vehicles

General Motors RECALLS Vans, Halts Sales

March 27, 2010

DETROIT — General Motors Co. is recalling about 5,000 heavy-duty Chevrolet Express and GMC Savana vans because of a faulty alternator. The automaker also halted sales of the vans Friday. It has also stopped production of them until it can fix the problem. GM spokesman Alan Adler says there have been no injuries related to the recall. Purchasers of the recalled vans, built in February and March, are urged to stop driving them and park them outside away from buildings and other vehicles. It is rare for an automaker to halt sales because of a safety defect. GM’s decision to stop sales of the vans comes two months after Toyota Motor Corp. halted sales of eight models because of faulty accelerator pedals. ____ On the Net: General Motors: http://www.gm.com

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

March 18, 2010

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

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Toyota Says It’s Upgrading Software That Records Data Following Accidents

March 12, 2010

By Jeff Plungis March 13 (Bloomberg) — Toyota Motor Corp. said it is upgrading software that helps read information from devices used to record vehicle crash data, according to a statement on the automaker’s Web site. Toyota, the world’s biggest automaker, has recalled about 8 million vehicles to repair defects that may cause unintended acceleration. Its handling of the recalls, and the government’s response, have been the subject of hearings by three committees in Congress. Media reports have “mischaracterized how Toyota uses and discloses information” from recorders in its Toyota and Lexus vehicles, the company said in the statement . Toyota has always made all data recorded available to the National Highway Traffic Safety Administration, law enforcement officials and courts “when requested or ordered to do so,” the automaker said. The software for the data recorders will be upgraded to be compatible with all vehicles, Toyota said in the statement. The Toyota City, Japan-based company delivered a specialized computer used to read crash data to U.S. regulators on March 3, and three more will be delivered in April, the company said. Toyota will also provide 150 computers to read the “event data recorders” throughout North America by the end of April, the statement said. “Once the additional read-out units are available and appropriate procedures are in place, Toyota will provide vehicle owners with access to EDR data from their vehicles upon request,” Toyota said. To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net .

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Twin Lahore Blasts Leave 53 People Dead, 95 Injured, Rescue Service Says

March 12, 2010

By Khalid Qayum and Farhan Sharif March 12 (Bloomberg) — Two suicide bombings in Pakistan’s Lahore killed at least 20 people and wounded 45 others, the second attack in the city this week, police and rescue services said. Bombers targeted two cars in a convoy of army vehicles as they drove through an area where military officers are based, Chaudhry Shafeeq, a police spokesman, told reporters in Lahore. Most of those killed and injured are army members, he said. A suicide car bombing outside a Pakistan police building in the same city, Pakistan’s second largest, killed 12 people on March 8, the first attack this year on major northern cities struck repeatedly by Taliban militants in late 2009. Pakistan’s government blames the Tehrik-e-Taliban militant network based in tribal areas bordering Afghanistan for the terrorist attacks. The militants have increased bombings and gun attacks after the army launched its biggest offensive against Taliban guerrillas in October. The first explosion today occurred at 12:48 p.m. local time on a road near Lahore’s RA Bazar, according to Rescue 1122. The second blast followed seconds later, it said. Lahore is Pakistan’s cultural center and is located to the southeast of the capital, Islamabad. Since the army operation began last year, terrorists have hit major cities and towns killing at least 800 people. In a major setback for the Taliban, Pakistan says their leader, Hakimullah Mehsud, was killed by a missile fired from a U.S. drone aircraft in January. The Taliban deny Mehsud is dead. To contact the reporters on this story: Khalid Qayum in Islamabad at kqayum@bloomberg.net ;

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Toyota Owners Filing Complaints After Recall Fixes Being Contacted by U.S.

