transportation

Utah Oil Spill: Chevron Vows To Pay

June 18, 2010

SALT LAKE CITY — Salt Lake City attorneys expect Chevron Corp. will quickly agree to a financial settlement related to last weekend’s pipeline spill that dumped 33,000 gallons of crude oil into city waterways, a spokeswoman for Mayor Ralph Becker said Friday. Becker has vowed to make Chevron pay for the cleanup, and the company has repeatedly pledged to cover the city’s expenses, as well as damage or reimbursement claims from others. A deal could be announced next week, said Lisa Harrison Smith, the mayor’s spokeswoman. “We won’t be satisfied until it’s done,” she said. San Ramon, Calif.-based Chevron believes an improbable series of events led to last Saturday’s spill, which sent crude oil into pristine Red Butte Creek. A short in an overhead 46,000-volt power line traveled to a fence post that acted like an electric arc welder, melting a quarter-size hole in the pipeline, the company said. The bottom of the fence post was anchored just inches above the buried pipeline – an obvious danger that went unnoticed for 30 years, Chevron said. “It would be highly unusual, but it’s a plausible theory,” Rocky Mountain Power spokesman Dave Eskelsen said. Some of the spilled oil traveled in the creek through Salt Lake City to the Jordan River, which drains into the Great Salt Lake. Chevron said it has cleaned up 21,000 of the 33,000 gallons of spilled oil. Much of that has been mopped and vacuumed from city waterways. Absorbent booms on the Jordan River have been capturing traces of oil, and workers were seen digging up oil-soaked soil Wednesday and sucking up residual oil from Red Butte Creek near the spill site. Chevron said it plans to flush the Red Butte Creek with water Saturday to capture residual oil with absorbent booms. It warned residents the flushing could stir up oil fumes for three or four hours. But the latest samples from 13 locations along Red Butte Creek and the Jordan River show no danger to human health or aquatic life, Utah Division of Water Quality officials said. The U.S. Department of Transportation has jurisdiction over oil pipelines and is investigating what caused the spill, said Patricia Klinger, a spokeswoman for the department’s pipeline-safety group. A metallurgist is examining the pipe, she said. The department’s Pipeline and Hazardous Materials Safety Administration can fine Chevron, but has no authority over Rocky Mountain Power, which owns the nearby fenced compound and power lines near the pipeline, Klinger said. Chevron officials said earlier this week that more than 30 claims had been filed with the oil company. The company is taking full responsibility and expects to get hit with a large amount of bills for damages and expenses, Chevron spokesman Dan Johnson said Friday. “We think that’s appropriate,” he said. “People who pay their bills are trusted.” The Utah Rivers Council on Friday called for Chevron to deposit $15 million into an escrow account to pay for damages and cleanup expenses. But the expected settlement agreement would make an escrow account unnecessary, Smith said.

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Utah Oil Spill: Chevron Vows To Pay

June 18, 2010

SALT LAKE CITY — Salt Lake City attorneys expect Chevron Corp. will quickly agree to a financial settlement related to last weekend’s pipeline spill that dumped 33,000 gallons of crude oil into city waterways, a spokeswoman for Mayor Ralph Becker said Friday. Becker has vowed to make Chevron pay for the cleanup, and the company has repeatedly pledged to cover the city’s expenses, as well as damage or reimbursement claims from others. A deal could be announced next week, said Lisa Harrison Smith, the mayor’s spokeswoman. “We won’t be satisfied until it’s done,” she said. San Ramon, Calif.-based Chevron believes an improbable series of events led to last Saturday’s spill, which sent crude oil into pristine Red Butte Creek. A short in an overhead 46,000-volt power line traveled to a fence post that acted like an electric arc welder, melting a quarter-size hole in the pipeline, the company said. The bottom of the fence post was anchored just inches above the buried pipeline – an obvious danger that went unnoticed for 30 years, Chevron said. “It would be highly unusual, but it’s a plausible theory,” Rocky Mountain Power spokesman Dave Eskelsen said. Some of the spilled oil traveled in the creek through Salt Lake City to the Jordan River, which drains into the Great Salt Lake. Chevron said it has cleaned up 21,000 of the 33,000 gallons of spilled oil. Much of that has been mopped and vacuumed from city waterways. Absorbent booms on the Jordan River have been capturing traces of oil, and workers were seen digging up oil-soaked soil Wednesday and sucking up residual oil from Red Butte Creek near the spill site. Chevron said it plans to flush the Red Butte Creek with water Saturday to capture residual oil with absorbent booms. It warned residents the flushing could stir up oil fumes for three or four hours. But the latest samples from 13 locations along Red Butte Creek and the Jordan River show no danger to human health or aquatic life, Utah Division of Water Quality officials said. The U.S. Department of Transportation has jurisdiction over oil pipelines and is investigating what caused the spill, said Patricia Klinger, a spokeswoman for the department’s pipeline-safety group. A metallurgist is examining the pipe, she said. The department’s Pipeline and Hazardous Materials Safety Administration can fine Chevron, but has no authority over Rocky Mountain Power, which owns the nearby fenced compound and power lines near the pipeline, Klinger said. Chevron officials said earlier this week that more than 30 claims had been filed with the oil company. The company is taking full responsibility and expects to get hit with a large amount of bills for damages and expenses, Chevron spokesman Dan Johnson said Friday. “We think that’s appropriate,” he said. “People who pay their bills are trusted.” The Utah Rivers Council on Friday called for Chevron to deposit $15 million into an escrow account to pay for damages and cleanup expenses. But the expected settlement agreement would make an escrow account unnecessary, Smith said.

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Obama Turns to Economy in Ohio to Highlight Administration’s Stimulus Jobs

June 18, 2010

By Kate Andersen Brower and Roger Runningen June 18 (Bloomberg) — President Barack Obama pivoted from the Gulf of Mexico oil spill back to the economy today with an emphasis on the jobs created by his administration’s $862 billion economic stimulus package. At a groundbreaking in Columbus, Ohio, for the 10,000th road project funded by the stimulus, Obama said improving the nation’s infrastructure is one of the keys to long-term prosperity. “If we’re going to rebuild America’s economy, then we’ve got to rebuild America, period, from the ports and the airways that ship our goods, to the roads and transit systems that move our workers and connect cities and businesses,” Obama said at the project site near the Nationwide Children’s Hospital . The president is seeking to remind voters of his efforts to revive the economy five months ahead November’s midterm elections. Republicans have criticized the stimulus legislation as a wasteful spending program that hasn’t fulfilled the administration’s promises on job creation. Unemployment in Ohio is 10.7 percent, one percentage point higher than the national average. While the Federal Reserve’s regional business survey showed last week that the economy expanded in all the central bank’s districts in April and May for the first time in more than two years, job growth has lagged. Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed yesterday. ‘Summer of Recovery’ “The economy is still lousy,” Transportation Secretary Ray LaHood told reporters before today’s trip. “We want to put the message out: This is going to be the summer of recovery.” LaHood, who traveled with the president to Ohio, said the project being highlighted today is expected to create more than 300 new jobs and is one of 462 transportation projects in Ohio funded by $1.1 billion in stimulus money. The work being done under the stimulus will “pay dividends to our communities for generations to come,” Obama said. “While the recovery may start with projects like this it can’t end here.” In a report to the president released yesterday, Vice President Joe Biden said the government has spent $620 billion from the stimulus and created or saved between 2.2 million and 2.8 million jobs. He predicted jobs created or retained by the end of 2010 will number “at least” 3.5 million. Republican Critics “We have created over 17,000 jobs in the last month” in Ohio, Republican state auditor Mary Taylor , a candidate for lieutenant governor, told reporters on a conference call today before Obama arrived. “But it’s an important fact to note that 16,800 of those jobs created were government jobs.” The White House is kicking off a six-week focus on scores of public works projects under way across the nation and into the election season. “This summer a lot more people are going to be working on highways, building clean water projects, weatherizing homes, and — and they’ll be drawing paychecks that they wouldn’t have otherwise drawn,” Biden said at a briefing yesterday that was part of the administration’s focus on the stimulus. The economy will be a top issue in the November elections that will determine which party controls the House and Senate. The Columbus area is represented in the House by freshman Democrat Mary Jo Kilroy . She was elected in 2008, the first Democrat to represent the district since 1982, according to the Almanac of American Politics. The non-partisan Cook Political Report rates her race against Republican former state Senator Steve Stivers as a toss-up. “There’s a feeling of disenchantment, disillusionment, discouragement — a feeling that no politician is going to be able to do much to turn the situation around,” Paul Beck , a political science professor at Ohio State University in Columbus, said of voter sentiment in the state. “Until the private sector really turns around you’re not going to have a big surge of jobs,” said Beck. Still, Beck said, “the stimulus money has been very important to Ohio, it’s prevented wrenching cutbacks in Ohio.” To contact the reporters on this story: Kate Andersen Brower in Columbus, Ohio at kandersen7@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net

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Airbus Delays Introduction of A320′s Successor Model Until as Late as 2027

June 11, 2010

By Andrea Rothman June 10 (Bloomberg) — Airbus SAS may need until 2027 to introduce an all-new single-aisle plane because new materials and engine technologies won’t be ready before then. The Toulouse-based planemaker is studying whether it has engineering resources to commit to offering existing models with new engines to help airlines cut fuel costs. The time needed to perfect the next generation of turbines means a new plane for short- and medium-haul routes may be delayed as many as three years, Chief Operating Officer John Leahy said in an interview. “The real game-changing technologies in airframes, systems and engines will come around 2025, 2027,” Leahy said in an interview at the Berlin Air Show. A replacement for the A320 before then “doesn’t make any sense, because the technology’s not there.” Single aisle passenger jets are the workhorses of low-cost airline fleets, and are widely used by carriers. Both Airbus and U.S. rival Boeing Co. had initially considered introducing successors to the A320 and 737 series by 2018. Airbus later moved the target to 2024. Global airlines flying both jets are keen to see manufacturers bring out new planes with advanced engines that provide savings on fuel, airlines’ No. 1 cost. Fuel prices of about $75 a barrel make the need less critical, yet airlines want to prepare for higher prices later on. Decision Time For now, both manufacturers have been looking at whether to offer their existing planes with new engines that would at least increase fuel-efficiency by some 15 percent. Both are promising decisions by yearend. Boeing on June 3 said the timetable for developing a new narrow-body jet is the “No. 1 thing” in the planemaker’s decision on whether to offer other engines for its best-selling 737 airliner. While Airbus and Boeing single-aisle models dominate the commercial aerospace market today, they are facing the prospect of that duopoly disappearing as they face threats from smaller rivals including Bombardier Inc. and China’s state-owned company, Comac. Bombardier’s CSeries and Comac’s C919 would offer engines that may boost fuel efficiency 15 percent. Between them, Boeing and Airbus have a backlog of 4,500 narrow-body jets. Second Choice Leahy also said he’d be willing to have use Pratt & Whitney’s geared turbofan engine on potential upgrades to the A320 model should the United Technologies Corp. unit fail to agree with Rolls-Royce Group Plc on offering the engine through their International Aero Engines venture. Leahy in January had said he wanted to work with IAE, not individually with Pratt. “It’s an acceptable solution for a second engine albeit not an ideal solution,” Leahy said today. “Ideal would be to do it through IAE.” Airbus’s current A320s offer the choice of IAE engines or engines built by CFM Intl., a joint venture between General Electric Co. and Safran SA of France. Leahy said CFM would also offer a newer engine for the more fuel-efficient upgrade, which Airbus is calling the A320 Neo. A decision hasn’t yet been made to move forward, however, and may not come till late in the year. The board of Airbus parent European Aeronautic, Defence & Space Co. must sign off on any move involving new engines. Plate Full “We’re looking at our resources,” Leahy said. “We’ve got a lot on our plate and we want to make sure we manage the risk correctly and the business case is very strong before doing the re-engining.” Airbus is about three years late in delivering its superjumbo A380 models and has already used up much of its six- month ”buffer” on the widebody A350, now scheduled for entry into service in 2013. Leahy said Airbus couldn’t afford to disappoint airlines. “We have to make sure we have got the right engineers in the right place so we don’t go with great fanfare and announce a program and then a year later have to say, ‘oops, we ran out of engineering resources,” the executive said. The costs of fitting new engines to existing planes will be “about 1 billion euros” ($1.2 billion), he said, some of which would be paid by engine makers. He declined to say how much more the planes with new engines would cost than existing models. Price-savings from lower fuel costs would be split between airlines buying the planes and Airbus and engine makers, in the form of higher sticker prices, according to Leahy. For Related News and Information: Top European Aerospace Stories: TNI ETOP ARO For EADS Earnings: EAD FP TCNI ERN Top Transportation Stories: TRNT Boeing news: BA US CN Airbus and Boeing annual orders: FRAVTOGO HP

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Kan Promises Grassroots Approach to Extricating Japan From Fiscal Plight

June 8, 2010

By Sachiko Sakamaki and Takashi Hirokawa June 9 (Bloomberg) — Naoto Kan , Japan’s first leader in 15 years with no family connection to politics, pledged to draw from his common upbringing to help revive an economy hamstrung by persistent deflation and the world’s biggest public debt . “I’m the son of an ordinary salaried worker and people from ordinary families should be able to perform well for society.” Kan, 63, said yesterday in his first press conference as prime minister. “I want to drastically rebuild Japan.” Kan is the fifth premier in four years and second since his Democratic Party of Japan overturned five decades of mostly one- party rule last August. He retained 11 Cabinet members from predecessor Yukio Hatoyama ’s administration as he sought to demonstrate stability before mid-term elections in July that are a referendum on the DPJ’s nine months in power. “Kan is a realist; Hatoyama was an idealist who sometimes mixed that up with realism,” said Eisuke Sakakibara , a former Ministry of Finance official and now a professor at Aoyama Gakuin University in Tokyo. “Kan is the right person for a time like this.” Kan told party officials the election date will be July 11, the Yomiuri newspaper reported today, without citing anyone. Japan’s public debt will rise even if new government bond sales remain at the current fiscal year’s cap of 44 trillion yen ($481 billion), Kan said. His government will compile a plan to address fiscal constraints by the end of the month as Japan bids to avoid comparisons with Greece and the European Union. “This is the biggest issue the country must tackle and must be discussed beyond our party’s boundaries,” Kan said. Yen Comment He also said a weak yen “is generally said to be positive for exports, which have a big weighting in our economy,” adding that it was best for him to avoid specific comments on currencies. The yen was little changed at 91.43 to the dollar. Japanese stocks yesterday rose for the first day in three, with the Nikkei 225 Stock Average gaining 0.2 percent before Kan spoke. The index is down 9.6 percent this year. Polls show Kan has given the party a boost since Hatoyama, 63, stepped down on June 2 following campaign-finance scandals and a broken promise to move a U.S. base out of Okinawa. Kan served as Hatoyama’s finance minister and deputy premier. Yoshito Sengoku , 64, was named chief cabinet secretary, while Yoshihiko Noda , 53, replaced Kan as finance minister. Noda becomes the ninth person to hold that position in four years. Policy Continuity Kan said his administration will maintain Hatoyama’s policy priorities, which include improving social welfare and closer ties with Asia. The government this month began paying families a monthly allowance of 13,000 yen ($141) per child, and is making public high schools tuition-free. Noda opposed Hatoyama’s plans to double the childcare handouts after one year. “The first challenge will be to restore some sense of stability and continuity in Japanese politics,” said Paul Sheard , New York-based chief global economist at Nomura Securities International Inc. “One glimmer of hope here is that Mr. Kan has been, as finance minister, one of the people very much in the driver’s seat of economic policy.” The government is unlikely to double the childcare payments next year because of fiscal constraints, the Nikkei newspaper said, citing Welfare Minister Akira Nagatsuma . Honor U.S. Accord Public confidence in Hatoyama dropped after he upheld an accord to keep American forces on Okinawa, breaking a campaign promise. Kan told U.S. President Barack Obama in a phone call three days ago that he would honor the agreement after Hatoyama’s eight months of wavering over the issue frayed ties with Japan’s biggest ally. “We must maintain the principle of honoring the Japan-U.S. agreement,” Kan said. “However, I’m aware the Okinawa people don’t support the plan, so we must continue to make efforts to win their understanding.” Kan also said he will improve ties with China and the rest of Asia, bringing praise from the region’s fastest-growing economy. “We highly appreciate the importance Prime Minister Kan attaches to China-Japan relations,” Foreign Ministry spokesman Qin Gang said at a press briefing yesterday in Beijing. Kan, whose father was an executive at a glass manufacturer, is the first Japanese leader since Tomiichi Murayama in the mid- 1990s not to hail from a political family. The past four prime ministers all had fathers or grandfathers who previously held the post. Former Civic Activist A licensed patent attorney and former civic organizer, Kan entered parliament as a lawmaker for the now-defunct Social Democratic Party in 1980, and co-founded the DPJ in 1998. He rose to prominence as health minister in the 1990s when he exposed the government’s role in allowing up to 5,000 Japanese to contract HIV through contaminated blood products. Cabinet members who kept their posts included Foreign Minister Katsuya Okada , trade minister Masayuki Naoshima , Defense Minister Toshimi Kitazawa and Transportation Minister Seiji Maehara . Shizuka Kamei , leader of minority coalition member People’s New Party , stayed on as financial services minister. Kan named Yukio Edano , 46, as his party’s No. 2 official, replacing Ichiro Ozawa , the architect of last year’s DPJ election victory for the lower house of parliament. Next month’s ballot is for half of the 242 seats in the less-powerful House of Councillors . Ozawa had previously refused to step down after three of his aides were indicted for violating campaign funding laws in February. The DPJ’s approval ratings have jumped since Kan was chosen last week by parliament to replace Hatoyama. The Asahi newspaper said 82 percent of voters approved of how Kan has dealt with Ozawa. The paper surveyed 1,074 voters on June 4-5 and didn’t provide a margin of error. The DPJ received a 36.1 percent support rate in a Kyodo News poll published four days ago, an increase of 15.6 percentage points from the end of May. “Our party’s lawmakers come from a wide range of backgrounds,” Kan said. “I’d like them to fight with the same common aspirations as an army.” To contact the reporter on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net ; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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American Commercial Lines Creates New National Director, Marine Assurance and Vetting Position

June 8, 2010

JEFFERSONVILLE, IN–(Marketwire – June 8, 2010) –  American Commercial Lines Inc. ( NASDAQ : ACLI ) (“ACL” or the “Company”) is pleased to announce the promotion of Dan Jaworski to the position of National Director, Marine Assurance and Vetting. Mr. Jaworski has been with ACL since 1981 and has held a series of senior commercial positions with the company in the liquids sector. In his new role, Mr. Jaworski will remain located in Houston, TX and will now report to Bill Braman, Vice President and General Manager, Transportation Services.

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Hatoyama Resignation Leaves Japan Again Searching for Leader With `Vision’

June 2, 2010

By John Brinsley June 3 (Bloomberg) — Yukio Hatoyama overturned half a century of one-party politics when he led his Democratic Party of Japan to power nine months ago. Yesterday he showed he’s much like his predecessors by becoming the fourth premier in three years to resign. His term, ended by a dispute over American troops in Japan, was the shortest by a Japanese leader since 1994 and cast doubt on the DPJ’s ability to deliver on its promise of change. The party, which had never held office until last year, will select a new leader tomorrow with less than six weeks to go before mid- term elections. Hatoyama’s fall comes just weeks before the government will say how it intends to rein in the world’s largest public debt and secure investor confidence in the nation’s bonds amid growing global scrutiny following Europe’s fiscal crisis. The DPJ is also due to release a strategy to sustain a 3 percent growth rate over the next decade, a pace unseen since 1991. “The lack of economic credentials, policymaking credentials is one of the reasons why we have revolving prime ministers,” said Naomi Fink , Japan strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in Tokyo. “There isn’t a real vision for Japan’s future.” Deputy Premier and Finance Minister Naoto Kan , 63, said he would run for the party leadership contest. Other likely candidates include Transportation Minister Seiji Maehara , 48, and 56-year-old Foreign Minister Katsuya Okada , said Jeff Kingston , head of Asian Studies at Temple University’s Tokyo campus. Knows the Issues “It’s likely to be Kan,” Kingston said. “He’s the deputy PM, he’s strong on the economy, he knows the issues.” Investors sold the yen and Japanese stocks. The Nikkei 225 Stock Average fell 1.1 percent to 9,603.24 in Tokyo, while the yen weakened against all of its major counterparts, falling to 91.44 per dollar in Tokyo from 90.94 yesterday in New York. Bonds rose for a second day, with 10-year yields falling one basis point to 1.265 percent. Hatoyama, 63, yesterday apologized for campaign finance scandals and his broken promise to move a U.S. base off Okinawa. Calls within the DPJ for him to step down intensified after polls this week showed four in five voters disapproved of his job performance. “In some cases the efforts of our party haven’t reached the hearts of the people,” Hatoyama told DPJ lawmakers. “I worked for half a year to try and move the bases off Okinawa, but wasn’t able to do do.” Funding Scandals Ichiro Ozawa , the architect of the DPJ’s August victory that unseated the Liberal Democratic Party after 50 years of almost uninterrupted government, said he would resign from his position as secretary-general. Ozawa has been hampered by his own funding scandal since three aides were indicted in February for violating campaign financing laws. With Hatoyama and Ozawa out, the party has a chance to recapture public support by ending a revolving door of leaders who inherited their parliamentary seats, said Koichi Nakano , a political science professor at Sophia University in Tokyo. The candidates likely to replace Hatoyama are three first- generation politicians. Hatoyama, like his four immediate predecessors, was the descendent of a prime minister or cabinet member. “This is an opportunity for the DPJ to turn things around and show a different face to the public,” Nakano said. “None of the candidates are from political dynasties and all have certain cabinet experience.” Population Shift The next premier will have to convince the public that the DPJ can reverse 20 years of economic stagnation and a shrinking population. Japan’s public debt is approaching 200 percent of gross domestic product, the biggest among the 31-member Organization for Economic Cooperation and Development in Paris. Hatoyama lost credibility with voters by upholding an accord to keep U.S. forces on Okinawa last week, breaking a campaign promise. He inherited the decision from the previous LDP-led government. The decision led the Social Democratic Party of Japan to abandon Hatoyama’s coalition government in protest. It also drove the prime minister’s support rating to as low as 17 percent, according to an Asahi newspaper survey of 1,106 respondents published on May 31 with no error margin given. His ratings were as high as 77 percent after the August election. Polls show voters are as likely to vote for the LDP as the DPJ in the July contest in the upper chamber of parliament. Half of the 242 upper-house seats are at stake. The DPJ and its other junior partner, the People’s New Party , have 122 legislators. Outrage over Hatoyama’s handling of the Futenma Marine Air base deployment issue overshadowed reports showing the world’s second-largest economy is rebounding. Bank of Japan Governor Masaaki Shirakawa said earlier this week that the economy is “making firm progress toward sustainable growth.” A surge in exports helped drive Japan’s 4.9 percent annualized growth in the January-March period, the fourth straight quarter of expansion. To contact the reporter on this story: John Brinsley at jbrinsley@bloomberg.net ;

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JPMorgan Bull Krauss Joins Erlanger in Predicting Stocks Rally Has Legs

May 21, 2010

By Lu Wang May 21 (Bloomberg) — Michael Krauss , the JPMorgan Chase & Co. analyst who correctly predicted the bottom of the 2007-2009 bear market in U.S. stocks , said the rally that has started since then is unlikely to end with the rout this month. His view was shared by Phil Erlanger of Phil Erlanger Research Inc., who said the advance will resume after the bull market experienced its first correction, or decline of at least 10 percent, since March 2009. Erlanger predicted the Dow Jones Industrial Average will rise to its 2007 record next year. “Everybody thinks that we’re going to crash and we’ll make new lows. I think they’re going to be wrong,” Krauss said in a panel sponsored by the Market Technicians Association in New York yesterday evening. “You don’t correct a 13-month trend, if you think it’s the first leg of a large bullish trend.” Technical analysts study charts of trading patterns and prices to predict changes in stocks. The Standard & Poor’s 500 Index has surged as much as 80 percent from a 12-year low after the U.S. economy returned to growth. The benchmark yesterday entered its first correction during the rally, plunging 12 percent from a 19-month high on April 23, after reports cast doubts about the strength of the economic recovery and European leaders struggled to contain the region’s debt crisis. At yesterday’s close of 1,071.59, the S&P 500 was 24 percent below its level 10 years ago, just after the peak of the Internet bubble, and 3 percent above its closing price on the first trading day after the Sept. 11, 2001, terrorism attacks. The benchmark rose 0.9 percent to 1,081.45 as of 11:34 a.m. in New York. ‘Cheap’ Stocks “This is either a depression-like event, or we’re not likely to see stocks so cheap again in our reasonable lifetime,” Erlanger said. “I don’t see it just yet” being a depression. Erlanger based his projection the Dow average may reach its Oct. 9, 2007, record of 14,164.53 on the Fibonacci theory that says stocks tend to recoup all their losses after erasing a 50 percent decline. The Dow average first recovered half its bear- market retreat on Nov. 16. Another bullish indicator he cites is that the Dow Jones Transportation Average held above its 2003 low during the most recent bear-market slump, even as the industrial average sank to a 12-year low. According to Dow Theory, developed by Wall Street Journal co-founder Charles Dow in the 1800s, moves by the industrial average must be “confirmed” by the transportation average to last. Bull Market Sam Stovall , chief investment strategist at Standard & Poor’s, advised investors to stay in stocks because the bull market may have more room to go. Based on his study of the past 60 years of stock-market movements, no bull market lasted fewer than 26 months and on average, one correction took place during the second year of the bull market. The current bull market began in March 2009 . Louise Yamada , managing director of Louise Yamada Technical Research Advisors LLC, said yesterday there are indications that the market may experience bigger losses. “A cyclical bear may take place in 2010. Today may have been the beginning,” Louise Yamada, managing director of Louise Yamada Technical Research Advisors LLC said. “Enough stocks have been damaged in this decline to suggest that those particular stocks should be sold into the rally.” The S&P 500 and the industrial average this week sank below the average during the past 200 days and lost ground at their 50 percent retracement of the 2007-2009 decline. The NYSE Composite Index , which tracks all stocks on the New York Stock Exchange, yesterday dropped below its Feb. 8 low. Krauss, who in November 2008 projected the S&P 500 would sink to 650 and then called for the subsequent rally in March 2009, agreed that more losses may lie ahead, with the S&P 500 dropping to as low as 950. Still, he said the market will take off again in the second half of this year. “We are going to be in correcting process for three to five months,” he said. Investors should “come down to the long side in July and August.” To contact the reporter on this story; Lu Wang in New York at lwang8@bloomberg.net

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Toyota Delayed Steering Recall By Almost A Year In U.S.

