co.’s Toni Sacconaghi projected 300,000 to 400,000. The device went on sale yesterday, drawing crowds to stores across the U.S. and rivaling the frenzy seen when the iPhone went on sale in 2007. Lines at five stores surveyed by Piper Jaffray were longer than expected, yet Apple had iPads available yesterday evening, signaling the company was able to produce enough devices to fulfill initial demand, Munster said. “Sales held relatively steady during the day,” said Munster, who bought a $499, 16-gigabyte model for himself. “I have high expectations.” The iPad is Apple’s bid to turn tablet computers into popular consumer devices, something rivals such as Microsoft Corp. have failed to do. The product builds on the success of Apple’s iPhone and iPod, staking out the middle ground between smartphones and laptop computers. Apple is betting the design is enticing enough that consumers are willing to pay a premium over low-cost notebooks. It starts at $499. ‘Unique, Sexier’ “It’s ridiculously expensive, way overpriced,” said Josh Klenert, a 36-year-old graphic designer, who still went ahead and bought one. “You may call it a dumb computer or a smart telephone –it’s in between. It’s a unique, sexier device.” Klenert, whose one-bedroom apartment in Tribeca has “more Macs than people,” pre-ordered the iPad as soon as it was available and came down to Apple’s SoHo store in New York to be one of the first to buy it. He plans to use it for reading newspapers and magazines. Hundreds of shoppers lined up to wait for stores to open, though crowds didn’t camp out for days this time, as they did when the iPhone debuted. Many of the buyers identified themselves as early adopters and Apple enthusiasts, making it harder to tell if the iPad will win over mainstream customers. “I love it,” said Jacob Arentoft, a 37-year-old digital business developer from Copenhagen. After exiting Apple’s Fifth Avenue store in Manhattan, he unpacked the brand-new silver gadget and waved it at the crowd. “The size fits, the design fits, everything fits.” Jobs made an opening-day appearance at his hometown store in Palo Alto, California, chatting with shoppers. Apple retail chief Ron Johnson was at the Fifth Avenue store and addressed employees before it opened. Positive Reviews Users can surf the Internet, peruse digital books, watch video and play games on the iPad. What it lacks is a built-in camera or support for Adobe Systems Inc. ’s Flash software, which runs much of the video on the Web. The device also doesn’t let users carry out multiple tasks at once. The iPad’s first wave of reviews praised its ability to deliver digital books and video quickly, saying it measures up well against other devices, including Amazon.com Inc.’s Kindle e-book reader. Bloomberg columnist Rich Jaroslovsky said it may change the way people relate to computers, requiring users to learn a “new language” that Apple has made “both elegant and very easy to master.” USA Today’s Edward Baig called the iPad “fun, simple, stunning to look at and blazingly fast.” TV Shows Tablets have been available in one form or another since the 1990s, without ever catching on. They account for less than 1 percent of the personal-computer market, according to research firm Gartner Inc. The iPad’s success will depend partly on the attractiveness of applications that run on it. CBS Corp., the most-watched U.S. TV network, announced plans last week to offer episodes of shows such as “Survivor” and “CSI” on the iPad. Walt Disney Co . will release iPad applications for ABC shows and ESPN games. And Netflix Inc. , the movie-rental company, will let subscribers watch programming streamed to the iPad. Apple , which has more than doubled in the past year, rose 97 cents to close at a record $235.97 April 1 in Nasdaq Stock Market trading. U.S. markets were closed April 2 for the Good Friday holiday. Like the iPhone, the iPad will test Apple’s ability to conquer new markets. Since returning to the company in 1997, Jobs revived the Macintosh computer business, reshaped digital music with the iPod and pushed Apple into the mobile-phone field. Adding those products propelled revenue and profit to record levels . Sales Estimates When the iPhone debuted, Apple struggled to keep it in stock. Most of its stores quickly sold out, and resellers on EBay and Craigslist hawked the device to desperate shoppers for as much as $12,000. Apple sold about 270,000 iPhones in its 2007 debut weekend. Apple may sell about 5 million iPads in the first 12 months, compared with 6.1 million iPhones in its first year on the market, according to Sacconaghi. Researcher ISuppli Corp. says full-year sales may reach 7.1 million globally. Apple declined to comment, said Natalie Kerris , a spokeswoman for the Cupertino, California-based company. At the outset, iPads will connect to the Web through localized hot spots that use Wi-Fi technology. Some shoppers may wait for a version with 3G, which lets the iPad connect to mobile-phone networks. It’s due later this month. Luis Martinez, a 30-year-old from Brooklyn who repairs computers, bought a Wi-Fi iPad yesterday and already put in an order for the 3G version. “People who criticize iPad are basically saying it doesn’t fit their lifestyle. It fits mine,” Martinez said. “Overall, I’m sold.” To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

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Apple’s IPad Attracts Crowds as First Day of Sales Rivals IPhone Hysteria

April 3, 2010

By Connie Guglielmo and Mina Kawai April 3 (Bloomberg) — Apple Inc. ’s iPad tablet computer went on sale this morning, drawing crowds to stores across the country, and rivaling the frenzy seen when the iPhone went on sale in 2007. Hundreds of shoppers lined up to wait for stores to open at 9 a.m., though crowds didn’t camp out for days this time, as they did when the iPhone debuted. Many of the buyers identified themselves as early adopters and Apple enthusiasts, making it harder to tell if the iPad will win over mainstream customers. “I love it,” said Jacob Arentoft, a 37-year-old digital business developer from Copenhagen. After exiting Apple’s Fifth Avenue store in Manhattan, he unpacked the brand-new silver gadget and waved it at the crowd. “The size fits, the design fits, everything fits.” The iPad is Apple’s bid to turn tablet computers into popular consumer devices, something rivals such as Microsoft Corp. have failed to do. The product builds on the success of Apple’s iPhone and iPod, staking out the middle ground between smartphones and laptop computers. Apple is betting the design is enticing enough that consumers are willing to pay a premium over low-cost notebooks. It starts at $499. “It’s ridiculously expensive, way overpriced,” said Josh Klenert, a 36-year-old graphic designer, who still went ahead and bought one. Klenert, whose one-bedroom apartment in Tribeca has “more Macs than people,” pre-ordered the iPad as soon as it was available and came down to Apple’s SoHo store in New York to be one of the first to buy it. ‘Sofa-Based Device’ “You may call it a dumb computer or a smart telephone — it’s in between,” said Klenert, who plans to use it for reading newspapers and magazines. “It’s a unique, sexier device. More like a sofa-based device.” Gene Munster , an analyst at Piper Jaffray & Co., expects Apple to sell 200,000 to 300,000 iPads this weekend. The full- year sales may reach 7.1 million globally, according to ISuppli Corp. Apple declined to comment, said Natalie Kerris , a spokeswoman for the Cupertino, California-based company. Apple fans began lining up yesterday at Chief Executive Officer Steve Jobs’s hometown store in Palo Alto, California. More than 200 people were waiting before the store opened, and employees handed out Krispy Kreme doughnuts and coffee. The shoppers included tech blogger Robert Scoble , who was one of the first in line, and Bill Atkinson, author of Apple’s MacPaint and MacWrite software programs for the first Macintosh computers. Executive Help Scott Forstall , Apple’s executive in charge of iPhone and iPad software, stood on the street filming the crowd as store employees counted down from 10 to the store’s opening. He then helped out at the customer service desk, answering questions and mingling with the early iPad buyers. Jobs showed up later in the morning, with Apple pushing reporters out of the store so he could mingle with the crowd. “It’s very exciting,” Forstall said after declining to be interviewed. Users can surf the Internet, peruse digital books, watch video and play games on the iPad. What it lacks is a built-in camera or support for Adobe Systems Inc. ’s Flash software, which runs much of the video on the Web. The device also doesn’t let users carry out multiple tasks at once. Courtney Shedden, who went to the Freehold Raceway Mall in New Jersey to buy an iPad for her boyfriend, says she wouldn’t get one for herself. ‘Just Another Toy’ “It’s just another toy and he HAS to have it,” said Shedden, 24. It wouldn’t help her as a student working toward a master’s degree at Villanova University, she said. She uses Microsoft’s Excel and there would be “a lot of compatibility issues,” Shedden said. The iPad’s first wave of reviews praised its ability to deliver digital books and video quickly, saying it measures up well against other devices, including Amazon.com Inc.’s Kindle e-book reader. Bloomberg columnist Rich Jaroslovsky said it may change the way people relate to computers, requiring users to learn a “new language” that Apple has made “both elegant and very easy to master.” USA Today’s Edward Baig called the iPad “fun, simple, stunning to look at and blazingly fast.” Tablets have been available in one form or another since the 1990s, without ever catching on. They account for less than 1 percent of the personal-computer market, according to research firm Gartner Inc. TV Shows The iPad’s success will depend partly on the attractiveness of applications that run on it. CBS Corp., the most-watched U.S. TV network, announced plans this week to offer episodes of shows such as “Survivor” and “CSI” on the iPad. Walt Disney Co . will release iPad applications for ABC shows and ESPN games. And Netflix Inc. , the movie-rental company, will let subscribers watch programming streamed to the iPad. Leo Mitchell, a 14-year-old shopper at an Apple store in St. Louis, will use his new iPad to replace his Nook, an e- reader sold by Barnes & Noble Inc. “I probably will bring it to school occasionally where I have a book report and the book is on my iPad,” he said. Mitchell used babysitting money to pay for the iPad, he said. “I save most of my money,” he said. “I don’t spend it frivolously.” New Markets At the Fair Oaks Shopping Center in Fairfax, Virginia, Bill Daniels was buying the computer for his five-year-old son. “I think there will eventually be one in every school classroom one day,” he said. Daniels, a 48-year-old marketing consultant from Vienna, Virginia, said he owns three other Apple products. “I was a PC guy,” he said. “Just converted to Apple last year.” Apple , which has more than doubled in the past year, rose 97 cents to close at a record $235.97 April 1 in Nasdaq Stock Market trading. U.S. markets were closed yesterday for Good Friday. Like the iPhone, the iPad will test Apple’s ability to conquer new markets. Since returning to the company in 1997, Jobs revived the Macintosh computer business, reshaped digital music with the iPod and pushed Apple into the mobile-phone field. Adding those products propelled revenue and profit to record levels . Sales Estimates When the iPhone debuted, Apple struggled to keep it in stock. Most of its stores quickly sold out, and resellers on EBay and Craigslist hawked the device to desperate shoppers for as much as $12,000. Even if the iPad fails to repeat that kind of frenzy, its initial sales could be higher than the iPhone’s, says Toni Sacconaghi , an analyst at Sanford C. Bernstein & Co. in New York. He projects sales of 300,000 to 400,000 iPads this weekend. That compares with the 270,000 iPhones sold in its 2007 debut. Apple may sell about 5 million iPads in the first 12 months, compared with 6.1 million iPhones in its first year on the market, according to Sacconaghi. At the outset, iPads will connect to the Web through localized hot spots that use Wi-Fi technology. Some shoppers may wait for a version with 3G, which lets the iPad connect to mobile-phone networks. It’s due later this month. Luis Martinez, a 30-year-old from Brooklyn who repairs computers, bought a Wi-Fi iPad today and already put in an order for the 3G version. “People who criticize iPad are basically saying it doesn’t fit their lifestyle. It fits mine,” Martinez said. “Overall, I’m sold.” To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net ; Mina Kawai in New York at minkawai@bloomberg.net

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Geely Buys Volvo From Ford for $1.8 Billion in Biggest Chinese Auto Deal

March 28, 2010

By Ola Kinnander and Keith Naughton March 29 (Bloomberg) — Zhejiang Geely Holding Co. agreed to buy Volvo Cars from Ford Motor Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker, more than 18 months after the two companies first entered discussions. The price includes a $200 million note and the remainder to be paid in cash, Ford Chief Financial Officer Lewis Booth said yesterday in Gothenburg, Sweden. Time spent on seeking regulatory approval in different jurisdictions means the companies now aim to complete the deal in the third quarter, Geely Chairman Li Shufu said. Booming auto sales in China made the nation the largest car market last year, generating profit that’s allowing its manufacturers to reach out to Western markets and technologies. After the 2007 sale of Aston Martin, and of Jaguar and Land Rover to Tata Motors Ltd. for $2.4 billion the following year, divesting Volvo completes Ford Chief Executive Officer Alan Mulally ’s strategy of exiting European luxury lines to focus on its namesake brand. “If I were a competitor to Geely in China and all of a sudden I would lose ground to my competitor because they acquired Volvo, I would look to do the same,” Mike Tyndall , an automotive specialist with Nomura Securities in London, said in a telephone interview. “The experience of both Tata and Geely will be the real test.” Geely Automobile Holdings Ltd., the automaker’s listed unit, rose 4.7 percent as of 10:19 a.m in Hong Kong trading. Ford Supplies Yesterday’s agreement includes terms regarding intellectual property rights and supply as well as research and development, the Chinese company said. Geely will help Volvo, whose headquarters will stay in Gothenburg, tap China’s growing market, Li said at a joint press conference with Ford. Tata, India’s biggest truckmaker, reported its first profit in the quarter ended in December after paying off the remaining debt from the Jaguar and Land Rover acquisition in October by raising $750 million. Tata plans to have seven Jaguar and Land Rover dealerships in India this fiscal year, including ones currently operating in Mumbai and New Delhi. As part of its efforts to increase the Indian company’s sales abroad, Tata last month hired Carl-Peter Forster , a former General Motors Co. and Bayerische Motoren Werke AG executive, as chief executive, based in the company’s Mumbai headquarters. Forster will be responsible for reviving the slumping luxury brands that Tata bought from Ford while increasing sales of the $2500 Nano, the cheapest car in the world. Tata’s stock has risen 13.8 percent since the Jaguar and Land Rover deal was announced in March 2008. ‘Tiger’ “I see Volvo as a tiger: it belongs to the forest and shouldn’t be contained in the zoo,” Li said in Mandarin. “The heart of the tiger is in Sweden and Belgium,” he said, referring to the two countries where Volvo has its main plants. “Its paws should extend all across the world.” Volvo plans to produce 390,000 cars this year, compared with 330,000 in 2009, CEO Stephen Odell said. Geely will restore profitability to Volvo, according to Ford ’s Booth. Ford will continue to supply Volvo powertrains, stampings and some vehicle components. It also agreed to provide engineering and technology support, and access to tooling for common components for an unspecified period. The Swedish carmaker’s S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford’s European lineup. ‘Image Boost’ “We have continued to invest in Volvo, just as we did at Jaguar Land Rover, to make sure that our employees and now our ex-employees at Jaguar Land Rover are going to be working in a place that has good potential for the future,” Booth said in a March 24 interview. Jaguar Land Rover reported its first quarterly profit since being bought by India’s Tata Motors Ltd. in 2008 in February after shedding staff and boosting sales of luxury cars. Geely first approached Dearborn, Michigan-based Ford about buying Volvo in mid-2008, two people familiar with the talks have said. Ford named Geely its “preferred bidder” in October 2009 and said on Dec. 23 that they had agreed on the major terms of the transaction. The cash portion of the purchase price will be adjusted for Volvo’s pension deficits, debt, cash and working capital, which could mean a “significant decrease” in proceeds to Ford, the U.S. carmaker said. Volvo Loan The European Investment Bank approved a 200 million-euro loan to Volvo last year, pending a Swedish state guarantee for the credit. Sweden later put on hold that process, citing Volvo’s uncertain ownership. Industry Minister Maud Olofsson said in an interview yesterday that the government is willing to revisit the loan. Geely hasn’t decided whether it will apply for the credit, Li said. Li, Geely’s founder, has said he is seeking to have half the company’s sales from overseas markets by 2015. He aims to sell 200,000 Volvos a year in China, up from 22,405 last year, and has been seeking locations for a new plant there. Sales-tax cuts for smaller vehicles combined with rural subsidies boosted nationwide auto sales in China 46 percent last year to 13.6 million, helping it supplant the U.S. as the world’s largest auto market. Sales Slump Volvo sold 334,808 cars worldwide last year, a decline of 11 percent from 2008 and 27 percent from a peak of about 460,000 in 2007, according to the company. Its sales in the U.S. have risen for nine consecutive months and increased 40 percent this year through February. The Swedish carmaker has about 20,000 employees worldwide, including almost 14,000 in Sweden. It has about 2,500 dealers in 100 countries. The unit’s pretax loss narrowed to $934 million last year from $1.7 billion in 2008, Ford said on Jan. 28. Volvo’s last annual pretax profit was $377 million in 2005. Volvo was founded 1926 as a subsidiary SKF AB , today the world’s largest bearings maker. Volvo, which means “I roll” in Latin, was the name of one of SKF’s ball bearings series. Saab, Hummer Saab Automobile, the Swedish auto brand that was under General Motors Co.’s control for the past two decades, was sold last month to Dutch luxury-automaker Spyker Cars NV for about $400 million. GM last month failed to complete a sale of its Hummer line of sport-utility vehicles to Sichuan Tengzhong Heavy Industrial Machinery Co. after failing to win Chinese government approval, the Detroit-based automaker said. GM has said it will consider other bidders for Hummer, and may retire the brand. Shanghai-based SAIC Motor Corp., China’s biggest automaker, paid $116 million for the design rights of MG Rover Group Ltd.’s Rover 25 and 75 cars in 2005. In December, Beijing Automotive Industry Holding Co. acquired some technology from Saab for $200 million to develop its own vehicles. Ford ended three years of losses with net income of $2.7 billion in 2009 and was the only major U.S. automaker to avoid bankruptcy. Ford paid $6.5 billion for Volvo in 1999. “Compared to the business environment when we bought it, it’s a very different world,” Booth said March 24. “We only have so much management resource, we only have so much capital to invest and we needed to make sure we were focusing on the Ford business.” Citigroup Inc. and JPMorgan Chase & Co. are advising Ford on the deal. N.M. Rothschild & Sons Ltd. is advising Geely. To contact the reporters on this story: Ola Kinnander in Gothenburg, Sweden, via okinnander@bloomberg.net Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Toyota Asks ABC News to Retract `Irresponsible’ Sudden-Acceleration Report