March 3, 2010

By Angela Greiling Keane March 3 (Bloomberg) — U.S. regulators are contacting Toyota Motor Corp. vehicle owners who reported unintended acceleration after their cars were repaired under the automaker’s recalls. The National Highway Traffic Safety Administration is seeking to “get to the bottom of the problem” in complaints posted yesterday on the agency’s Web site, NHTSA Administrator David Strickland said today in an e-mailed statement. “If Toyota owners are still experiencing sudden acceleration incidents after taking their cars to the dealership, we want to know about it,” Strickland said in the statement. Toyota has recalled more than 8 million vehicles globally to modify floor mats and accelerator pedals blamed for incidents of unintended acceleration. The reports posted yesterday involved a 2007 and 2010 Camry, 2009 Matrix and a 2008 Avalon that owners said had been repaired at dealerships. A Transportation Department spokeswoman, Olivia Alair , said the agency hasn’t confirmed the complaints’ validity. It started contacting customers yesterday and has already interviewed “a couple” people, she said today in an e-mail. NHTSA is part of the Transportation Department. NHTSA is investigating whether electronic systems contributed to the incidents, while Toyota has said there is no evidence of a connection. “We will continue to thoroughly investigate any complaints involving unintended acceleration,” Brian Lyons , a Toyota spokesman said yesterday. NHTSA said yesterday that Toyota crashes linked to reports of unintended acceleration have caused 43 fatal crashes with 52 deaths and 38 injuries. About two-thirds of the incidents have been reported since Toyota started recalling vehicles last year for unintended acceleration. Reported Complaints The owner of the 2010 Camry wrote in the complaint that the car was repaired Feb. 12 and accelerated unexpectedly for five to six seconds as the driver entered a parking lot on Feb. 17. The owners of the Avalon and 2007 Camry said their vehicles were at the dealership for review after having repeat accelerations incidents that were supposed to have been repaired earlier. The Matrix owner said the recall work was completed Feb. 10 and on Feb. 26 the car moved forward with the driver’s foot on the brake in a parking lot. “I put my other foot on the brake as well,” the unidentified woman wrote in the complaint. “My son said ‘It’s doing it again Mom!’ I put it in neutral, and we both heard the engine wind out like I had pushed the gas pedal to the floor. This obviously means the recall ‘fix’ isn’t working!” Toyota’s American depositary receipts, each equal to two ordinary shares, rose $2.60, or 3.5 percent, to $77.02 in New York Stock Exchange composite trading. The shares have lost about $30 billion in value since Toyota announced a recall on Jan. 21. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ;

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General Motors Plans to Shut Hummer After Sale to Sichuan Tengzhong Fails

February 24, 2010

By Katie Merx Feb. 24 (Bloomberg) — General Motors Co. said it will close Hummer, the maker of military-inspired sport-utility vehicles, after Sichuan Tengzhong Heavy Industrial Machinery Co. couldn’t win Chinese approval to buy the unit. GM doesn’t know how many jobs will be lost among the 3,000 people now employed at Hummer, because some employees work on other vehicles, Nick Richards , a spokesman, said today. Richards said winding down the brand would take several months. Unloading Hummer was part of GM’s plan to cut its U.S. brands to four from eight after bankruptcy. The Detroit-based automaker sold its Saab unit yesterday, and absent a last-minute buyer Hummer will join Saturn and Pontiac in being shut as GM focuses on its top-selling domestic vehicle lines. “The Hummer brand was very much a product of its time,” said Aaron Bragman , an analyst at IHS Global Insight in Troy, Michigan. “In today’s much more environmentally conscious world, it’s a brand that just doesn’t fit in.” Tengzhong was “unable to obtain clearance of the transaction from the Chinese regulators within the proposed deal time frame,” according to a statement from the Chengdu-based company. GM and Tengzhong announced a sales agreement on Oct. 9. A Chinese government agency indicated that it wouldn’t give approval for Tengzhong to buy Hummer, said three people briefed on the deal, who asked not to be identified because the talks weren’t public. Wang Chao , China’s assistant commerce minister, said today that China didn’t block the bid. Small-Car Policy A Tengzhong purchase of Hummer would have bucked China’s government policy of promoting fuel-sipping small cars, which includes cutting the sales tax on vehicles with engine displacements of less than 1.6 liters. The H2 Hummer has a 6.2- liter V-8 engine, according to GM’s Hummer Web site. Richards, the Hummer spokesman, said GM would consider “viable alternatives for all or part of the brand during wind down.” GM also had said in December it would shut Saab, only to revive talks and reach the agreement that was completed yesterday with Spyker Cars NV . GM first said it planned to sell Hummer at its June 2008 annual meeting as record fuel prices prompted the biggest U.S. automaker to focus on developing more fuel-efficient cars. U.S. sales for the unit fell 67 percent last year as the economy faltered, GM slid into a 40-day government-backed bankruptcy and Hummer’s fate was unresolved. Hummer sales began in 1999 with the $140,000 H1, a 7,600- pound SUV (3,400 kilograms) patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger , now California’s governor. The 6,600-pound H2 debuted in 2002, followed by the 4,700-pound H3 in 2005. “Closing Hummer simultaneously improves the health of GM, China and the planet,” said Daniel Becker , director of the Safe Climate Campaign at the Center for Auto Safety, an advocacy group in Washington. “Hummer should rest in pieces.” To contact the reporter on this story: Katie Merx in Detroit at kmerx@bloomberg.net