May 10, 2010

MIAMI — Toyota waited nearly a year in 2005 to recall trucks and SUVs in the United States with defective steering rods, despite issuing a similar recall in Japan and receiving dozens of reports from American motorists about rods that snapped without warning, an Associated Press investigation has found. The lengthy gap between the Japanese and U.S. recalls – strikingly similar to Toyota’s handling of the recent recall for sudden acceleration problems – triggered a new investigation Monday by the National Highway Traffic Safety Administration, which could fine the automaker up to $16.4 million. That was also the amount Toyota paid last month in the acceleration case. “Our team is working to obtain documents and information from Toyota to find out whether the manufacturer notified NHTSA within five business days of discovering a safety defect in U.S. vehicles,” NHTSA Administrator David Strickland said in a statement. Federal regulators “are taking this seriously and reviewing the facts to determine whether a timeliness investigation is warranted,” NHTSA spokeswoman Karen Aldana told the AP in response to questions about the 2005 recall. An automaker is required to notify NHTSA about a defect within five days of determining one exists. NHTSA has now linked 16 crashes, three deaths and seven injuries to the steering rod defect. When a steering rod snaps, the driver cannot control the vehicle because the front wheels will not turn. The AP reviewed hundred of pages of court documents, including many of Toyota’s internal communications from the period when the steering problems first emerged. The AP also analyzed government files and complaints from drivers who experienced trouble behind the wheel. After the 2004 Japanese recall, Toyota claimed initially that it had scant evidence of a steering rod problem among U.S. trucks and SUVs. But the AP found that the automaker had received at least 52 reports from U.S. drivers about the defect before vehicles were recalled in Japan. Toyota told the AP that it has now confirmed seven total cases in the U.S. of steering problems in the T100 small pickup and no reports of accidents or injuries. Company spokesman Brian Lyons said Monday that the automaker received an information request from NHTSA and intended to cooperate with the agency’s inquiry. Toyota claimed in a 2004 letter to NHTSA obtained by the AP that driving conditions in Japan were so different from those on U.S. roads that a recall was not necessary for 4Runner SUVs and T100 pickup trucks, known in Japan as the Hilux and Hilux Surf. That was despite the vehicles having nearly identical steering components, according to company documents filed with NHTSA. In the October 2004 letter, the company told the agency there were differences between left- and right-hand drive vehicles and that Toyota “believes that the unique operating conditions in Japan, such as frequent standing full lock turns, such as for narrow parking spaces and close quarters maneuvering, greatly affects the occurrence of this problem.” In addition, Toyota insisted to U.S. regulators the company had only scattered reports by 2004 from U.S. drivers about the steering problems. However, company documents that surfaced in a 2009 lawsuit show Toyota received 35 complaints through its customer service department – four formal complaints to its legal department and 13 warranty claims through dealers before the 2004 recall. The company later acknowledged in court documents that it received at least some letters from U.S. customers whose steering rods had broken. Yet it was not until September 2005 – 11 months after the Japanese recall began – that Toyota issued a recall in the U.S. for nearly 1 million 4Runners and Toyota trucks from model years 1989 to 1995, and T100s from model years 1993 to 1998, to repair steering rods. Last month, Toyota agreed to pay a $16.4 million fine for delaying its recalls of millions of vehicles to replace floor mats that can trap accelerator pedals and accelerator pedals that can stick. The attorney for an Idaho family suing Toyota over the steering issue now says there are strong parallels between the 2005 steering recall and the accelerator situation. On Monday, California attorney John Kristensen said Toyota failed to meet its obligation to promptly notify the agency about a vehicle defect. Kristensen represents the family of 18-year-old Michael “Levi” Stewart, who was killed in a 2007 accident. “They clearly had evidence. They clearly had problems in the U.S.,” Kristensen said. “They’ve got to be held responsible for misleading the U.S. government about why they weren’t doing a recall in the United States.” NHTSA is also reviewing whether Toyota improperly delayed for six weeks the January recall of the 2009-2010 Venza in the United States to address floor mats that could trap accelerator pedals. The company had made a similar recall in Canada six weeks earlier. Earlier Monday, Transportation Secretary Ray LaHood met with top Toyota executives in Japan and said the company could face additional fines for safety-related issues. LaHood said investigators are going through some 500,000 Toyota documents. A determination on new fines probably will not be made for months. In Stewart’s death, Toyota acknowledged in a 2009 filing that the company was contacted by two U.S. drivers complaining of broken steering rods in 2002 and 2003 but emphasized “the fact that a steering rod broke is not in and of itself evidence of the recall condition.” The reports uncovered in the Stewart lawsuit tell a different story. One motorist who wrote in 2002 to Toyota urged the company to do something after the steering rod broke on his 1997 T100 pickup. “I bring this evidence to your attention because of the obvious safety hazard,” wrote Yigal Schacht of Flushing, N.Y. “Had this fracture in the center link occurred even 10 minutes later, I would have been traveling on the Long Island Expressway, and without steering, surely a horrific tragedy would have ensued.” The Toyota steering recall in Japan began after a highly publicized accident in which five people were injured after a steering rod snapped, leading to a criminal investigation there of Toyota executives involving the timing of the recall. Ultimately, Japanese prosecutors decided not to file professional negligence charges against the executives. The Stewart case is one of four lawsuits that were filed in state courts after the U.S. steering recall and the only one drawing close to trial, which is set for November in Los Angeles. In addition to the defective vehicle, the Stewart family is claiming Toyota’s 2005 recall was faulty because it repaired only about a third of the vehicles – far below the 70 percent level that is the typical goal under NHTSA guidelines. NHTSA officials cautioned, however, that repair levels for older vehicles are often lower because many of them are not in use any more. Stewart was killed Sept. 15, 2007, while driving friends home in his 1991 Toyota pickup near Fairfield, Idaho. Toyota has said in court documents that the steering rod may have broken on impact rather than before the crash and has suggested the crash may have been alcohol related. Stewart’s blood-alcohol level was 0.03, within Idaho’s legal limits. “Stewart was under the influence and speeding” before the accident, Toyota said in one filing. Kristensen said Stewart drank “half a beer” that night and was the group’s designated driver. If the recall had been performed sooner and more efficiently, “it could have saved Levi Stewart’s life,” the attorney said. Similar claims are being made today in hundreds of lawsuits against Toyota over the sudden unwanted acceleration problem, which NHTSA has linked to 52 deaths in the U.S. ___ Associated Press Writer Ken Thomas in Washington contributed to this report.

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Delta, American, Hawaiian Win Routes to Haneda Airport Near Central Tokyo

May 7, 2010

By John Hughes May 8 (Bloomberg) — U.S. and Japanese business travel may be easier after Delta Air Lines Inc. , American Airlines and Hawaiian Holdings Inc. won routes to Tokyo’s Haneda airport, favored by executives flying to the capital. The U.S. Transportation Department approved four flights for the carriers yesterday while UAL Corp. ’s United Airlines and Continental Airlines Inc. , which announced a plan to merge this week, were denied the Haneda flights they sought. Japan-U.S. treaties since 1978 have restricted U.S. carriers to serving Narita Airport, the Japanese capital’s main international airport, about 44 miles (71 kilometers) east of the city by car. A draft “Open Skies” agreement reached in December permits four daily U.S.-Japan round trips at Haneda, 10 miles south of the city, starting in October. Delta’s two daily Haneda flights will connect Los Angeles and Detroit, AMR Corp.’s American will fly to and from New York, and Hawaiian will link Honolulu, the department said in granting the first U.S. flights to the airport in 32 years. “Haneda is the busiest airport in Asia and the fourth busiest airport in the world,” Will Ris , an American senior vice president, said in a statement. “It is in the public’s best interest that New York is first in line.” American, the world’s second-largest carrier, is based in Fort Worth, Texas. The preliminary decision is subject to final approval by the countries under the “Open Skies” treaty. United didn’t comment. Continental, which applied with partner Continental Micronesia, was “disappointed,” spokeswoman Mary Clark said an e-mailed statement. “We believe we presented strong cases that would benefit our customers, communities and passengers,” she said. ‘Customer Benefits’ The award “will increase competition and enhance customer benefits,” Delta Chief Executive Officer Richard Anderson said in a statement. Hawaiian is “delighted” with approval of its flight that would depart Haneda about midnight and arrive in Honolulu about noon, Mark Dunkerley , the carrier’s chief executive officer, said in a statement. The Transportation Department declined to give any of the carriers all the routes they requested, and rejected Continental’s application, citing the carrier’s existing access to U.S-Asia routes through a global alliance. In the decision, the agency cited specific market benefits. Los Angeles is the largest U.S. West Coast market for Tokyo flights, and Delta would serve more passengers from the city with Boeing Co. 747s than American with smaller Boeing 777s, Susan Kurland , a department assistant secretary, wrote in the decision. Chicago-based United, the No. 3 U.S. carrier, had sought service from San Francisco. ‘Strong Hub’ Delta’s service is the best option in the central U.S. because Detroit is a “strong hub” for Asian service and offers good connecting service, Kurland wrote. Michigan and Ohio have “extensive industrial relationships with Japanese companies.” American’s flights from New York’s Kennedy airport offer “greater public benefits” than Continental’s from Newark because they would boost alliance competition, Kurland wrote. Delta’s SkyTeam and United and Continental’s Star alliances “hold significant positions” in the U.S.-Asia market compared with American’s Oneworld, the decision found. Hawaiian would boost competition as a new entrant in the Tokyo-U.S. market, Kurland said. Houston-based Continental, ranked fourth in the U.S. by traffic, and its Micronesia unit filed for routes from New Jersey’s Newark Liberty airport and Guam. Atlanta-based Delta, the world’s largest airline, also applied for Haneda flights from Seattle and Honolulu. Hawaiian proposed a second daily flight from Honolulu, where the carrier is based. To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

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Police Query SUV Owner Over Failed New York Bomb; Mayor Pledges More CCTV

May 3, 2010

By Henry Goldman and Allison Bennett May 3 (Bloomberg) — New York City police interviewed the owner of a bomb-carrying sport-utility vehicle discovered in Times Square, Mayor Michael Bloomberg said. He pledged to add scores of video cameras to bolster security in the most populous U.S. city. The 1993 Nissan Pathfinder’s owner was tracked through the car’s vehicle identification number, which was stripped from the dashboard, Police Commissioner Raymond Kelly said. The number is typically stamped on other parts of a car or truck, such as the engine block. “We have no information whatsoever, no sense that they are involved,” Bloomberg said of the SUV’s owner. “We’re talking with everybody. We’ll continue to do that.” The attempted bombing “was intended to terrorize, and I would say that whomever did that would be categorized as a terrorist,” White House press secretary Robert Gibbs said. U.S. officials still don’t know who was responsible, he said. Several people in a plot with international links may have coordinated the incident, the Washington Post said, citing unidentified officials in President Barack Obama ’s administration. Bloomberg had “no immediate comment” on the report, said Jason Post , a spokesman for the mayor. The city will spend $110 million to add video cameras in Midtown Manhattan between 30th and 60th Streets, from the Hudson River to the East River, to expand a security network centered on Wall Street downtown, Bloomberg said today. ‘Whatever Is Necessary’ “I commit to you we will spend whatever is necessary in either federal or, if need be, city funds, to complete this project and to protect New York,” Bloomberg, 68, told reporters at a press conference in the Bronx. U.S. Senator Charles Schumer will seek federal funding for a system using security cameras and license-plate readers to record and track “every vehicle moving between 34th and 59th Streets,” the New York Democrat said in a press release. A man described as about 40 years old was seen on a neighborhood surveillance camera as he hurried through Shubert Alley , a pedestrian walkway between 44th and 45th Streets, steps from where the explosive-laden car was parked May 1, Kelly said. Red T-Shirt The man can be seen on the video removing a dark shirt, revealing a red T-shirt underneath, Kelly said. He placed the outer shirt in a bag and walked from the scene “in a furtive manner,” the commissioner said. Police also collected images of the SUV as it traveled along 45th Street at Times Square before being left at a curb near several Broadway theaters, the mayor said. While the police department has 82 cameras in the Times Square area, there are many more, he said. “There are hundreds of cameras, mostly in private buildings,” Bloomberg said. “This is a function that government should provide and to the extent that the private sector has information that would augment that, that is great, and we certainly take that into account.” The 1,949-room Marriott Marquis , across the street from where the car was parked, said it was cooperating with authorities. “We did provide the authorities access to all video content as needed,” said Kathleen Duffy, a spokeswoman for Marriott International Inc.’s hotels in New York City. The Marriott Marquis evacuated 800 to 1,000 people to ballrooms for about seven hours during the bomb scare, she said. ‘My Home Town’ It’s too early to call the case a “terrorist incident” or to say “who might ultimately be responsible and who’s involved,” Attorney General Eric Holder told reporters in Arlington, Virginia, today, according to a Justice Department transcript. There are “a number of leads” in addition to surveillance video, he said. “New York remains a target,” Holder said. “There’s a determination by those terrorists to try to inflict damage on my home town.” Transit officials and some Times Square building owners said they had already upgraded security in the aftermath of the Sept. 11, 2001, terrorist attack on the World Trade Center. “NYC Transit has remained at the highest state of alert since 9/11, reminding employees to report any suspicious activity,” said Paul Fleuranges , a spokesman for New York City Transit, which operates the subways and buses. Heightened Awareness He cited an April 30 incident in which track workers spotted someone in a tunnel near Bowling Green in lower Manhattan and turned the individual in to police as “an example of that heightened state of awareness.” In response to the bombing attempt, the Transportation Security Administration began conducting operations at East Coast airports to find explosives in vehicles, a Department of Homeland Security official said. Authorities also were doing more random screenings as passengers went through security checkpoints and at departure gates, said the official, who requested anonymity. “The past five weeks, there’s been a noticeable increase in military and police,” said Scott Froseth, 30, a business consultant, in Manhattan’s Penn Station. He travels from Hartford, Connecticut, to Brooklyn every Monday. “Guys in fatigues with their hands on their guns. It’s the same as usual today.” New York City “should increase video surveillance,” said cabdriver Nana Sarfo, 41, a Bronx resident and Ghana native. Interviewed along Eighth Avenue in midtown Manhattan, Sarfo said he hadn’t seen police searching cars today. Tourist Video Police travelled to Pennsylvania, where a tourist reported that he may have unintentionally photographed the person while taking snapshots of Times Square, Kelly said. Investigators have “no evidence” that a group of Pakistani Taliban sympathizers were responsible for the attempt, although a self-described group took credit for it, Kelly said. He noted authorities have ruled out the group’s involvement in other attempted and successful attacks around the world after receiving similar messages in the past. “Cops aren’t going to make me feel any safer because we’re not addressing the source of the problem: what motivates these people,” said Pepe Palikis, 55, a cattle trader for Australian Agriculture Co. who travels from New York to Philadelphia via Penn Station three times a week. “Right now I’m more concerned with the U.S. dollar going down.” Improvised Explosive Investigators have examined bags of a granular material found in a gun box in the car, which they believe might be fertilizer, Kelly said. Timothy McVeigh used about 5,000 pounds of ammonium nitrate fertilizer ingredient in the improvised explosive device in the 1995 truck bombing of a federal building in Oklahoma City. The intended detonator of the Times Square bomb, Kelly said, was a 16-ounce can filled with consumer-grade fireworks. The car also held two five-gallon containers of gasoline and three propane tanks, wired with two clocks, the commissioner said. Obama , speaking in Louisiana where he had gone to inspect damage from the Gulf of Mexico oil spill, praised the city’s police and fire departments, the Federal Bureau of Investigation, and the street vendor who alerted police to the smoking car. ‘Every Step Necessary’ “My national security team has been taking every step necessary to ensure that our state and local partners have the full support and cooperation of the federal government,” Obama said. “We’re going to do what is necessary to protect the American people to determine who’s behind this potentially deadly act and to see that justice is done.” U.S. Homeland Security Secretary Janet Napolitano , in an interview on NBC’s “Today” show, said it’s “premature to rule in or out” that the bombing attempt is linked to international terrorism. Plans to host foreign ministers in New York at a United Nations conference on nuclear non-proliferation won’t be disrupted, said U.S. State Department spokesman Philip Crowley . The gathering, which will draw participants from Europe, the Middle East and Asia, starts May 4. Businesses Respond Among businesses stepping up security was Bank of America Corp. , whose 54-story tower is about two blocks from where the vehicle was parked. “Our corporate security team has increased uniform presence at One Bryant Park,” spokesman T.J. Crawford said in an e-mail. The building “was built with 9/11 in mind,” said its owner, Douglas Durst , co-president of The Durst Organization, in a phone interview. Completed in 2008, the structure “has extra-wide staircases, it has pressurized stairs to keep smoke out, and it’s surrounded by bollards,” or protective traffic guards, he said. Durst, whose properties also include the Conde Nast building at 4 Times Square, said his company had installed security cameras and refitted buildings with blast-resistant glass and traffic buffers to protect against car bombs. “This city is as safe as it’s ever been,” Bloomberg said. “Is it perfectly safe? No, but we always will have events, we’ve had 11 or so in the last eight years, and every time we have responded appropriately. We keep changing our procedures, we keep studying what happens overseas, and we so far have done the right thing. And you can never guarantee 100 percent.” Police presence has been increased in the Times Square area today. Bloomberg urged tourists and New Yorkers to continue visiting the area and “enjoy a Broadway show.” The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; Allison Bennett in New York at abennett23@bloomberg.net .

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New York Police Query SUV Owner on Times Square Bomb, Mayor Bloomberg Says

May 3, 2010

By Henry Goldman and Allison Bennett May 3 (Bloomberg) — New York City police interviewed the owner of a bomb-carrying sport-utility vehicle discovered in Times Square, Mayor Michael Bloomberg said. He pledged to add scores of video cameras to bolster security in the most populous U.S. city. The 1993 Nissan Pathfinder’s owner was tracked through the car’s vehicle identification number, which was stripped from the dashboard, Police Commissioner Raymond Kelly said. The number is typically stamped on other parts of a car or truck, such as the engine block. “We have no information whatsoever, no sense that they are involved,” Bloomberg said of the SUV’s owner. “We’re talking with everybody. We’ll continue to do that.” The attempted bombing “was intended to terrorize, and I would say that whomever did that would be categorized as a terrorist,” White House press secretary Robert Gibbs said. U.S. officials still don’t know who was responsible, he said. Several people in a plot with international links may have coordinated the incident, the Washington Post said, citing unidentified officials in President Barack Obama ’s administration. Bloomberg had “no immediate comment” on the report, said Jason Post , a spokesman for the mayor. The city will spend $110 million to add video cameras in Midtown Manhattan between 30th and 60th Streets, from the Hudson River to the East River, to expand a security network centered on Wall Street downtown, Bloomberg said today. ‘Whatever Is Necessary’ “I commit to you we will spend whatever is necessary in either federal or, if need be, city funds, to complete this project and to protect New York,” Bloomberg, 68, told reporters at a press conference in the Bronx. U.S. Senator Charles Schumer will seek federal funding for a system using security cameras and license-plate readers to record and track “every vehicle moving between 34th and 59th Streets,” the New York Democrat said in a press release. A man described as about 40 years old was seen on a neighborhood surveillance camera as he hurried through Shubert Alley , a pedestrian walkway between 44th and 45th Streets, steps from where the explosive-laden car was parked May 1, Kelly said. Red T-Shirt The man can be seen on the video removing a dark shirt, revealing a red T-shirt underneath, Kelly said. He placed the outer shirt in a bag and walked from the scene “in a furtive manner,” the commissioner said. Police also collected images of the SUV as it traveled along 45th Street at Times Square before being left at a curb near several Broadway theaters, the mayor said. While the police department has 82 cameras in the Times Square area, there are many more, he said. “There are hundreds of cameras, mostly in private buildings,” Bloomberg said. “This is a function that government should provide and to the extent that the private sector has information that would augment that, that is great, and we certainly take that into account.” The 1,949-room Marriott Marquis , across the street from where the car was parked, said it was cooperating with authorities. “We did provide the authorities access to all video content as needed,” said Kathleen Duffy, a spokeswoman for Marriott International Inc.’s hotels in New York City. The Marriott Marquis evacuated 800 to 1,000 people to ballrooms for about seven hours during the bomb scare, she said. ‘My Home Town’ It’s too early to call the case a “terrorist incident” or to say “who might ultimately be responsible and who’s involved,” Attorney General Eric Holder told reporters in Arlington, Virginia, today, according to a Justice Department transcript. There are “a number of leads” in addition to surveillance video, he said. “New York remains a target,” Holder said. “There’s a determination by those terrorists to try to inflict damage on my home town.” Transit officials and some Times Square building owners said they had already upgraded security in the aftermath of the Sept. 11, 2001, terrorist attack on the World Trade Center. “NYC Transit has remained at the highest state of alert since 9/11, reminding employees to report any suspicious activity,” said Paul Fleuranges , a spokesman for New York City Transit, which operates the subways and buses. Heightened Awareness He cited an April 30 incident in which track workers spotted someone in a tunnel near Bowling Green in lower Manhattan and turned the individual in to police as “an example of that heightened state of awareness.” In response to the bombing attempt, the Transportation Security Administration began conducting operations at East Coast airports to find explosives in vehicles, a Department of Homeland Security official said. Authorities also were doing more random screenings as passengers went through security checkpoints and at departure gates, said the official, who requested anonymity. “The past five weeks, there’s been a noticeable increase in military and police,” said Scott Froseth, 30, a business consultant, in Manhattan’s Penn Station. He travels from Hartford, Connecticut, to Brooklyn every Monday. “Guys in fatigues with their hands on their guns. It’s the same as usual today.” New York City “should increase video surveillance,” said cabdriver Nana Sarfo, 41, a Bronx resident and Ghana native. Interviewed along Eighth Avenue in midtown Manhattan, Sarfo said he hadn’t seen police searching cars today. Tourist Video Police travelled to Pennsylvania, where a tourist reported that he may have unintentionally photographed the person while taking snapshots of Times Square, Kelly said. Investigators have “no evidence” that a group of Pakistani Taliban sympathizers were responsible for the attempt, although a self-described group took credit for it, Kelly said. He noted authorities have ruled out the group’s involvement in other attempted and successful attacks around the world after receiving similar messages in the past. “Cops aren’t going to make me feel any safer because we’re not addressing the source of the problem: what motivates these people,” said Pepe Palikis, 55, a cattle trader for Australian Agriculture Co. who travels from New York to Philadelphia via Penn Station three times a week. “Right now I’m more concerned with the U.S. dollar going down.” Improvised Explosive Investigators have examined bags of a granular material found in a gun box in the car, which they believe might be fertilizer, Kelly said. Timothy McVeigh used about 5,000 pounds of ammonium nitrate fertilizer ingredient in the improvised explosive device in the 1995 truck bombing of a federal building in Oklahoma City. The intended detonator of the Times Square bomb, Kelly said, was a 16-ounce can filled with consumer-grade fireworks. The car also held two five-gallon containers of gasoline and three propane tanks, wired with two clocks, the commissioner said. Obama , speaking in Louisiana where he had gone to inspect damage from the Gulf of Mexico oil spill, praised the city’s police and fire departments, the Federal Bureau of Investigation, and the street vendor who alerted police to the smoking car. ‘Every Step Necessary’ “My national security team has been taking every step necessary to ensure that our state and local partners have the full support and cooperation of the federal government,” Obama said. “We’re going to do what is necessary to protect the American people to determine who’s behind this potentially deadly act and to see that justice is done.” U.S. Homeland Security Secretary Janet Napolitano , in an interview on NBC’s “Today” show, said it’s “premature to rule in or out” that the bombing attempt is linked to international terrorism. Plans to host foreign ministers in New York at a United Nations conference on nuclear non-proliferation won’t be disrupted, said U.S. State Department spokesman Philip Crowley . The gathering, which will draw participants from Europe, the Middle East and Asia, starts May 4. Businesses Respond Among businesses stepping up security was Bank of America Corp. , whose 54-story tower is about two blocks from where the vehicle was parked. “Our corporate security team has increased uniform presence at One Bryant Park,” spokesman T.J. Crawford said in an e-mail. The building “was built with 9/11 in mind,” said its owner, Douglas Durst , co-president of The Durst Organization, in a phone interview. Completed in 2008, the structure “has extra-wide staircases, it has pressurized stairs to keep smoke out, and it’s surrounded by bollards,” or protective traffic guards, he said. Durst, whose properties also include the Conde Nast building at 4 Times Square, said his company had installed security cameras and refitted buildings with blast-resistant glass and traffic buffers to protect against car bombs. “This city is as safe as it’s ever been,” Bloomberg said. “Is it perfectly safe? No, but we always will have events, we’ve had 11 or so in the last eight years, and every time we have responded appropriately. We keep changing our procedures, we keep studying what happens overseas, and we so far have done the right thing. And you can never guarantee 100 percent.” Police presence has been increased in the Times Square area today. Bloomberg urged tourists and New Yorkers to continue visiting the area and “enjoy a Broadway show.” The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. To contact the reporters on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net ; Allison Bennett in New York at abennett23@bloomberg.net .