March 18, 2010

By Alan Ohnsman and Jeff Plungis March 19 (Bloomberg) — Toyota Motor Corp. asked U.S. broadcaster ABC News to retract and apologize for an “irresponsible” report it aired last month suggesting electronics as the cause of sudden acceleration in its cars. The world’s largest automaker is working to repair its reputation after recalling 8 million vehicles worldwide to fix defects linked to bursts of speed. The National Highway Traffic Safety Administration said yesterday that evidence from a Toyota Prius involved in a Harrison, New York, crash tied to unintended acceleration found no sign the car’s brakes had been applied. Toyota has said accelerators that stick or snag on floor mats are at fault in sudden acceleration, with no evidence of failures in the electronic-control systems of its cars and trucks. An ABC News report on Feb. 22 challenged that assumption, and the network in a response to Toyota defended its right to air the report. The network owned by Walt Disney Co. “relentlessly promoted” a view that electronics in Toyota and Lexus models were a cause of sudden-acceleration complaints, without providing “credible scientific evidence,” Christopher Reynolds , Toyota’s U.S. general counsel, said in a March 11 letter to ABC News President David Westin . “Toyota deserves a public retraction and formal apology from ABC News for your irresponsible broadcast,” Reynolds said in the four-page letter, reported yesterday by the Web site gawker.com. ‘Legitimate, Newsworthy’ ABC News’s report on the design of Toyota electronic throttle controls was “legitimate and newsworthy,” John Zucker , ABC Inc. senior vice president of law & regulation, said yesterday in a three-page letter to Reynolds. Toyota was contacted on Feb. 22, before the broadcast for a response to be included in the report, and didn’t respond, Zucker said. ABC News had included a fabricated video image of a car tachometer in the broadcast “to create the false and misleading impression with viewers of a dangerous and uncontrolled acceleration,” Reynolds wrote. The original video image was deemed difficult for viewers to observe because of the car’s motion, Zucker responded. Using a different shot was an “editorial error,” and a re-edited video has been posted to the abcnews.com Web site, he said. “The larger point, however, is that the use of the video shot was not intended to, and did not, materially mislead the public,” Zucker said. “ABC News intends to continue to cover the issues surrounding reports of unintended acceleration by Toyota vehicles.” Harrison Accident Toyota City, Japan-based Toyota faces more than 100 class- action and individual lawsuits from customers related to vehicle defects. Toyota’s American depositary receipts, each equal to two ordinary shares, fell 49 cents to $78.81 yesterday in New York Stock Exchange composite trading. The shares have lost $25.2 billion in market value since Toyota announced a recall on Jan. 21. In the suburban New York crash on March 9, a 2005 Prius sped out of control before hitting a stone wall. The Prius’s diagnostic recorder indicated the car’s accelerator was engaged, NHTSA said in the e-mailed statement. “Information retrieved from the vehicle’s onboard computer systems indicated there was no application of the brakes and the throttle was fully open,” the Washington-based auto safety agency said in the statement. “Any release of information regarding an investigation that’s not complete or without consulting local investigating authorities is irresponsible,” said Captain Anthony Marraccini, head of the Harrison police department. Gilbert’s Test The information mentioned by NHTSA is “just one snapshot,” Marraccini said. Harrison police are still meeting with Toyota to analyze the data and is using the Rockville, Maryland, office of RTI International, a forensic engineering company, to help assess the crash, he said. Toyota told reporters March 8 that Southern Illinois University professor David Gilbert ’s test, featured in the ABC broadcast, altered a circuit in a way that couldn’t occur in everyday driving, so it couldn’t be used as evidence of sudden acceleration. Toyota Motor Sales vice president of corporate communications, Mike Michels , said at the time that the company wasn’t planning legal action against ABC. Reynolds couldn’t be immediately reached for comment yesterday. The automaker “reserves the right to take any and every appropriate step to protect and defend the reputation of our company and its products from irresponsible and inaccurate claims,” Reynolds wrote in the letter, which was copied to Disney Chief Executive Officer Robert Iger . Gilbert testified before a U.S. House of Representatives hearing on Feb. 23 that he had isolated weaknesses in Toyota’s electronic throttle system not found in units from other automakers. Toyota engineers and those from the firm it hired to assess its electronics, Exponent Inc., used Gilbert’s technique to induce engine-revving in vehicles from General Motors Co., Daimler AG and Chrysler Group LLC at the March 8 demonstration. To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net ; Jeff Plungis in Washington at jplungis@bloomberg.net

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China’s Geely May Take Control of Iconic London Black Cab Maker Manganese

March 18, 2010

By Bloomberg News March 18 (Bloomberg) — Zhejiang Geely Holding Group Co. , the Chinese carmaker seeking to buy Ford Motor Co.’s Volvo Cars, may take control of Manganese Bronze Holdings Plc , maker of the iconic London black cab, the U.K.-based company said. Geely’s Hong Kong-listed unit may raise its stake in the company to 51 percent from 19.9 percent by buying new shares at 70 pence apiece, Mark Fryer , Manganese’s finance director, said in an interview. The Coventry, England-based automaker, which would raise about 14 million pounds ($21.5 million) from the share sale, will spearhead Geely’s plans to sell its own saloon cars in Europe, he said. “Our future will be both as a manufacturer of black cabs in Coventry, although more of the parts will be coming from China, and an assembler and distributor for Geely vehicles,” Fryer said yesterday. Zhang Xiaodong , a Hangzhou, China-based spokesman for Zhejiang Geely Holding Group, referred questions to the Hong Kong-listed unit, Geely Automobile Holdings Ltd. Lawrence Ang , an executive director at the unit, didn’t immediately answer calls to his office and mobile phones. His assistant, Daniel Dai, declined to comment. Manganese’s LTI Vehicles unit and its predecessor companies have made cabs for the London market since 1948, according to LTI’s Web site. Geely in early 2009 began manufacturing black cabs in Shanghai for the Asian market, as well as parts for the U.K. company’s Coventry plant, under a joint-venture agreement. Chinese Expansion Geely Auto rose 3.5 percent to close at HK$4.16 in Hong Kong trading. The shares have declined 1.9 percent this year. “It is a reasonable move, but whether Geely can gain from the deal will depend on the sales volume,” said Ricon Xia , an analyst at Daiwa Institute of Research in Hong Kong. “Geely has enough funds for the purchase, and by taking over a majority of shares, Geely will have more decision-making power.” In a statement yesterday, Manganese said parts for its TX4 vehicles will be made in Shanghai, in a move that would eliminate about 60 jobs at its Coventry plant. Chinese Premier Wen Jiabao is encouraging companies in the world’s third-largest economy to acquire technology and take on foreign rivals. Geely unveiled the Emgrand, its first homegrown model specifically designed for Western markets, in December and is seeking to use Manganese as its European distributor. Rover, Hummer Shanghai-based SAIC Motor Corp. paid $116 million for the design rights to MG Rover Group Ltd.’s Rover 25 and 75 cars in 2005 and became the owner of MG’s plant in Birmingham, England, after a 2007 merger with Nanjing Automobile Group Corp. Some previous attempts by Chinese automakers to expand overseas failed. Sichuan Tengzhong Heavy Industrial Machinery Co. said last month its purchase of General Motors Co.’ Hummer brand was blocked by Chinese regulators as the gasoline-guzzling vehicles didn’t fit the government’s energy efficiency policy. Geely and Manganese need to agree on a range of commercial issues, including warranty policies and translation of handbooks, before the deal can go ahead, Fryer said. “If you look back, you would have thought it was a stretch that British people would take to Japanese or South Korean cars,” Fryer said. “But Hyundai and Kia sold about 30,000 vehicles each in the U.K. last year and we sold 1,724. So it’s not going to take much to significantly increase the size and scale of our business.” Biggest Shareholder Geely became Manganese’s biggest shareholder in 2007 after taking a 23 percent stake as part of a 53 million-pound venture agreement. That holding was diluted to 19.9 percent after a share placement in June. Making components in Shanghai for shipment to Coventry has led to cost savings of 1,200 pounds per vehicle so far, with a further 800 pounds expected within six months. Manganese yesterday reported a 6.9 million-pound 2009 loss. “Unfortunately, we have had to make redundancies in Coventry, but we are losing money and we can’t keep relying on shareholders to keep funding the business,” Fryer said. China is aiming for 10 percent, or an $85 billion share, of the world’s vehicle and auto-parts sales by 2015, the nation’s commerce ministry said in November. — Nerys Avery in London, with assistance from Tian Ying in Beijing. Editors: Kenneth Wong , Terje Langeland To contact the reporter responsible for this story: Nerys Avery at Navery2@bloomberg.net

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China’s Geely May Take Control of Iconic London Black Cab Maker Manganese

March 18, 2010

By Bloomberg News March 18 (Bloomberg) — Zhejiang Geely Holding Group Co. , the Chinese carmaker seeking to buy Ford Motor Co.’s Volvo Cars, may take control of Manganese Bronze Holdings Plc , maker of the iconic London black cab, the U.K.-based company said. Geely’s Hong Kong-listed unit may raise its stake in the company to 51 percent from 19.9 percent by buying new shares at 70 pence apiece, Mark Fryer , Manganese’s finance director, said in an interview. The Coventry, England-based automaker, which would raise about 14 million pounds ($21.5 million) from the share sale, will spearhead Geely’s plans to sell its own saloon cars in Europe, he said. “Our future will be both as a manufacturer of black cabs in Coventry, although more of the parts will be coming from China, and an assembler and distributor for Geely vehicles,” Fryer said yesterday. Zhang Xiaodong , a Hangzhou, China-based spokesman for Zhejiang Geely Holding Group, referred questions to the Hong Kong-listed unit, Geely Automobile Holdings Ltd. Lawrence Ang , an executive director at the unit, didn’t immediately answer calls to his office and mobile phones. His assistant, Daniel Dai, declined to comment. Manganese’s LTI Vehicles unit and its predecessor companies have made cabs for the London market since 1948, according to LTI’s Web site. Geely in early 2009 began manufacturing black cabs in Shanghai for the Asian market, as well as parts for the U.K. company’s Coventry plant, under a joint-venture agreement. Chinese Expansion Geely Auto rose 3.5 percent to close at HK$4.16 in Hong Kong trading. The shares have declined 1.9 percent this year. “It is a reasonable move, but whether Geely can gain from the deal will depend on the sales volume,” said Ricon Xia , an analyst at Daiwa Institute of Research in Hong Kong. “Geely has enough funds for the purchase, and by taking over a majority of shares, Geely will have more decision-making power.” In a statement yesterday, Manganese said parts for its TX4 vehicles will be made in Shanghai, in a move that would eliminate about 60 jobs at its Coventry plant. Chinese Premier Wen Jiabao is encouraging companies in the world’s third-largest economy to acquire technology and take on foreign rivals. Geely unveiled the Emgrand, its first homegrown model specifically designed for Western markets, in December and is seeking to use Manganese as its European distributor. Rover, Hummer Shanghai-based SAIC Motor Corp. paid $116 million for the design rights to MG Rover Group Ltd.’s Rover 25 and 75 cars in 2005 and became the owner of MG’s plant in Birmingham, England, after a 2007 merger with Nanjing Automobile Group Corp. Some previous attempts by Chinese automakers to expand overseas failed. Sichuan Tengzhong Heavy Industrial Machinery Co. said last month its purchase of General Motors Co.’ Hummer brand was blocked by Chinese regulators as the gasoline-guzzling vehicles didn’t fit the government’s energy efficiency policy. Geely and Manganese need to agree on a range of commercial issues, including warranty policies and translation of handbooks, before the deal can go ahead, Fryer said. “If you look back, you would have thought it was a stretch that British people would take to Japanese or South Korean cars,” Fryer said. “But Hyundai and Kia sold about 30,000 vehicles each in the U.K. last year and we sold 1,724. So it’s not going to take much to significantly increase the size and scale of our business.” Biggest Shareholder Geely became Manganese’s biggest shareholder in 2007 after taking a 23 percent stake as part of a 53 million-pound venture agreement. That holding was diluted to 19.9 percent after a share placement in June. Making components in Shanghai for shipment to Coventry has led to cost savings of 1,200 pounds per vehicle so far, with a further 800 pounds expected within six months. Manganese yesterday reported a 6.9 million-pound 2009 loss. “Unfortunately, we have had to make redundancies in Coventry, but we are losing money and we can’t keep relying on shareholders to keep funding the business,” Fryer said. China is aiming for 10 percent, or an $85 billion share, of the world’s vehicle and auto-parts sales by 2015, the nation’s commerce ministry said in November. — Nerys Avery in London, with assistance from Tian Ying in Beijing. Editors: Kenneth Wong , Terje Langeland To contact the reporter responsible for this story: Nerys Avery at Navery2@bloomberg.net