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Toyota: Recalls Won’t Totally Fix Gas Pedal Issues

February 23, 2010

WASHINGTON — The president of Toyota’s U.S. operations acknowledged to skeptical lawmakers on Tuesday that the company’s recalls of millions of its cars may “not totally” solve the problem of sudden and dangerous acceleration. “We are vigilant and we continue to look for potential causes,” Toyota’s James Lentz told a congressional panel. However, he repeated his company’s position that unexpected acceleration in some of the company’s most popular cars and trucks was caused by one of two problems – misplaced floor mats and sticking accelerator pedals. He insisted electronic systems connected to the gas pedal and fuel line did not contribute to the problem, drawing sharp criticism from lawmakers who said such a possibility should be further explored – and from a tearful woman driver who could not stop her runaway Lexus. “Shame on you, Toyota,” Rhonda Smith, of Sevierville, Tenn., said at a congressional hearing. Then she added a second “shame on you” directed at federal highway safety regulators. Texas Republican Rep. Joe Barton cautioned his colleagues early in the hearing against conducting a “witch hunt” and said “We don’t want to just assume automatically that Toyota has done something wrong and has tried to cover it up.” But midway through Lentz’s testimony, Barton said of Toyota’s investigation of the problems: “In my opinion, it’s a sham.” Lentz said the company had not completely ruled out an electronics malfunction and was still investigating causes of the sudden acceleration. Still, “We have not found a malfunction” in the electronics of any of the cars at issue, he said. As to Smith’s harrowing story, “I’m embarrassed for what happened,” Lentz said. “I want her and her husband to feel safe about driving our products,” Lentz said. At one point in more than two hours of testimony Lentz was asked by Rep. Eliot Engel, D-N.Y., whether there were any new bombshells to come. “God, I hope there aren’t any more,” he said, while apologizing anew for the problems. “We stubbed our toe,” he said. Three congressional panels are investigating Toyota’s problems, which affect a huge number of Americans. Toyota has recalled some 8.5 million vehicles worldwide – more than 6 million in the United States – since last fall because of unintended acceleration problems in multiple models and braking issues in the Prius hybrid. It is also investigating steering concerns in Corollas. People with Toyotas have complained of their vehicles speeding out of control despite efforts to slow down, sometimes resulting in deadly crashes. The government has received complaints of 34 deaths linked to sudden acceleration of Toyota vehicles since 2000. Lentz, who choked up while discussing the death of his own brother more than 20 years ago in a car accident, said he understood the pain. “I know what those families go through,” he said. Lentz has said in the past that he was confident Toyota’s fixes on the recalled vehicles would correct the problems. But when pressed by Energy and Commerce Committee Chairman Henry Waxman, D-Calif., on whether the two recalls Toyota put in place to deal with the issue would completely solve it, Lentz replied: “Not totally.” Still, he said chances of unintended accelerations were “very, very slim” once the recall was complete. Lentz also said Toyota was putting in new brakes that can override the gas pedal on almost all of its new vehicles and a majority of its vehicles already on the road. Meanwhile, Toyota president Akio Toyoda, who will testify before a separate panel on Wednesday, said he took “full responsibility” for the uncertainty felt by Toyota owners and offered his condolences to a San Diego, Calif., family who were killed in late August, reigniting interest in the problems. “I will do everything in my power to ensure that such a tragedy never happens again,” Toyoda said in prepared testimony for Wednesday’s hearing to the House Government Oversight Committee. “My name is on every car. You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers.” Lawmakers heard a brief, but riveting, description from Smith, the Tennessee woman whose Toyota-made Lexus suddenly zoomed to 100 miles per hour as she tried to get it to stop – shifting to neutral, trying to throw the car into reverse and hitting the emergency brake. Finally, her car slowed enough that she was able to pull it off the road onto the median and turn off the engine. Fighting back tears, she described her nightmare ride of October 2006, calling it “a near death experience.” “After six miles, God intervened” and slowed the car, she said. She added that it took a long time for Toyota to respond to her complaints. In an often contentious full day of testimony, lawmakers returned again and again to the question of whether electronic malfunctions may have contributed to the speeding cars. “We are confident that no problems exist with the electric throttle control system in our vehicles,” Lentz said. He cited “fail-safe mechanisms” in the cars that were designed to shut off or reduce engine power “in the event of a system failure.” Transportation Secretary Ray LaHood told the panel that possible electronics problems were being looked into by his agency. He said the company’s recalls were important steps but “we don’t maintain that they answer every question.” Toyota hired a consulting firm to analyze whether electronic problems could cause unintended acceleration. The firm, Exponent Inc., found no link between the two. But committee investigators said the testing studied only a small number of vehicles Tracking down an electrical problem can be far more difficult, expensive and time-consuming than finding a mechanical problem. Electrical problems can have more than one source, and they can come from inside or outside the car. Mechanical problems often leave clues such as physical damage, where electronic troubles can be hidden in software or leave no trace at all. House investigators who reviewed Toyota’s customer call database found that 70 percent of the complaints of sudden acceleration were for vehicles that are not subject to the recalls over floor mats or sticky pedals. Lentz is president and chief operating officer of Toyota Motor Sales USA Inc. Separately, among hundreds of Toyota dealers lobbying members of Congress Tuesday, there seemed to be widespread rancor toward a federal government they view as picking on the automaker, at least in part because of the government’s investment of billions of dollars in General Motors and Chrysler. “That’s hard for me as a citizen to understand why my tax dollars are going in that direction,” Paul Atkinson, a Houston-area Toyota dealer, said at a news conference that also served as a pep rally for the visiting dealers. “To compete with the government as an individual entrepreneur is pretty tough.” ___ Associated Press writers Alan Fram, Stephen Manning and Tom Raum in Washington and Tom Krisher in Detroit contributed to this story.