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United, Continental May Cede Air Routes to Win U.S. Clearance for Merger

May 2, 2010

By John Hughes and Jeff Bliss May 3 (Bloomberg) — United Airlines and Continental Airlines Inc. may need to cede some flights to win U.S. approval for the first proposed airline merger reviewed by the Obama administration. The U.S. Justice Department may question whether the deal would limit competition on routes to China and Japan and from New York to Europe, prompting the airlines to give up routes or airport takeoff and landing slots, Mike Goldman, a Washington aviation attorney, said in an interview. United parent UAL Corp. and Continental agreed yesterday to merge in a stock swap valued at $3.7 billion, said people with knowledge of the deal. The combination may test President Barack Obama’s antitrust policies after the Bush administration cleared three mergers, most recently Delta Air Lines Inc. and Northwest Airlines Corp. in 2008 to create the world’s biggest carrier. Democrat Obama’s Justice Department is “likely to be somewhat more skeptical” than George W. Bush’s was, said James Burnley , a partner at Venable LLP in Washington and transportation secretary under Republican President Ronald Reagan . “It’s by no means going to get automatic approval.” The department may require the carriers to yield some take- off and landing slots at airports such as Liberty in Newark, New Jersey, where competition is restricted because total flights are capped, Burnley said. Jean Medina , a spokeswoman for United, and Continental’s Julie King declined to comment yesterday. The deal may be announced today, said the people who requested anonymity because the deal hasn’t been made public. The companies’ combined equity value would be about $8.3 billion, one person said. Not ‘Very Serious’ Paul Mifsud, a Washington consultant and former airline executive, said he doesn’t “see the antitrust issues as very serious.” While the Justice Department will examine routes for overlapping service, Mifsud said, “I would see this approved in fairly short order, 30 to 60 days.” United , based in Chicago, and Houston-based Continental are the third- and fourth-largest U.S. airlines by traffic. Antitrust authorities have previously approved Delta-Northwest, buyout firm TPG Inc.’s takeover of Midwest Air Group Inc. in 2008 and US Airways Group Inc.’s merger with America West Holdings Corp. in 2005. The Justice Department’s antitrust division, now led by Christine Varney , has raised questions about airline alliances that stop short of mergers. Last June the department called for limits on Continental’s request to coordinate flights overseas with United, saying the plan was “unprecedented in scope and breadth, sanctioning collusion.” ‘Very Skeptical’ The department “signaled quite strongly, in my view, that it would be very skeptical of a complete merger between United and Continental,” said Mark Popofsky , co-head of antitrust at Ropes & Gray in Washington and a senior counsel in President Bill Clinton’s Justice Department. The Transportation Department approved the Continental- United alliance in July, with limits sought by the Justice Department. Varney’s agency in December also urged limits on British Airways Plc’s alliance with AMR Corp.’s American Airlines. “I come to this job not timid about using antitrust authority,” Varney said in a February interview. Among United-Continental domestic routes that may draw scrutiny are Chicago-Houston, Cleveland-Washington and New York- Chicago, said Goldman, a partner at Silverberg Goldman and Bikoff LLP. Three Network Airlines “The concern is that we are consolidating to an industry with three big network carriers” and low-fare airlines, said Goldman, whose clients include European carriers SAS Group and Spanair SA. “The question is whether that is good for competition. Will it result in higher prices?” Of the 100 largest U.S. cities, the merger would increase market concentration in four — Washington, San Diego, Seattle and New Orleans, according to an April 19 note by Jamie Baker , a JPMorgan Chase & Co. analyst in New York. The two carriers have overlapping non-stop flights in 13 markets, one more than Delta and Northwest had when their merger was proposed, according to Baker. “The precedent of Delta and Northwest will have an impact,” said Mifsud, former vice president of government and legal affairs for Dutch carrier KLM. The growth of low-fare carriers such as Southwest Airlines Co. also will help assuage concerns, he said. Continental has U.S. hubs in Newark, Houston and Cleveland, while United’s are in Chicago, San Francisco, Denver and Washington. Hub City Review “The scrutiny will be the effect of the hub cities on competition domestically,” said Makan Delrahim, an attorney with Brownstein Hyatt Farber Schreck in Washington. “One potential area could be the effect of the merger with respect to Newark,” said Delrahim, a deputy assistant attorney general in the antitrust division under George W. Bush. A United-Continental combination would surpass Delta for the top spot among U.S. airlines for flights across the Atlantic, with 40 percent of passenger traffic, and would handle 53 percent of traffic across the Pacific, where United leads, based on data compiled by Bloomberg. “Even if the government determines that certain aspects of the transaction are anticompetitive, the parties will have the opportunity to offer a settlement,” said Andre Barlow , a partner at Doyle, Barlow & Mazard LLC in Washington and a former Justice antitrust lawyer. “That could possibly remedy those antitrust concerns.” To contact the reporters on this story: John Hughes in Washington at jhughes5@bloomberg.net ; Jeff Bliss in Washington at jbliss@bloomberg.net

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Toyota Sienna Recall: Minivan Tire Cables Can Rust, 600,000 Recalled

April 16, 2010

WASHINGTON — As congressional investigators dig further into potential electronic problems in runaway Toyotas, the automaker is facing other safety concerns, recalling 600,000 Sienna minivans over rusting spare tire holders. The recall Friday came as House investigators said they would hold another hearing in May to review possible electronic problems in runaway Toyotas. The Japanese automaker has recalled more than 8 million vehicles because of faulty accelerator pedals, humbling a car company long known for its quality and safety. Company leaders vowed to respond quickly to the safety concerns. Separately, Toyota said its engineers in Japan had duplicated the same results of tests that led Consumer Reports to issue a rare “don’t buy” warning on the 2010 Lexus GX 460 over rollover concerns. Toyota responded by halting sales of new GX 460s and conducting tests on all of its SUVs. Lexus spokesman Bill Kwong said the company was evaluating potential remedies for the GX 460 but it was “too early to speculate (on) the details of the remedy and its timing.” Toyota said its latest recall covered the 1998-2010 model year Siennas with two-wheel-drive that have been sold or registered in 20 cold-climate states and the District of Columbia. Toyota said rust from road salt could cause the carrier cable that holds the spare tire to rust and break, allowing the tire to tumble into the road. The problem could threaten the safety of other drivers. Toyota said it was unaware of any accidents or injuries. The National Highway Traffic Safety Administration said it received six complaints of spare tires falling off Siennas. The company said it was working on a fix. In the meantime, customers will receive a notice telling them to bring their vehicle to a dealership for an inspection. The recall involves Siennas in the District of Columbia and the following states: Connecticut, Delaware, Illinois, Indiana, Kentucky, Massachusetts, Maryland, Maine, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Virginia, Vermont, Wisconsin and West Virginia. Steve St. Angelo, Toyota’s chief quality officer for North America, said the company was providing free inspections of the spare tire carrier cable across the nation, including states not included in the recall. Owners can call (800) 331-4331 for more information. Lawmakers remain focused on the spate of recalls affecting the company. Rep. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, and Rep. Bart Stupak, D-Mich., a subcommittee chairman, said they plan a May 6 hearing to look into potential electronic causes of sudden acceleration in Toyota vehicles. Toyota has said it has found no evidence of electronic problems, attributing the issues to sticking gas pedals and accelerators that can become jammed in floor mats. Toyota said in a statement Friday it was “more than willing to meet with the committee and discuss the ongoing testing related to our electronic throttle control system, as well as the steps we are taking to improve our quality assurance processes. Nothing is more important to us than the safety and reliability of the vehicles our customers drive.” The Transportation Department has fined the company $16.4 million for failing to promptly notify the government about defective gas pedals. Toyota has until Monday to agree to the penalty or contest it. The fine is the largest civil penalty ever imposed on an automaker by the government. ___ On the Net: Toyota recall: http://www.toyota.com/recall

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U.S. Senate Moves Toward Passage of Bill Extending Benefits for Unemployed

April 13, 2010

By Brian Faler April 13 (Bloomberg) — The U.S. Senate took a step toward reinstating unemployment benefits to tens of thousands of Americans whose aid was ended following a partisan dispute over how to pay the cost. Legislation providing a one-month extension of the benefits cleared a procedural hurdle 60-34 yesterday, and Democratic leaders aim for a final vote by the end of the week. The measure, designed to buy lawmakers time to debate a longer-term extension, was passed by the House last month. Benefits for thousands expired April 5 after Republicans blocked an extension because its $9 billion cost would be added to the government’s budget deficit, which reached a record $1.4 trillion in the fiscal year that ended last September. Republicans called for the cost to be offset by cuts elsewhere in the budget, while Democrats argued that fighting the deficit shouldn’t come at the expense of the jobless. About 212,000 Americans will see their benefits disrupted for every week the measure is delayed, according to the National Employment Law Project . The bill would extend provisions offering as many as 99 weeks of assistance to the unemployed. The extension would be retroactive to the day the benefits ended. The measure would also renew subsidies to help unemployed people buy health insurance and forestall a 21 percent cut in Medicare reimbursements to doctors. Republicans this year have twice blocked otherwise routine extensions of jobless benefits because of the cost. The legislation includes $1 million to provide back pay to 2,000 Transportation Department workers who were briefly furloughed because of the previous delay. To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net .

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Toyota Hid Defect in Violation of Law, LaHood Says

April 5, 2010

By Angela Greiling Keane and Alan Ohnsman April 6 (Bloomberg) — Toyota Motor Corp. “knowingly hid a dangerous defect” that caused its vehicles to accelerate unexpectedly, the U.S. said, for the first time accusing the world’s largest automaker of breaking the law. Transportation Secretary Ray LaHood proposed a record civil penalty of $16.4 million, the most the government can impose. The fine recommended yesterday escalates the confrontation between Toyota and LaHood, who initially praised the carmaker for its handling of recalls the company attributed to faulty accelerator pedals. The fine was announced the week after Toyota reported U.S. sales rose 41 percent in March with the help of no-interest loans and discount leases, signaling the Toyota City, Japan- based company may be recovering from recalls of more than 8 million vehicles worldwide. The Transportation Department’s action showed “safety matters and they’re going to be tough as nails,” Joan Claybrook , a former head of the National Highway Traffic Safety Administration , said in an interview. “That’s very appropriate. They caught Toyota red-handed.” The Japanese automaker waited at least four months before telling the agency that accelerator pedals might stick, LaHood said in a statement yesterday. Companies have five business days to report safety defects, the agency said. Toyota fell 45 yen, or 1.2 percent, to 3,770 yen at 10:36 a.m. in Tokyo Stock Exchange trading. The shares have declined 2.8 percent this year. ‘We Now Have Proof’ “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” Toyota hadn’t received NHTSA’s letter on the fine, according to an e-mailed statement yesterday from the company’s North American sales unit. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance,” the company said, without saying whether it will exercise its right to dispute the fine. ‘They Screwed Up’ LaHood has increasingly faulted Toyota’s response since Jan. 28, when he said he had “no criticism” of the company and Toyota “did what they’re supposed to do.” Toyota in January recalled about 2.3 million U.S. cars and trucks for sticky accelerator pedals. The penalty could “very possibly” be the first of multiple fines, said Claybrook, who is former president of Public Citizen, a Washington-based consumer advocacy group. NHTSA cited documents obtained from Toyota in saying the company knew about the pedal defect since at least Sept. 29, the day it told distributors in 31 European countries and Canada to make repairs to resolve sticky-pedal complaints. “NHTSA wants to make it clear that it was Toyota that was at fault and the agency did its best within the system,” said Alan Baum , an auto industry analyst at Baum & Associates in West Bloomfield, Michigan. He said Toyota probably won’t contest the fine, “since they’ve essentially said they screwed up.” ‘Firepower to Attorneys’ At a February congressional hearing, Toyota’s U.S. sales chief Jim Lentz told lawmakers “we failed to promptly analyze and respond to information emerging from Europe and in the United States” about the sticky pedals. Toyota has two weeks to accept or contest the proposed fine, Olivia Alair , a Transportation Department spokeswoman, said in an e-mail. If Toyota contests the penalty and a settlement isn’t reached, “it would go to court,” she said. “One of the biggest reasons to fight the fine would be to defend themselves from the language used by the Department of Transportation,” Ed Kim , an industry analyst for forecaster AutoPacific Inc. in Tustin, California, said in an interview. “That would seem to provide some firepower to attorneys that are suing the company.” NHTSA’s largest civil penalty was $1 million against General Motors Corp. in 2004 to settle charges that the company failed to conduct a timely recall involving windshield-wiper failures in about 581,000 vehicles. ‘Free Publicity’ “Both industry and government failed the test of putting the safety of America’s drivers first” in the Toyota recalls, Representative Darrell Issa , the top Republican on the House Oversight and Government Reform Committee, one of three panels that has held hearings on Toyota actions, said in a statement yesterday. The proposed NHTSA fine may help consumers suing Toyota over sudden acceleration, said Houston attorney W. Mark Lanier , who has filed class-action and individual lawsuits related to the claims. “Toyota is spending millions of dollars on public relations right now to sway consumers or a potential jury pool,” Lanier said in a phone interview. The fine “is free publicity that counters Toyota.” The penalty probably couldn’t be introduced in court because “it’s not like a criminal finding in that there was due process,” he said. Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 56 suits claiming personal injuries or deaths caused by sudden acceleration incidents, according to data compiled by Bloomberg. Lanier has filed two personal injury cases and is considering filing about 100 others, including a dozen involving deaths, he said. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net .

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Toyota `Knowingly Hid’ Pedal Defect in Violation of U.S. Law, LaHood Says

April 5, 2010

By Angela Greiling Keane and Alan Ohnsman April 6 (Bloomberg) — Toyota Motor Corp. “knowingly hid a dangerous defect” that caused its vehicles to accelerate unexpectedly, the U.S. said, for the first time accusing the world’s largest automaker of breaking the law. Transportation Secretary Ray LaHood proposed a record civil penalty of $16.4 million, the most the government can impose. The fine recommended yesterday escalates the confrontation between Toyota and LaHood, who initially praised the carmaker for its handling of recalls the company attributed to faulty accelerator pedals. The fine was announced the week after Toyota reported U.S. sales rose 41 percent in March with the help of no-interest loans and discount leases, signaling the Toyota City, Japan- based company may be recovering from recalls of more than 8 million vehicles worldwide. The Transportation Department’s action showed “safety matters and they’re going to be tough as nails,” Joan Claybrook , a former head of the National Highway Traffic Safety Administration , said in an interview. “That’s very appropriate. They caught Toyota red-handed.” The Japanese automaker waited at least four months before telling the agency that accelerator pedals might stick, LaHood said in a statement yesterday. Companies have five business days to report safety defects, the agency said. Toyota fell 45 yen, or 1.2 percent, to 3,770 yen at 10:36 a.m. in Tokyo Stock Exchange trading. The shares have declined 2.8 percent this year. ‘We Now Have Proof’ “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” Toyota hadn’t received NHTSA’s letter on the fine, according to an e-mailed statement yesterday from the company’s North American sales unit. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance,” the company said, without saying whether it will exercise its right to dispute the fine. ‘They Screwed Up’ LaHood has increasingly faulted Toyota’s response since Jan. 28, when he said he had “no criticism” of the company and Toyota “did what they’re supposed to do.” Toyota in January recalled about 2.3 million U.S. cars and trucks for sticky accelerator pedals. The penalty could “very possibly” be the first of multiple fines, said Claybrook, who is former president of Public Citizen, a Washington-based consumer advocacy group. NHTSA cited documents obtained from Toyota in saying the company knew about the pedal defect since at least Sept. 29, the day it told distributors in 31 European countries and Canada to make repairs to resolve sticky-pedal complaints. “NHTSA wants to make it clear that it was Toyota that was at fault and the agency did its best within the system,” said Alan Baum , an auto industry analyst at Baum & Associates in West Bloomfield, Michigan. He said Toyota probably won’t contest the fine, “since they’ve essentially said they screwed up.” ‘Firepower to Attorneys’ At a February congressional hearing, Toyota’s U.S. sales chief Jim Lentz told lawmakers “we failed to promptly analyze and respond to information emerging from Europe and in the United States” about the sticky pedals. Toyota has two weeks to accept or contest the proposed fine, Olivia Alair , a Transportation Department spokeswoman, said in an e-mail. If Toyota contests the penalty and a settlement isn’t reached, “it would go to court,” she said. “One of the biggest reasons to fight the fine would be to defend themselves from the language used by the Department of Transportation,” Ed Kim , an industry analyst for forecaster AutoPacific Inc. in Tustin, California, said in an interview. “That would seem to provide some firepower to attorneys that are suing the company.” NHTSA’s largest civil penalty was $1 million against General Motors Corp. in 2004 to settle charges that the company failed to conduct a timely recall involving windshield-wiper failures in about 581,000 vehicles. ‘Free Publicity’ “Both industry and government failed the test of putting the safety of America’s drivers first” in the Toyota recalls, Representative Darrell Issa , the top Republican on the House Oversight and Government Reform Committee, one of three panels that has held hearings on Toyota actions, said in a statement yesterday. The proposed NHTSA fine may help consumers suing Toyota over sudden acceleration, said Houston attorney W. Mark Lanier , who has filed class-action and individual lawsuits related to the claims. “Toyota is spending millions of dollars on public relations right now to sway consumers or a potential jury pool,” Lanier said in a phone interview. The fine “is free publicity that counters Toyota.” The penalty probably couldn’t be introduced in court because “it’s not like a criminal finding in that there was due process,” he said. Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 56 suits claiming personal injuries or deaths caused by sudden acceleration incidents, according to data compiled by Bloomberg. Lanier has filed two personal injury cases and is considering filing about 100 others, including a dozen involving deaths, he said. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net .

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Toyota Hid Pedal Defect, Broke U.S. Law, LaHood Says

April 5, 2010

By Angela Greiling Keane and Alan Ohnsman April 6 (Bloomberg) — Toyota Motor Corp. “knowingly hid a dangerous defect” that caused its vehicles to accelerate unexpectedly, the U.S. said, for the first time accusing the world’s largest automaker of breaking the law. Transportation Secretary Ray LaHood proposed a record civil penalty of $16.4 million, the most the government can impose. The fine recommended yesterday escalates the confrontation between Toyota and LaHood, who initially praised the carmaker for its handling of recalls the company attributed to faulty accelerator pedals. The fine was announced the week after Toyota reported U.S. sales rose 41 percent in March with the help of no-interest loans and discount leases, signaling the company may be recovering from recalls of more than 8 million vehicles worldwide. The Transportation Department’s action showed “safety matters and they’re going to be tough as nails,” Joan Claybrook , a former head of the National Highway Traffic Safety Administration , said in an interview. “That’s very appropriate. They caught Toyota red-handed.” The Japanese automaker waited at least four months before telling the agency that accelerator pedals might stick, LaHood said in a statement yesterday. Companies have five business days to report safety defects, the agency said. “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” Multiple Fines Possible The penalty could “very possibly” be the first of multiple fines, said Claybrook, who is former president of Public Citizen, a Washington-based consumer advocacy group. Toyota hadn’t received NHTSA’s letter on the fine, according to an e-mailed statement yesterday from the company’s North American sales unit. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance,” the company said, without saying whether it will exercise its right to dispute the fine. LaHood has increasingly faulted Toyota’s response since Jan. 28, when he said he had “no criticism” of the company and Toyota “did what they’re supposed to do.” Toyota, based in Toyota City, Japan, in January recalled about 2.3 million U.S. cars and trucks for sticky accelerator pedals. NHTSA cited documents obtained from Toyota in saying the company knew about the pedal defect since at least Sept. 29, the day it told distributors in 31 European countries and Canada to make repairs to resolve sticky-pedal complaints. ‘They Screwed Up’ “NHTSA wants to make it clear that it was Toyota that was at fault and the agency did its best within the system,” said Alan Baum , an auto industry analyst at Baum & Associates in West Bloomfield, Michigan. He said Toyota probably won’t contest the fine, “since they’ve essentially said they screwed up.” At a February congressional hearing, Toyota’s U.S. sales chief Jim Lentz told lawmakers “we failed to promptly analyze and respond to information emerging from Europe and in the United States” about the sticky pedals. Toyota has two weeks to accept or contest the proposed fine, Olivia Alair , a Transportation Department spokeswoman, said in an e-mail. If Toyota contests the penalty and a settlement isn’t reached, “it would go to court,” she said. ‘Firepower to Attorneys’ “One of the biggest reasons to fight the fine would be to defend themselves from the language used by the Department of Transportation,” Ed Kim , an industry analyst for forecaster AutoPacific Inc. in Tustin, California, said in an interview. “That would seem to provide some firepower to attorneys that are suing the company.” NHTSA’s largest civil penalty was $1 million against General Motors Corp. in 2004 to settle charges that the company failed to conduct a timely recall involving windshield-wiper failures in about 581,000 vehicles. “Both industry and government failed the test of putting the safety of America’s drivers first” in the Toyota recalls, Representative Darrell Issa , the top Republican on the House Oversight and Government Reform Committee, one of three panels that has held hearings on Toyota actions, said in a statement yesterday. The proposed NHTSA fine may help consumers suing Toyota over sudden acceleration, said Houston attorney W. Mark Lanier , who has filed class-action and individual lawsuits related to the claims. ‘Free Publicity’ “Toyota is spending millions of dollars on public relations right now to sway consumers or a potential jury pool,” Lanier said in a phone interview. The fine “is free publicity that counters Toyota.” The penalty probably couldn’t be introduced in court because “it’s not like a criminal finding in that there was due process,” he said. Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 56 suits claiming personal injuries or deaths caused by sudden acceleration incidents, according to data compiled by Bloomberg. Lanier has filed two personal injury cases and is considering filing about 100 others, including a dozen involving deaths, he said. Toyota’s American depositary receipts, each equal to two ordinary shares, rose 77 cents to $81.26 at 4:15 p.m. yesterday in New York Stock Exchange composite trading. They have lost 3.4 percent this year before today compared with the benchmark NYSE Composite Index, which has increased 5.8 percent. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net .

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Toyota Hid Pedal Defect, Broke U.S. Law, LaHood Says

April 5, 2010

By Angela Greiling Keane and Alan Ohnsman April 6 (Bloomberg) — Toyota Motor Corp. “knowingly hid a dangerous defect” that caused its vehicles to accelerate unexpectedly, the U.S. said, for the first time accusing the world’s largest automaker of breaking the law. Transportation Secretary Ray LaHood proposed a record civil penalty of $16.4 million, the most the government can impose. The fine recommended yesterday escalates the confrontation between Toyota and LaHood, who initially praised the carmaker for its handling of recalls the company attributed to faulty accelerator pedals. The fine was announced the week after Toyota reported U.S. sales rose 41 percent in March with the help of no-interest loans and discount leases, signaling the company may be recovering from recalls of more than 8 million vehicles worldwide. The Transportation Department’s action showed “safety matters and they’re going to be tough as nails,” Joan Claybrook , a former head of the National Highway Traffic Safety Administration , said in an interview. “That’s very appropriate. They caught Toyota red-handed.” The Japanese automaker waited at least four months before telling the agency that accelerator pedals might stick, LaHood said in a statement yesterday. Companies have five business days to report safety defects, the agency said. “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” Multiple Fines Possible The penalty could “very possibly” be the first of multiple fines, said Claybrook, who is former president of Public Citizen, a Washington-based consumer advocacy group. Toyota hadn’t received NHTSA’s letter on the fine, according to an e-mailed statement yesterday from the company’s North American sales unit. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance,” the company said, without saying whether it will exercise its right to dispute the fine. LaHood has increasingly faulted Toyota’s response since Jan. 28, when he said he had “no criticism” of the company and Toyota “did what they’re supposed to do.” Toyota, based in Toyota City, Japan, in January recalled about 2.3 million U.S. cars and trucks for sticky accelerator pedals. NHTSA cited documents obtained from Toyota in saying the company knew about the pedal defect since at least Sept. 29, the day it told distributors in 31 European countries and Canada to make repairs to resolve sticky-pedal complaints. ‘They Screwed Up’ “NHTSA wants to make it clear that it was Toyota that was at fault and the agency did its best within the system,” said Alan Baum , an auto industry analyst at Baum & Associates in West Bloomfield, Michigan. He said Toyota probably won’t contest the fine, “since they’ve essentially said they screwed up.” At a February congressional hearing, Toyota’s U.S. sales chief Jim Lentz told lawmakers “we failed to promptly analyze and respond to information emerging from Europe and in the United States” about the sticky pedals. Toyota has two weeks to accept or contest the proposed fine, Olivia Alair , a Transportation Department spokeswoman, said in an e-mail. If Toyota contests the penalty and a settlement isn’t reached, “it would go to court,” she said. ‘Firepower to Attorneys’ “One of the biggest reasons to fight the fine would be to defend themselves from the language used by the Department of Transportation,” Ed Kim , an industry analyst for forecaster AutoPacific Inc. in Tustin, California, said in an interview. “That would seem to provide some firepower to attorneys that are suing the company.” NHTSA’s largest civil penalty was $1 million against General Motors Corp. in 2004 to settle charges that the company failed to conduct a timely recall involving windshield-wiper failures in about 581,000 vehicles. “Both industry and government failed the test of putting the safety of America’s drivers first” in the Toyota recalls, Representative Darrell Issa , the top Republican on the House Oversight and Government Reform Committee, one of three panels that has held hearings on Toyota actions, said in a statement yesterday. The proposed NHTSA fine may help consumers suing Toyota over sudden acceleration, said Houston attorney W. Mark Lanier , who has filed class-action and individual lawsuits related to the claims. ‘Free Publicity’ “Toyota is spending millions of dollars on public relations right now to sway consumers or a potential jury pool,” Lanier said in a phone interview. The fine “is free publicity that counters Toyota.” The penalty probably couldn’t be introduced in court because “it’s not like a criminal finding in that there was due process,” he said. Toyota is facing at least 177 consumer and shareholder lawsuits seeking class-action status and at least 56 suits claiming personal injuries or deaths caused by sudden acceleration incidents, according to data compiled by Bloomberg. Lanier has filed two personal injury cases and is considering filing about 100 others, including a dozen involving deaths, he said. Toyota’s American depositary receipts, each equal to two ordinary shares, rose 77 cents to $81.26 at 4:15 p.m. yesterday in New York Stock Exchange composite trading. They have lost 3.4 percent this year before today compared with the benchmark NYSE Composite Index, which has increased 5.8 percent. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net .