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Toyota Claimed `Win’ in U.S. Response to Sienna Injuries, Documents Show

February 25, 2010

By Jeff Green and Alan Ohnsman Feb. 26 (Bloomberg) — Toyota Motor Corp. in 2008 succeeded in blocking a formal recall of Sienna minivans linked by U.S. regulators to 98 injuries caused by collapsing liftgates, according to company and U.S. documents. Instead of issuing a recall under the U.S. Safety Act, Toyota sent letters to owners of 196,222 Sienna vans offering to replace struts on the liftgates as part of a “safety improvement campaign” without acknowledging a defect. The National Highway Traffic Administration accepted the response and stopped pressing for a costlier recall, agency documents show. The Sienna case was among the “wins” cited by the automaker’s Washington office in a memo obtained by a congressional panel investigating the recalls of 8 million Toyota vehicles worldwide for defects that could cause unintended acceleration. The claimed wins saved Toyota $255 million, including $100 million previously reported for less extensive responses to the acceleration issue, according to the memo. Toyota executives this week underwent two days of congressional hearings during which lawmakers said there was a pattern at the company of failing to respond promptly and adequately to reported safety problems. “Toyota’s own internal documents indicate that a premium was placed on delaying or closing NHTSA investigations, delaying new safety rules and blocking the discovery of safety defects,” Representative Edolphus Towns , a New York Democrat and chairman of the House Committee on Oversight and Government Reform, said at a hearing of the panel two days ago. Prius, Tacoma Yoshimi Inaba , Toyota’s North American president, testified at the hearing that the Washington office’s memo was presented to him when he assumed his current position last July. The presentation also cited Toyota’s success in limiting responses to reports of defective Prius headlights and of two separate defects in Tacoma pickups, one involving rust and the other unexpected acceleration. NHTSA opened an investigation of the Tacoma on Feb. 16 as part of a broader probe of vehicles that may have sudden acceleration defects and haven’t been recalled. Jim Wiseman , Toyota’s vice president for North American corporate communications, said the Washington briefing materials “didn’t represent the views of the company.” Wiseman said he wasn’t aware of any pending recalls or defect issues. “But the effort going forward is to pursue maximum openness,” he said. “We want to get everything out in the open.” Olivia Alair , a spokeswoman for the Transportation Department, which oversees NHTSA, disputed the contention that Toyota had succeeded in the Sienna matter. Struts Replaced “In a letter to the agency, Toyota agreed to replace the struts free of charge to the consumer to address the problem,” Alair said. “It is unclear why this safety recall was touted as a ‘win’ for the manufacturer.” As in at least four unrelated cases in which Toyota warded off U.S. recalls involving unintended acceleration allegations, a former NHTSA employee hired by the company took part in negotiations with the agency over handling the reported Sienna problems. “Although Toyota is willing to identify this campaign as a safety recall in the owner communication about the campaign, Toyota has not determined that the condition described above is a ‘safety-related defect’ within the meaning of the federal vehicle safety laws,” Toyota Vice President Christopher Tinto , the former NHTSA employee, wrote in a May 30, 2008 letter to the agency. NHTSA agreed to the lesser classification in a June 25, 2008, report that cited the Toyota letters to owners. Agencies’ Resources “Based on these actions, the agency had decided to close the investigation,” the report said. “While Toyota has not made a decision that the recalled vehicles contain a safety- related defect, in view of the recall, further use of the agencies’ resources does not appear to be warranted.” Toyota’s letter was sent to owners of Siennas for model years 2004 to 2006. As of September 2009, the last time Toyota submitted an update to NHTSA, 98,582 vehicles, or about half of the total affected, had been inspected and repaired. Among those injured were a 50-year-old resident of Illinois who suffered a cervical sprain and nerve damage requiring more than $50,000 in medical bills; a 68-year-old Utah man who incurred an injury to his rotator cuff and damage to his knee; and a 51-year-old California resident who had a concussion while standing under his liftgate, according to NHTSA reports . Striking Owner’s Head The first injury filing came on April 10, 2006, when NHTSA reported a “2004 Toyota Sienna liftgate closing automatically and striking the owner’s head,” according to a search of complaints in the agency’s database. The agency eventually tallied 410 complaints with 98 injuries and an additional 12,452 warranty repairs conducted by Toyota prior to the safety campaign, according to a June 2008 report. In a January 2008 letter to Toyota, the agency said the liftgates might fall with the strength of 140 to 300 pounds if gas leaked from the struts, which NHTSA said were showing “a steady increase in failures.” NHTSA at that time asked Toyota to initiate a safety recall , saying it had identified 70 injuries. Toyota initially rejected the request because it had already agreed to an extended warranty on the parts. The six- year warranty notice didn’t warn of a risk of injury, according to a copy submitted to NHTSA by Toyota. The automaker also disputed the injury reports in the NHTSA letter as not being as serious as initially reported. Fix ‘Exacerbated’ Toyota’s attempts to change the design of the liftgate strut started as early as December 2003, for 2004 model-year vehicles, according to NHTSA documents. The first three fixes were “mixed,” as the first fix “exacerbated” the problem, the agency said. The final change, in December 2006, was deemed successful and included in minivans starting in model year 2007. The NHTSA database shows at least two reports of injuries to owners of 2007 Sienna minivans that were also made since then because of hatch failures. The owner of a 2010 Sienna minivan also complained to NHTSA on Nov. 15 that his liftgate has hit him and his family members on their heads and shoulders by closing unexpectedly. To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

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Obama Endorses New Medicare Tax, Drugmaker Fees Under Health-Overhaul Plan

February 22, 2010

By Ryan J. Donmoyer and Nicole Gaouette Feb. 22 (Bloomberg) — President Barack Obama , seeking to break an impasse over health-care legislation, proposed a plan that includes the first Medicare tax on unearned income such as capital gains and higher fees on drugmakers, while scaling back a levy on high-end benefits. The measure released today marks a reversal from months of leaving the legislation’s details largely up to congressional Democrats, who have failed to agree on a plan. Obama relied mostly on a Senate bill passed in December, with elements of a House version passed in November. The plan to cover 31 million uninsured Americans presents a challenge to Republicans before a Feb. 25 meeting at Blair House, across the street from the White House. Obama invited leaders from both parties and called on Republicans, who have almost universally opposed the Democratic plans, to offer their own “comprehensive bill” to extend coverage and reduce costs . “We view this as the opening bid for the health meeting,” said Dan Pfeiffer , the White House communications director, on a conference call with reporters today. “The president is coming to the meeting with an open mind. He hopes that the Republicans do, too. Our hope is to find some areas of agreement.” Republicans have criticized the Democratic legislation, saying it’s too expensive at about $1 trillion over 10 years, that it unfairly forces people to obtain insurance, and will lead to government domination of health care. The White House says the program will be fully paid for with taxes and savings. Using Reconcilation? House Republican leader John Boehner said today Obama was undermining the Feb. 25 meeting with his plan. “The president has crippled the credibility of this week’s summit by proposing the same massive government takeover of health care based on a partisan bill the American people have already rejected,” Boehner, of Ohio, said in a statement. To sidestep Republican opposition, the Democrats may use a procedure called reconciliation, which would require just 51 Senate votes to pass as long as the bill dealt only with revenue and spending issues. Pfeiffer said the possibility of using reconciliation played a part in the design of the White House plan and gives Democrats “flexibility.” In the plan, Obama is advocating new taxes for Medicare, the government health program for the elderly. He proposed a 2.9 percent assessment on income from interest, dividends, annuities, royalties and rents for individuals earning more than $200,000 or families making more than $250,000. Capital Gains The proposed tax would also apply to capital gains, an administration official confirmed. That would push the rate to 22.9 percent in 2011, up from 15 percent now and 20 percent scheduled to take effect next year. Obama also embraced the Senate proposal for an increase in the Medicare payroll tax on the highest earners. “This is a potential pot sitting out there, a source of tax revenue that they haven’t tapped into,” said Roberton Williams , a senior fellow at the Tax Policy Center in Washington. “It changes the nature of financing for Medicare.” The president endorsed yet another change in the so-called Cadillac tax on high-end employer-provided plans, which has been one of the most contentious parts of the legislation. While some economists say the levy would discourage wasteful spending, labor unions say it would hurt too many workers, and they successfully negotiated to scale it back in January. Easing Cadillac Tax Under the Obama measure, the 40 percent excise tax would apply to plans with premium costs in excess of $10,200 for singles and $27,500 for families, with adjustments for high-risk occupations and companies with higher costs because of the age or gender of their workers. That’s up from a deal of $8,900 and $24,000 that had been worked out with labor leaders earlier. Dental and vision benefits would no longer be counted, and the effective date would be moved to 2018. The president said there would also be an automatic adjustment to the thresholds for premiums if health-care costs rise unexpectedly quickly. Under the plan, the pharmaceutical industry led by New York-based Pfizer Inc. would shoulder $10 billion more in fees over 10 years starting in 2011. The extra money would be used to help close the so-called doughnut hole in coverage for Medicare prescription-drug patients. No Pay-to-Delay The proposal includes a provision that would outlaw a practice in which brand-name drugmakers pay companies to keep competing generics off the market. There were 19 so-called pay- to-delay deals last year, usually made as part of a settlement in patent litigation, according to the Federal Trade Commission. Obama made smaller changes to plans to raise money from medical device makers such as Boston Scientific Corp. of Natick, Massachusetts, and health insurers such as Indianapolis-based WellPoint Inc. He delayed until 2014 the implementation of $67 billion in fees on the insurance industry over 10 years and changed the $20 billion assessed on device makers to an excise tax instead of a fee, with a start date of 2013. He endorsed a new panel that could curb insurance-rate increases it deems unreasonable and included restrictions already in the House and Senate bills. For instance, insurers wouldn’t be able to refuse new clients because they have preexisting medical conditions. Too Much Regulation The trade group America’s Health Insurance Plans called on the White House to include “system-wide reforms to control the rapid increase in the underlying cost of medical care.” “Creating a new duplicative layer of federal premium regulation on top of what states are already doing will only add regulatory complexity and increase health-care costs,” said Robert Zirkelbach , a spokesman for the Washington group. Obama also eliminated a Senate provision that gave special aid to Nebraska to help the state cover additional costs for Medicaid, the government health program for the poor. Instead, he said he would provide greater assistance to all the states. The president said he was proposing changes that would give more aid to Americans to help them buy insurance. Under his plan, families making between $66,000 and $88,000 a year would pay no more than 9.5 percent of their income in premiums. He came down on the side of the Senate on the issue of how new online purchasing exchanges should be set up, opting for a state-by-state system rather than a national version. House leaders argue that state exchanges wouldn’t be as effective. He also sided with the Senate in avoiding a mandate on employers to offer insurance while including a penalty for large companies whose employees end up buying taxpayer-funded insurance. Under his plan, companies with more than 50 workers who don’t offer coverage would be subject to a fee of $2,000 per worker, minus the first 30 employees. House Speaker Nancy Pelosi said the proposal contained “positive elements” from both the House and Senate bills. “I look forward to reviewing it with House members and then joining the president and the Republican leadership at the Blair House meeting on Thursday,” she said in a statement. To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net

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ANXeBusiness Expands Executive Team With New CTO

February 18, 2010

Abdallah F. Shanti to Drive Development and Design of New Managed Services and Technologies

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Gazprom May Shift Shtokman Gas to U.K., France Until U.S. Demand Recovers

February 17, 2010

By [bn:PRSN=1] Anna Shiryaevskaya [] Feb. 17 (Bloomberg) — OAO Gazprom , the world’s largest gas producer, and its partners in the Arctic Shtokman project plan to direct some liquefied natural gas to Europe until demand for fuel imports recovers in North America. “The LNG business will develop in Europe,” Yuri Komarov , chief executive officer of Shtokman Development AG, said in an interview in the northern Russian port of Arkhangelsk yesterday. “Some LNG volumes can go to the European market, first of all, the U.K., Italy and France.” Gazprom, the majority owner in Shtokman, planned to market as much as 90 percent of its LNG to North America in a bid to break into the market. The company aims to gain 25 percent of the global LNG market by 2020 and with it greater flexibility than pipelines offer as the chilled gas can be shipped by tanker and sold on the spot market. Gazprom, Total SA and Statoil ASA delayed their first gas output at Shtokman by three years to 2016, with LNG production to start in the following year. Global fuel demand waned in the economic slowdown, while new LNG capacity and U.S. success in developing unconventional resources, such as shale gas, may lead to oversupply. “We expect the situation will change by the end of next year and either let us make an investment decision or not,” Komarov said. The partners plan to make a final investment decision on pipeline gas by March 2011 and on LNG by the end of that year. The LNG project will be ready to start when the market is ready for it, he said. Shtokman in 2015 The start of Shtokman may be moved up, with pipeline shipments as early as the end of 2015 if European demand recovers, Komarov said. The partners initially planned to ship half of Shtokman’s gas by pipeline and liquefy the other half. In the first phase, 23.7 billion cubic meters of gas a year will be pumped from the field. That ratio may be changed, Komarov said. Still, Gazprom remains committed to LNG production, he said. “From the strategic point of view, it is extremely important for Russia to have LNG,” Komarov said. “Gazprom, as a global player, will be able to choose gas flows depending on the market situation.” Shtokman, 550 kilometers (340 miles) offshore under the Barents Sea, will be connected to land through a subsea pipeline. The link will be extended by land to the town of Vyborg on the Gulf of Finland, where it will connect to the planned Nord Stream export pipeline under the Baltic Sea to Germany. Investment Burden The pipeline project documents will be ready to submit to the venture partners by September, Komarov said. The onshore link will be “purely Russian,” he said, with the design, construction and supplies provided by domestic companies. The partners are carrying out additional studies to minimize the capital expenditure, Shtokman Development First Deputy CEO Herve Madeo said at a conference in Arkhangelsk yesterday. Komarov declined to provide a new estimate for Shtokman’s project costs, which in 2006 were seen to be about $15 billion, saying the economics are “interesting.” “Maybe it will be one of the best projects in terms of investment burden,” Komarov said. “The investments per unit of production will be very low.” Shtokman has 3.9 trillion cubic meters of gas reserves, enough to supply the world for more than a year. It is surrounded by satellite fields that may hold 10 trillion cubic meters of gas, which may fuel the project into the future, Komarov said. To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