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Toyota Could Be Fined $16 Million For Slow Action On Recall: Transportation Department

April 5, 2010

WASHINGTON — The government accused Toyota of hiding a “dangerous defect” and proposed a record $16.4 million fine on Monday for failing to quickly alert regulators to safety problems in gas pedals on popular models such as the Camry and Corolla. The proposed fine, announced Monday by Transportation Secretary Ray LaHood, is the most the government could levy for the sticking gas pedals that have led Toyota to recall millions of vehicles. There could be further penalties under continuing federal investigations. The Japanese automaker faces private lawsuits seeking many millions more. Toyota Motor Corp. has recalled more than 6 million vehicles in the U.S., and more than 8 million worldwide, because of acceleration problems in multiple models and braking issues in the Prius hybrid. Documents obtained from the automaker show that Toyota knew of the problem with the sticking gas pedals in late September but did not issue a recall until late January, LaHood said. The sticking pedals involved 2.3 million vehicles. “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in a statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” For those reasons, LaHood said, the government is seeking a fine of $16.375 million, the maximum penalty possible. That dwarfs the previous record: In 2004, General Motors paid a $1 million fine for responding too slowly on a recall of nearly 600,000 vehicles over windshield wiper failure. How Toyota decides to respond to the fines could pose a dilemma for the automaker. The company faces 138 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts nationwide. If Toyota pays the fines, the admission could hurt it in courtrooms. But battling the government over the penalties could undermine the automaker’s attempts to move on from the recalls. “It may be easier to pay it than to let this keep dragging on and drawing more attention to themselves,” said Jessica Caldwell, a senior analyst with auto research site Edmunds.com. Toyota did not say whether it would pay the fine. The automaker has two weeks to accept or contest the penalty. “While we have not yet received their letter, we understand that NHTSA has taken a position on this recall,” the company said in a statement, a reference to the National Highway Transportation Safety Administration. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance.” The company noted that it has appointed a new chief quality officer for North America and has given its North American office a greater role in making safety-related decisions. Under federal law, automakers must notify NHTSA within five days of determining that a safety defect exists and promptly conduct a recall. The Transportation Department said the fine it is seeking is specifically tied to the sticking pedal defect and Toyota could face additional penalties if warranted by investigations. The government has linked 52 deaths to crashes allegedly caused by accelerator problems in Toyotas. The recalls have led to congressional hearings, a criminal investigation by federal prosecutors, dozens of lawsuits and an intense review by the Transportation Department. Toyota has attributed the problem to sticking gas pedals and accelerators that can become jammed in floor mats. Dealers have fixed 1.7 million vehicles under recall so far. The sticky accelerator pedal recall involves the 2007-2010 Camry, 2009-10 Corolla, 2009-10 Matrix, 2005-10 Avalon, the 2010 Highlander and 2007-10 Tundra. Consumer groups have suggested electronics could be the culprit, and dozens of Toyota owners who had their cars fixed in the recall have complained of more problems with their vehicles surging forward unexpectedly. Toyota says it has found no evidence of an electrical problem. Reviews of some recent high-profile crashes in San Diego and suburban New York have failed to find either mechanical or electronic problems. In the New York case, a police investigation found that the driver, not the car, was to blame. Following the recalls, the Transportation Department demanded in February that Toyota turn over documents detailing when and how it learned of the problems with sticking accelerators and with floor mats trapping gas pedals. NHTSA said documents provided by Toyota showed the automaker had known about the sticky pedal defect since at least Sept. 29, 2009, when it issued repair procedures to distributors in 31 European countries and Canada to address complaints of sticking pedals, sudden increases in engine RPM and sudden vehicle acceleration. The government said the documents also show that Toyota knew that owners in the United States had experienced the same problems. Toyota has provided NHTSA with more than 70,000 pages of documents during the investigation.

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Toyota Could Be Fined $16 Million For Slow Action On Recall: Transportation Department

April 5, 2010

WASHINGTON — The government accused Toyota of hiding a “dangerous defect” and proposed a record $16.4 million fine on Monday for failing to quickly alert regulators to safety problems in gas pedals on popular models such as the Camry and Corolla. The proposed fine, announced Monday by Transportation Secretary Ray LaHood, is the most the government could levy for the sticking gas pedals that have led Toyota to recall millions of vehicles. There could be further penalties under continuing federal investigations. The Japanese automaker faces private lawsuits seeking many millions more. Toyota Motor Corp. has recalled more than 6 million vehicles in the U.S., and more than 8 million worldwide, because of acceleration problems in multiple models and braking issues in the Prius hybrid. Documents obtained from the automaker show that Toyota knew of the problem with the sticking gas pedals in late September but did not issue a recall until late January, LaHood said. The sticking pedals involved 2.3 million vehicles. “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in a statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” For those reasons, LaHood said, the government is seeking a fine of $16.375 million, the maximum penalty possible. That dwarfs the previous record: In 2004, General Motors paid a $1 million fine for responding too slowly on a recall of nearly 600,000 vehicles over windshield wiper failure. How Toyota decides to respond to the fines could pose a dilemma for the automaker. The company faces 138 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts nationwide. If Toyota pays the fines, the admission could hurt it in courtrooms. But battling the government over the penalties could undermine the automaker’s attempts to move on from the recalls. “It may be easier to pay it than to let this keep dragging on and drawing more attention to themselves,” said Jessica Caldwell, a senior analyst with auto research site Edmunds.com. Toyota did not say whether it would pay the fine. The automaker has two weeks to accept or contest the penalty. “While we have not yet received their letter, we understand that NHTSA has taken a position on this recall,” the company said in a statement, a reference to the National Highway Transportation Safety Administration. “We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance.” The company noted that it has appointed a new chief quality officer for North America and has given its North American office a greater role in making safety-related decisions. Under federal law, automakers must notify NHTSA within five days of determining that a safety defect exists and promptly conduct a recall. The Transportation Department said the fine it is seeking is specifically tied to the sticking pedal defect and Toyota could face additional penalties if warranted by investigations. The government has linked 52 deaths to crashes allegedly caused by accelerator problems in Toyotas. The recalls have led to congressional hearings, a criminal investigation by federal prosecutors, dozens of lawsuits and an intense review by the Transportation Department. Toyota has attributed the problem to sticking gas pedals and accelerators that can become jammed in floor mats. Dealers have fixed 1.7 million vehicles under recall so far. The sticky accelerator pedal recall involves the 2007-2010 Camry, 2009-10 Corolla, 2009-10 Matrix, 2005-10 Avalon, the 2010 Highlander and 2007-10 Tundra. Consumer groups have suggested electronics could be the culprit, and dozens of Toyota owners who had their cars fixed in the recall have complained of more problems with their vehicles surging forward unexpectedly. Toyota says it has found no evidence of an electrical problem. Reviews of some recent high-profile crashes in San Diego and suburban New York have failed to find either mechanical or electronic problems. In the New York case, a police investigation found that the driver, not the car, was to blame. Following the recalls, the Transportation Department demanded in February that Toyota turn over documents detailing when and how it learned of the problems with sticking accelerators and with floor mats trapping gas pedals. NHTSA said documents provided by Toyota showed the automaker had known about the sticky pedal defect since at least Sept. 29, 2009, when it issued repair procedures to distributors in 31 European countries and Canada to address complaints of sticking pedals, sudden increases in engine RPM and sudden vehicle acceleration. The government said the documents also show that Toyota knew that owners in the United States had experienced the same problems. Toyota has provided NHTSA with more than 70,000 pages of documents during the investigation.

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Toyota Faces Record $16.4 Million U.S. Fine for Hiding Accelerator Defect

April 5, 2010

By Angela Greiling Keane April 5 (Bloomberg) — Toyota Motor Corp. may face the maximum civil penalty of $16.4 million from the U.S. because it “knowingly hid a dangerous defect” that caused sudden acceleration, Transportation Secretary Ray LaHood said. Toyota, the world’s largest automaker, waited at least four months before it told the National Highway Traffic Safety Administration about vehicle accelerator pedals that may stick, LaHood said today in an e-mailed statement. “We now have proof that Toyota failed to live up to its legal obligations,” LaHood said in the statement. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.” The fine would be the largest civil penalty assessed by the auto safety regulator against an automaker. Toyota, based in Toyota City, Japan, in January recalled about 2.3 million cars and trucks for sticky accelerator pedals. The company has recalled more than 8 million vehicles worldwide for flaws that may cause unintended acceleration. To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net .

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Joe Costello: The American Economy and the American Dream

April 5, 2010

The American economy has undergone tremendous changes over the past several decades. Presently, we are in an acute phase of a chronic condition that has been festering for years. In the past 18 months, trillions of dollars have gone to Wall Street and the mega-banks, while state and local governments continue to slash their budgets, and millions have lost their jobs. The LAT has a must read piece regarding devastating cuts to public transit and their impact, not in LA, but in Georgia. Clayton County is majority black abutting Atlanta. The bus service is going to be canceled, according to the article: A large number of suburban working poor may now be stranded: A survey of riders in April 2008 found that 65% of them do not have access to a car. In a survey last month, 3 out of 4 said they may lose their jobs when the buses stopped rolling. Can you imagine people in the US not having a car, and not having a car living in a suburban area? Why don’t they have a car? They can’t afford it. Why, isn’t a car an essential aspect of the last half of the 20th century American Dream? The article further states: Since 1995, public transportation use is up 31%, more than twice the U.S. population growth rate, according to the American Public Transportation Assn., the nonprofit that represents the nation’s commuter systems. Last year, Americans took 10.2 billion public transit trips. People didn’t increase their public transit use out of environmental concern, no, solely for economic reasons. Two years ago, when gasoline was plus $4 a gallon, and with every wisp of news the economy is strengthening the price heads quickly back, public transit use greatly expanded. Thinking we’re going to rebuild the auto-industry at 35 mpg is stupid, whether looked at from an environmental, economic, or war and peace perspective. Public transit is the last thing we should be cutting — we should be doing just the opposite, investing more, yet: In a survey of 151 (public transit) member agencies released Thursday, the association found that about 9 in 10 of them reported flat or decreased local and state funding. Nearly 3 in 5 had already cut service or raised fares. Understand, when the economy fails tens of millions of people on an essential element like transportation, it is failing grandly. So, when you see all the anger being vented, remember what really underlies it: an American economy that increasingly works for fewer and fewer people. Eldrin Bell, a black Commissioner of Clayton County put it best, “I’ve lived with racism, But this is a new one — it’s called classism. I’ve never seen anything like it.” When class becomes permanently entrenched in America, that will truly be the death of the American Dream.

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U.S. Requires Airlines to Add Extra Layer of Security at Foreign Airports

April 2, 2010

By Roger Runningen April 2 (Bloomberg) — The U.S. government is requiring airlines at foreign airports to add a new layer of security that includes intelligence data in an effort to prevent a breach such as the attempted bomb attack on an airliner near Detroit on Christmas Day. The Department of Homeland Security and the Transportation Security Administration are adding new procedures in coming weeks that apply to overseas airports with direct flights to the U.S., according to an administration official, who spoke anonymously because of the sensitivity of the issue. Under the program, approved by President Barack Obama this week, domestic and foreign airlines now will have access to U.S. intelligence data that will augment conventional magnetometer screening, full-body imaging, bomb-sniffing dogs and other procedures that are classified, the official said. The intelligence material might include recent travels of a would-be passenger, whether they visited a terrorist camp for training, partial names, recent residence or unusual facial features that would flag them as a “person of concern.” Airlines, acting with host governments and overseas airport personnel, would match that data against names on airline tickets, passports or other security checks. If results raise suspicion, passengers would be pulled aside for a secondary screening that may include questions, pat-down or both. The new procedures are more refined than current ones and can be updated almost instantly with new intelligence as it becomes available, the official said. Foreign governments and members of Congress were briefed on the plan yesterday, according to the official. No Guarantee The administration official said the addition of fresh intelligence data increases that a future terrorist would be blocked from boarding a U.S.-bound flight. New security procedures reflect a stronger “filter” to weed out potential terror suspects, the official said. The Department of Homeland Security was scheduled to release further details on its Web site today. Umar Farouk Abdulmutallab , a Nigerian, smuggled explosives hidden in his underwear and boarded a Northwest Airlines flight from Amsterdam’s Schiphol Airport to Detroit on Christmas Day. The bombing attempt failed as the jetliner landed in Detroit. Review Ordered Obama ordered an investigation and review of aviation security procedures in January. The addition of intelligence data in the screening process is the result of a 90-day review, the official said. Janet Napolitano , secretary of the Department of Homeland Security, briefed the president on the plan this week, the official said. Napolitano has obtained agreements with foreign governments over the past several weeks to put the plan into effect. In a separate step, the administration planned the release today of a review of security efforts and gaps involving U.S. mass transit, commuter and long-distance passenger rail such as Amtrak, freight rail, commercial vehicles and pipelines. The yearlong study showed the nation’s transportation network is vulnerable to attack and lists 20 steps that should be taken by the government to boost security. They include such things as grants to pay for increased security and uniform security audits and inspections. The 30-page study, called “Surface Transportation Security Priority Assessment,” is scheduled to be available on the White House Web site later today, http://www.whitehouse.gov . To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

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Municipalities Sell Least Debt This Year as Yields Touch Five-Month High

April 2, 2010

By Catarina Saraiva April 2 (Bloomberg) — Oregon’s Transportation Department and North Carolina led issuers in the slowest week for municipal debt in 2010, as yields on tax-exempts reached a five-month high. State and local issuers sold about $4.4 billion in debt this week, the smallest amount since the week of Dec. 25, according to data compiled by Bloomberg. Yields on most top- rated tax-exempts increased, while the average yield on taxable Build America Bonds dropped. Oregon’s transit agency sold $580.3 million, including $544.7 million in its first issue of the taxable debt. The highway user-tax revenue bonds will help finance its road and bridge improvement program. North Carolina sold $487.7 million of general obligations competitively to help pay for capital projects across the state. “It was a really flat week,” said Terry O’Grady , senior vice president of municipal trading at FMSBonds Inc. in North Miami Beach, Florida. “If supply stays light, then prices can improve from here.” Yields on 10-year tax-exempts held at 3.22 percent yesterday, the highest since October, according to a daily survey by Municipal Market Advisors. Yields on shorter-term maturities of such debt have also increased. Yields on AAA- rated, seven-year debt sank to 2.34 percent March 4, the lowest since December. They have since climbed to 2.59 percent, the highest since November, according to the Concord, Massachusetts- based MMA. The average yield on the Wells Fargo Build America Bond Index dropped 6 basis points to 6.23 percent March 31, after rising to a two-month high of 6.32 percent March 25. First Anniversary “As the markets approach the one-year anniversary of the first issuance, it’s clear that BABs are a big success story for munis,” strategists led by Alan Schankel and Guy LeBas of Janney Montgomery Scott LLC in Philadelphia, said in a note yesterday. The average yield on the Build America Bond index has gained 21 basis points since it was created in August. The 10-year tax- exempts have added 6 basis points. The taxable bonds were created as part of last year’s federal economic stimulus package. Issuers have sold about $91 billion of the debt so far and $26 billion in the first three months of this year, according to Bloomberg data. Following are descriptions of pending sales of municipal debt in the U.S.: ILLINOIS , the second-lowest-rated U.S. state after California, plans to issue $356 million in general obligation taxable debt, including $300 million of Build America Bonds, through a competitive sale as early as next week. The securities are part of $1.056 billion series of bonds that will help rebuild transportation and school infrastructure, according to John Sinsheimer , Illinois director of capital markets. The state will sell the remaining $700 million later this month. Illinois’ general obligation debt has the seventh-lowest investment grade from Fitch Ratings, A-, an A2 from Moody’s Investors Service and an A+ from S&P. (Added April 2) THE CONVENTION CENTER AUTHORITY OF NASHVILLE AND DAVIDSON COUNTY plans to sell $633.3 million in bonds later this month to help fund a new convention center in the capital city. The securities will be backed by tourism tax revenue. The issues will mature from 2019 through 2043. Goldman Sachs Group Inc. will market the sale. The bonds are rated Aa3 by Moody’s, A+ by Fitch and A by S&P, the fifth- and sixth-highest investment grades, respectively. (Added April 1) MASSACHUSETTS DEPARTMENT OF TRANSPORTATION, created last year in a merger of state agencies, plans to sell $592.3 million of variable-rate demand obligations to match an interest-rate swap tied to its debt, according to a preliminary official statement. It sold $261.2 million of fixed-rate securities to lower its borrowing costs this week. The bonds were originally sold in 1997 and 1999 by the Massachusetts Turnpike Authority to finance Boston’s $14.9 billion “Big Dig,” the largest public works project in U.S. history. The subordinated bonds are secured by turnpike tolls and other revenue, such as state aid, and were rated AA-, fourth-highest, by Fitch on March 16. (Updated April 1) To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

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Texas Republican Hutchison Says She’ll Keep U.S. Senate Seat in Reversal

March 31, 2010

By Patrick O’Connor March 31 (Bloomberg) — Republican Kay Bailey Hutchison of Texas said she will remain in the U.S. Senate for the rest of her term, reversing a pledge made during her failed bid for the state’s governorship that she would surrender the seat. Hutchison announced her plans at a press conference today in San Antonio. She was joined by Senate Republican leader Mitch McConnell of Kentucky and fellow Texas Senator John Cornyn , who heads the National Republican Senatorial Committee . Her term expires in 2012. Her decision to stay eliminates the need for a special election to replace her, potentially freeing up campaign funds that Republicans can use elsewhere in Senate and House races in November. Hutchison was defeated earlier this month in the Republican gubernatorial primary by incumbent Rick Perry . Hutchison had promised to step down as senator even if she lost to Perry. In her announcement today, Hutchison, 66, attributed her change of heart to President Barack Obama ’s successful push for a health-care overhaul, his stalled bid to revamp U.S. energy laws and the country’s deepening national debt — a trend that is “taking away the essence of America,” she said. These developments “caused me to look at my resignation differently,” Hutchison told reporters in San Antonio. High Stakes “It is clear to me that the stakes in our nation’s capital have never been higher,” Hutchison said. “President Obama’s victory on health-care legislation has emboldened those who want an even bigger and more intrusive federal government.” She pledged to “work alongside our great Texas congressional delegation to repeal and replace President Obama’s massive health bill, to stop cap-and-trade legislation and to cut the deficit the president is building that is putting our economy in peril.” Fellow Republicans applauded her move. “The country and the Republican Party need Kay Bailey Hutchison’s wisdom and experience in the U.S. Senate,” Tennessee Senator Lamar Alexander said in a statement. “I am glad she has decided to continue to help provide a check and balance to an overreaching government in Washington.” Her resignation would have forced Perry to appoint an interim successor and set up the prospect of the special election in November. Hutchison, the state’s senior senator, was first elected to the chamber in a special election in 1993. She holds a seat on the Senate’s Appropriations Committee, which doles out money to the rest of the federal government, and serves as the top Republican on the Commerce, Science and Transportation Committee. To contact the reporter on this story: Patrick O’Connor in Washington at Poconnor14@bloomberg.net

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New York Airports Top List of Worst Delays With 41 of 50 Tardiest Flights

March 30, 2010

By Mary Schlangenstein and Mary Jane Credeur March 30 (Bloomberg) — After meetings in New York, Chris Nagy often went home on Continental Airlines Inc. ’s 7:30 p.m. flight to Omaha, Nebraska. It was so reliably late he could eat a leisurely dinner before going to New Jersey’s Newark airport. “I knew it was never going to leave on time, and sure enough I’d get there at 8 or 8:30 and they wouldn’t even be close to boarding,” said Nagy, 45, managing director of order routing sales and strategy for TD Ameritrade Holding Corp. Thousands of travelers at New York’s three major airports shared experiences like Nagy’s, whose Flight 2558 arrived late half the time in 2009 by an average 61 minutes. Of the country’s 50 tardiest flights, 41 started or ended at Newark or New York’s LaGuardia and Kennedy airports, according to data compiled by the U.S. Bureau of Transportation Statistics for Bloomberg News. The figures offer the first full-year glimpse at delays on individual routes in the biggest U.S. aviation market and the ripple effect across the nation. The statistics agency ranked almost 3,400 flights based on how often they arrived late, which is defined as 15 minutes or more beyond schedule. “It’s part of the cost of doing business in the chronically congested New York area,” said Michael Derchin , a CRT Capital Group LLC analyst who previously worked for billionaire Julian Robertson ’s Tiger Management LLC. “You just have to expect a certain amount of delays.” Delay Cost New York-area flights make up 12 percent of operations at the 35 largest airports while accounting for almost half the delays, according to the Air Transport Association. Industrywide delays may have cost U.S. carriers as much as $17 billion in 2009, including spending on wasted fuel and crew pay, the Washington-based trade group said yesterday. Carriers affected by New York tie-ups include Delta Air Lines Inc. , which has a hub at Kennedy; AMR Corp.’s American Airlines , second-largest in the world behind Delta and operator of bases at Kennedy and LaGuardia; Continental , which has a Newark hub; and New York-based JetBlue Airways Corp. Airlines keep their chronically delayed flights to preserve “use it or lose it” landing rights at airports such as LaGuardia where the U.S. government controls access, said Jeff Straebler , a fixed-income strategist at RBS Securities Inc. The solution, Continental and other airlines said, is to upgrade the U.S. air-traffic control system. The federal data offer clues on how airlines manage congestion: All but eight of the most-delayed flights involved regional carriers such as Delta’s Comair unit and Continental partner ExpressJet Holdings Inc. ‘Very Proactive’ “They’re very proactive in choosing ‘this is the flight that’s going to take the hit’ because they want to minimize cost and passenger irritation from missed connections or late arrivals,” said Straebler, who like CRT’s Derchin is based in Stamford, Connecticut. Continental moved Flight 2558, operated by ExpressJet , to 9 p.m. Nagy said it still rarely leaves before 10:30 p.m., arriving in the wee hours the next day. He said passengers on the 50-seat Embraer 145 jet dubbed it the “Midnight Pencil.” “If you’re on a little regional jet like that, the airlines are like ‘Sorry guys, but you’re gonna sit on the tarmac for two hours to clear all the big jets out first, then you can take off,’” said Nagy, who estimated he flies about 125,000 miles a year. New York-area delays reinforce the need to “modernize the nation’s antiquated air-traffic control system,” said Julie King , a spokeswoman for Houston-based Continental. ExpressJet referred calls to Continental . 74 Minutes The 50 most-delayed flights in 2009 were an average of 74 minutes late, and 14 had longer delays than their average time in the air, according to the Bureau of Transportation Statistics, which hadn’t previously released annual results. Newark posted the worst on-time arrival rate among the biggest U.S. airports last year, at 66 percent, government figures show. LaGuardia was second-worst with 69 percent. The most-delayed flight was a trip from Washington Dulles to Kennedy on Comair that was late 85 percent of the time, according to the Bureau of Transportation Statistics. It was airborne for 62 minutes on average, and late by 65 minutes. Delta’s schedule shows that flight operated for only four months last year, which isn’t reflected in the U.S. figures. Snow and rain and congestion can “significantly” delay Comair flights because half the carrier’s operations occur in the northeastern U.S., said Christine Weaver, a spokeswoman. “We constantly monitor those flights on the frequently delayed list and work closely with Delta to develop a schedule that takes into account the many factors that impact Northeast operations,” Weaver said. Congestion Outlook Improvements in New York may come slowly. Construction began March 1 to replace Kennedy’s longest runway, which handles half of departures. JetBlue , Delta and others agreed not to increase flights for the peak travel season to minimize tie-ups until work is complete in June. “It’s going to be a hell of a summer,” said Kevin Mitchell , chairman of the Business Travel Coalition, a group that represents about 300 corporate-travel buyers globally. Airlines at all three New York airports should be exempted temporarily from a rule taking effect in April that requires carriers to let passengers off planes stuck on tarmacs for more than three hours, Continental said on March 17. Violators face fines. In October, the Federal Aviation Administration extended hourly flight limits at Kennedy, LaGuardia and Newark for two more years while the agency hunts for ways to ease delays. The airports are run by the Port Authority of New York and New Jersey, and handle more than 100 million travelers annually. “We understand how much flight delays impact our passengers, which is why we’ve invested billions” in runway and terminal improvements, said Stephen Sigmund , a port authority spokesman. New air traffic control technology would “produce the most significant” reductions in delays, he said. To avoid delays, TD Ameritrade’s Nagy has started taking Southwest Airlines Co. flights to New York sometimes, even though it means making a connection at Chicago’s Midway airport. “They don’t dink around,” Nagy said. “The pilot has the engines fired up and it’s like ‘Come on, get in, we’re going with or without you.” To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net ; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

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Toyota Recall: NASA To Investigate Acceleration Problems

March 29, 2010

WASHINGTON — NASA and the National Academy of Sciences are joining the government’s effort to figure out what caused the sudden acceleration problems that led to Toyota’s massive recalls. NASA scientists with expertise in electronics will help the National Highway Traffic Safety Administration study potential electronic ties to unintended acceleration in Toyotas. NASA’s knowledge of electronics, computer hardware and software and hazard analysis will ensure a comprehensive review, Transportation Secretary Ray LaHood said Monday. In a separate study, the National Academy of Sciences will examine unwanted acceleration and electronic vehicle controls in cars from around the auto industry, LaHood said. The National Academy is an independent organization chartered by Congress. The academy study, expected to take 15 months, will review acceleration problems and recommend how the government can ensure the safety of vehicle electronic control systems. “We believe their outside expertise, fresh eyes and fresh research perhaps can tell us if electronics have played a role in these accelerations,” LaHood said. Toyota has recalled more than 8 million vehicles worldwide, including 6 million in the United States. Toyota said in a statement it was “confident in our vehicles and in our electronics” and would cooperate with the government review. “These studies are just the kind of science-based examination we have been calling for. Bringing some sunshine to this subject is bound to separate fact from fiction, which will be good for Toyota, the industry and the motoring public,” the company said. LaHood has told Congress the department will dig deeply into what has caused hundreds of complaints of unwanted acceleration in Toyotas. LaHood said he has asked the Transportation Department inspector general to review whether NHTSA’s Office of Defects Investigation has what it needs to identify and address safety defects. Some lawmakers have criticized NHTSA for failing to investigate Toyota complaints earlier and more thoroughly. “Carmakers have entered the electronics era, but NHTSA seems stuck in a mechanical mindset,” House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., said last month. “We need to make sure the federal safety agency has the tools and resources it needs to ensure the safety of the electronic controls and on-board computers that run today’s automobiles.” Toyota has attributed the problem to sticking gas pedals and accelerators that can become jammed in floor mats, and has cited no evidence of an electrical problem. The company has noted that other manufacturers also have had reports of cars surging forward. Consumer groups contend electronics could be the culprit, and dozens of Toyota owners who had their cars fixed in the recall have complained of more problems with their vehicles surging forward unexpectedly. Regulators have linked 52 deaths in Toyotas to crashes allegedly caused by accelerator problems. Reviews of some recent high-profile crashes have failed to find a mechanical or electronic problem. A police investigation of a March 9 accident in suburban New York involving a 2005 Prius found that the driver, not the car, was to blame. Tests following a March 8 incident in San Diego in which a driver reported the gas pedal on his 2008 Prius got stuck, leading to a 94 mph ride on a freeway, found that the hybrid’s gas pedal, backup safety system and electronics were working fine. NHTSA’s review of Toyota’s electronic throttle control systems is expected to be completed by late summer. The safety agency, with NASA’s help, is looking at electronic systems used in Toyotas and whether they have flaws that would warrant a defect investigation. The National Academy of Sciences’ National Research Council will review industry and government efforts to identify possible sources of unintended acceleration, including electronic vehicle controls, human error, mechanical failure and interference with accelerator systems. The experts will look at software, computer hardware design, electromagnetic compatibility and electromagnetic interference. They will make recommendations to NHTSA in mid-2011 on how the government agency’s rulemaking, research and defect investigations could help ensure the safety of vehicle electronic control systems. The two studies together will cost about $3 million, including the expense of buying cars that have allegedly had unintended acceleration. Both studies will be peer reviewed by scientific experts, the Transportation Department said. ____ National Highway Traffic Safety Administration: http://www.nhtsa.dot.gov/ National Academy of Sciences: http://www.nas.edu/

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Transfac Capital Hires Audrey Summers for Business Financing

March 26, 2010

SALT LAKE CITY, UT–(Marketwire – March 26, 2010) –   Transfac Capital , LLC is pleased to announce the addition of Audrey Summers as Regional Director of Business Development out of Nashville, TN. Audrey comes to Transfac with years of experience providing accounts receivable financing and factoring to small and medium sized businesses. Most recently, Audrey worked for Bibby Financial focusing on factoring services to the transportation industry. Audrey joins David Costello in the Nashville office. 

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Disney World Bullet Train May Spur U.S. Sales of Japan, China Locomotives

March 16, 2010

By Chris Cooper March 16 (Bloomberg) — Walt Disney World in Florida may be the next stop for bullet-train makers in Japan and China. Central Japan Railway Co. and China South Locomotive & Rolling Stock Corp. are competing for the $8 billion President Barack Obama granted for 13 high-speed corridors across the U.S., including a Tampa-Orlando line that may include a station at the Walt Disney Co. resort in Orlando. The Japanese company, also known as JR Central, is eyeing North America as a shrinking population at home limits its growth. France’s Alstom SA , Germany’s Siemens AG and Canada’s Bombardier Inc. also want to sell trains, tracks and operating equipment under an initiative that Transportation Secretary Ray LaHood called “an absolute game-changer for American transportation.” The high-speed corridors include New York- Buffalo, New York; Los Angeles-San Francisco; and Chicago- Detroit. “High-speed rail is going to be a big industry in the U.S.,” said Masayuki Kubota , who oversees the equivalent of $1.8 billion in assets at Daiwa SB Investments Ltd. in Tokyo. “A lot of companies are going to try and get a piece of the action.” ‘Top of Our List’ Bullet trains are generally considered to be those traveling faster than 180 mph (290 kph). Japan is home to the world’s first “shinkansen” and the biggest high-speed network, carrying 308 million people in the 12 months through March 2009. JR Central runs Japan’s busiest bullet-train line. By comparison, Amtrak’s Acela Express, which can reach 150 mph between Washington and Boston, carried 3.4 million passengers in fiscal 2008. Amtrak, which received $112 million of the Obama package to upgrade its Northeast Corridor , uses trains from Alstom and Bombardier, the world’s biggest maker of passenger locomotives. Nagoya-based JR Central is working with U.S.-Japan High- Speed Rail , backed by Washington-based New Magellan Ventures LLC, to sell its train systems in North America. “Florida is at the top of our list,” JR Central Chairman Yoshiyuki Kasai said yesterday. “Our marketing partners in the U.S. have been in close contact with the routes we have targeted.” Those include Texas and a line between Los Angeles and Las Vegas, he said. ‘Smoothest Train’ JR Central controls Japan’s largest maker of bullet trains, Nippon Sharyo Ltd. , whose shares have dropped 8.6 percent this year to 539 yen in Tokyo. JR Central has risen 11 percent to 688,000 yen, compared with a 1.7 percent gain in the Nikkei 225 Stock Average. JR Central showcased its trains to representatives from U.S. high-speed rail groups and embassies in November. Its N700 model accelerated to 205 mph within minutes of leaving a station in western Japan. “It was probably the smoothest high-speed train I’ve been on,” Robert Eckels, chairman of the Texas High Speed Rail & Transportation Corp. , said as he stood on the platform after the midnight run. The not-for-profit corporation aims to link San Antonio, Dallas-Fort Worth, and Houston by 2020. Kawasaki, Hitachi      JR Central isn’t the only Japanese trainmaker seeking to boost exports. Kawasaki Heavy Industries Ltd., of Kobe, made the trains for Taiwan’s $15 billion high-speed line that started operating three years ago between suburban Taipei and Kaohsiung in the south. Hitachi Ltd. of Tokyo made high-speed trains that run from London’s northern suburbs to the financial district. More than 50 countries already use trains or rail parts made in China, which has three high-speed rail lines and plans to connect all provincial capitals and cities with more than 500,000 citizens by 2020, the Ministry of Railways said. State-owned China South Locomotive and China CNR Corp. signed overseas contracts worth a combined $2.3 billion last year, according to their annual reports. The sales included switches to the U.S. and 20 locomotives to New Zealand. “China’s rail parts and trains at least have advantage in price,” said Han Weiqi , an analyst for CSC International Holdings Ltd. in Shanghai. “Chinese trainmakers want to go abroad because they want to sell the products at higher profit margin.” General Electric Deal New York-based General Electric Co. , the world’s biggest maker of freight locomotives, announced a partnership with China’s Ministry of Railways in November to manufacture equipment for U.S. high-speed rail projects. Shao Renqiang , board secretary for China South Locomotive, said the company will “actively” participate in U.S. railway construction. “It’s too early to say which lines will use Chinese products,” Shao said. Disney, the world’s biggest theme-park operator, offered to donate 50 acres (20 hectares), worth about $25 million, to Florida for a station at its Orlando resort, according to a Sept. 28 letter from Meg Crofton , the resort’s president. In return, the Burbank, California-based company wants the rights to approve the station’s design and operate it. The link is scheduled to begin operating by 2015, with plans to reach Miami by 2017 . The $1.3 billion awarded by Obama is half the amount needed for the line. Florida, where unemployment rose to a 35-year high in December and the budget shortfall is expected to be $2.7 billion this fiscal year, is negotiating with the U.S. Federal Railroad Administration for the rest. “The Europeans and other Asian competitors are all eyeing the U.S. market,” said Michael Finnegan, an executive vice- president at U.S.-Japan High-Speed Rail. “The competition will be fierce.” — Irene Shen in Shanghai, with assistance from Kiyotaka Matsuda in Tokyo. Editors: Michael Tighe , Neil Denslow . To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

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Jared Bernstein: Recovery Act in Action: Tracking the Ripples

March 10, 2010

Throw a rock in a still pond and you will observe many ripples. Throw a Recovery Act program in a stagnant economy and you will observe many jobs. Therein lies the lesson from our latest entry of the Recovery Act in Action, thanks to some truly thorough journalism by Robert Gavin of the Boston Globe . Gavin looked at the ripple effects, or — if you want to be boring — multipliers, from $77 million in Recovery Act contracts awarded to Reveal Imaging Technologies (RIT), a manufacturer of airport security equipment in Bedford, MA. RIT reports that thanks to the Recovery Act-funded contracts from the Transportation Security Administration, they’ve added nearly 40 jobs over the past year and they’re still hiring. They’ve expanded their plant capacity, more than doubling the size of their facility. But what Gavin’s article shows is that beyond these direct hiring effects, there’s a lot more upstream and downstream job creation generated by this type of activity. So far, RIT has subcontracted parts of its Recovery Act projects to 21 other companies in 12 states “that make components or provide services for its advanced scanning machines.” For example, an RIT subcontract helped reduce planned layoffs at a firm that assembles conveyor systems. Same with a machine tool shop, whose “metal cutting machines, silent several months ago, are humming again” thanks largely to another RIT subcontract. I spoke to the owner of that machine shop, Jack McGrail. He told me that most of 2009 was pretty dismal and that if things didn’t improve he was going to have to let some folks go. Then, in November, the RIT order generated by the Recovery Act came in, and, as Jack said, “it saved me from laying two guys off and I was able to add one more.” That’s one type of multiplier effect — the jobs created by firms providing inputs to the final product. But there’s another type that’s also important: the activity caused when people earn more and go out and spend it. Gavin picked up this kind of activity too by visiting Rebecca’s Café, a restaurant near RIT that reports a 15% increase in sales since RIT expanded its workforce. The evidence around the RIT case supports something economists have known since Keynes taught it to us: the jobs you directly create through government spending at a time of recession are just the tip of the iceberg. Thanks to the Recovery Act, there are hundreds of thousands of teachers in classrooms and police on the beat, construction workers fixing roads, weatherizing and rehabbing buildings , engineers building out the smart grid and planning new high-speed rail lines, and much more. But as with RIT, for each one of these jobs, there are many others helping to supply materials and services to these firms and workers. We’ll be throwing a lot more stones in the water in coming months, and I’ll be sure to keep posted on both the splash and the ripples.

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Toyota Autos’ Sudden Acceleration Tied to 43 Crashes, 52 Deaths, U.S. Says

March 2, 2010

By Angela Greiling Keane March 2 (Bloomberg) — The U.S. National Highway Traffic Safety Administration has received reports of 43 fatal crashes involving sudden unintended acceleration in Toyota Motor Corp. vehicles since 2000. The crashes caused a total of 52 deaths and 38 injuries, the agency said today in an e-mailed statement on data through last month. The agency provided the information to the Senate Commerce, Science and Transportation Committee , which is holding a hearing today on Toyota’s record recalls. Thirty three of the crashes, causing 41 deaths, were in vehicles with electronic throttle controls. NHTSA is investigating whether electronic systems contributed to the incidents, while Toyota has said there is no evidence of a connection. To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

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Senate Democrats’ $150 Billion Plan Would Reinstate U.S. Jobless Benefits

March 2, 2010

By Brian Faler March 2 (Bloomberg) — Senate Democrats are proposing to reinstate unemployment benefits that expired Feb. 28 as part of a $150 billion measure intended to boost the economy. The legislation would spend $81 billion to extend the unemployment benefits, including so-called Cobra subsidies to help the jobless buy health insurance, for the rest of this year. It also would send $25 billion to state governments to help prevent layoffs. Jobless benefits for thousands of Americans expired after Senator Jim Bunning , a Kentucky Republican, blocked a one-month continuation designed to keep checks from being interrupted. Bunning complained that the $10 billion cost would be tacked onto the $1.6 trillion budget deficit. “I am exercising my right as a senator duly elected from Kentucky to object,” Bunning said yesterday as Democrats tried again to pass the short-term extension. About 400,000 people will lose unemployment benefits in the next few weeks if Congress doesn’t act, according to the Department of Labor. The agency also estimated that 500,000 Americans will lose access to Cobra by the end of this month. The program allows the jobless to buy health insurance through their former employer, with the government paying 65 percent of the cost. The Transportation Department said it was putting 2,000 employees on furlough because highway money included in the legislation blocked by Bunning was being delayed. ‘Spend It Quickly’ Senate Finance Chairman Max Baucus , a Montana Democrat, said the need for the bill was “urgent” and that it would “put cash in the hands of Americans who could spend it quickly, boosting economic demand.” It would provide unemployment benefits retroactively to March 1. The Senate aims to send the bill to the House for approval this week or next. The measure includes provisions unrelated to job creation, including a $7 billion plan to prevent, for seven months, a 21 percent scheduled cut in Medicare reimbursements to doctors. The bill would also extend a package of miscellaneous tax cuts, including a $1-per-gallon tax credit for biodiesel fuel and a $6.6 billion credit promoting corporate research and development programs. It would also temporarily ease corporate pension-funding requirements. The bill revives a number of provisions Senate Majority Leader Harry Reid , a Nevada Democrat, dropped last month from an $85 billion jobs plan created by Baucus and his committee’s ranking Republican, Senator Charles Grassley of Iowa. $15 Billion Jobs Plan Reid, who said their bill included too many provisions unrelated to creating jobs, instead put a scaled-back $15 billion plan before senators that was approved last month. House Majority Leader Steny Hoyer , a Maryland Democrat, said he hopes his chamber will pass that bill this week. The measure would offer companies a tax break for hiring new workers. “I think we all would see that as round one of what we would expect to be a series of bills on jobs,” said Representative Chris Van Hollen , a Maryland Democrat, in a conference call with reporters. To contact the reporter on this story: Brian Faler  in Washington at   or bfaler@bloomberg.net .

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Senate Democrats Introduce $150 Billion Plan to Extend U.S. Aid to Jobless

March 1, 2010

By Brian Faler March 1 (Bloomberg) — Senate Democrats unveiled a $150 billion measure that would reinstate unemployment benefits that expired yesterday. The legislation would spend $81 billion to extend the unemployment benefits, including so-called Cobra subsidies to help the jobless buy health insurance, for the rest of this year. It also would send $25 billion to state governments to help prevent layoffs. Jobless benefits for thousands of Americans expired yesterday after Senator Jim Bunning , a Kentucky Republican, blocked a one-month continuation designed to keep checks from being interrupted. Bunning complained that the $10 billion cost would be tacked onto the $1.6 trillion budget deficit. “I am exercising my right as a senator duly elected from Kentucky to object,” Bunning said today as Democrats tried again to pass the short-term extension. About 400,000 people will lose unemployment benefits in the next few weeks if Congress doesn’t act, according to the Department of Labor. The agency also estimated that 500,000 Americans will lose access to Cobra by the end of this month. The program allows the jobless to buy health insurance through their former employer, with the government paying 65 percent of the cost. Transportation Workers The Transportation Department also said today that it was putting 2,000 employees on furlough because highway money included in the legislation blocked by Bunning was being delayed. Senate Finance Chairman Max Baucus , a Montana Democrat, said the need for the bill was “urgent” and that it would “put cash in the hands of Americans who could spend it quickly, boosting economic demand.” It would provide unemployment benefits retroactively to March 1. The Senate aims to send the bill to the House for approval this week or next. The measure includes provisions unrelated to job creation, including a $7 billion plan to prevent, for seven months, a 21 percent scheduled cut in Medicare reimbursements to doctors. The bill would also extend a package of miscellaneous tax cuts, including a $1-per-gallon tax credit for biodiesel fuel and a $6.6 billion credit promoting corporate research and development programs. It would also temporarily ease corporate pension-funding requirements. The bill revives a number of provisions Senate Majority Leader Harry Reid , a Nevada Democrat, dropped last month from an $85 billion jobs plan created by Baucus and his committee’s ranking Republican, Senator Charles Grassley of Iowa. $15 Billion Jobs Plan Reid, who said their bill included too many provisions unrelated to creating jobs, instead put a scaled-back $15 billion plan before senators that was approved last month. House Majority Leader Steny Hoyer , a Maryland Democrat, said he hopes his chamber will pass that bill this week. The measure would offer companies a tax break for hiring new workers. “I think we all would see that as round one of what we would expect to be a series of bills on jobs,” said Representative Chris Van Hollen , a Maryland Democrat, in a conference call today with reporters. To contact the reporter on this story: Brian Faler  in Washington at   or bfaler@bloomberg.net .

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Toyota Hearing: Driver To Describe Six Miles Of Nonstop Terror

February 23, 2010

WASHINGTON — Rhonda Smith’s story of six miles of interstate terror, as her Lexus suddenly zoomed to 100 miles per hour, will set the mood Tuesday for the first congressional hearing on Toyota’s acceleration problems. The Sevierville, Tenn., woman shifted to neutral. She tried to throw the car into reverse. She hit the emergency brake. Nothing. Then, her Toyota-made car miraculously slowed down before she crashed. Smith’s description of her nightmare ride in October 2006 will precede testimony by safety experts, Toyota’s U.S. president and the secretary of transportation Tuesday. Members of the House Energy and Commerce Committee’s investigative panel will be armed with preliminary staff findings that Toyota and the government failed to protect the public. Rep. Bart Stupak, D-Mich., chairman of the subcommittee, wrote Toyota that the company misled the public by failing to reveal that misplaced floor mats and sticking gas pedals accounted for only some of the acceleration problems. He said the company resisted the possibility that electronics problems were the cause. And he told Transportation Secretary Ray LaHood in a letter that his agency lacked the expertise and will to thoroughly investigate Toyota, which has recalled 8.5 million vehicles to fix acceleration problems in several models and braking issues in the 2010 hybrid Prius. Tuesday’s hearing, along with a second House hearing Wednesday, present a high bar in the company’s attempts to convince the public it cares about safety. James Lentz, president and chief operating officer of Toyota Motor Sales U.S.A. Inc., won’t have the benefit of speaking to consumers in company ads Tuesday. Rather, he’ll have to convince customers of company sincerity while facing expected hostile questioning from lawmakers venting their anger before television cameras. The atmosphere outside the hearing won’t be pleasant for the company, either. Toyota revealed Monday that federal prosecutors and the Securities and Exchange Commission are now investigating the company’s safety problems and what it told government investigators. On Wednesday, the House Committee on Oversight and Government Reform will hear from company president Akio Toyoda, who is expected to speak to the committee through a translator. In an opinion piece published by The Wall Street Journal, Toyoda acknowledged that the automaker had stumbled badly. “It is clear to me that in recent years we didn’t listen as carefully as we should – or respond as quickly as we must – to our customers’ concerns,” wrote Toyoda. LaHood, who testifies Tuesday, is expected to assure Americans that the government is addressing the possibility that electromagnetic interference played a role in the acceleration problems. LaHood also will remind Americans that his agency is investigating whether Toyota acted quickly enough in reporting defects and took appropriate action to protect consumers. The government has demanded that the company turn over a wide range of documents. Stupak said Monday that documents and interviews demonstrate that Toyota relied on a flawed engineering report to reassure the public that it had found the answer to the acceleration problem. In his letter to Toyota, he said a review of consumer complaints shows company personnel identified sticking pedals or floor mats as the cause of only 16 percent of the unintended acceleration reports. Some 70 percent of the acceleration incidents in Toyota’s customer call database involved vehicles that are not subject to the 2009 and 2010 floor mat and “sticky pedal” recalls. In a letter to LaHood, Stupak raised questions about whether the transportation agency lacked the expertise to review defects in vehicle electronics and said it was slow to respond to 2,600 complaints of sudden unintended acceleration from 2000 to 2010. As regulators looked into reports that accelerator pedals were becoming jammed in floor mats on Lexus ES350 sedans, a Toyota safety official told colleagues that government officials didn’t appear concerned. “I ran into a lot of different investigators and (Office of Defect Investigations) staff and when asked why I was there, when I told them for the (Lexus) ES350 floor mats, they either laughed or rolled their eyes in disbelief,” wrote Chris Santucci, a former government transportation safety employee.

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Toyota Case Shows Law Spurred by Firestone Deaths Not Working, Critics Say

February 23, 2010

By Jeff Plungis and Angela Greiling Keane Feb. 23 (Bloomberg) — Toyota Motor Corp. ’s recalls of millions of vehicles show that a law passed after fatal crashes of Ford Explorers with Firestone tires a decade ago isn’t working, former U.S. officials and consumer advocates said. Lawmakers begin hearings today in the biggest review of auto defects by Congress since faulty tires were linked to rollovers of Ford Motor Co. sport-utility vehicles that caused more than 200 deaths. A law passed in November 2000 created a database to track manufacturer complaints, warranty claims and fatalities in order to catch defects more quickly. Toyota, the world’s largest automaker, has recalled more than 8 million vehicles for defects worldwide, starting with 3.8 million announced in September. Thirteen months earlier, U.S. regulators turned down a consumer petition for an investigation, saying evidence of a flaw was “quite limited.” “Some of the same problems that were present in 2000 and 2001 after Firestone still exist today,” said Ken Mead , a special counsel at Baker Botts LLP in Washington who was the Transportation Department’s inspector general from 1997 to 2006. “Given the passage of the law, given the creation of this multimillion-dollar system, why did we miss this?” Sudden acceleration of Toyota cars and trucks has been linked to 34 deaths in complaints filed by consumers with the Transportation Department’s National Highway Traffic Safety Administration, the federal agency supervising the recalls. NHTSA has too little money and too few investigators to handle safety probes, said Allan Kam, a former official. ‘Understaffed, Overworked’ “The office, in my view, has been significantly understaffed and overworked,” Kam, who was a NHTSA senior enforcement attorney until he retired in 2000, said in an interview. NHTSA has an $873 million budget this year, with more than 71 percent passed through to states as highway-safety grants. The agency is spending $18 million, about 2 percent of its funds, for enforcing recalls and compliance with safety rules. That includes $9.8 million for its Office of Defects Investigation, according to NHTSA and administration budget documents. President Barack Obama ’s budget for next year, proposed on Feb. 1, would leave the office’s funding unchanged. “There’s only $18 million spent at NHTSA on overseeing auto manufacturers,” Representative Darrell Issa of California, the top Republican on the House Oversight and Government Reform Committee, said in a Feb. 17 interview with Bloomberg Television. “There’s almost $100 billion spent by auto manufacturers around the world on R&D.” Early Signs Issa said his panel, which is holding a hearing on Toyota’s recalls tomorrow, will examine how NHTSA responded to early signs of danger and whether the agency has enough information about safety problems occurring in other countries. “This is a bureaucracy that has simply been allowed not to get the job done right,” Issa said. The House Energy and Commerce Committee will hold a hearing today. Toyota saved $100 million through a “negotiated” recall with NHTSA of floor mats that the automaker said could snag on accelerator pedals, the company said in an internal document from July 6, 2009, that was obtained by the oversight committee. The Toyota City, Japan-based company employed two former NHTSA officials who negotiated with the agency to end at least four inquiries into unintended acceleration, court documents show. NHTSA’s defects investigations office had a goal of employing 64 people in 2002, including authorization for 24 investigators, according to a report by the inspector general’s office when Mead held the post. Today, there are 57 people on the staff, with 21 investigators, according to Transportation Department spokeswoman Olivia Alair . 30,000 Complaints The highway traffic safety administration opens about 100 vehicle-defect investigations a year, and its process ensures the most serious risks are identified and handled urgently, Alair said in an e-mailed statement. The regulator demanded a recall of Toyota floor mats in 2007 after only five consumer complaints because three of those involved injury-producing crashes, she said. “NHTSA reviews more than 30,000 consumer complaints every year and analyzes them along with comprehensive data obtained from auto manufacturers and other sources to identify potential safety issues quickly,” Alair said. Alair said she couldn’t provide information regarding year- to-year funding and staffing at the Office of Defects Investigation. Nor could Calvin Scovel , who took over the inspector general’s office in October 2006, according to spokesman David Wonnenberg. A request to interview Kathy DeMeter, chief of the defects office, was declined. Not Keeping Pace The office’s funding hasn’t kept pace with inflation or the number of cars on the road, said Clarence Ditlow , executive director of the Center for Auto Safety, based in Washington and founded by consumer activist Ralph Nader . The defects office had a budget of $7.6 million in fiscal 2001, before the legislation prompted by the Firestone recalls. There were 248 million motor vehicles registered in the U.S. in 2008, compared with 156 million in 1980, according to the U.S. Federal Highway Administration. “I look at the amount of money they have in enforcement per vehicle on the road, and the real dollar value keeps going down,” Ditlow said. The congressional hearings this week on Toyota’s recalls echo the Firestone inquiries in September 2000. NHTSA was criticized over reports that Ford Explorer SUVs were rolling over after their Firestone tires lost treads. Bridgestone Corp. of Tokyo, which had acquired the Firestone brand, recalled 6.5 million tires that Aug. 9. ‘Déjà vu’ On Nov. 1, 2000, President Bill Clinton signed the legislation that enabled NHTSA to hire more investigators and create a database, called the Early Warning System, that would compile quarterly reports from auto manufacturers, tiremakers and parts suppliers incorporating warranty repairs, customer complaints, deaths and injuries. The measure provided for an extra, one-time appropriation of $9.1 million to set up the new system and speed recall investigations. In a follow-up examination in September 2004, Mead, the inspector general, found NHTSA established a database to track the early warning data while failing to develop the ability to establish a relationship between deaths and alleged defects. “It’s obvious to me that either the system that was supposed to be a pointer system didn’t work or it didn’t work on time” in the Toyota recalls, Mead said in an interview. “It’s very déjà vu,” he said. To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net ; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net .