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Skytap Appoints Software Industry Veteran as Vice President of Engineering

February 11, 2010

Brad Schick to Lead Design and Development of Skytap Cloud Services

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U.S. Targets Iran’s Revolutionary Guard With Sanctions on Four Companies

February 10, 2010

By Jeff Bliss Feb. 10 (Bloomberg) — The U.S. Treasury Department said today it would freeze the assets of four companies and one individual connected with Iran’s Islamic Revolutionary Guard Corps, which the U.S. has accused of developing weapons of mass destruction and supporting terrorism. “Today’s action exposing Khatam al-Anbiya subsidiaries will help firms worldwide avoid business that ultimately benefits the IRGC and its dangerous activities,” said Treasury’s undersecretary for terrorism and financial intelligence, Stuart Levey , in a statement. The U.S. has been trying to rally reluctant countries, especially China, to sanction Iran as the government in Tehran resists pressure to scale back its uranium enrichment work. Secretary of State Hillary Clinton has signaled the U.S. wants to target the Revolutionary Guard, an elite military branch with extensive business interests. President Barack Obama said yesterday that Iran continues to “pursue a course that would lead to weaponization” of nuclear materials, prompting the U.S. to pursue tougher penalties in an attempt to block its path. Obama was echoing a concern of leaders in Europe and the Middle East that Iran’s enrichment of uranium to a level it says is needed for a medical-research reactor would move the country closer to producing a concentration needed for a bomb. Israeli Prime Minister Benjamin Netanyahu called yesterday for “crippling sanctions” against Iran. UN Sanctions Iran already is subject to United Nations Security Council restrictions, including a 2007 resolution freezing assets and banning travel for some Revolutionary Guard-affiliated companies and officials. The Iranian government maintains that its nuclear development work is a legitimate effort to build a civilian power industry. Levey, who has played a role in the design and enforcement of financial restrictions on Iran since the administration of President George W. Bush , was in London last month to discuss the implementation of sanctions with foreign officials. Those sanctioned today include General Rostam Qasemi, a commander in the Khatam al-Anbiya Construction Headquarters, the engineering arm of IRGC, Treasury said in a statement. The firms singled out by the action are subsidiaries of Khatam al-Anbiya or have ties to it, Treasury said, and include Fater Engineering Institute, Imensazen Consultant Engineers Institute, Makin Institute and Rahab Institute. The companies fund the Guard’s operations by building streets, tunnels, pipelines, water-conveyance systems and agricultural restoration projects, Treasury said. ‘Cash Cow’ “Khatam al-Anbiya is essentially an IRGC-controlled Army Corps of Engineers ,” Cliff Kupchan a senior analyst at Eurasia Group, a New York political-risk consulting firm, said in an e- mail, referring to a U.S. government agency that does flood- control, navigation, hydropower and other projects in addition to military construction. Kupchan described the Iranian company as a “cash cow” for the Revolutionary Guards. “The U.S. has promised targeted sanctions against the IRGC and the Iranian leadership, and now that diplomacy has apparently failed, I think this is the beginning of that process,” Kupchan said. To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

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Toyota Said to Plan Recall of Prius Hybrids in Japan This Week

February 8, 2010

By Tetsuya Komatsu and Yuki Hagiwara Feb. 8 (Bloomberg) — Toyota Motor Corp. will recall its 2010 model Prius hybrid car in Japan this week to repair a problem with the vehicle’s braking system, two people familiar with the matter said, adding to global recalls of almost 8 million autos for separate defects. The world’s largest automaker plans to recall at least 270,000 of the gasoline-electric hatchbacks in Japan and the U.S., one person said, declining to be identified as the information isn’t yet public. Juergen Stolze , a Toyota spokesman in Germany, said the carmaker will decide whether to recall Prius cars in Europe by Feb. 10. A Prius recall may further tarnish Toyota’s reputation after the Toyota City, Japan-based company lost about $33 billion in market value amid expanding global recalls of other models to repair defects linked to unintended acceleration. Those recalls have yet to include any vehicles in Japan , where the Prius was last year’s top-selling model. “It’s really shocking,” said Koichi Ogawa , chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo. “The damage to Toyota will be big.” Ririko Takeuchi , a spokeswoman for Toyota in Tokyo, said the company hasn’t decided whether to recall the Prius. Stolze, speaking by phone from Cologne, Germany, declined to say what the carmaker’s decision will be regarding recalls in Europe. There haven’t been any proven cases of brake failures in the Prius in Europe, he said. ‘Kind of Scary’ Japan’s government ordered Toyota to investigate the Prius after receiving complaints from drivers. The company has been looking into reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments where the car continues to coast for about a second after the brakes are applied, because of the anti-lock brake system. “It sounds kind of scary,” said Steve Wozniak , co-founder of Apple Inc., who drives a 2010 Prius. “You sure don’t want your car to continue on, on an icy road, when it’s supposed to be stopping.” The New York Times reported that Toyota will recall at least 311,000 Priuses. Toyota has sold at least 332,000 units of the 2010 Prius, including 197,000 in Japan and 103,200 in the U.S., spokesman Takanori Yokoi said. The model is built in Japan. Sai, Lexus Toyota also plans to recall Lexus HS250h and Sai hybrid models in Japan this month, one of the people said. The company is considering steps dealers can take for current Prius owners, including exchanging some parts, the person said. Toyota fell 1.1 percent to close at 3,280 yen in Tokyo trading today. The stock has declined 22 percent since Jan. 21, when the carmaker began recalling vehicles to fix gas pedals linked to unintended acceleration. Wozniak, 59, who said earlier this month he had also experienced incidents of unintended acceleration in his Prius, said he would probably take the car to a dealer to have the brake system checked, “but not right away.” He said the reports that have led to recalls of Toyota vehicles aren’t statistically significant and that he remains a fan of the Prius because of its environmental benefits. “All these problems should get fixed, but they shouldn’t stop people from buying the Prius,” Wozniak said in a phone interview. “There are bugs in every product.” U.S. Investigation Toyota said last week it had received complaints about Prius brakes through dealers starting in the last few months of 2009. Toyota changed the design of the brake software at the end of January, the company said. The U.S. Transportation Department is also investigating reports of Prius brake failures. The department’s National Highway Traffic Safety Administration received 124 reports from consumers, including four saying crashes occurred with two “minor” injuries, according to an investigation document. Toyota told U.S. dealers to expect an update early this week on steps the company plans to take to address the complaints, according to John Hanson , a spokesman for the carmaker’s sales unit in the country. The brake complaints aren’t related to the reports of unintended acceleration, according to Toyota’s Takeuchi. Toyota has recalled at least 7.8 million vehicles on five continents to repair defects that have been linked to unintended acceleration. Those recalls may cut demand for the company’s vehicles by 100,000 units, Toyota has said. Return to Profit The company last week predicted a return to profit in the fiscal year ending March 31, even as it said recalls may cost 100 billion yen ($1.1 billion). The full-year net income forecast of 80 billion yen takes into account recalls for flaws linked to unintended acceleration, though it doesn’t include potential Prius recalls, Toyota said at the time. Toyota faces at least 29 lawsuits filed on behalf of customers in the U.S. and Canada seeking a range of damages from loss of car value to a return of profits. It also faces at least 10 lawsuits brought by individuals claiming deaths or injuries caused by uncontrollable acceleration. Sudden acceleration of Toyota vehicles has been linked to 19 deaths in the last decade, according to Henry Waxman , the U.S. House of Representatives’ Energy and Commerce Committee chairman. To contact the reporters on this story: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net ; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

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Toyota Faces Canada Class-Action Suit Claiming Prius Defect, Law Firm Says

February 5, 2010

By Margaret Cronin Fisk Feb. 5 (Bloomberg) — Toyota Motor Corp. , the world’s largest automaker, was sued in Canada in a class-action case claiming defects in the braking system of its Prius and Lexus hybrid vehicles, a law firm said. Merchant Law Group said it filed a claim today in Victoria, British Columbia, against the automaker on behalf of Canadian owners of 2010 Toyota Prius and Lexus HS250h hybrids. The lawsuit , which seeks reimbursement of purchase prices or payment equal to a loss in resale value, claims the vehicles’ brake systems are defectively designed because they shut off brake power to save energy. “The energy reclaiming nature of these vehicles as part of braking makes them dangerous for use,” attorney Tony Merchant said in a statement sent to Bloomberg. “As the vehicle switches to the brake pad system, there is a lapse where the vehicle has no braking power.” Toyota is facing at least 30 class-action , or group, lawsuits in the U.S. and Canada connected to multiple recalls over sudden acceleration of its vehicles. More than half of these lawsuits blame Toyota’s electronic throttle control system for these events. The Canada hybrid lawsuit isn’t connected to those cases. Quebec Lawsuit The Merchant firm in Regina, Saskatchewan, said it also sued Toyota Canada Inc. and Toyota North America and that it filed a separate claim today in Quebec. Sandy Di Felice, director of external affairs with Toyota Canada in Toronto, said the company hasn’t been served and isn’t aware of either lawsuit. Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments in which the car continues to coast for about a second after the brakes are applied because of the anti-lock brake system. The company said this week that it changed the design of Prius brake software at the end of January to correct the situation. The carmaker said it is considering steps dealers can take for current Prius owners, including exchanging some parts. There has been no recall of the 2010 Prius or Lexus HS250h announced in the U.S. and Canada. The case is Marklely v. Toyota Canada Inc., 10-0540, Supreme Court, British Columbia (Victoria). To contact the reporter on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net .

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Toyoda Apologizes for Recalls, Says Carmaker Still Weighing Prius Measures

February 5, 2010

By Makiko Kitamura Feb. 5 (Bloomberg) — Toyota Motor Corp. President Akio Toyoda apologized for the company’s growing recall crisis in his first public appearance since the carmaker halted U.S. sales and production of its best-selling models last month. The company will set up a committee on quality control after recalls related to unintended acceleration have swollen to almost 8 million vehicles worldwide, Toyoda, the 53-year-old grandson of the company’s founder, said in Nagoya, Japan. Toyota, the world’s largest automaker , has lost almost $34 billion in market value in the past two weeks and today had its “AA” debt rating put under review by Standard & Poor’s as the recalls erode its brand image. The company, a global benchmark for manufacturing, will hire outside experts for its quality committee, said Executive Vice President Shinichi Sasaki . “We aim to regain customer trust,” Toyoda told reporters. “We should admit mistakes where they were made.” Separately, Japan’s government has ordered Toyota to investigate complaints from customers about brake failures in the latest version of its Prius hybrid car, the nation’s best- selling vehicle last year. The company is still considering measures related to the Prius, Toyoda said. “The company lacks crisis management,” said Koji Endo , managing director of Advanced Research Japan. “We are left with the impression, ‘too late, too little,’” he said. U.S. Probe The U.S. Transportation Department is also investigating reports of brake failures in the Prius . The department’s National Highway Traffic Safety Administration received 124 reports from consumers, including four saying crashes occurred with two “minor” injuries, according to an investigation document. Toyota, based in Toyota City, Japan, said this week it began using modified braking software on Priuses built since January. The newest Prius model is built exclusively in Japan. “If the company recalls the Prius, they really have a serious problem,” Endo said. Toyota’s announcements today could have been made three months ago, the analyst said. The Prius, driven by U.S. actor Leonardo DiCaprio and Apple Inc. co-founder Steve Wozniak , is the world’s best-selling hybrid vehicle. Toyota has sold 1.615 million of the latest version worldwide, including 572,800 in Japan and 833,200 in North America, according to the company. Prius Complaints Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments where the car continues to coast for about a second after the brakes are applied because of the anti-lock brake system. The carmaker said yesterday it had received complaints about Prius brakes through dealers starting in the last few months of 2009. Toyota changed the design of the brake software at the end of January, the company said. Toyota is also examining HS250h and Sai hybrid models and considering steps dealers can take for current Prius owners, including exchanging some parts. The brake complaints aren’t related to incidents of sudden acceleration in the U.S., company spokeswoman Ririko Takeuchi said. The recalls related to acceleration may cut demand for the company’s vehicles by 100,000 units, Toyota said yesterday. Profit Forecast The company yesterday predicted a return to profit in the fiscal year ending March 31, even as it said recalls may cost 100 billion yen ($1.1 billion). The full-year net income forecast of 80 billion yen takes into account recalls for flaws linked to unintended acceleration, though it doesn’t include potential Prius recalls, Toyota said at the time. Toyota faces at least 29 lawsuits filed on behalf of customers in the U.S. and Canada seeking a range of damages from loss of cars’ value to a return of profits. It also faces at least 10 lawsuits brought by individuals claiming deaths or injuries caused by uncontrollable acceleration. Sudden acceleration of Toyota vehicles has been linked to 19 deaths in the last decade, according to Henry Waxman , the U.S. House of Representatives’ Energy and Commerce Committee chairman. To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

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Nicotine Skin Patch Helps More Quitters Resist Cigarettes When Worn Longer

February 1, 2010

By Ellen Gibson Feb. 1 (Bloomberg) — Cigarette smokers trying to quit who wear a nicotine patch for six months, rather than the standard two, may stay away from smoking longer, U.S. scientists said. Researchers at the University of Pennsylvania School of Medicine found that 32 percent of smokers who wore the patch for 24 weeks were smoke-free, compared with 20 percent of those who used it for 8 weeks, according to a report in tomorrow’s Annals of Internal Medicine . Participants used GlaxoSmithKline Plc ’s Nicoderm CQ. Novartis AG makes a competing product. Smoking cigarettes increases the risk for lung cancer, heart attack, stroke and high blood pressure, according to the National Institutes of Health , and adults who smoke die 14 years earlier on average than nonsmokers. Those who puff may become addicted to nicotine, and quitters often undergo withdrawal and have cravings that persist long term. “Nicotine addiction is not an acute condition that can be treated in a couple of months,” said study author Robert Schnoll , an associate professor of psychology at Penn, in a Jan. 29 phone interview. “It’s a chronic condition that needs extended therapy and we hope this research will encourage doctors to keep their patients on the patch longer.” Glaxo’s NicoDerm CQ and Novartis’s Habitrol are patches that supply the body and brain with a steady stream of nicotine absorbed through the skin. Current guidelines recommend using the patches for 8 weeks, the study’s authors said. The nicotine helps to prevent withdrawal symptoms in people who stop smoking, according to the Bethesda, Maryland-based NIH. Study Design The study was conducted at Penn’s Transdisciplinary Tobacco Use Research Center in Philadelphia in people who smoked at least half a pack a day. About half of the 568 participants received active nicotine patches for 24 weeks. The rest had eight weeks of nicotine replacement followed by 16 weeks of placebo patches. All were given behavioral counseling. At the end of six months, 89 people in the treatment group were smoke-free for seven days, compared with 58 people in the placebo group, the researchers said. At the one-year mark there was no difference between the two groups, with both having a quit rate of about 14 percent. That statistic reinforces the idea that nicotine dependence should be treated more like opioid addiction, Schnoll said, where users are sometimes given methadone, a detoxification medication, for years. No Cold Turkey The American Lung Association in Washington doesn’t recommend that smokers quit “cold turkey,” without the aid of a prescription or over-the-counter treatment, said Norman Edelman , the organization’s chief medical officer, in a Jan. 29 phone interview. Nicotine supplements also come in the form of gum, lozenges, nasal sprays, and inhalers, according to the NIH. Other treatment options are Chantix, a drug from New York-based Pfizer Inc. that works on the brain’s nicotine receptors, and Glaxo’s Zyban, which is available in generic form under the name buproprion. The two main barriers to keeping patients on the nicotine patch longer are side effects and costs, Schnoll said. Common side effects of the patch include skin redness, headache, nausea, and sleep problems. The researchers found no significant difference in the intensity of side effects between the treatment and placebo groups after the eighth week, according to the report. Safer Than Smoking “We don’t know, longer term, what effect keeping people on the patch would have,” said Schnoll. “But nicotine replacement therapy is definitely safer than tobacco use.” The additional cost per quitter was about $2,482 for the 24-week treatment regimen, the research paper said. Only 8.6 percent of health insurers cover the full cost of the patches, and only 33 states subsidize them for Medicaid patients, the study’s authors said. “If you do the arithmetic,” said the lung association’s Edelman, “you’ll find that if you live in New York City and you smoke a pack a day, you’re already spending about $300 a month.” The study was funded by a grant from the National Cancer Institute and the National Institute on Drug Abuse. The study’s senior author, Caryn Lerman , has served as a consultant for GlaxoSmithKline. To contact the reporters on this story: Ellen Gibson in New York at egibson9@bloomberg.net ;

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Clinton to Push for Tougher Sanctions Against Iran During London Meetings

January 27, 2010

By Indira A.R. Lakshmanan Jan. 27 (Bloomberg) — U.S. Secretary of State Hillary Clinton is taking advantage of meetings with foreign ministers in London today and tomorrow to push for tougher sanctions aimed at Iran’s nuclear program. Clinton will discuss strengthening the implementation of existing sanctions, and the possible elements of a new United Nations resolution aimed at reining in Iran’s nuclear ambitions, according to senior U.S. officials who spoke on condition of anonymity, because of the sensitivity of the private talks. While Iran says its nuclear program is aimed at generating electricity, the U.S., Europeans and UN inspectors have cast doubt on Iran’s motives for building clandestine atomic facilities and enriching uranium, which can be used for bomb- making. President Barack Obama said he would focus on diplomacy through 2009 before pressing for tougher international pressure to force Iran to comply with inspectors. Clinton’s effort to drum up support for sanctions while in London for international meetings on Yemen and Afghanistan is a sign of the Obama administration’s attempt to rejuvenate a policy that has foundered in the UN Security Council. China in particular has resisted the idea of new sanctions on Iran, which is China’s third-largest source of crude oil. Clinton is meeting with foreign ministers from the nations that join the U.S. as permanent Security Council members, Russia, China, Britain and France. She also will talk with her counterparts from Germany, Italy, Turkey, Indonesia, the United Arab Emirates and Saudi Arabia. Met Lavrov A senior State Department official said Clinton and Russian Foreign Minister Sergei Lavrov had a constructive discussion today about how to effectively pressure Iran, including through what the official called appropriate action at the UN. Clinton will press some countries, such as Indonesia, to convince Iran that it isn’t meeting its obligations to the international community, while talks with others will focus on the possible language of a new UN resolution, officials said. Clinton has indicated the U.S. wants to target Iran’s Revolutionary Guard Corps, an elite military branch with far- reaching business interests and involvement in nuclear and missile development. Iran is already subject to three rounds of UN sanctions, including a 2007 resolution freezing assets and banning travel for some Revolutionary Guard-affiliated companies and officials. Sanctions Draft Officials representing the five permanent Security Council members and Germany — a group that has held regular talks on the Iranian nuclear issue for several years — plan to hold a conference call this week to discuss the first draft of a sanctions resolution, according to a European diplomat. The group will discuss a proposed U.S. text that suggests strengthening existing measures and probably would add certain Revolutionary Guard individuals or entities to the UN travel ban and asset freeze, the diplomat said. U.S. Treasury Undersecretary Stuart Levey , who has played a pivotal role in the design and enforcement of financial restrictions on Iran since the George W. Bush administration, is also in London to discuss the implementation of sanctions with foreign officials, the senior U.S. officials said. The Treasury Department has identified 119 Iranian companies, banks and officials, saying they support Iran’s nuclear or terrorist activities and banning them from dealings with U.S. companies and allowing the U.S. to seize their assets. Treasury officials have discussed with European counterparts the possibility of additional restrictions on financial transactions or insurance for Iranian cargo shipments. Earlier today, Lutz Guellner , spokesman for European Union foreign policy chief Catherine Ashton , told reporters in Brussels that there’s “no precise calendar” for a UN debate on Iran, adding, “we can’t wait forever.” To contact the reporter on this story: Indira Lakshmanan in London at ilakshmanan@bloomberg.net .

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Ernst & Young Partners Jailed: Richard Shapiro, Brian Vaughn Sentenced To Prison

January 23, 2010

NEW YORK — Two ex-partners of the accounting firm Ernst & Young each have been sentenced in New York to more than 1 1/2 years in prison, the second set of former partners of the firm to be sentenced in as many days. Richard Shapiro and Brian Vaughn were sentenced Friday in federal court in Manhattan. Shapiro was sent to prison for two years and four months while Vaughn received a 1-year-and-8-months prison term. They were among four defendants convicted last May of conspiracy in the design, marketing and implementation of tax shelters sold by Ernst & Young. Two others were sentenced Thursday. The government said the tax shelters generated billions of dollars in paper tax losses that were used to offset actual income.

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Susanna Speier: New Year’s Neuroeconomics Politiku

January 5, 2010

In 2010, the frequency of Politiku I post will be determined exclusively by the success and/or failure of my New Year’s resolution to balance the number of unpaid writing projects with the number of paid writing project I take on. The rush I get by hitting the “submit” button that forwards my post on to the Huffington Post ‘s round the clock editorial staff is addictive. This is, in part, because the rush doesn’t end with, submit . I go to sleep only to wake to discover that the round the clock editorial elves have transmitted by post around the globe and back. A post, lovingly syndicated by the New York Times , the Wall Street Journal and Business Week sustains my buzz. The re-tweets, follow up comments and spikes in my own blog traffic, only further sustain me. I’m not saying that blogging for HuffPost isn’t a worthy passion project, in and of itself. Nor am I saying that I don’t genuinely benefit from the distinguished community to which the website connects me. I am simply saying that the disproportionately exhaustive process of pitching to editors, querying potential clients and calling to follow up on the status of unreceived paychecks, is far too undesirable by contrast. In effort to avoid agonizing the pain caused by job scarcity, combined with the pain of MFA loans with metrics, I am resolving to only allow myself to indulge in the pleasurable Politiku process after successfully securing and completing a writing project or assignment that pays market rates. Neuroeconomics, the study of how irrational financial decisions are made, tracks the neuropathways of consumers, investors and gamblers. As far as I know, it has not yet been discussed in conjunction with the neuropathways that light up during the blogging process. Thanks to the behavioral specialists who generously contributed to my Neuroeconomics Politiku shout-out, we do now! Joseph Weiner Politiku Empty wallet. So? “Life is short,” wise people say. Don’t waste minutes, spend. Joesph Weiner is Chief of Consultation Psychiatry at North Shore University Hospital in Manhasset, NY and Associate Professor of Clinical Psychiatry and Medicine at Albert Einstein College of Medicine. Barbara J. Rubin Politiku There’s more than enough. Recession? Conspiracy. Bacchanalia. Barbara J. Rubin, PsyD, is an Atlanta-based Licensed Psychologist and Member, American College of Forensic Examiners. Alan Hall Politiku MRI’s don’t lie Tyrannical consumption Now clouds my cortex Alan Hall is a socionomist, researcher, writer and forecaster for The Socionomics Institute, founded by Robert Prechter. The Institute studies how waves of social mood produce patterns in financial and social behavior. Mollie M. Marti Politiku Simple pleasures free Deals hidden in crowded malls Back to the basics Mollie Marti, PhD is the Founder of Best Life Design and Adjunct Professor of Psychology, The University of Iowa. Georgia Witkin Politiku Shorter lines, more help, Early discounts, later hours, Recession? Not bad! Georgia Witkin, Ph.D., is an acclaimed professor of psychiatry at The Mount Sinai Medical Center in New York City. An expert on family relationships and stress management, national health correspondent, author of ten books, and a TV personality. Physko Politiku It amazes me Neuroeconomics claims What Cro-Magnon knew Trulyfool Politiku High priests will tell us – Econ gurus know it all – Impulse is cold cash Susanna Speier Politiku Earn more and blog less: My New Year’s Resolution moderates the buzz

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Susanna Speier: New Year’s Neuroeconomics Politiku

January 5, 2010

In 2010, the frequency of Politiku I post will be determined exclusively by the success and/or failure of my New Year’s resolution to balance the number of unpaid writing projects with the number of paid writing project I take on. The rush I get by hitting the “submit” button that forwards my post on to the Huffington Post ‘s round the clock editorial staff is addictive. This is, in part, because the rush doesn’t end with, submit . I go to sleep only to wake to discover that the round the clock editorial elves have transmitted by post around the globe and back. A post, lovingly syndicated by the New York Times , the Wall Street Journal and Business Week sustains my buzz. The re-tweets, follow up comments and spikes in my own blog traffic, only further sustain me. I’m not saying that blogging for HuffPost isn’t a worthy passion project, in and of itself. Nor am I saying that I don’t genuinely benefit from the distinguished community to which the website connects me. I am simply saying that the disproportionately exhaustive process of pitching to editors, querying potential clients and calling to follow up on the status of unreceived paychecks, is far too undesirable by contrast. In effort to avoid agonizing the pain caused by job scarcity, combined with the pain of MFA loans with metrics, I am resolving to only allow myself to indulge in the pleasurable Politiku process after successfully securing and completing a writing project or assignment that pays market rates. Neuroeconomics, the study of how irrational financial decisions are made, tracks the neuropathways of consumers, investors and gamblers. As far as I know, it has not yet been discussed in conjunction with the neuropathways that light up during the blogging process. Thanks to the behavioral specialists who generously contributed to my Neuroeconomics Politiku shout-out, we do now! Joseph Weiner Politiku Empty wallet. So? “Life is short,” wise people say. Don’t waste minutes, spend. Joesph Weiner is Chief of Consultation Psychiatry at North Shore University Hospital in Manhasset, NY and Associate Professor of Clinical Psychiatry and Medicine at Albert Einstein College of Medicine. Barbara J. Rubin Politiku There’s more than enough. Recession? Conspiracy. Bacchanalia. Barbara J. Rubin, PsyD, is an Atlanta-based Licensed Psychologist and Member, American College of Forensic Examiners. Alan Hall Politiku MRI’s don’t lie Tyrannical consumption Now clouds my cortex Alan Hall is a socionomist, researcher, writer and forecaster for The Socionomics Institute, founded by Robert Prechter. The Institute studies how waves of social mood produce patterns in financial and social behavior. Mollie M. Marti Politiku Simple pleasures free Deals hidden in crowded malls Back to the basics Mollie Marti, PhD is the Founder of Best Life Design and Adjunct Professor of Psychology, The University of Iowa. Georgia Witkin Politiku Shorter lines, more help, Early discounts, later hours, Recession? Not bad! Georgia Witkin, Ph.D., is an acclaimed professor of psychiatry at The Mount Sinai Medical Center in New York City. An expert on family relationships and stress management, national health correspondent, author of ten books, and a TV personality. Physko Politiku It amazes me Neuroeconomics claims What Cro-Magnon knew Trulyfool Politiku High priests will tell us – Econ gurus know it all – Impulse is cold cash Susanna Speier Politiku Earn more and blog less: My New Year’s Resolution moderates the buzz

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Medical-Device Studies Lack Scientific Rigor, California Researchers Find