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Toyota Backers Say Critics Are Motivated More by Self-Interest Than Safety

February 22, 2010

By John Hughes and Theo Francis Feb. 23 (Bloomberg) — “Gangster government targets Toyota,” said the headline on a Washington Examiner editorial . U.S. Transportation Secretary Ray LaHood was behaving like “one of the brand managers” for General Motors Co. and Chrysler Group LLC, “running around ripping Toyota to shreds,” Rush Limbaugh said on his radio show. The governors of four states with Toyota plants wrote to House lawmakers to complain about the federal government’s “disturbing statements and hasty actions.” For some critics, U.S. scrutiny of Toyota Motor Corp.’s handling of vehicle defects is motivated by more than safety concerns. They say the government may be beating up on Toyota partly because of the federal stakes in GM and Chrysler. “Here’s another reason you don’t want the government in the car business,” Indiana Republican Mitch Daniels, one of the governors who signed the protesting letter, said in an interview. “It sure has given every impression of the government discriminating against its direct competitor.” The U.S. owns 61 percent of Detroit-based GM, the biggest U.S. car company, after bailing out the automaker with $49.9 billion in aid. Auburn Hills, Michigan-based Chrysler received $14.3 billion, giving the U.S. a 10 percent stake. The National Highway Traffic Safety Administration , part of the Transportation Department, is investigating reports of unintended acceleration and brake problems in Toyota cars and trucks that have caused the recall of more than 8 million vehicles on five continents. Three Hearings The Toyota probe takes center stage in Washington today, with the first of three scheduled congressional hearings. The House Energy and Commerce Committee, headed by California Democrat Henry Waxman , holds today’s session. LaHood and Jim Lentz, Toyota’s U.S. sales unit president, are among the scheduled witnesses. Akio Toyoda , president of Toyota City, Japan-based Toyota, which last year passed GM as the world’s biggest automaker, is due to testify tomorrow before a separate House committee. A Senate panel will have a hearing on March 2. Critics may be justified in wondering about the politics behind the controversy, said Chester Spatt , a finance professor at Carnegie Mellon University in Pittsburgh and a former chief economist for the Securities and Exchange Commission. “There’s definitely a problem,” Spatt said in an interview. “In a private context, people would be talking about all kinds of conflicts.” Administration officials dismiss the notion that the government’s stakes in GM and Chrysler are influencing the investigation. Safety Only “We take auto safety very seriously and base all decisions for investigations on the merits of the data regardless of who manufactures the vehicle,” LaHood spokeswoman Olivia Alair said in an e-mail responding to the conflict-of-interest suggestions. Of the agency’s 44 open investigations, 39 involve automakers other than Toyota, she said. Bill Burton, the White House deputy press secretary, and Meg Reilly, a spokeswoman for the Treasury Department officials who oversee the GM and Chrysler stakes, also said the ownership issue plays no role in the investigation. The U.S. can juggle its interests, particularly considering that the GM and Chrysler stakes don’t give it the kind of economic motivations that a private owner would have, said Julian Zelizer , a Princeton University professor of history and public affairs in Princeton, New Jersey. The government “took over GM not simply as a business venture, but to shore up the economy,” Zelizer said. “A lot of Toyota is in the U.S. now. They want Toyota to be healthy as well.” ‘Witch Hunting’ Toyota defenders see cause for concern. In their Feb. 10 letter to Waxman and three other members of the House committees holding hearings, the governors of Kentucky, Indiana, Mississippi and Alabama said the federal government has an “obvious conflict.” “There seems to be a degree of witch-hunting,” Indiana’s Daniels said in the interview. Members of the International Brotherhood of Teamsters and United Auto Workers union protested Jan. 27 outside Japan’s embassy in Washington, calling Toyota a “danger to America.” The demonstrators chanted that the company took U.S. money in the so-called cash for clunkers rebate program while producing “damaged cars.” “Certainly the labor unions would love to have the non- unionized Toyota be over-enforced,” Representative Darrell Issa, a California Republican, said in an interview. “But it’s really their turn in the barrel,” he said of Toyota. Ford Scrutiny Issa, the senior Republican on the House Oversight and Government Reform Committee, which holds tomorrow’s hearing, said Ford Motor Co. “was just as much in scrutiny” for defects about a decade ago. George Lusby, county executive for Scott County, Kentucky, where Toyota has a plant that had to halt production because of a sales decline linked to the recalls, said past government responses to defects by automakers including Ford were more subdued. “All of a sudden a Japanese company is having a problem, and it’s like this thing is the most dangerous thing that ever was,” Lusby said in an interview. The Washington Examiner, a free daily newspaper in the nation’s capital, weighed in with its “gangster government” editorial on Feb. 4, taking lawmakers and “a chorus of Naderite auto safety nannies” to task. Founded by Anschutz The newspaper was founded by Denver billionaire Philip Anschutz , who has contributed almost $150,000 to Republican candidates and state or national organizations since 2008, according to data from the Center for Responsive Politics, a Washington group that monitors campaign finance. Radio host Limbaugh said GM and Chrysler are “essentially owned by Obama, owned by the federal government,” according to the Feb. 4 page for his show’s Web site. “So here’s one of the branch managers, Ray LaHood, running around ripping Toyota to shreds.” Japanese media also have voiced suspicions. In a Feb. 5 commentary, the Nikkei, Japan’s top-selling financial newspaper, said U.S. elections coming in November may have contributed to the government and Congress taking “a hard-line stance” on Toyota. “The fact that the Japanese auto giant has sharply increased its market share in the U.S., while General Motors and Chrysler headed for bankruptcy, provoked a strong reaction to its vehicle problems,” the Nikkei said. ‘Protectionist’ Policies “It appears that the U.S. is moving toward more protectionist trade policies,” Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, said in an interview. “My hope is that Toyota’s recalls won’t accelerate that trend and make the U.S. more defensive.” Before the recall controversy, Toyota indicated it was cognizant of a “changing political environment” in the U.S., according to a company document dated last July on operations of the automaker’s Washington office. The document, as provided to the House Committee on Oversight and Government Reform, listed an “Activist Administration & Congress” and “Massive government support for Detroit automakers” as “Toyota Challenges.” “We’re focused on upcoming hearings,” said Ed Lewis, a Toyota spokesman in Washington, when asked whether a conflict of interest may be influencing the investigation. ‘Calmer Heads’ “We need to let calmer heads prevail,” said Representative Shelley Moore Capito , a West Virginia Republican whose district has a Toyota engine and transmission plant. “I don’t think it serves anybody to unreasonably gang up on Toyota and try to take them down for other reasons, besides the fact of getting the straight information out,” Capito said in an interview. “The Toyota that I know is a high-quality, good-paying company,” she said. “Obviously there is a problem, and they’re trying to fix it.” To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net .

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Toyota Recall: Internal Document Declares ‘Win’ After Negotiating Limited Recall, Saving $100 Million In 2007

February 21, 2010

WASHINGTON — Toyota officials claimed they saved the company $100 million by successfully negotiating with the government on a limited recall of floor mats in some Toyota and Lexus vehicles, according to new documents shared with congressional investigators. Toyota, in an internal presentation in July 2009 at its Washington office, said it saved $100 million or more by negotiating an “equipment recall” of floor mats involving 55,000 Toyota Camry and Lexus ES350 vehicles in September 2007. The savings are listed under the title, “Wins for Toyota – Safety Group.” The document cites millions of dollars in other savings by delaying safety regulations, avoiding defect investigations and slowing down other industry requirements. The documents could set off alarms in Congress over whether Toyota put profits ahead of customer safety and pushed regulators to narrow the scope of recalls. Two House committees are holding hearings this week on the Japanese automaker’s recall of 8.5 million vehicles in recent months to deal with safety problems involving gas pedals, floor mats and brakes. The world’s largest automaker has been criticized for responding too slowly to complaints of sudden acceleration in its vehicles, threatening to undermine its reputation for quality and safety. The documents were turned over to the House Oversight and Government Reform Committee and obtained by The Associated Press on Sunday. The presentation was first reported by The Detroit News. Toyota said in a statement: “Our first priority is the safety of our customers and to conclude otherwise on the basis of one internal presentation is wrong. Our values have always been to put the customer first and ensure the highest levels of safety and quality.” Kurt Bardella, a spokesman for Rep. Darrell Issa, R-Calif., the top Republican on the Oversight Committee, said the documents raise questions on “whether Toyota was lobbying for less rigid actions from regulators to protect their bottom line.” Transportation Department spokeswoman Olivia Alair called the document “very telling. And that’s why Secretary (Ray) LaHood has been saying we’re going to hold Toyota’s feet to the fire and make sure they do what’s necessary to make their cars safe for the driving public.” The new documents show the financial benefit of delay. In the presentation, Toyota said a phase-in to new safety regulations for side air bags saved the company $124 million and 50,000 man hours. Delaying a rule for tougher door locks saved $11 million. On defect regulations, the document boasts that Toyota “avoided investigation” on rusting Tacoma pickup trucks. The National Highway Traffic Safety Administration investigated the case in 2008 but closed it without finding a safety defect. Toyota agreed to buy back certain rusty pickups, inspect other and extend warranties. The document lists seven “Wins for Toyota & Industry,” including “favorable recall outcomes,” “secured safety rulemaking favorable to Toyota” and “vehicles not in climate legislation.” Another page lists “key safety issues,” including “Sudden acceleration on ES/Camry, Tacoma, LS etc.” In one passage, the document says Toyota “negotiated ‘equipment’ recall on Camry/ES re SA; saved $100M+, w/ no defect found.” NHTSA had launched an investigation in March 2007 over allegations that floor mats were interfering with accelerator pedals. Toyota told the government a month later that there was “no possibility of the pedal interference with the all-weather floor mat if it’s placed properly and secured.” By that August, the government had connected the problem to a dozen deaths and a survey of 600 Lexus owners discovered 10 percent reported sudden or unexpected acceleration. But the recall in September 2007 was limited to 55,000 Camry and ES350 vehicles to replace the floor mats. The 10-page internal presentation was dated July 6, 2009, less than two months before a high-speed crash near San Diego killed a California highway patrol officer and his family and reignited concerns over sudden acceleration in Toyotas. In October 2009, Toyota issued its largest-ever U.S. recall, involving about 4 million vehicles, over concerns of pedals getting stuck in floor mats. The presentation lists Yoshi Inaba, Toyota’s chief executive in North America, on its cover. Inaba is scheduled to testify before the House Energy and Commerce Committee on Wednesday, along with Toyota president Akio Toyoda and Jim Lentz, president of Toyota Motor Sales USA. The committee is also expected to hear from LaHood, NHTSA Administrator David Strickland and safety advocates. The Oversight Committee is holding a hearing Tuesday with Lentz, LaHood and Strickland. A Senate committee is planning a March 2 hearing. Toyota has said it will create an outside review of company operations, do a better job of responding to customer complaints and improve communication with federal officials. Separately, the government said Sunday it was already investigating reports of sudden acceleration in Toyota vehicles when the nation’s largest auto insurer shared complaints about the issue. The Transportation Department released documents showing that in December 2003 it began investigating 39 complaints of sudden acceleration involving 2002-03 Toyota Camry sedans. That was about three months before State Farm shared with NHTSA complaints of sudden acceleration in 2003-04 Lexus ES300s and 2002-04 Camrys. The document released by LaHood said the department had received allegations of 26 crashes and 4 injuries involving drivers complaining of their vehicles surging when backing up, pulling in and out of parking spaces and shifting gears. Reports of deaths in the U.S. connected to sudden acceleration in Toyota vehicles have surged in recent weeks, with the toll of deaths allegedly attributed to the problem reaching 34 since 2000, according to new consumer data gathered by the U.S. government.

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Billionaire Len Blavatnik Takes On JPMorgan Over $98 Million Subprime Loss

February 17, 2010

By Thom Weidlich and Linda Sandler Feb. 17 (Bloomberg) — Billionaire Len Blavatnik said JPMorgan Chase & Co. , his bank for 15 years, lost a tenth of the $1 billion he had it manage and, for redress, he did something he never did before: He sued. JPMorgan, the second-biggest U.S. bank , put twice as much money into risky mortgages as Blavatnik’s investment guidelines allowed while Jamie Dimon , the bank’s chief executive, was unloading such investments from its own books, according to the complaint. Blavatnik tried for a year to resolve the $98 million loss before suing in June in New York state court, he said. The dispute between the billionaire and the bank spotlights a common difference investors and their money managers have in the wake of a financial crisis that wiped out at least $1.73 trillion of wealth. Blavatnik blames the bank for his reverses; the bank blames the market. “This is my first litigation that I initiated,” Blavatnik said in an interview in his conference room overlooking the Plaza Hotel and Central Park in New York. “I made several attempts to reach a solution.” Both sides on Jan. 28 appealed a judge’s December order that tossed out two of Blavatnik’s claims while keeping two others alive. The case, which hinges on the definition of an “asset-backed security,” has begun the information-gathering, or discovery, phase. The suit is “an improper attempt” to “use the courts to collect reimbursement for investment losses that have resulted from an extraordinary and unprecedented economic crisis that no one could have anticipated,” New York-based JPMorgan said in its court papers. “The lawsuit is a classic example of pleading with the benefit of 20/20 hindsight.” Bank Comment Mary Sedarat , a JPMorgan spokeswoman, said the bank, which ranks behind Bank of America Corp. in assets, wouldn’t comment on the litigation. In the interview, Blavatnik, 52, detailed his rags-to- riches life before the dispute: He was born in Ukraine, grew up near Moscow and attended that city’s Transportation Engineering Institute. He and his parents emigrated to the U.S. in 1978. After earning a master’s degree in computer science from Columbia University in New York, he landed jobs at the Arthur Andersen accounting firm and Macy’s Inc. He also has a master’s from Harvard Business School in Cambridge, Massachusetts. Showing an entrepreneurial bent, he began investing in New York co-op apartments. Later, he took interests in privatized companies in Russia amid the fall of the Soviet Union. New York- based Access Industries Group , which he founded in 1986, owns energy, chemical, aluminum, media and real-estate companies. Soccer Fan Blavatnik, a soccer fan and World War II history buff, is now a U.S. citizen worth $7 billion, according to three people familiar with his finances. That includes a $1 billion gain made Jan. 22 as a minority owner of Moscow-based aluminum producer United Co. Rusal, which conducted an initial public offering in Hong Kong, the people said. He is also a suitor for Metro- Goldwyn-Mayer Inc., owner of a 4,100-film library with titles that include “Rocky,” according to two people familiar with the situation. “I think like any successful businessman he has strongly held views when he believes he’s right,” said Edgar M. Bronfman Jr ., chairman and chief executive officer of Warner Music Group Corp. , on whose board Blavatnik sat until 2008. “I know Len’s a highly principled guy and would not do something unless he thought he was in the right.” Bronfman said he wasn’t familiar with the JPMorgan lawsuit. Loaded Up Blavatnik says JPMorgan loaded his Access Industries fund with subprime and so-called Alt-A mortgages at the same time CEO Dimon was ridding his bank of such exposure. “One of the issues that we will be exploring in discovery is whether JPM sold the Access fund subprime securities that it owned and thereby reduced its subprime exposure,” said Richard I. Werder Jr ., a New York partner at Los Angeles-based Quinn Emanuel Urquhart Oliver & Hedges LLP, the 400-lawyer litigation firm Blavatnik hired to handle the case. JPMorgan said in court papers that the instruments it sold were different from those in the Access Industries account. Other companies have accused the bank in lawsuits of stuffing portfolios with too much subprime-mortgage risk as it rid itself of the securities. They include bond insurer Ambac Financial Group Inc. and New Millennium Homes LLC, a homebuilder in Calabasas, California. On Jan. 28, JPMorgan won dismissal of a similar suit brought by reinsurer Assured Guaranty Ltd., which has appealed that ruling. Investment Goals The investment objective for Blavatnik’s fixed-income portfolio that JPMorgan began managing in May 2006 was “to provide a high level of current income consistent with low volatility of principal,” according to the guidelines cited in his complaint. Access Industries said its units needed to tap the money for their operations. “Frankly, no one even said they were sorry — they said it was the market,” Blavatnik said of the $98 million loss. “It’s unfair. It’s not a way to treat one of your customers.” Justice Melvin L. Schweitzer of New York State Supreme Court in Manhattan threw out Blavatnik’s claims for negligence and breach of fiduciary duty. He refused to dismiss accusations of breach of contract and negligent misrepresentation. Schweitzer limited the contract claim to the question of whether JPMorgan exceeded the guidelines’ 20 percent cap on mortgage-backed securities. Those investments eventually topped 46 percent, according to the complaint. JPMorgan Disagrees JPMorgan, which earned more than $1 million managing the account, according to the complaint, disagrees. The guidelines listed asset-backed securities separately from mortgage-backed securities. The bank categorized certain instruments backed by real-estate collateral, such as home- equity loans or second-lien mortgages, as asset-backed, according to the complaint. Blavatnik argues that the real-estate instruments tagged as asset-backed are really mortgage securities. Because the bank’s statements didn’t break out the asset-backed securities into subgroups such as auto and student loans, Access Industries didn’t know the asset-backed category included exposure to mortgages, according to the complaint. The bank said in court papers that it’s an industry practice to classify certain instruments, such as Asset-Backed Securities Home Equity Loans, as asset-backed. It also said its reports to Access Industries identified which securities were so categorized. Alt-A Securities Alt-A securities “are a type of mortgage-backed security and thus capped by the guidelines at 20 percent,” JPMorgan wrote. Subprime securities “are a type of asset-backed security and thus capped by the guidelines at 40 percent,” it wrote. Subprime mortgages are loans made to people with poor credit scores. Alt-A mortgages are loans made to people with higher credit scores than subprime borrowers who still don’t meet underwriting criteria established by government-sponsored entities such as the Federal Home Loan Mortgage Corp., or Freddie Mac. According to JPMorgan, the “over-concentration” of mortgage-backed securities happened because Blavatnik made “large cash withdrawals.” For example, in February 2007 he took out $455 million, or 24 percent of the account’s book value, which brought the mortgage securities up to 20.8 percent of the portfolio from 13.2 percent, the bank said. “To the extent cash withdrawals skewed the allocation of the portfolio away from the guidelines, JPMorgan had a duty to adjust,” Access Industries argued in court papers. Rebalancing Impact Rebalancing the account by selling off mortgage securities would have generated losses, for which Blavatnik “would doubtlessly be suing,” the bank counterargued. JPMorgan stuffed the portfolio with risky mortgages even though it knew the real-estate market was ebbing, according to the complaint. In October 2006, Dimon, JPMorgan’s CEO, told William King, then its head of securitized products, that they needed to start selling its subprime-mortgage positions, Access Industries claimed in the complaint. By late 2006, JPMorgan had offloaded $12 billion in such mortgages that it had originated and was advising clients to follow suit, according to the complaint. Access Industries didn’t name the other clients. At the same time, the bank told Access Industries to increase its subprime exposure, Blavatnik says. By January 2007, the portfolio had 23 percent in “risky residential real-estate securities” and, by the end of that July, more than 46 percent, according to the complaint. First Losses That was the first month the portfolio began to show big losses, shrinking in value by more than $2.1 million, according to the complaint. JPMorgan calls the 46 percent figure “bogus,” a result of Access Industries’ combining mortgage- and asset-backed securities. It also says Dimon was referring to collateralized- debt obligations and structured-investment vehicles — different entities subject to different risks than the ones Access Industries held. “These statements therefore have nothing to do with the subprime or Alt-A mortgage-backed securities held in the account,” the bank wrote in court papers. By November 2007, Access Industries couldn’t withdraw cash it needed, and by April 2008 the portfolio had lost more than $106 million, $98 million of which it blames on the residential real-estate investments, according to the complaint. Access Industries said that when it started to complain about losses, JPMorgan told it the securities were backed by government agencies. Swift Correction JPMorgan said that was a “swiftly corrected error.” As of December 2007, only two of 52 collateralized-mortgage obligations, accounting for $9 million, or just over 1 percent of the portfolio, had government backing, Access Industries says. Blavatnik, while eschewing the filing of suits himself, has been involved in litigation and other disputes. In December, unsecured creditors of his bankrupt Lyondell Chemical Co. said he undercut them by settling a lawsuit they brought against bank lenders, including Citigroup Inc., three days before it was to be tried. The creditors accused Blavatnik and the lenders of crippling the company with $22 billion in debt when he bought it in 2007. The creditors, who called the $300 million settlement “woefully inadequate,” told a bankruptcy judge yesterday that they had secured a new accord to pay them $450 million. BP Dispute Blavatnik and three Russian-billionaire partners were embroiled in more than three months of public acrimony in 2008 when they accused BP Plc of treating their 50-50 joint venture in Russia like a subsidiary, ignoring their interests. The London-based oil company rejected those complaints. The dispute was resolved with the Dec. 1 resignation of Robert Dudley , the venture’s CEO, whom the billionaires accused of mismanagement. Vice President Maxim Barsky will replace him next year. In the interim, Mikhail Fridman , one of the four owners, will run the company. “I find him to be a very perceptive partner,” said Thomas H. Lee , head of New York buyout firm Lee Equity Partners. “He’s a guy who likes to invest for the future.” Blavatnik and Lee were partners in the purchase of Warner Music from Time Warner Inc. in 2004, when Lee was still with his Thomas H. Lee Partners LP. Lee said he and Blavatnik have teamed up on other private investments, which he declined to name. The case is CMMF LLC v. J.P. Morgan Investment Management Inc., 601924-09, New York State Supreme Court (Manhattan). To contact the reporters on this story: Thom Weidlich in New York at tweidlich@bloomberg.net ; Linda Sandler in New York at lsandler@bloomberg.net .

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Toyota Recall: 2 U.S. Plants To Be Shut Down Temporarily, SEE Which Factories Will Be Affected

February 16, 2010

WASHINGTON — The Transportation Department demanded documents related to Toyota’s massive recalls in the United States on Tuesday to find out if the automaker acted swiftly enough. Toyota, meanwhile, said it will idle production temporarily at Texas and Kentucky plants over concerns the recalls could lead to big stockpiles of unsold vehicles. The legal documents demand that Toyota tell the government when and how the company learned of the safety defects in millions of vehicles over the entrapment of gas pedals by floor mats and sticky accelerators. The documents were delivered to Toyota on Tuesday and the company must respond within 30-to-60 days or face fines. The intensifying government investigation of Toyota and production halts at its assembly plants represented another sign of the ripple effect the recall of 8.5 million vehicles has had on the world’s No. 1 automaker. Toyota faces separate probes by the Obama administration and Congress as it struggles to maintain its loyal customer base and its reputation for safety and quality. Toyota said it was halting production temporarily in San Antonio, Texas, and Georgetown, Ky., to address concerns that too many unsold vehicles may be building up at dealerships because of the large recalls. Company spokesman Mike Goss said the Texas plant, which builds the Tundra pickup truck, would take production breaks for the weeks of March 15 and April 12. The Kentucky plant, which makes the Camry, Avalon and Venza vehicles, plans to take a non-production day on Feb. 26 and may not build vehicles on three more days in March and April. Toyota employs 1,850 workers at the San Antonio plant and about 6,850 at the Georgetown facility. In late January, Toyota halted production of recalled brands throughout the United States for about a week. The information requests from the government, similar to a subpoena, follows criticism from consumer groups that the Transportation Department was too soft on automakers and failed to fine the companies or seek detailed information from them through subpoena powers. Transportation Secretary Ray LaHood has defended his department’s handling of the Toyota investigation, calling the Japanese automaker “a little safety deaf” about the safety problems. LaHood said the government urged Toyota to issue recalls and sent federal safety officials to Japan to warn company officials of the seriousness of the problems. Under federal law, automakers must notify the DOT’s National Highway Traffic Safety Administration within five days of determining that a safety defect exists and promptly conduct a recall. Government investigators are looking into whether Toyota discovered the problems during preproduction or post-production of the affected vehicles, whether their recalls covered all affected vehicles and whether the company learned of the problems through consumer complaints or internal tests. Federal officials are focusing on the two major issues behind the recalls – gas pedals that can become lodged on floor mats and pedal systems that are “sticky,” making it harder for drivers to press on the pedal or ease up on the gas. The information requests seek detailed timelines on when Toyota first became aware of the problems, how they handled complaints, how much they have paid out in warranty claims over pedal problems, internal communications about pedals and company officials involved in making decisions about the issue. NHTSA also wants to know how seriously Toyota considered the possibility that electronics of the gas pedal system may play a role. The company has said tests show that the electronics were not to blame. But federal safety officials want to know how Toyota dealt with complaints that might not be related to floor mats or sticking pedals. Kathleen DeMeter, the director of NHTSA’s Office of Defects Investigation Enforcement, wrote that the agency was “seeking to determine whether Toyota viewed the underlying defects too narrowly…without fully considering the broader issue of unintended acceleration and any associated safety-related defects that warrant recalls.” Congress is also investigating. The House Oversight and Government Reform Committee is holding a hearing on the Toyota recalls on Feb. 24 and the House Energy and Commerce Committee has scheduled a Feb. 25 hearing. Toyota Motor North America chief executive Yoshi Inaba, LaHood and NHTSA Administrator David Strickland are expected to testify at both meetings. The Senate Commerce, Science and Transportation Committee has scheduled a March 2 hearing but has not yet announced its witness list. Toyota has stepped up its lobbying ahead of the hearings by highlighting its workers and U.S. production. It flew production workers into Washington a day before a blizzard last week to highlight the company’s commitment to quality and safety. The company also received help from the governors of four states with Toyota plants – including Kentucky Gov. Steve Beshear – who called on Congress to be fair to the automaker. Toyota has been fixing vehicles under recall. Toyota Vice President Bob Carter told reporters at the National Automobile Dealers Association convention in Orlando, Fla., on Monday that the company had repaired about 500,000 of the 2.3 million vehicles recalled over a potentially sticky gas pedal. Toyota president Akio Toyoda is expected to answer questions in Japan Wednesday about the company’s recalls.