December 30, 2009

By David Olmos Dec. 29 (Bloomberg) — Cardiac pacemakers, stents and other medical devices implanted each year in hundreds of thousands of U.S. heart patients often are approved by government regulators based on insufficient scientific review, researchers said. About two of three cardiovascular devices approved by the U.S. Food and Drug Administration from 2000 to 2007 were tested in a single clinical trial rather than multiple studies, said scientists at the University of California, San Francisco. Eighty-eight percent of the studies failed to include, as a primary goal, a direct clinical measure of whether patients felt better, their heart function improved or they lived longer, the researchers found. Senator Charles Grassley , a Republican from Iowa, has criticized the FDA’s device review process as too friendly to the industry. The agency said in a Sept. 24 report that its approval of a knee implant made by Hackensack, New Jersey-based ReGen Biologics Inc . was flawed and needed to be re-examined. The FDA asked the Institute of Medicine , an advisory body, to review the approval procedure used for most medical devices, though not for the majority of cardiovascular devices. “The findings in this study raise questions about the quality of the data on which some cardiovascular device approvals are based,” wrote cardiologist Rita Redberg , a co- author of the study published today in the Journal of the American Medical Association. The approvals “lack adequate strength and may be prone to bias,” Redberg wrote. $15 Billion Market Minneapolis-based Medtronic Inc. , Boston Scientific Corp. , based in Natick, Massachusetts and St. Jude Medical Inc. , based in St. Paul, Minnesota, compete in the U.S. market for heart devices estimated at $15 billion by Frost & Sullivan Inc., a research and consulting firm based in Mountain View, California. The FDA said it has “serious concerns with the approach” used by the University of California researchers, whose study made “inappropriate assumptions” about the design of device trials. The researchers erred by evaluating medical-device approvals in a “drug-centric way” that used criteria commonly associated with the review of new prescription drugs, Jeffrey Shuren, acting director of the FDA’s Center for Devices and Radiological Health , said in a telephone interview. “I can’t vouch for their numbers,” Shuren said. “I don’t know how they got a lot of them, and I think they are incorrect.” The scientific rigor required for medical device studies “should be higher” than for drugs, the researchers said, because devices often are surgically implanted in patients and can’t just be discontinued, like drugs, if side effects occur. Medtronic Recall As an example, the study cited problems with Medtronic’s Sprint Fidelis defibrillators that led to a recall of the lead wires in October, 2007. The recall came three years after approval and implantation of 268,000 of the devices, according to the study. “Although devices can be lifesaving, they also have great potential for risk and adverse events,” the authors wrote. The researchers evaluated 123 studies of 78 cardiovascular devices reviewed through the FDA’s “pre-market approval” process. They used summaries of safety and effectiveness data that the FDA makes public after a device is approved. The process is the “most stringent” of the FDA’s three types of medical-device approvals, intended for “novel or high-risk’ devices, according to the study. Study Protocols Of the studies, only 27 percent were “randomized” and 14 percent were “blinded,” two common protocols used in clinical studies to ensure that bias does not weaken or invalidate the study results, the researchers noted. A blinded study means the participants don’t know whether they are receiving the treatment being studied or a placebo. Fourteen percent of the trials didn’t have a stated primary goal, or “endpoint,” and 48 percent lacked a “control group.” A control group is made up of participants who don’t receive the treatment being studied, and whose results are compared to assess how well a treatment works. An unpublished study conducted by researchers at Harvard University-affiliated Beth Israel Deaconess Medical Center in Boston and the FDA also found flaws in medical-device approvals for heart devices from 2000 and 2007, the agency said. That study was based on public and confidential FDA data, said Bram Zuckerman , director of the FDA’s division of cardiovascular devices, in a telephone interview. Safety and effectiveness were “suboptimally defined” and incomplete information about patients’ secondary heart-related illnesses, such as diabetes or hypertension,” were “infrequently reported,” according to the FDA-Beth Israel study of the approval process, the FDA said in a statement. FDA Revisions Based on the Beth Israel study, the FDA has begun revising its approval process for cardiovascular devices, including “careful screening” of safety and effectiveness goals and better reporting of patients’ health status. The FDA said it “is engaged in a broader evaluation of clinical studies” and “may take additional actions based on the findings of this evaluation.” The JAMA and FDA-Beth Israel studies “are highly critical of the quality of data submitted” for medical device approvals, Sidney Wolfe , director of the health research group at Public Citizen, a Washington, D.C.-based consumer watchdog group, said today in a telephone interview. “The difference between the JAMA and the FDA studies is that the FDA had access to more data.” AdvaMed Review AdvaMed , a medical-device industry group based in Washington, D.C., is reviewing the findings of the University of California researchers, said Janet Trunzo, executive vice president for technology and regulatory affairs. “Clinical trial data is but one piece of the overall approval process for medical devices,” Trunzo said yesterday in an e-mail. “American patients have access to life-saving, life- enhancing technology because the FDA carefully balances the risks and benefits of each new device or advancement in a given technology.” Medical innovation is needed for patients, said Redberg, the JAMA study co-author. “But we also think it’s important that when we put invasive devices in people that are permanently implanted, we are assured of their safety and effectiveness.” To contact the reporter on this story: David Olmos in San Francisco at dolmos@bloomberg.net

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America’s Cup Spending Spree on Design May Buy Speedier Boats for Everyone

December 15, 2009

By Aaron Kuriloff Dec. 15 (Bloomberg) — The America’s Cup boats that will race in February — products of a technological showdown between billionaire sailors — may bring wings, multiple hulls and computers to the next generation of sailboats. The two-year legal battle between billionaires Larry Ellison and Ernesto Bertarelli has produced two racing yachts that are a decade ahead of any boat built previously, even as it has dogged and delayed the 158-year-old regatta, to be held off the coast of Spain. The innovations made as longstanding Cup rules were abandoned in the search for a settlement may one day benefit sailors on weekend jaunts. Designers for both Ellison’s BMW-Oracle Racing and Bertarelli’s Alinghi syndicate said building and learning to sail these boats, each at least 90 feet long and among the fastest yachts ever built, has meant gains in everything from data collection to sail technology. “We’re like kids in the candy shop,” said Dirk Kramers, chief engineer for the Cup-defending Alinghi catamaran. “During the last Cup , it was all about trying to squeeze another 1/100th of a knot out of the boat. Now we’re really in discovery mode, learning huge lessons every day. We get to work on boats that are just so much more exciting than anything that’s ever been done.” Sailors, recreational boaters or other users of ultralight, aerodynamic technologies may benefit in coming years from equipment and data being assembled by both the Alinghi and BMW- Oracle racing syndicates, said Pete Melvin, a U.S. Olympic sailor and world champion . Development Jump “It’s been a hugely concentrated development, with all the best people in the industry, plus outside experts in every field, all focused on pushing the edge of the envelope,” said Melvin, co-founder of Morrelli & Melvin Design & Engineering Inc. . “It normally would have taken eight or 10 years to do what’s been done in just two short years.” Morelli & Melvin has designed multihulls, including Steve Fossett’s record-setting Playstation , and has consulted for BMW- Oracle. Multihulls are much faster than monohull boats, because they are lighter and have less drag. The America’s Cup has long featured yachting’s cutting edge. The 1983 victor, Australia II , used wings on its keel to reduce drag and increase performance. Such wings, so secret at the time that it took two undercover frogmen to spot them, are now common on sailboats worldwide. Recent editions of the Cup required boats that were restrictive and boring, says Donnie Brennan, boatwright for the U.S. Olympic sailing team in Beijing and owner of Mobile, Alabama-based Diversified Marine Services Inc. Two years of lawsuits over the rules of the event have led to an anything- goes faceoff that “certainly opens the door to innovation and technology,” he said. ‘Kazilllions of Dollars’ “They’re charting new areas,” said Brennan. “It’s great that we’ve got someone like Larry Ellison out there dumping kazillions of dollars into this technology.” Bertarelli spent about $90 million to capture the Cup from New Zealand in 2003. Grant Simmer, Alinghi’s design team coordinator, told Seahorse magazine that the team’s catamaran cost about five times as much as a typical Cup boat. Representatives of both teams declined to discuss the details of their biggest advances, saying they wanted to hide them from each other. Alinghi said in a New York court filing that Ellison had hired spies to sneak looks at its catamaran. Mike Drummond, design chief for the BMW-Oracle trimaran, said he can’t conceal the 190-foot wing that this month replaced a sail on his boat. The carbon-fiber foil is bigger than the wing of an Airbus A380 , the world’s largest passenger jet. The 60-foot Stars & Stripes catamaran that defended the America’s Cup in 1988 used a wing that was about half the size. A wing is more efficient than a conventional sail, holding its shape better while generating increased lift and diminished drag. High Risks It’s also harder to control, Drummond said. “It is an unknown risk for us,” he said. “We decided that the potential gains were enough that we would take that risk.” Drummond called some recent small breakage “teething problems” and said that the team was working to solve them while processing “more e-mails than the moon landing” full of questions from excited sailors. Alinghi also has considered wing technology, Kramers said in an interview. Designers also have worked on new kinds of line to handle the excess loads and, for the first time in the America’s Cup, onboard engines to power winches and other systems. On-Board Cameras Other likely spots for technological advancement include some of the most concentrated data collection in sailing history. Both teams use fiberoptic systems and on-board cameras to measure things like sail shape and stress. Kramers said sailors would find uses for both the data and the collection systems. In the meantime, he cautioned against celebrating either design until the two boats meet off Valencia. “It’s not a game about who comes up with the fanciest toys — you’ve still got to win a boat race,” Kramers said. “You can shoot yourself in the foot quite easily. You can make it too light and have something break on you, or you come up with something so complex you don’t know how to sail it. So there’s a certain amount of restraint involved, too.” To contact the reporter on this story: Aaron Kuriloff in New York at akuriloff@bloomberg.net .

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Bruce Ratner’s Brooklyn Arena Awaits Judges’ Ruling, Bond Sale: Commentary

November 23, 2009

Commentary by James S. Russell Nov. 23 (Bloomberg) — I’m standing on the roof of a building in the New York borough of Brooklyn that offers a panorama of rusting rail yards and several empty commercial buildings and row houses. This could become the $800 million Barclays Center arena. The view may not change soon, however, given the legal and financial hurdles the ill-starred project still faces. If all goes well, the arena will be the new home for the National Basketball Association’s New York Nets and part of the 22-acre Atlantic Yards commercial and residential development that once comprised 16 towers under the master plan of architect Frank Gehry . Much has gone awry so far. The local activist group Develop Don’t Destroy Brooklyn has filed a suit that argues against the use of eminent domain. The family of the group’s spokesman, Daniel Goldstein, faces eviction because they are the last occupants of an eight-story building located where the basketball court would be. Another suit claims that some changes made to the original project by developer Forest City Ratner Cos. under Chief Executive Officer Bruce C. Ratner are significant enough to require additional environmental review. If the judge in either case rules for the plaintiff, the resultant delay would make it almost impossible for Ratner to obtain financing through tax-exempt bonds that must be issued before the end of the year. An adverse ruling in either case also would give Barclays Plc the right to withdraw from a deal in which it would provide $400 million for naming rights on the arena.     “We expect the bond process to proceed by the end of year,” said Joe DePlasco, Forest City Ratner spokesman. “We’re waiting for the rating agencies.” Rulings and Limbo Court rulings could come as early as this week and will likely determine whether the development moves forward or sinks into limbo. The project has already changed drastically for the worse. It was once a glittering Gehry blueprint that would have covered the rail yards with a glass-walled arena and sprouted 16 towers wrapped in fluttering ribbons of metal and glass. As the climate for property development went frigid, Ratner dumped Gehry and brought in a sports-design specialist, the San Francisco office of architect/engineer Ellerbe Becket Co., which was recently bought by design giant AECOM Technology Corp. When images of the revised arena project — a bloated, brown airplane hangar — were greeted with revulsion, Forest City Ratner disavowed them. The developer hastily married Manhattan-based SHoP Architects with Ellerbe Becket. SHoP wrapped the brown blight in a pelt the color of rusting steel. The gambit got the arena cost down to $800 million from $1 billion, according to Forest City Ratner. Hack Expediency The result still smacks of hack expediency. One of SHoP’s overlapping metal bands thins as it arches into a broad porch over a bleak plaza, where Gehry had planned to build a high, glass-walled public space. Instead we would have a toad hunkering at one of the most important intersections in Brooklyn, that of Flatbush and Atlantic avenues. Fans would stand soaking on the plaza on rainy days. The broad cineplex-look entry awkwardly squeezes into a much tighter gathering space and concourse. The secondary entrances have shrunk to the size of subway holes. The spacious yet largely useless plaza and the beaklike porch occupy land slated in the Gehry plan for an iconic commercial tower once dubbed Miss Brooklyn. Ratner has promised the tower will be built. That means lopping off the beak, which would destroy what little integrity the design possesses. Environmental Review Ratner must insist on the tower’s eventual presence – even if he cancels it later — because giving it up now means redoing the environmental review, as Develop Don’t Destroy Brooklyn seeks, costing him the favorable financing. In the surreal morass of legalities under which state-owned rail yards become the setting for heavily subsidized private development, city and state officials have endorsed the design, yet state bonds have yet to be offered. Ratner raised $200 million by selling 45 percent of the Barclays Center and 80 percent of the Nets to Mikhail Prokhorov , the basketball-obsessed Russian billionaire. Gehry’s 2005 master plan was flamboyant and untidy, leaving important issues, like traffic, not fully addressed. But it injected tremendous energy into downtown Brooklyn, while subtly weaving together areas long divided by the sunken rail yards. Ratner blames not-in-my-backyard delays and the real-estate meltdown, but he shouldn’t have been surprised. Protesting neighbors are predictable — they now correctly fear that empty buildings and cracked asphalt parking lots will blight the neighborhood for years. They suspect affordable housing backloaded in the project will never be built. Yes, the economy tanked, but Ratner had to figure that New York would boom and bust in the course of his project, as it repeatedly has. Brooklyn might have been proud of the Gehry arena. Swapping it for a life-sucking eyesore suggests that Ratner won’t keep any promises that prove inconvenient. ( James S. Russell is Bloomberg’s U.S. architecture critic. The opinions expressed are his own.) To contact the writer of this column: James S. Russell in New York at jamesrussell@earthlink.net .

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Zynga May Be Valued at $1 Billion as Game Maker Feeds Off Facebook Craze

November 23, 2009

By Adam Satariano and Ari Levy Nov. 23 (Bloomberg) — Zynga Inc. , maker of the “Mafia Wars” and “FarmVille” games played on Facebook, may be valued at $1 billion based on the sale price of a smaller rival. Valuations for Zynga and its peers were established this month when Electronic Arts Inc. bought Playfish Inc. for three to four times its revenue, said Jesse Divnich , an analyst with researcher Electronic Entertainment Design & Research. Zynga may generate a value of $1 billion should the company be taken public, said Terry Schallich, head of capital markets at Pacific Crest Securities, a technology-focused investment bank. “If the IPO were timed to price around mid-2010 or later, our expectation would be for a billion dollar or greater valuation,” said Schallich, who is based in Portland, Oregon. That could make San Francisco-based Zynga the third-largest U.S. video-game publisher by market capitalization, bigger than Take-Two Interactive Software Inc. , the maker of crime-game franchise “Grand Theft Auto.” New York-based Take-Two had 2008 sales of $1.54 billion and has a market value of $909 million. Zynga will have revenue of $210 million this year and $355 million next year, according to Justin Smith, the founder of the industry-tracking Web site Inside Social Games. The figures are based on estimates of Zynga’s revenue per player across all its games and its number of daily active users, Smith said. “It is a real business and has huge momentum,” said Todd Greenwald , a games and Internet analyst at Signal Hill Capital Group LLC in Baltimore. “There would definitely be an appetite” for a Zynga initial public offering. $2 Billion Market Zynga Chief Executive Officer Mark Pincus , 43, said he has no immediate plans to take the closely held company public and that doing so would be a “distraction.” “Our mission is to accelerate our product development and business plan,” Pincus said in an interview. The U.S. market for games played on social networks including Facebook Inc. and News Corp.’s MySpace will triple to $2 billion by 2012, according to ThinkEquity LLC. The growth contrasts with a 12 percent drop through October in the market for console games, such as those played on Nintendo Co. ’s Wii, said industry researcher NPD Group Inc. Redwood City, California-based Electronic Arts , the second- biggest game publisher, paid $275 million in cash for London- based Playfish, plus another $125 million in performance and retention incentives. That’s equivalent to three to four times Playfish’s revenue, Electronic Arts Chief Financial Officer Eric Brown said on a conference call. $3 Chicken Coop Zynga and its rivals offer free-to-play games and generate revenue when players pay to add new features like a $3 chicken coop in “FarmVille.” The game, which lets people manage a virtual farm, has more than 65 million users. That compares with more than 52.6 million units sold worldwide for the Wii , the most among consoles. One risk to Zynga may be that, relative to Playfish, it gets a higher percentage of revenue from companies that pay for the ability to offer online movies, credit cards and other items to game users, said Eric Goldberg, an industry consultant and managing director of Crossover Technologies, a developer of online games based in New York. Some of those offers on Zynga games have turned out to be misleading. An example is when a player is offered to receive more game currency in exchange for filling out an IQ quiz. A user will enter a mobile number to receive the survey’s results and unwittingly sign up for a subscription that will be added to their monthly bill. Promotion Problems Palo Alto, California-based Facebook temporarily removed Zynga’s “FishVille” from the Web site this month because of problems related to promotions. Pincus said in a Nov. 8 blog posting that misleading ads were being offered in Zynga’s games and that the company is working with offer providers to ensure they don’t continue. “We recognize it is our responsibility to ensure that offers which generate a bad user experience are not shown with any of our games,” he said. All offers have been removed “until we can control their inclusion and presentation.” Promotions now account for less than 20 percent of the company’s revenue, Pincus said. Of that amount, a “very tiny portion” is from bad offers, said Shernaz Daver, a Zynga spokeswoman. Playfish said it receives less than 10 percent of its revenue from such advertising and only works with offer providers it says are reputable. Some analysts caution that the companies are new — all three of the biggest social game makers have emerged since 2007 — and the games may be a fad. ‘One Click Away’ “Consumers’ appetites in these worlds change rapidly,” said Divnich of Carlsbad, California-based Electronic Entertainment Design & Research. “Somebody can be playing ‘FarmVille’ for a couple of weeks and then get bored and they are gone. It’s one click away.” Zynga’s $1 billion valuation makes it less likely to get bought than Playfish, said Atul Bagga , a San Francisco-based analyst at ThinkEquity. He said Activision Blizzard Inc. is the only game company that could afford that amount and isn’t likely to make the investment because it already has a strong online game presence with “World of Warcraft.” A large media company also could buy Zynga, though he said that was unlikely because of the cost. Activision Chief Executive Officer Bobby Kotick , the head of the world’s largest game company, said Nov. 12 that social games will be a “great area for growth.” To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net Ari Levy in San Francisco at alevy5@bloomberg.net .

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Zynga May Be Valued at $1 Billion as Game Maker Feeds Off Facebook Craze

November 23, 2009

By Adam Satariano and Ari Levy Nov. 23 (Bloomberg) — Zynga Inc. , maker of the “Mafia Wars” and “FarmVille” games played on Facebook, may be valued at $1 billion based on the sale price of a smaller rival. Valuations for Zynga and its peers were established this month when Electronic Arts Inc. bought Playfish Inc. for three to four times its revenue, said Jesse Divnich , an analyst with researcher Electronic Entertainment Design & Research. Zynga may generate a value of $1 billion should the company be taken public, said Terry Schallich, head of capital markets at Pacific Crest Securities, a technology-focused investment bank. “If the IPO were timed to price around mid-2010 or later, our expectation would be for a billion dollar or greater valuation,” said Schallich, who is based in Portland, Oregon. That could make San Francisco-based Zynga the third-largest U.S. video-game publisher by market capitalization, bigger than Take-Two Interactive Software Inc. , the maker of crime-game franchise “Grand Theft Auto.” New York-based Take-Two had 2008 sales of $1.54 billion and has a market value of $909 million. Zynga will have revenue of $210 million this year and $355 million next year, according to Justin Smith, the founder of the industry-tracking Web site Inside Social Games. The figures are based on estimates of Zynga’s revenue per player across all its games and its number of daily active users, Smith said. “It is a real business and has huge momentum,” said Todd Greenwald , a games and Internet analyst at Signal Hill Capital Group LLC in Baltimore. “There would definitely be an appetite” for a Zynga initial public offering. $2 Billion Market Zynga Chief Executive Officer Mark Pincus , 43, said he has no immediate plans to take the closely held company public and that doing so would be a “distraction.” “Our mission is to accelerate our product development and business plan,” Pincus said in an interview. The U.S. market for games played on social networks including Facebook Inc. and News Corp.’s MySpace will triple to $2 billion by 2012, according to ThinkEquity LLC. The growth contrasts with a 12 percent drop through October in the market for console games, such as those played on Nintendo Co. ’s Wii, said industry researcher NPD Group Inc. Redwood City, California-based Electronic Arts , the second- biggest game publisher, paid $275 million in cash for London- based Playfish, plus another $125 million in performance and retention incentives. That’s equivalent to three to four times Playfish’s revenue, Electronic Arts Chief Financial Officer Eric Brown said on a conference call. $3 Chicken Coop Zynga and its rivals offer free-to-play games and generate revenue when players pay to add new features like a $3 chicken coop in “FarmVille.” The game, which lets people manage a virtual farm, has more than 65 million users. That compares with more than 52.6 million units sold worldwide for the Wii , the most among consoles. One risk to Zynga may be that, relative to Playfish, it gets a higher percentage of revenue from companies that pay for the ability to offer online movies, credit cards and other items to game users, said Eric Goldberg, an industry consultant and managing director of Crossover Technologies, a developer of online games based in New York. Some of those offers on Zynga games have turned out to be misleading. An example is when a player is offered to receive more game currency in exchange for filling out an IQ quiz. A user will enter a mobile number to receive the survey’s results and unwittingly sign up for a subscription that will be added to their monthly bill. Promotion Problems Palo Alto, California-based Facebook temporarily removed Zynga’s “FishVille” from the Web site this month because of problems related to promotions. Pincus said in a Nov. 8 blog posting that misleading ads were being offered in Zynga’s games and that the company is working with offer providers to ensure they don’t continue. “We recognize it is our responsibility to ensure that offers which generate a bad user experience are not shown with any of our games,” he said. All offers have been removed “until we can control their inclusion and presentation.” Promotions now account for less than 20 percent of the company’s revenue, Pincus said. Of that amount, a “very tiny portion” is from bad offers, said Shernaz Daver, a Zynga spokeswoman. Playfish said it receives less than 10 percent of its revenue from such advertising and only works with offer providers it says are reputable. Some analysts caution that the companies are new — all three of the biggest social game makers have emerged since 2007 — and the games may be a fad. ‘One Click Away’ “Consumers’ appetites in these worlds change rapidly,” said Divnich of Carlsbad, California-based Electronic Entertainment Design & Research. “Somebody can be playing ‘FarmVille’ for a couple of weeks and then get bored and they are gone. It’s one click away.” Zynga’s $1 billion valuation makes it less likely to get bought than Playfish, said Atul Bagga , a San Francisco-based analyst at ThinkEquity. He said Activision Blizzard Inc. is the only game company that could afford that amount and isn’t likely to make the investment because it already has a strong online game presence with “World of Warcraft.” A large media company also could buy Zynga, though he said that was unlikely because of the cost. Activision Chief Executive Officer Bobby Kotick , the head of the world’s largest game company, said Nov. 12 that social games will be a “great area for growth.” To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net Ari Levy in San Francisco at alevy5@bloomberg.net .

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Afghanistan’s First Railroad Aims to Undermine Bandit Funding of Taliban

October 27, 2009

By Dave McCombs Oct. 28 (Bloomberg) — Afghanistan is building its first rail link with the help of the Asian Development Bank in a bid to improve trade and aid and undermine highway bandits helping to fund insurgents, including the Taliban. The bank will name the design and operation contractors next week for the $170 million railway from Uzbekistan’s border to Mazar-e-Sharif, Afghanistan’s second-largest city and a hub for aid and imports, said Juan Miranda, ADB director-general for Central and West Asia. Work on the 75-kilometer (47-mile) line will start this year and may finish in 2010, he said. Afghanistan has only 25 kilometers of train track and crime gangs along the highways extort cash and steal cargo from haulers. Human rights campaigners and U.S. government officials say the bandits are helping fuel an insurgency that prompted President Barack Obama to send 21,000 additional soldiers to the country this year and to consider committing more U.S. troops. “It’s a project that will be transformational,” Miranda said by phone from the Philippines capital, Manila. “A railway is a visible sign of progress and it will really help with the trade bottleneck at the border. It’s a sign of hope, rather than desperation.” U.S. General Stanley McChrystal , the commander of U.S. and NATO-led forces in Afghanistan, wrote in an August assessment requesting more troops that insurgent taxes imposed on the “local population through check points” would enable anti- government forces to fund operations, even if profit from the opium trade was eliminated. For more than a century, every attempt to build a rail network has failed as French, German, Indian, Iranian and Soviet rail plans were abandoned or never broke ground, leaving the landlocked nation without an all-weather transport backbone. Cutting off Bandits “A rail line would help by cutting off the source of funds for some of the organized crime groups, because they would not be able to stop the train,” said Ahmad Nader Naderi, a member of the Kabul-based Afghan Independent Human Rights Commission . Afghanistan’s reliance on trucks facilitates “informal payments” such as extortion that inflate shipping costs by 50 percent in the region, according to a 2006 World Bank study. The International Monetary Fund in 2007 estimated shipping costs and delays in Afghanistan are double the regional average. “Projects like this railway would bring hope for a better future,” said Nader Naderi, whose commission investigates human rights abuses. Aid Bottleneck In February, 1,500 metric tons of Russian-donated flour packed onto 25 rail cars arrived at Haryaton, where the Uzbekistan railway line ends, Russia’s state-run RIA Novosti news agency reported. The cargo took days to shift onto trucks and weeks to deliver, allowing more spoilage, theft and extortion. Almost half of Afghanistan’s imports and even more of its humanitarian aid now come through Haryaton to Mazar-e-Sharif, 290 kilometers north of the capital, Kabul. Local governors have been accused of extorting payments from truck drivers, undermining support for President Hamid Karzai’s central government, Nader Naderi said. Deteriorating road security is also thwarting the U.S. military. In June 2008 alone, 44 trucks and 220,000 gallons (832,790 liters) of fuel were lost because of hijackings and attacks while delivering fuel to Bagram air field near Kabul, the U.S. Government Accountability Office said in a March 2009 report . While the ADB is financing 97 percent of estimated costs through a $165 million grant, Afghanistan will contribute $5 million. The rail construction contract has been awarded to Uzbekistan Temir Yollari , the Uzbek national railway company. ADB Investment The ADB expects to invest about a billion dollars in Afghanistan over the next five years, Miranda said. The paving of a 3,000-kilometer ring road through Kabul, Herat and Kandahar, started six years ago, has yet to be completed as the December 2009 target approaches. Taliban attacks on workers and traffic have delayed construction, Richard Boucher , assistant U.S. secretary of state, said last November. Attempts to create an Afghan railroad began in the 1920s when two German locomotives were used on a 7-kilometer line from Kabul. When King Amanullah Khan, who ordered them, was overthrown, the project was abandoned. The engines now sit rusting among weeds in an outdoor museum, said Andrew Grantham, news editor of Railway Gazette International magazine and author of a Web site on the history of rail projects in Afghanistan. Three locomotives imported from Germany in the 1950s to supply a power station east of Kabul vanished, their fate unknown, said Grantham, who also said he thinks the ADB-financed railway will be built. Similar Fate The current rail project may meet a similar fate, given the lack of security, said Malou Innocent, a foreign policy analyst at the Cato Institute, a Washington research organization. Aid projects pay a percentage to the Taliban for protection, though that may not prevent attacks, she said in an e-mailed comment. “Unless enough U.S., NATO, and Afghan troops are prepared to defend the new railway network indefinitely, we could see all of this infrastructure destroyed almost as quickly as we build it,” said Innocent, co-author of the report: “Escaping the Graveyard of Empires: A Strategy to Exit Afghanistan.” To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net .

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Apple Lurks as Kindle, Nook Squeeze Out Sony: Rich Jaroslovsky

October 23, 2009

Commentary by Rich Jaroslovsky Oct. 23 (Bloomberg) — As futurist Paul Saffo likes to say, you should never mistake a clear view for a short distance. Case in point: the nascent market for e-readers. Everyone from desperate publishers to techno-lusting consumers knows what an e-reader should be: a thin, light, affordable tablet with a bright color touch screen, decent battery life and fast wireless access to books, magazines, newspapers and work documents. A flood of new e-readers will hit the market over the next few months, and none of them will come anywhere close to that vision. E-readers are still in their infancy, saddled with monochrome screens ranging from bad to adequate, and user interfaces that few would describe as elegant. They also have limited flexibility in terms of where you can go for content and what you can do with it once you get it. That won’t stop millions of people from buying e-readers this holiday season. Forrester Research Inc. recently raised its 2009 estimate for U.S. sales by 50 percent and said they may double next year. And the level of interest around this week’s announcement of Barnes & Noble Inc. ’s new Nook , which won’t be available until the end of November, was positively iPod-worthy. Up to now, Amazon.com Inc. ’s Kindle has defined the state of the art, at least until we can lay our hands on and evaluate the Nook and the other new devices headed for the market. Amazon has followed Apple Inc. ’s iPod playbook: Produce the hardware, assemble the content and make yourself the conduit for getting the latter to the former. Going Global The base model, the Kindle 2, now costs $259 and includes a very readable 6-inch (15-centimeter) screen and wireless 3G connection from Sprint Nextel Corp. that allows you to shop for, purchase and download books on the go. Earlier this month, Amazon announced a $299 variation that works over AT&T Inc. ’s 3G network — meaning that, for the first time, it becomes plausible for people living outside the U.S. But selection may be more limited, and costs higher, than in the U.S. No piece of technology I use is more likely to start a conversation with a stranger than the Kindle ; there remains huge curiosity about it. That’s both a strength and a weakness: Because it’s available only via mail order from Amazon, you can’t fondle one yourself at the neighborhood Best Buy . Moreover, as more e-books are sold through more sources in more formats, Amazon’s largely closed environment might well become a major liability. Hands-On Experience Barnes & Noble says the ability to see and touch a Nook before you buy will be one of its advantages over the Kindle, along with its support for a wider variety of formats. The new device, which matches the Kindle 2’s price, runs on Google Inc. ’s Android smart-phone software and will offer features the Kindle lacks: a color touch screen for navigation and shopping below the monochrome text window, WiFi connectivity to go with its AT&T 3G link, a memory expansion slot and the ability to digitally lend a book to another Nook user. It will also be a little heavier, won’t run as long on a charge and lacks the Kindle’s physical keyboard. If there’s a real loser in the Kindle-Nook shootout, it may turn out to be Sony Corp. , whose Reader models were already overshadowed by the Kindle and now must wonder if they will end up being eclipsed altogether. In an effort to get back in the game, Sony recently revamped its product line, with a $199 base model that represents the cheapest entry point into the world of e-readers, and a $299 touch-screen version. Neither version has wireless, so you are tethered to your computer to buy and download books, which must then be transferred to your reader. Sony’s Hopes Sony is pinning its hopes on the new Reader Daily Edition, which the company says will go on sale before Christmas. It includes a 7-inch screen, WiFi and AT&T wireless 3G connections, memory-card slots and support for a wider array of formats than the base Kindles. But the planned price, $399, may just be too high for a device whose screen will be only a bit bigger than the Kindle 2 and Nook, and considerably smaller than the 9.7-inch screen of Amazon’s $489 Kindle DX. It’s also smaller than the 8.1-inch touch-screen of the new $399 reader promised from iRex Technologies Ltd. , a spinoff of Royal Philips Electronics NV , that will start showing up in U.S. Best Buy stores shortly, along with 3G support from Verizon Wireless and books from Barnes & Noble. Further over the horizon from Silicon Valley startup Plastic Logic is the Que, which is promised for early 2010 and may have the largest screen in the industry, 10.7 inches. Plastic Logic has announced deals with AT&T for wireless connectivity and Barnes & Noble to provide the bookstore back end; pricing hasn’t been announced. Fewer Details Even fewer details are available about Alex, announced by an outfit called Spring Design Inc. that, like the Nook, will be based on Google’s open-source Android software and will feature a large color screen for Web browsing below the reader display. While the e-reader wars continue, the real question may be whether all these products will be overtaken by Apple. The maker of the iconic Macintosh computer and iPhone is rumored to be readying a tablet device for media. While any Apple device would presumably do more than just read books, history suggests it could swamp the playing field for e-readers just as the iPod did for music players. You can make an argument that the iPhone already offers a better reading experience than the current generation of dedicated readers. Using the iPhone’s free Kindle and Barnes & Noble apps, books can be purchased and downloaded directly to the phone; the apps also wirelessly sync with the Kindle and Nook hardware, so that each device knows where you stopped reading on the other one. Whatever Apple’s “it” turns out to be, you can bet it will come closer to the “clear view” model of a media reader. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