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American, British Airways Oneworld Alliance Wins U.S. Antitrust Approval

February 14, 2010

By John Hughes Feb. 13 (Bloomberg) — AMR Corp. ’s American Airlines and British Airways Plc won tentative U.S. government permission to deepen their trans-Atlantic alliance as they counter competition created by the 2008 lifting of flight restrictions between the U.S. and Europe. American Airlines, the second-largest U.S. carrier, and British Airways, Europe’s third-biggest, may jointly price, market and schedule international flights in their Oneworld alliance without fear of antitrust prosecution, the U.S. Transportation Department said today. As a condition of approval, American and British Airways must yield four pairs of takeoff and landing slots at London’s Heathrow Airport, Europe’s busiest, to rivals that would provide new U.S. service, the Transportation Department said. That’s a fourth of the 16 pairs of slots the department asked the carriers to give up in 2002, when an earlier request for antitrust immunity fell through. The decision “beggars belief,” said Richard Branson , president of Virgin Atlantic Airways Ltd., a British Airways competitor that had campaigned against the agreement, in an e- mailed statement. “Four slots pairs is a complete joke, and those responsible for this decision should hang their heads in shame.” The decision may become final after a 60-day comment period, the Transportation Department said. ‘Valuable Benefits’ “The potential benefits outweigh the potential harm,” Susan Kurland , the department’s assistant secretary for aviation and international affairs, wrote in the decision. “Oneworld could provide the traveling and shipping public with a wide range of valuable benefits, including lower fares.” Carriers restricted by law from cross-border mergers seek such grants of antitrust immunity to act more like single entities. Iberia Lineas Aereas de Espana SA , Finnair Oyj and Royal Jordanian Airlines are also part of the agreement, which is still being evaluated by the European Union. American and British Airways also won tentative approval for a separate joint venture with Iberia, according to the Transportation Department order. Airlines use each others’ routes to expand networks and compete with other large alliances. Oneworld is the third- largest global airline alliance behind Star and SkyTeam. Airlines Respond “We are pleased that DOT has agreed that it is in the best interest of the traveling public” for the carriers to have immunity, Will Ris , an American senior vice president, said in a statement. The “order is a key step in the process towards allowing Oneworld alliance members to cooperate more effectively,” British Airways said in a statement. American Airlines, based in Fort Worth, Texas, and British Airways of London won the immunity after two previous requests in 1997 and 2001 failed. A hurdle to past approval was removed with “Open Skies,” a treaty that ended a four-carrier monopoly on flights between the U.S. and Heathrow. British Airways, Virgin Atlantic, American Airlines and UAL Corp. ’s United Airlines had been the only carriers that could compete on flights between the U.S. and Heathrow, which are popular with business travelers willing to pay high fares. Since 2008, all carriers can pursue the routes. Justice Department The U.S. Justice Department advised the transportation agency in December that the American Airlines-British Airways alliance should gain antitrust immunity only if some takeoff and landing slots are surrendered or routes exempted from the partnership. The European Union said in a statement Feb. 1 that it was evaluating proposed antitrust remedies by the carriers aiming to alleviate concerns that the alliance would hurt competition. The Transportation Department in July approved antitrust immunity for Continental Airlines Inc. to coordinate flights abroad with United and eight other carriers as part of the Star Alliance, the world’s largest airline group. Northwest Airlines Corp. and Delta Air Lines Inc. , before they merged in 2008, also received antitrust immunity to collaborate with Air France-KLM , Italy’s Alitalia SpA and Ceske Aerolinie AS in SkyTeam, the second-largest alliance. An American-British Airways alliance with antitrust immunity would be “comparable and more competitive with the product and service offerings of Star Alliance and SkyTeam,” Kurland of the Transportation Department said. The European Commission said Oct. 2 it sent complaints to American Airlines, British Airways and Iberia concerning their agreement on coordinating operations and marketing. The Brussels-based commission said the deal may break EU rules on “restrictive business practices.” To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

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Toyota Said to Consider Warranties, Discounts to Lure Buyers After Recall

February 12, 2010

By Doron Levin Feb. 12 (Bloomberg) — Toyota Motor Corp. is considering longer warranties and cash discounts to woo U.S. consumers after recalls that forced the automaker to halt sales of eight models, dealer executives familiar with the talks said. Ideas being considered include warranties of as long as 10 years and rebates of thousands of dollars per vehicle that would start in March, said three executives from retailer groups with Toyota franchises. They declined to be identified because the discussions are private. “Toyota has got to be aggressive on this,” Mike Maroone , chief operating officer of AutoNation Inc. , the biggest U.S. retailer of the automaker’s vehicles, said in an interview today at an industry conference in Orlando, Florida. “Toyota has to put a wall around its customers.” Boosting incentives might help Toyota keep customers as it tries to recover from recalls linked to unwanted acceleration that included about 8 million vehicles worldwide. The Toyota City, Japan-based company’s U.S. sales fell 16 percent in January while the industry total rose 6.3 percent. Mike Michels , a spokesman at Toyota’s U.S. sales unit in Torrance, California, wouldn’t comment about any planned incentives. Maroone also declined to discuss details of the plan. Toyota’s American depositary receipts rose $1.05, or 1.4 percent, to $77.05 in New York Stock Exchange composite trading. The automaker has declined 8.4 percent this year. Like Hyundai In 1998 Hyundai Motor Co. offered an industry-leading 10- year warranty on the engine and transmission of its vehicles to neutralize consumer worries about durability. Hyundai said in 2006 it would continue the warranty at least through 2010. The U.S. House Energy and Commerce Committee, headed by California Democrat Henry Waxman , is among three congressional panels that have scheduled hearings on Toyota’s recalls and their handling by the Transportation Department. The hearings are scheduled for Feb. 24 through March 2. Toyota won’t offer a new warranty program until the hearings are complete, said one of the executives. To contact the reporters on this story: Doron Levin in Southfield, Michigan, at Dlevin5@bloomberg.net

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Regulators Hired by Toyota Helped Halt U.S. Safety Probes, Documents Show

February 11, 2010

Feb. 12 (Bloomberg) — Former regulators hired by Toyota Motor Corp. helped end at least four U.S. investigations of unintended acceleration by company vehicles in the last decade, warding off possible recalls, court and government records show. Christopher Tinto , vice president of regulatory affairs in Toyota’s Washington office, and Christopher Santucci, who works for Tinto, helped persuade the National Highway Traffic Safety Administration to end probes including those of 2002-2003 Toyota Camrys and Solaras, court documents show. Both men joined Toyota directly from NHTSA, Tinto in 1994 and Santucci in 2003. While all automakers have employees who handle NHTSA issues, Toyota may be alone among the major companies in employing former agency staffers to do so. Spokesmen for General Motors Co., Ford Motor Co. , Chrysler Group LLC and Honda Motor Co. all say their companies have no ex-NHTSA people who deal with the agency on defects. Possible links between Toyota and NHTSA may fuel mounting criticism of their handling of defects in Toyota and Lexus models tied to 19 deaths between 2004 and 2009. Three congressional committees have scheduled hearings on the recalls. “Toyota bamboozled NHTSA or NHTSA was bamboozled by itself,” said Joan Claybrook , an auto safety advocate and former NHTSA administrator in the Jimmy Carter administration. “I think there is going to be a lot of heat on NHTSA over this.” ‘Discussed Scope’ In one example of the Toyota aides’ role, Santucci testified in a Michigan lawsuit that the company and NHTSA discussed limiting an examination of unintended acceleration complaints to incidents lasting less than a second. “We discussed the scope” of the investigation, Santucci testified. “NHTSA’s concerns about the scope ultimately led to a decision by the agency to reduce that scope. You say it worked out well for Toyota, I think it worked out well for both the agency and Toyota.” In an e-mailed response to questions about possible influence of former NHTSA employees on agency Toyota decisions, Transportation Department spokeswoman Olivia Alair said NHTSA “currently has three open investigations involving Toyota and is monitoring two major safety recalls involving Toyota vehicles. NHTSA’s record reflects that safety is its singular priority.” Toyota City, Japan-based Toyota on Jan. 21 recalled 2.3 million U.S. cars and trucks with a potentially defective accelerator pedals. That followed Toyota’s decision in November to recall 4.48 million vehicles in the U.S. and Canada because floor mats might trap gas pedals while they were depressed. Since that recall, Toyota’s shares have dropped 17 percent, wiping out $27.9 billion in market capitalization. The stock rose 2.4 percent to 3,470 yen as of 12:45 p.m. in Tokyo today. Electronics Probe Combined worldwide recalls for pedals, floor mats and a software fix to adjust brakes on the Prius and other hybrid models rose to more than 8 million vehicles as of Feb. 8. “A recall is bad for any automaker because they have to admit there’s a defect in their vehicle and the repairs can be expensive,” said Rebecca Lindland , a forecaster at IHS Global Insight Inc. in Lexington, Massachusetts. In Toyota’s case, “the company has built itself on pillars of safety, quality and reliability,” she said. “A defect in their product is appalling to them, sort of unthinkable.” All four of the probes the Toyota aides helped end were into complaints that the unintended acceleration was caused by flaws in the vehicles’ electronic throttle systems. Toyota has denied that the system is a problem. U.S. Transportation Secretary Ray LaHood said on Feb. 3 that NHTSA is reviewing the electronics. Toyota spokeswoman Martha Voss declined to make Santucci and Tinto available for comment. ‘Highest Standards’ “Anything Mr. Tinto and Mr. Santucci did was in the interest of full disclosure, transparency and openness with regulators and safety experts,” Voss said in an e-mailed statement. “Their actions have been consistent with our efforts to maintain the highest professional and ethical standards in all of our legal and regulatory practices. Their paramount concern was for the safety of every single owner of one of our vehicles.” The NHTSA decisions on Toyota weren’t necessarily biased just because former agency people were involved, said Sidney Shapiro, a law professor at Wake Forest University in Winston- Salem, North Carolina. “I’m not sure regulators set out to say ‘I’m going to give a special deal to my old friends in the auto industry,’” he said. “But what happens is it just sort of deteriorates because these are the only people you talk to.” Opposite Sides There are no waiting-period requirements for moves to a company from its regulator for lower-level positions like those of Tinto and Santucci, said Allan Kam, former NHTSA senior enforcement attorney, who retired in 2000 after 25 years and said he was a “mentor” to Tinto at the agency. Santucci came to NHTSA after Kam’s retirement. “They’re not supposed to deal with the agency about a matter they dealt with at the agency,” he said. Neither former NHTSA employee testified to any such conflicts when asked by attorneys. Tinto, 46, came to Toyota after about four years at NHTSA. He hired Santucci from NHTSA in 2003, after the two met on opposite sides of the table in defect investigation cases, Santucci said in a deposition in the Michigan lawsuit. Santucci, 39, works on most of the automaker’s recall petitions, he said in the deposition. In last year’s floor-mat recall, Santucci said he helped write Toyota’s explanation of the remedy and had phone calls and meetings with NHTSA to describe the automaker’s plans. Cases Closed NHTSA opened eight investigations of unintended acceleration of Toyota vehicles from 2003 to 2010, according to Safety Research & Strategies Inc. , a Rehoboth, Massachusetts, group that gathers data from NHTSA and other sources for plaintiff’s attorneys and consumers. Three of the probes resulted in recalls for floor mats. Five were closed, meaning NHTSA found no evidence of a defect. In four of the five cases that were closed, Tinto and Santucci worked with NHTSA on Toyota’s responses to the consumer complaints the agency was investigating, agency documents show. The first closed case where NHTSA records show the involvement of Tinto and Santucci dealt with unanticipated acceleration by 2002 and 2003 Toyota Camrys and Solaras. The case, opened in March 2004, was the one Santucci testified about when he discussed limiting the scope of the probe. He did so in a deposition for a lawsuit filed on behalf of a Michigan woman who was killed in an April 2008 accident. ‘Blew Past’ Intersection In that lawsuit, the family of Guadalupe Alberto, 76, says she died when her 2005 Toyota Camry sped out of control and crashed into a tree. The lawsuit blames a defect in the electronic throttle control, said attorney Edgar Heiskell, who represents the Alberto family. “She blew past an intersection, witnesses saw her with both hands on the wheel,” Heiskell said. “She appeared to be standing on the brake while steering.” On March 3, 2004, the agency told Toyota it was opening a preliminary investigation to determine “if the throttle control system could be the cause of vehicle surge or unwanted acceleration.” Santucci and Tinto worked with Santucci’s former NHTSA co- workers, Scott Yon and Jeffrey Quandt, on the investigation, Santucci testified in his deposition. Yon and Quandt weren’t available for comment, Alair of the Transportation Department said. ‘Certainly, We Talked’ Twenty days after the probe began, NHTSA investigator Yon determined that the agency wouldn’t investigate “longer duration incidents involving uncontrollable acceleration where brake pedal application allegedly had no effect,” according to a document provided in the Michigan lawsuit. “But that was after talking with you and Mr. Tinto, correct?” Heiskell asked during the deposition. “Certainly, we talked to them in that time period,” Santucci said. NHSTA opted to limit the investigation to unintended acceleration events that lasted less than a second and those where the brake could be used to control the vehicle, or about 11 incidents with 5 crashes. In Toyota’s initial response, Tinto identified 114 similar cases, according to NHTSA documents. The case was closed July 22, 2004, agency records show. The agency decided to limit the cases to eliminate instances where a driver may have used the wrong pedal, the Transportation Department’s Alair said. No Social Relationship Santucci didn’t work on unintended acceleration cases involving Toyota while at NHTSA and doesn’t have a social relationship with former co-workers, he said in his deposition. The second NHTSA-Toyota case settled with the automaker’s input was a 2005 investigation requested by the owner of a 2002 Toyota Camry who reported two instances of unintended acceleration, one involving a crash. The owner cited eight other complaints from other Toyota drivers about similar episodes, without identifying the vehicle make and model. Toyota said dealer representatives investigated 59 of 100 vehicles whose owners complained. “In each of these vehicles, no evidence of a system or component failure was found and the vehicles were operating as designed,” Tinto wrote in a Nov. 15 letter to NHSTA. He also cited the findings that ended the Camry investigation in 2004. Water Corrosion NHTSA ended its probe of the 2002 Camry in January 2006, citing lack of evidence of a problem and the agency’s need to allocate “limited resources” to other investigations. Tinto also weighed in on a broader August 2006 complaint about the Camry, this time covering model years 2002 to 2006. In that case, Tinto wrote that Toyota had found no abnormality in the throttle actuator, or controller, which the petitioner blamed. In the defect investigation notice, NHSTA noted 3,546 cases where Toyota had replaced throttle actuators under warranty terms. The automaker did find evidence that returned actuators had corroded due to water intrusion caused by circumstances “such as driving through a flooded road, in the heavy rain or a hurricane” and a drain hose was modified to prevent future water intrusion, Tinto wrote in a Dec. 20, 2006, letter to the agency. NHTSA decided not to pursue the investigation, telling the owner “after reviewing the concerns raised by the petitioner and other information, NHTSA has concluded that further expenditure of the agency’s investigative issues raised by the petition in not warranted.” Tacoma Pickups In the fourth case, in 2008, Tinto told NHTSA the automaker couldn’t find enough evidence to support allegations of unintended acceleration in 2006-2007 Toyota Tacoma pickup trucks. The owner reported two incidents of unintended acceleration in his 2006 Tacoma and pointed to 32 similar complaints in the NHTSA database. Toyota itself received complaints of 478 incidents involving 431 Tacomas, for model years 2004 to 2008, that allegedly increased engine speed when the accelerator pedal wasn’t pushed, according to an April 25, 2008, memo by Tinto. Of those incidents, 49 resulted in a crash and 9 had injuries, he said. After a review, Tinto said he disagreed that the complaints to NHSTA “in and of themselves justify opening an investigation” and said media attention to driver complaints contributed to the allegations. “In Toyota’s view, neither the consumer complaints nor the field study indicate the existence of any defect in the subject vehicles, much less a safety-related defect,” he wrote. Request Denied NHTSA closed the investigation on Aug. 27, 2008, after an eight-month review, saying that “we have been unable to determine a cause related to throttle control or any underlying cause that gave rise to the complaint.” Tinto also may have helped thwart an attempt by the owner of a 2007 Lexus ES350 to reopen a NHTSA investigation that resulted in a 55,000-unit recall for floor mat problems. The owner, Jeffrey Pepski of Plymouth, Minnesota, said he experienced an unintended acceleration incident in February 2009 and wanted the agency to probe other possible causes, such as the electronic throttle. Tinto’s response to NHTSA last May said the incident was Pepski’s fault because his floor mat wasn’t secured and that there was no need for a new investigation because the “limited number of such incidents does not suggest the existence of a safety-related defect in these vehicles.” Seeking Toyoda U.S. Transportation Department, NHTSA and Toyota officials have been asked to appear on Feb. 24 before the House Oversight and Government Reform Committee and Feb. 25 before the House Energy and Commerce Committee to talk about the recalls. The Senate Commerce Committee plans a hearing March 2. “At the heart of the matter is determining whether Toyota acted as quickly as possible to notify regulators there was a problem and whether or not government acted as quickly and diligently as possible to investigate and act,” Representative Darrell Issa , a California Republican and ranking member of the House Committee on Oversight and Government Reform, said in a statement this week. Issa called on Toyota President Akio Toyoda to appear before the Senate panel. “I would fully support the issuance of a subpoena” if Toyoda doesn’t cooperate, Issa said in a statement yesterday. For Related News and Information: Legal news about Toyota: 7203 JT TCNI LAW Automaker earnings stories: TNI ERN AUT Toyota financial analysis: 7203 JT FA AUTO U.S. auto-industry fundamentals: IFS3

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Regulators Hired by Toyota Helped Halt Probes, Documents Show

February 11, 2010

Feb. 12 (Bloomberg) — Former regulators hired by Toyota Motor Corp. helped end at least four U.S. investigations of unintended acceleration by company vehicles in the last decade, warding off possible recalls, court and government records show. Christopher Tinto, vice president of regulatory affairs in Toyota’s Washington office, and Christopher Santucci, who works for Tinto, helped persuade the National Highway Traffic Safety Administration to end probes including those of 2002-2003 Toyota Camrys and Solaras, court documents show. Both men joined Toyota directly from NHTSA, Tinto in 1994 and Santucci in 2003. While all automakers have employees who handle NHTSA issues, Toyota may be alone among the major companies in employing former agency staffers to do so. Spokesmen for General Motors Co., Ford Motor Co. , Chrysler Group LLC and Honda Motor Co. all say their companies have no ex-NHTSA people who deal with the agency on defects. Possible links between Toyota and NHTSA may fuel mounting criticism of their handling of defects in Toyota and Lexus models tied to 19 deaths between 2004 and 2009. Three congressional committees have scheduled hearings on the recalls. “Toyota bamboozled NHTSA or NHTSA was bamboozled by itself,” said Joan Claybrook , an auto safety advocate and former NHTSA administrator in the Jimmy Carter administration. “I think there is going to be a lot of heat on NHTSA over this.” ‘Discussed Scope’ In one example of the Toyota aides’ role, Santucci testified in a Michigan lawsuit that the company and NHTSA discussed limiting an examination of unintended acceleration complaints to incidents lasting less than a second. “We discussed the scope” of the investigation, Santucci testified. “NHTSA’s concerns about the scope ultimately led to a decision by the agency to reduce that scope. You say it worked out well for Toyota, I think it worked out well for both the agency and Toyota.” In an e-mailed response to questions about possible influence of former NHTSA employees on agency Toyota decisions, Transportation Department spokeswoman Olivia Alair said NHTSA “currently has three open investigations involving Toyota and is monitoring two major safety recalls involving Toyota vehicles. NHTSA’s record reflects that safety is its singular priority.” Toyota City, Japan-based Toyota on Jan. 21 recalled 2.3 million U.S. cars and trucks with a potentially defective accelerator pedals. That followed Toyota’s decision in November to recall 4.48 million vehicles in the U.S. and Canada because floor mats might trap gas pedals while they were depressed. Electronics Probe Combined worldwide recalls for pedals, floor mats and a software fix to adjust brakes on the Prius and other hybrid models rose to more than 8 million vehicles as of Feb. 8. “A recall is bad for any automaker because they have to admit there’s a defect in their vehicle and the repairs can be expensive,” said Rebecca Lindland , a forecaster at IHS Global Insight Inc. in Lexington, Massachusetts. In Toyota’s case, “the company has built itself on pillars of safety, quality and reliability,” she said. “A defect in their product is appalling to them, sort of unthinkable.” All four of the probes the Toyota aides helped end were into complaints that the unintended acceleration was caused by flaws in the vehicles’ electronic throttle systems. Toyota has denied that the system is a problem. U.S. Transportation Secretary Ray LaHood said on Feb. 3 that NHTSA is reviewing the electronics. Toyota spokeswoman Martha Voss declined to make Santucci and Tinto available for comment. ‘Highest Standards’ “Anything Mr. Tinto and Mr. Santucci did was in the interest of full disclosure, transparency and openness with regulators and safety experts,” Voss said in an e-mailed statement. “Their actions have been consistent with our efforts to maintain the highest professional and ethical standards in all of our legal and regulatory practices. Their paramount concern was for the safety of every single owner of one of our vehicles.” The NHTSA decisions on Toyota weren’t necessarily biased just because former agency people were involved, said Sidney Shapiro, a law professor at Wake Forest University in Winston- Salem, North Carolina. “I’m not sure regulators set out to say ‘I’m going to give a special deal to my old friends in the auto industry,’” he said. “But what happens is it just sort of deteriorates because these are the only people you talk to.” Opposite Sides There are no waiting-period requirements for moves to a company from its regulator for lower-level positions like those of Tinto and Santucci, said Allan Kam, former NHTSA senior enforcement attorney, who retired in 2000 after 25 years and said he was a “mentor” to Tinto at the agency. Santucci came to NHTSA after Kam’s retirement. “They’re not supposed to deal with the agency about a matter they dealt with at the agency,” he said. Neither former NHTSA employee testified to any such conflicts when asked by attorneys. Tinto, 46, came to Toyota after about four years at NHTSA. He hired Santucci from NHTSA in 2003, after the two met on opposite sides of the table in defect investigation cases, Santucci said in a deposition in the Michigan lawsuit. Santucci, 39, works on most of the automaker’s recall petitions, he said in the deposition. In last year’s floor-mat recall, Santucci said he helped write Toyota’s explanation of the remedy and had phone calls and meetings with NHTSA to describe the automaker’s plans. Cases Closed NHTSA opened eight investigations of unintended acceleration of Toyota vehicles from 2003 to 2010, according to Safety Research & Strategies Inc. , a Rehoboth, Massachusetts, group that gathers data from NHTSA and other sources for plaintiff’s attorneys and consumers. Three of the probes resulted in recalls for floor mats. Five were closed, meaning NHTSA found no evidence of a defect. In four of the five cases that were closed, Tinto and Santucci worked with NHTSA on Toyota’s responses to the consumer complaints the agency was investigating, agency documents show. The first closed case where NHTSA records show the involvement of Tinto and Santucci dealt with unanticipated acceleration by 2002 and 2003 Toyota Camrys and Solaras. The case, opened in March 2004, was the one Santucci testified about when he discussed limiting the scope of the probe. He did so in a deposition for a lawsuit filed on behalf of a Michigan woman who was killed in an April 2008 accident. ‘Blew Past’ Intersection In that lawsuit, the family of Guadalupe Alberto, 76, says she died when her 2005 Toyota Camry sped out of control and crashed into a tree. The lawsuit blames a defect in the electronic throttle control, said attorney Edgar Heiskell, who represents the Alberto family. “She blew past an intersection, witnesses saw her with both hands on the wheel,” Heiskell said. “She appeared to be standing on the brake while steering.” On March 3, 2004, the agency told Toyota it was opening a preliminary investigation to determine “if the throttle control system could be the cause of vehicle surge or unwanted acceleration.” Santucci and Tinto worked with Santucci’s former NHTSA co- workers, Scott Yon and Jeffrey Quandt, on the investigation, Santucci testified in his deposition. Yon and Quandt weren’t available for comment, Alair of the Transportation Department said. ‘Certainly, We Talked’ Twenty days after the probe began, NHTSA investigator Yon determined that the agency wouldn’t investigate “longer duration incidents involving uncontrollable acceleration where brake pedal application allegedly had no effect,” according to a document provided in the Michigan lawsuit. “But that was after talking with you and Mr. Tinto, correct?” Heiskell asked during the deposition. “Certainly, we talked to them in that time period,” Santucci said. NHSTA opted to limit the investigation to unintended acceleration events that lasted less than a second and those where the brake could be used to control the vehicle, or about 11 incidents with 5 crashes. In Toyota’s initial response, Tinto identified 114 similar cases, according to NHTSA documents. The case was closed July 22, 2004, agency records show. The agency decided to limit the cases to eliminate instances where a driver may have used the wrong pedal, the Transportation Department’s Alair said. No Social Relationship Santucci didn’t work on unintended acceleration cases involving Toyota while at NHTSA and doesn’t have a social relationship with former co-workers, he said in his deposition. The second NHTSA-Toyota case settled with the automaker’s input was a 2005 investigation requested by the owner of a 2002 Toyota Camry who reported two instances of unintended acceleration, one involving a crash. The owner cited eight other complaints from other Toyota drivers about similar episodes, without identifying the vehicle make and model. Toyota said dealer representatives investigated 59 of 100 vehicles whose owners complained. “In each of these vehicles, no evidence of a system or component failure was found and the vehicles were operating as designed,” Tinto wrote in a Nov. 15 letter to NHSTA. He also cited the findings that ended the Camry investigation in 2004. Water Corrosion NHTSA ended its probe of the 2002 Camry in January 2006, citing lack of evidence of a problem and the agency’s need to allocate “limited resources” to other investigations. Tinto also weighed in on a broader August 2006 complaint about the Camry, this time covering model years 2002 to 2006. In that case, Tinto wrote that Toyota had found no abnormality in the throttle actuator, or controller, which the petitioner blamed. In the defect investigation notice, NHSTA noted 3,546 cases where Toyota had replaced throttle actuators under warranty terms. The automaker did find evidence that returned actuators had corroded due to water intrusion caused by circumstances “such as driving through a flooded road, in the heavy rain or a hurricane” and a drain hose was modified to prevent future water intrusion, Tinto wrote in a Dec. 20, 2006, letter to the agency. NHTSA decided not to pursue the investigation, telling the owner “after reviewing the concerns raised by the petitioner and other information, NHTSA has concluded that further expenditure of the agency’s investigative issues raised by the petition in not warranted.” Tacoma Pickups In the fourth case, in 2008, Tinto told NHTSA the automaker couldn’t find enough evidence to support allegations of unintended acceleration in 2006-2007 Toyota Tacoma pickup trucks. The owner reported two incidents of unintended acceleration in his 2006 Tacoma and pointed to 32 similar complaints in the NHTSA database. Toyota itself received complaints of 478 incidents involving 431 Tacomas, for model years 2004 to 2008, that allegedly increased engine speed when the accelerator pedal wasn’t pushed, according to an April 25, 2008, memo by Tinto. Of those incidents, 49 resulted in a crash and 9 had injuries, he said. After a review, Tinto said he disagreed that the complaints to NHSTA “in and of themselves justify opening an investigation” and said media attention to driver complaints contributed to the allegations. “In Toyota’s view, neither the consumer complaints nor the field study indicate the existence of any defect in the subject vehicles, much less a safety-related defect,” he wrote. Request Denied NHTSA closed the investigation on Aug. 27, 2008, after an eight-month review, saying that “we have been unable to determine a cause related to throttle control or any underlying cause that gave rise to the complaint.” Tinto also may have helped thwart an attempt by the owner of a 2007 Lexus ES350 to reopen a NHTSA investigation that resulted in a 55,000-unit recall for floor mat problems. The owner, Jeffrey Pepski of Plymouth, Minnesota, said he experienced an unintended acceleration incident in February 2009 and wanted the agency to probe other possible causes, such as the electronic throttle. Tinto’s response to NHTSA last May said the incident was Pepski’s fault because his floor mat wasn’t secured and that there was no need for a new investigation because the “limited number of such incidents does not suggest the existence of a safety-related defect in these vehicles.” Seeking Toyoda U.S. Transportation Department, NHTSA and Toyota officials have been asked to appear on Feb. 24 before the House Oversight and Government Reform Committee and Feb. 25 before the House Energy and Commerce Committee to talk about the recalls. The Senate Commerce Committee plans a hearing March 2. “At the heart of the matter is determining whether Toyota acted as quickly as possible to notify regulators there was a problem and whether or not government acted as quickly and diligently as possible to investigate and act,” Representative Darrell Issa , a California Republican and ranking member of the House Committee on Oversight and Government Reform, said in a statement this week. Issa called on Toyota President Akio Toyoda to appear before the Senate panel. “I would fully support the issuance of a subpoena” if Toyoda doesn’t cooperate, Issa said in a statement yesterday. For Related News and Information: Legal news about Toyota: 7203 JT TCNI LAW Automaker earnings stories: TNI ERN AUT Toyota financial analysis: 7203 JT FA AUTO U.S. auto-industry fundamentals: IFS3