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Lawrence G. McDonald: The Case For Dismantling Giant Banks

October 12, 2009

The long awaited resignation of Bank of America’s CEO Ken Lewis finally arrived this week, but I guess we’ll still have to wait until January to see it come to its full, well deserved conclusion. Ken is “retiring” at the “end of the year.” Since the news broke I’ve seen a collection of old school bankers rush to poor Ken’s defense. Ken’s old buddy, Bank of America Board Member Don Powell included. After writing my new book, A Colossal Failure of Common Sense, the Inside Story of the Collapse of Lehman Brothers and watching this charade I was struck by the similarities of Richard Fuld and Ken Lewis. As many people know, Richard Fuld was CEO and Chairman of the board of Lehman Brothers. Like Ken he enjoyed the perks of having constructed a board of directors of old pals and cronies. Richard Fuld was as close to a banking Monarch as anything we’ve ever seen in modern capitalism. During his almost 18-year reign at Lehman Brothers, Goldman Sachs had four different CEOs, Whitehead, Rubin, Paulson and Blankfein. There have been no Kings over on 85 Broad Street in recent years; maybe that’s one of the reasons Goldman has survived this desperate credit crunch. While Ken was certainly no King, his CEO and Chairman of the board stint will have lasted just under 10 years if he finally retires in January. Ken was stripped of his Chairman role in April. A look at the Bank of America Board reveals some interesting similarities with the Lehman Board. While the average age of the Lehman Board, 70 will go down in the record books as the most outrageous, Bank of America’s 64 is not far behind. Of the 10 member Lehman board only one spent his life in finance — and he was 82! Of the 15 member BOFA board, only 2 had investment banking experience, 6 were from outside the world of finance and 7 were just like Ken Lewis … old school regional and commercial bankers. Not one member of his board is younger than 56 years of age. Now I don’t opine in this regard to be mean, we must get the best people into the important positions as soon as possible. I worked on the trading floor at Lehman Brothers … right in the trenches, where the rubber meets the road, so to speak. I saw firsthand the design and construction of what Warren Buffett calls financial Weapons of Mass Destruction — credit derivatives. These 21st century banks have become deadly systemically risky dominoes that can crush us all if they fail, or can bankrupt us all with debt if we have to bail them out. These are not country clubs. With the demise of Glass Steagall at the turn of the century, banking was placed in a new, modern, neutron era while the makeup boards of directors are back in the Ozzie and Harriet days of the 1950′s. This is a mistake fraught with peril. In our government’s quest to save our system last fall, their main line of defense was to make banks bigger and more deadly. It’s the golden rule; he who has the gold makes all the rules. Shot gun marriages had never been more common at the US Treasury, Wells Fargo / Wachovia … JP Morgan / Bear Stearns and Washington Mutual, Bank of America / Countrywide and Merrill Lynch. Risk is more concentrated than ever. The dominoes are much bigger and closer together than ever before. These banks are not too big to fail, they’re too big to succeed … too big to manage. There’s no transparency of risk. They’re much too big. Years ago when banks failed, say Continental Illinois or Drexel Burnham, they didn’t crush the entire global economy and require trillions of government borrowed bail out dollars. I hate to be the bearer of bad news, but these boards do not have modern risk takers and sophisticated 21st century financial thinkers on them. Bank of America lost billions and billions of dollars and put innocent depositor’s money at risk when Ken Lewis allowed his company to get up to their neck in off balance sheet SIVs, CDOs, CMBS, CLOs. Many people argue she was insolvent before Uncle Sam saved them with $50 billion. You cannot underestimate the difference between a commercial / regional bank and an investment bank / hedge fund in the 21st century. We cannot allow regional bankers to oversee 21st century risks. The stakes are just too high now. I’ve laid out some solutions. Going forward we must do a few simple things that will go a long way in making sure a disaster like this never happens again. Abolish CEO and Chairman of the Board rolls in any systemically risky financial institution. That’s an institution that can potentially obliterate the world’s economy. The fox should never be watching the chicken coup. Make Boards indepenant of CEO influence. Put financial experts on boards of these big banks, 21st century experts. Can we have one member of BOFAs board in his or her 40s? Maybe two. Eliminate the retirement country club. Pay Board members more. Paying them more will bring in the right talent with experience in modern financial products. It makes no sense to have traders and investment bankers on Wall Street making $5 to $10 million a year and some board member, overseeing all their risk, only making $140k? These boards shouldn’t meet quarterly or monthly, pay them and have them meet three times a month. The stakes are just too high now. Boards must be more involved. Get them down on the trading floors talking to traders and risk takers on a regular basis. At Lehman, our board had zero interaction with the best risk takers and traders. That’s wrong. Term Limits for CEOs and Boards or Directors. If the President of the United States is limited to 8 years I say that’s good enough for CEOs of giant banks. Power corrupts and the bottom line is the longer a CEO is in power the greater the number of his old pals seem to end up on Boards of Directors. We simply cannot allow tradition and the status quo to get in the way of sound risk management. We must make changes soon as our financial system is no more safe today than it was on the eve of Lehman’s collapse. The same troubling issues that placed us all on the doorstep of disaster are still there. Capitalism cannot work without transparency and there is no transparency of risk and the people overseeing those risks are not the best people for the monumental task at hand. Lawrence McDonald is the bestselling author of A Colossal Failure of Common Sense, and is now spending his time on the lecture circuit, making sure the world learns the great lessons of this financial crisis. To contact his booking agent, click here.

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Luis Acevedo Joins Cheil USA as Creative Director for Dallas Office

September 28, 2009

Robust Advertising and Design Experience Enhances Delivery of Client Solutions Across North American Network

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Eric Schurenberg: Obama’s Retirement Plan Needs More Nerve

September 10, 2009

This weekend, the President announced a handful of new initiatives designed to make it easier for American workers to save more for retirement. The initiatives make use of research from behavioral economics , the arm of the dismal science that incorporates the way people really act into the design of retirement plans. That has proven extremely effective in the past … except this time the Administration loses its nerve. The new initiative does four things: Let employers more easily enroll workers automatically in the company’s 401(k) or SIMPLE-IRA . This is mainly a boon to younger employees, who have a disturbing tendency not to sign up for plans voluntarily. The Administration’s idea is to use the most powerful force in personal finance inertia to help those younger employees do the right thing in spite of themselves. With automatic enrollment, the company signs you up and starts putting money from your paycheck into your 401(k) without asking your permission. You can always opt out, but as behavioral economics predicts, few do. Inertia, you know. Make it easier to save tax refunds . The new rule will allow you to use your income tax refund to purchase U.S. Savings Bonds. Nice impulse, but savings bonds are not the right investment for a long-term goal. You’re better off shipping the money to an IRA, if you’re not already over 2009′s $5,000 contribution limit. Make it possible to save unused leave and vacation pay in your 401(k) . This is the money you get for the vacation days you didn’t have a chance to take before your employer canned you. Since no one counts on earning vacation pay — you never see it in cash until the company is showing you the door — it’s psychologically easier to set aside. In theory. Problem is, when you lose your job in this economy, you’re probably going to want the cash now rather than an opportunity to stash it away for decades. Create “plain English” explanations of your options when you leave a 401(k) plan . The Administration promises to create easy-to-understand explanations of why you shouldn’t make one of the dumbest of all financial moves: taking money out of a 401(k) you are leaving, rather than rolling it over into an IRA or a new 401(k). If you make that mistake, not only do you lose your savings, but you pay a huge tax bill for the privilege. Unfortunately, behavioral economics doesn’t offer much support to the idea that investor education — however plain its English — can change human tendencies. Maybe a few people don’t already know it’s bad to gut their 401(k) between jobs, but I think their main motivation is that they simply find it too tempting to lay their hands on so much money at one time. In other words, it’s not that people don’t understand that they shouldn’t cash out their 401(k)s; it’s that they lack the self-control not to. If the Administration really wanted to stop the leakage from 401(k) plans, it whould have the courage of its behavioral economic convictions and simply make it impossible to get at the money except in real emergencies. You don’t get smokers to quit by showing them plain-English graphs proving that smoking eventually has a suboptimal influence on your health. You just lock up the cigarettes. Continue on CBSMoneyWatch.com

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S3 Investment Company Announces Appointment of CEO for Redwood Medical Subsidiary

September 10, 2009

DANVILLE, CA–(Marketwire – September 10, 2009) – S3 Investment Company, Inc. ( PINKSHEETS : SIVC ) today announced the appointment of Dr. Hal Lemmon to serve as chief executive officer for the company’s new Redwood Medical subsidiary. Redwood Medical was formed to serve companies seeking to import Western medical technologies and products into China. Dr. Lemmon holds a Bachelor of Science and a Master of Science degree in Mathematics as well as a Ph.D. in Chemical Engineering from the University of Utah. He was initially employed in the nation’s defense industry working on the design of the Minuteman Missile System.

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Better Place Wins 2009 INDEX: Design to Improve Life Award

August 28, 2009

Better Place Wins 2009 INDEX: Design to Improve Life Award

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Piers Fawkes: Clothing Company to go Logo-less and Brand-less

August 12, 2009

To many streetwear aficionados, the name Freshjive conjures up some of the hardest working designers and and innovators in the business. For over 20 years, Freshjive has been stocking skate shops and streetwear boutiques with their signature looks, often sporting one of the most recognizable logos of the ’90s. However, all of that is about to change as Freshjive embarks upon one of the world’s first anti-branding campaigns, in which they will be stripping their logos from not just the outside of their garments, but from the labels themselves. Rick Klotz, the owner and designer for Freshjive states disillusionment with the world of branding and marketing and a desire to return to the essence of the design practice as reason for this bold new move. In an exclusive interview with the Hundreds streetwear blog , Klotz states: “Throughout the years I’ve become uncomfortable with this business of branding and brand identity. I’m not the type of person that buys something for the brand name. I’ve also never done a very good job at creating a captivating identity to our own brand logo. Also, within the streetwear culture, the promotion of a company’s brand has become downright silly to me. What’s amusing is I still really enjoy designing gear, graphics, and even logos. But when I see kids wearing company logos it reminds of people who are trying to be a part of a “tribe” or “gang”, as if they need to be part of something, which seems to go against the idea of individualism in style.” To take this project to a new level, Klotz will also strip the Freshjive website of all logos as well, but he admits that the label will still be called Freshjive and continue to be sold at the same retail outlets. Though he doesn’t admit it outright, one thinks that the recent (illegal) appropriation of iconic streetwear brand’s images to sell counterfeit and inferior goods may be the reason for Klotz to take such a drastic step to take back his own company’s image. However, in typical punk rock attitude, Klotz seems to warn other labels not to rest on the laurel’s of their own iconic brands logos or they leave themselves open to becoming a parody, perhaps by Klotz himself: “the Freshjive name is forever defunct. But I still design logos in the t shirt line. But the logos are single designs within the line, usually designed to communicate a certain thought provoking idea. You can’t discount the power of a logo in the market. Now I’m just dropping our own logo, and then occasionally appropriating the power of someone else’s logo to communicate a new message. So to the brand building community: Careful when building an influential logo, as I just might use that influence through some further graphic manipulation, and throw it back out into the market like a brick bashing through a window.” Though we have no doubt that Freshjive will still be welcomed with open arms by retailers and fans as always, this step may make it hard for Freshjive to hold on to newer shoppers who aren’t familiar with Klotz’s ethos or even what distinguishes the clothes from others once the logos are gone. However, though incredibly simple there is something elegant about the plain black labels inside the new garments- which may come to be Freshjive’s new logo whether Klotz intended it to be or not. This article originally appeared on PSFK.com

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`The Shard’ Defies Credit Crisis as Qatari Cash Elevates London Skyline

August 5, 2009

By Peter Woodifield Aug. 5 (Bloomberg) — Half a mile across the River Thames from where bankers tally job losses in London’s financial district, builders sink girders to lay the foundations of what will be western Europe’s tallest skyscraper . “The Shard,” funded by four Qatar-based companies, is due to be completed in 2012.

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Work Faces

August 1, 2009

law firm WarnerStevens L.L.P. has hired Stewart Wayne as senior counsel

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Dennis Whittle: What’s wrong with experts?

July 28, 2009

What’s wrong with experts? Nothing, as long as they don’t monopolize control over decisions, resources, and information. Experts – people with special skills, a lot of experience, and/or who have thought a lot about an issue – should be an important part of any decision-making or resource-allocation process

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Gerald Sindell: GM to Buy Back All Pontiac Azteks for Cash!

July 20, 2009

A few weeks ago I posted an open letter to GM CEO Fritz Henderson on the first day of GM’s entering into bankruptcy protection, offering my concern that Mr. Henderson’s reliance on great GM design to save the company might be a problem since GM had put so much ugly tin on America’s roads. I also noted that GM’s culture needed to change, and this was their last chance to get it right

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Jodie Allen: Not on the Job

July 18, 2009

The consensus of economic wisdom now informs us that we are facing a jobless recovery. That might not be so bad if it hadn’t been preceded by a long period of poorly paid prosperity

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