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Washington Closes Down, Flights Canceled in Northeast as Snowstorm Looms

February 9, 2010

By Brian K. Sullivan Feb. 9 (Bloomberg) — The U.S. House of Representatives has canceled votes for the week, hundreds of flights have been scrubbed and Amtrak still isn’t running a full schedule as a “paralyzing” storm packing as much as 20 inches of snow bears down on the East Coast. The storm, the second for the Washington-Baltimore area in less than a week, will be accompanied by cold and winds gusting from 35 to 55 mph (56 to 88 kph) in the Northeast, forecasters said. Ten to 20 inches could fall in Washington, where federal offices were closed for a second full day today, while 8 to 13 are forecast for New York. “Unfortunately, everything is coming together for another paralyzing winter storm event from D.C. up to Philadelphia, but this time it won’t spare New York City,” said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. “This will probably shut down the East Coast cities for the next couple of days. This is definitely going to be one for the record books.” Heating oil advanced on speculation demand will increase as temperatures plunge in the U.S. Northeast, which consumes four- fifths of home heating fuel. Contracts for March delivery gained 5.18 cents, or 2.7 percent, to settle at $1.9373 a gallon on the New York Mercantile Exchange. Heating demand in Washington and Baltimore was 16 percent higher than normal last week and New York was up 6 percent, David Salmon , a forecaster for Weather Derivatives of Belton, Missouri, said in a note to clients. Amtrak Schedules Disrupted Amtrak canceled 14 of its Acela trains between Boston and Washington, as well as more than 20 out of New York, Chicago and other Northeast cities, according to a statement. The national passenger railroad hasn’t run a full schedule since last week’s storm, said Cliff Cole , a spokesman. The biggest air carriers including UAL Corp. ’s United Airlines and Delta Air Lines Inc. canceled at least 1,300 flights today in cities including Washington, New York and Chicago. Spokesmen for the airlines said more flights would likely be scrubbed tonight. US Airways Group Inc. halted 1,300 flights for tomorrow, or 42 percent of its entire schedule, while Delta said it cut “several hundred” and AMR Corp. ’s American Airlines trimmed 120. Continental Airlines Inc. said it will suspend all 400 of its Newark flights tomorrow. Heavy snow, from 10 to 20 inches and as much as 24 inches in some isolated areas, may fall from Washington to New York, Rouiller said in a telephone interview from Berwyn, Pennsylvania. Boston is likely to receive 6 to 10 inches, along with Chicago and Detroit, he said. Winter Records “The snow we are predicting for this will lift places like Philadelphia over the record for snowfall over the course of any winter,” Rouiller said. Washington is likely to get about 10 inches tonight and tomorrow, while the snowfall will deepen closer to Baltimore , where 20 inches are possible, said Jared Klein, a weather service meteorologist in Sterling, Virginia. A system moving in from the west is forecast to spark the creation of a major low pressure system off the mid-Atlantic coast that will drive the snow northward and into the cities, Rouiller said. “They call this a bomb in the meteorological community,” Rouiller said by telephone. Washington Snarled A winter storm warning was posted for Washington starting at noon today. Federal government offices remain shut, after more than 20 inches fell on parts of the city over the weekend, the Office of Personnel Management said in an e-mailed statement. The U.S. Senate won’t meet tomorrow because of the storm, Senate Democratic Leader Harry Reid announced on the floor today. The House has canceled votes for the rest of the week. In the New York City area, a winter storm warning goes into effect at midnight. The snow is expected to be heavy at times before tapering off tomorrow evening, the National Weather Service in Upton, New York, said. New York Mayor Michael Bloomberg said public schools will close tomorrow so parents don’t have to face half-day cancellations. “The forecast is for a much worse situation with blowing snow and possibly blizzard conditions by mid-afternoon tomorrow and we don’t want to subject students to those conditions as they travel home,” said the mayor, founder and majority owner of Bloomberg News parent Bloomberg LP. Watches, warnings and advisories stretch across much of the eastern half of the U.S. from Minnesota to New Hampshire and south to Kentucky, according to the weather service. Snow Costs In New York City, 365 plow-equipped salt-spreaders will begin operating at first snowfall tonight, said Kathy Dawkins , a spokeswoman for the Sanitation Department . The plan calls for some 1,600 plows to start work when 2 inches pile up. Snow removal usually costs the city about $1 million per inch of accumulation, Dawkins said. Delaware has spent $3.9 million since Jan. 30, which almost depletes its snow removal budget of $4.1 million, said Jim Westhoff, spokesman for the state Department of Transportation. If Delaware goes over budget from the storm, it will automatically shift funds from the state’s Transportation Trust Fund. “At no time are we ever out of money for snow removal and to keep our roads safe,” Westhoff said. Alpha Natural Resources Inc. , the third-largest U.S. coal company, said today that its Cumberland operation in Waynesburg, Pennsylvania, has been idled for three days because of power disruptions. The mine has capacity to produce about 7.3 million tons of coal annually, according to the company’s Web site. Dominion Virginia Power has just about restored all power to customers who lost it during the last storm and are now positioning crews to be ready for the next, said Karl Neddenien , a company spokesman in Richmond, where snow has begun to fall. “This is quite a string of challenges and we are prepared, but we would like to see some blue sky for a while too,” Neddenien said by telephone. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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AIG’s Udvar-Hazy Retires as Plane-Leasing CEO Amid Effort to Sell Business

February 5, 2010

By Susanna Ray Feb. 5 (Bloomberg) — American International Group Inc .’s Steven Udvar-Hazy stepped down as chief executive officer of the bailed-out insurer’s plane-leasing unit he founded 37 years ago as the parent company prepares to sell jets to help repay debt. John Plueger , president and chief operating officer, will take over today as acting CEO of International Lease Finance Corp. , AIG said in a statement last night. Udvar-Hazy, who sold the company to AIG in 1990, gave up the chairmanship of the unit to AIG board member Douglas Steenland in December. ILFC, based in Los Angeles, has been unable to tap its usual sources of funding since the insurer’s bailout, forcing AIG to prop up the unit with a $1.7 billion credit line in March and $2 billion in October. Udvar-Hazy was in talks to buy as much as a $4.5 billion chunk of ILFC’s fleet to start a new firm, people familiar with the matter said in October. “We anticipate selling some ILFC assets in the future,” AIG CEO Robert H. Benmosche said in the statement. “We continue to review other options, including accessing the capital markets through secured debt financing.” Udvar-Hazy, 63, and Plueger, 55, declined to comment. Mark Herr , a spokesman for New York-based AIG, also wouldn’t discuss the matter. Private-equity firms Onex Corp. and Greenbriar Equity Group LLC backed Udvar-Hazy in his bid to start a new company, the people said. ILFC has about 1,000 aircraft in its fleet valued at more than $44 billion. An Outsider “Maybe Steve has to actually step out and become an outsider before he can step back in to what’s a new, recast organization,” said George Hamlin , president of Fairfax, Virginia-based Hamlin Transportation Consulting. “There’s a very strong chance that Steve will stay in the business, but maybe he’s got something else entirely in his mind.” AIG is selling assets to repay a $182.3 billion government rescue. The company has struck deals to raise more than $12 billion, divesting a U.S. auto insurer, an equipment guarantor and a Japanese office tower. MetLife Inc., the biggest U.S. life insurer, is in talks to buy a non-U.S. life unit from AIG. ILFC, the biggest customer for both Boeing Co. and Airbus SAS , has more than $4 billion of debt maturing in the first nine months of 2010. It was cut to the lowest investment-grade level by Standard & Poor’s on Jan. 25 on the prospect the insurer may take “several years” to sell the business. Moody’s Investors Service cut the company to junk in December on concern that AIG may cut off funding this year. What’s Next? “The factors that were beating up most of ILFC’s portfolio were taking place with or without him,” said Richard Aboulafia , an analyst at the Teal Group, a Fairfax, Virginia-based aviation consulting firm. “What he does next will have an impact on perceptions of ILFC’s value.” The uncertainty around ILFC’s ownership and financing prevented the company from placing any orders last year and weighed on sales at Airbus and Boeing. In prior slumps in air travel, leasing companies increased their pace of buying as airlines scaled back. As of Sept. 30 , ILFC had contracts to buy 125 aircraft from the two planemakers through 2019 with a purchase price of $14 billion. The company had about $31 billion in total debt at the end of the third quarter. Plueger has worked at ILFC for 23 years and has been president and COO since 1995, responsible for worldwide sales and marketing efforts and relationships with the manufacturers, AIG said. Steenland, who will remain non-executive chairman, was CEO of Northwest Airlines Inc. until the carrier was bought by Delta Air Lines Inc. in October 2008, and became a director of AIG in June 2009. Udvar-Hazy is among more than 50 AIG managers to leave after the 2008 bailout. Edmund Tse stepped down in 2009 as a senior vice chairman after 48 years with the firm. Matthew Winter was named by Allstate Corp. in October to run its life insurance business after being AIG’s vice chairman of transition planning and administration. Kevin Kelley left AIG in 2008 to become CEO of Ironshore Inc. To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

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Toyota May Recall New Prius After Japan Orders Probe Into Brake Complaints

February 3, 2010

By Makiko Kitamura and Tetsuya Komatsu Feb. 4 (Bloomberg) — Toyota Motor Corp. may recall its new Prius hybrid model in Japan after the government ordered the company to investigate brake-related complaints on the car. “The possibility of a recall is not zero,” spokesman Takanori Yokoi in Tokyo said today by phone. The company is considering measures that may include a recall, he said. A recall of the world’s best-selling hybrid car would bring the crisis to Toyota’s home market and tarnish the reputation of what President Akio Toyoda has called the company’s flagship model. The carmaker is already reeling from recalls approaching 8 million units worldwide due to cases of unintended acceleration. “This could be fatal for Toyota,” said Yasuhiro Matsumoto , a Shinsei Securities Co. analyst in Tokyo. “Toyota’s got a global problem and it’s not a problem of local suppliers.” Toyota is examining 77 reports in Japan and eight in North America, Yokoi said. Driver complaints include brake failure or weaker braking while driving on bumpy roads, according to a list posted on the Web site of Japan’s Transport Ministry. Toyota shares fell as much as 4.7 percent to 3,240 yen in Tokyo, to the lowest level in almost 11 months. U.S. Agency The U.S. National Highway Traffic Safety Administration also has received a number of complaints about a possible defect, the agency said yesterday. “There is a small computer inside the brake and Toyota is making adjustments and improvements,” Economy Minister Masayuki Naoshima said yesterday after meeting with Toyota Executive Vice President Shinichi Sasaki , according to comments broadcast on NHK. “For cars currently being built at the factory, measures have already been taken.” Toyota was ordered by Japan’s government to investigate brake-related problems in August, Shunsuke Miyaoka , an official in the Transportation Ministry’s recall division, said yesterday. The public scrutiny in Japan may undermine the company’s efforts to reassure consumers amid a global recall on other models involving almost 8 million vehicles globally. “Our dealers have received a lot more complaints, but we are pursuing the root cause and we will be considering what improvement measures we will take for our customers,” Sasaki said yesterday in remarks broadcast on the Fuji News Network. Toyota’s third-generation Prius, introduced last year, is made in Japan and was the nation’s top-selling model last year. It is not among vehicles whose sales were halted in the U.S. Sasaki also met with Japan’s Transport Minister Seiji Maehara yesterday, Yokoi said. Outside Japan Outside of Japan, the company is recalling at least 7.8 million vehicles. The carmaker is fixing accelerator pedals on models including the top-selling Camry and Corolla models. That recall covers 2.57 million vehicles in the U.S. and Canada. It also includes 1.71 million in Europe, 80,000 in China, and 180,000 in Latin America, Africa and the Middle East, Toyota’s Sasaki told reporters earlier this week. Separately, Toyota is recalling 5.35 million vehicles in the U.S., because of floor mats that could jam pedals. Covered vehicles include model years 2004-2009 Prius hybrid, 2007-2010 Lexus ES350, 2006-2010 Lexus IS250 and 2006-2010 Lexus IS350. Toyota has said 2.1 million cars are covered by both safety actions. To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net ; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net

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Toyota May Recall New Prius After Japan Orders Probe Into Brake Complaints

February 3, 2010

By Makiko Kitamura and Tetsuya Komatsu Feb. 4 (Bloomberg) — Toyota Motor Corp. may recall its new Prius hybrid model in Japan after the government ordered the company to investigate brake-related complaints on the car. “The possibility of a recall is not zero,” spokesman Takanori Yokoi in Tokyo said today by phone. The company is considering measures that may include a recall, he said. A recall of the world’s best-selling hybrid car would bring the crisis to Toyota’s home market and tarnish the reputation of what President Akio Toyoda has called the company’s flagship model. The carmaker is already reeling from recalls approaching 8 million units worldwide due to cases of unintended acceleration. “This could be fatal for Toyota,” said Yasuhiro Matsumoto , a Shinsei Securities Co. analyst in Tokyo. “Toyota’s got a global problem and it’s not a problem of local suppliers.” Toyota is examining 77 reports in Japan and eight in North America, Yokoi said. Driver complaints include brake failure or weaker braking while driving on bumpy roads, according to a list posted on the Web site of Japan’s Transport Ministry. Toyota shares fell as much as 4.7 percent to 3,240 yen in Tokyo, to the lowest level in almost 11 months. U.S. Agency The U.S. National Highway Traffic Safety Administration also has received a number of complaints about a possible defect, the agency said yesterday. “There is a small computer inside the brake and Toyota is making adjustments and improvements,” Economy Minister Masayuki Naoshima said yesterday after meeting with Toyota Executive Vice President Shinichi Sasaki , according to comments broadcast on NHK. “For cars currently being built at the factory, measures have already been taken.” Toyota was ordered by Japan’s government to investigate brake-related problems in August, Shunsuke Miyaoka , an official in the Transportation Ministry’s recall division, said yesterday. The public scrutiny in Japan may undermine the company’s efforts to reassure consumers amid a global recall on other models involving almost 8 million vehicles globally. “Our dealers have received a lot more complaints, but we are pursuing the root cause and we will be considering what improvement measures we will take for our customers,” Sasaki said yesterday in remarks broadcast on the Fuji News Network. Toyota’s third-generation Prius, introduced last year, is made in Japan and was the nation’s top-selling model last year. It is not among vehicles whose sales were halted in the U.S. Sasaki also met with Japan’s Transport Minister Seiji Maehara yesterday, Yokoi said. Outside Japan Outside of Japan, the company is recalling at least 7.8 million vehicles. The carmaker is fixing accelerator pedals on models including the top-selling Camry and Corolla models. That recall covers 2.57 million vehicles in the U.S. and Canada. It also includes 1.71 million in Europe, 80,000 in China, and 180,000 in Latin America, Africa and the Middle East, Toyota’s Sasaki told reporters earlier this week. Separately, Toyota is recalling 5.35 million vehicles in the U.S., because of floor mats that could jam pedals. Covered vehicles include model years 2004-2009 Prius hybrid, 2007-2010 Lexus ES350, 2006-2010 Lexus IS250 and 2006-2010 Lexus IS350. Toyota has said 2.1 million cars are covered by both safety actions. To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net ; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net

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Toyota Electronics Said to Be a Focus of U.S. Probe

February 3, 2010

By Angela Greiling Keane and Margaret Cronin Fisk Feb. 3 (Bloomberg) — Electronic throttle systems are under review by U.S. safety officials as a possible cause of sudden acceleration in Toyota Motor Corp. vehicles, as alleged in at least seven lawsuits . The agency is also examining the electronics of other automakers in response to complaints, Transportation Secretary Ray LaHood said today. Among the questions is whether electromagnetic interference from power lines could affect the computerized systems that help run today’s vehicles, LaHood told reporters in Washington. Toyota has said it ruled out electronics as a cause of sudden acceleration that has resulted in recalls of millions of its cars and trucks. The company’s credibility would be further damaged if it is proved wrong, said Rebecca Lindland , an analyst at IHS Global Insight. “Consumers would view that very negatively,” Lindland, based in Lexington, Massachusetts, said in a phone interview yesterday. “That group of diehard Toyota loyalists is being chipped away at as each new recall comes out.” The government is also considering civil penalties against Toyota, the world’s largest automaker, for its handling of the recalls, according to an official at the Transportation Department, who asked not to be identified while a review of Toyota’s actions continues. Shares Decline LaHood said today he will phone Toyota President Akio Toyoda to be certain his agency “pushed them over the line” so that Toyota is doing all it can to resolve defects. Separately, the Toyota City, Japan-based carmaker has been ordered by Japan’s government to investigate brake-related problems with the latest version of its Prius hybrid car, the nation’s transportation ministry said today. The ministry said it has received 14 complaints related to Prius brakes. It has also asked other carmakers to look into similar reports. Such requests are “routine,” said Masaya Ota , an official in the ministry’s recall division. Toyota’s American depositary receipts, each representing two ordinary shares, fell $3.06, or 3.9 percent, to $75.12 at 10:01 a.m. in New York Stock Exchange composite trading. The ADRs are down about 18 percent in the past two weeks. Toyota began shipping steel plates to U.S. dealers on Feb. 1 as a fix for sticky gas pedals that have caused the carmaker to recall about 2.57 million vehicles in the U.S. and Canada. “We know what the problem is,” Jim Lentz , Toyota’s president of U.S. sales, said in an interview on Bloomberg Television on Feb. 1. “We have the fix.” Recalled Models The U.S. recall for pedals that stick applies to model years 2009-2010 RAV4, 2010 Highlander and 2008-2010 Sequoia sport-utility vehicles, 2009-2010 Corolla and 2005-2010 Avalon sedans, some 2007-2010 Camry sedans, 2009-2010 Matrix hatchbacks, and 2007-2010 Tundra pickups, according to Toyota. Toyota also has recalled and plans to fix about 5.6 million Toyota- and Lexus-brand cars and trucks in the U.S. and Canada because of floor mats that might trap gas pedals and cause vehicles to speed out of control. Some Toyota brand vehicles are affected by both types of recalls. The investigation of the Prius in Japan could undermine sales in Toyota’s home market , where it hasn’t recalled any vehicles due to the sudden-acceleration issue. The model was Japan’s best-selling vehicle in 2009. “The Prius is Toyota’s flagship model, its key to the future,” said Ashvin Chotai , managing director of London-based Intelligence Automotive Asia Ltd., a consulting company. “If that model gets tainted, that would suggest Toyota’s crisis has moved on to the next level.” Lawsuit Allegations In the U.S., the National Highway Traffic Safety Administration, part of the Transportation Department, hadn’t found evidence as of Feb. 1 that anything other than sticky or trapped accelerators caused unintended acceleration, the Transportation Department official said. Mike Michels , Toyota’s U.S. vice president for corporate communications based in Torrance, California, said in an e- mailed statement yesterday that he had “no information” on a continuing investigation by NHTSA of the automaker’s electronic throttle control system. At least 15 lawsuits seeking class action status have been filed against Toyota on the acceleration issue, and seven of them claim an electronic throttle system called ETCS-i is at fault instead of the pedals. In cars with the ETCS-i system, the engine’s throttle is controlled by electronic signals, which are sent from a sensor that detects how far the gas pedal is depressed. The signals are transmitted to a computer module that controls how much the throttle opens. Lawyers claiming an electronic defect contend that floor mats or stuck pedals don’t explain the sudden-acceleration incidents that triggered their lawsuits. ‘Sitting Dead Still’ Edgar Heiskell , an attorney from Charleston, West Virginia, who represents the family of a Michigan woman who died when her 2005 Toyota Camry hit a tree at almost 80 miles an hour (129 kilometers per hour), said her car didn’t have a floor mat. She stood on the brake, attempting to stop the car after it accelerated from a speed of 25 miles per hour, he said. The suit was filed in November. Heiskell also has filed a West Virginia suit against Toyota seeking class-action status. In a Texas lawsuit filed on Jan. 29, plaintiff Alfred Pena said his 2008 Toyota Avalon unexpectedly accelerated at a stop sign on Jan. 14, causing a collision. He wasn’t injured, said Robert Hilliard , an attorney representing Pena. Pena’s wife, Sylvia, had a previous episode of unintended acceleration that didn’t result in an accident, Hilliard said. Sylvia Pena “was sitting dead still,” and the car accelerated as she released the brake before she touched the gas pedal, Hilliard, of Corpus Christi, Texas, said in an interview. “My belief is that fixed Toyotas with new pedals will still inadvertently accelerate,” Hilliard said. NHTSA tested throttle electronics last year in response to a petition from a 2007 Lexus ES 350 owner who had experienced sudden acceleration of his vehicle. The agency denied the petition in October after subjecting the same model of car to “multiple electrical signals” and “magnetic fields.” ‘Exhaustive Testing’ Toyota said at the time that the October decision marked the fifth in which the agency had rejected similar requests to investigate company vehicles for defects including electronics related to unintended acceleration. “In terms of electronics of the vehicle, we’ve done exhaustive testing and we’ve found no issues with the electronics,” Toyota’s Lentz said on a conference call with reporters Feb. 1. Toyota, as required by law, stopped selling eight vehicles recalled in the U.S. last week. The company said it will begin fixing accelerator pedals, which were supplied by Elkhart, Indiana-based CTS Corp. , this week, with some dealerships preparing to do repairs around the clock. The Transportation Department and its auto safety agency have been called to testify at two congressional hearings on the handling of the Toyota recalls. “While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point,” LaHood said yesterday in an e-mailed statement. The department is “continuing to review possible defects.” House Hearings A House Oversight and Government Reform Committee panel will hold a hearing on the recalls on Feb. 10, followed by the House Energy and Commerce Committee on Feb. 25. Representative Bart Stupak , a Michigan Democrat who serves on both committees scheduled to question Toyota, said in a letter to Lentz that his public statements on Feb. 1 were “different than the representations” Toyota officials made to the Energy and Commerce Committee’s staff last week. Asked whether Toyota “could be certain that floor mat entrapment and sticking accelerator pedals fully explained” the causes of unintended acceleration, company officials said the “causes of unintended acceleration are ‘very, very hard’ to identify,” Stupak said in a letter today to Lentz. Toyota executives at the meeting also said sticking pedals are “unlikely to be responsible” for reports of drivers losing control as cars accelerated past 60 miles per hour, Stupak said in the letter. He asked Lentz to “clarify” the differing accounts. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net .

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Toyota Owners Should Stop Driving Recalled Vehicles, U.S. Government Says

February 3, 2010

By [bn:PRSN=1] Angela Greiling Keane [] Feb. 3 (Bloomberg) –Owners of vehicles that Toyota Motor Corp. has recalled for accelerator-pedal defects should “stop driving” them and bring them to a Toyota dealer for repair, Transportation Secretary Ray LaHood said. “We need to fix the problem so people don’t have to worry about disengaging the engine or slamming the brakes on or put it in neutral,” LaHood said today at a House Appropriations panel hearing in response to questions from a lawmaker. “If anybody owns of these vehicles, stop driving it and take it to a Toyota dealer.” Toyota spokesman Ed Lewis couldn’t immediately be reached for comment. To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

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