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Toyota Recalls Some Tacoma Pickups for Defect in Drive Shafts Made by Dana

February 12, 2010

By Angela Greiling Keane Feb. 13 (Bloomberg) — Toyota Motor Corp. said it’s recalling a “limited number” of Tacoma pickups because of cracks in the drive-shaft components. The defect was recently caught during the manufacturing process before any reports of problems, said John Hanson , a spokesman for the Japanese automaker’s U.S. sales unit in Torrance, California. The parts supplier, Dana Holding Corp. , said the recall involves about 34,000 tube yokes that were also sold to Ford Motor Co. and Nissan Motor Co. The recall is the latest in a series for Toyota, the world’s largest automaker, which has sought to correct defects with about 8 million vehicles globally. It suspended sales this year of eight models in the U.S., including the top-selling Camry, after defects related to accelerator pedals. Dana sent the U.S. National Highway Traffic Safety Administration a notice Feb. 11 saying it would handle the recall after finding a defect in the manufacturing process for the part, which attaches to the end of the drive shaft and helps transfer torque. Dana hasn’t been made aware of any accidents related to the flaw, Chuck Hartlage , a spokesman for the Toledo, Ohio-based company, said in an e-mail. The recall involves “a very limited number of vehicles,” Hanson of Toyota said. “Many of the vehicles are still in marshaling yards and feeder lots,” Hanson said. Toyota also alerted NHTSA, and “we will be notifying owners on this,” he said. Wes Sherwood , a spokesman for Dearborn, Michigan-based Ford, and Fred Standish of Nissan North America didn’t immediately respond to telephone calls and e-mails seeking comment. Toyota’s American depositary receipts, each equal to two ordinary shares, have fallen 8.4 percent in New York Stock Exchange composite trading this year. To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@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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Toyota Recalls Become `Reinforcing Cycle’ as Scrutiny of Automaker Grows

February 10, 2010

By Jeff Plungis and Alan Ohnsman Feb. 10 (Bloomberg) — Toyota Motor Corp. ’s perceived delays in fixing vehicles prone to unintended acceleration are intensifying scrutiny of the company’s products and leading to more reviews and recalls, automotive analysts said. “Some of this is a negatively reinforcing cycle,” said Jeremy Anwyl , chief executive officer of Edmunds.com , a Santa Monica, California-based automotive research Web site. “To the outside world, it appears Toyota is trying to hide something. The more it appears that way, the more people start digging.” The world’s biggest automaker announced yesterday its latest recall, of 437,000 hybrids including the Prius, the top- selling vehicle in Japan. Also yesterday, U.S. safety officials said they were reviewing Toyota’s Corolla, the world’s best- selling car, after complaints about how it steered. “The king isn’t perfect,” said Jim Hossack , an industry analyst at AutoPacific Inc. in Fountain Valley, California. “Toyota had such a strong reputation for quality for so long, that it’s inevitable this would become such a big thing.” Toyota has recalled almost 8 million vehicles on five continents to repair defects linked to unintended acceleration. At least three U.S. congressional committees plan hearings into how Toyota and the U.S. National Highway Traffic Safety Administration handled complaints about the problem. The Toyota City, Japan-based company lost about $31 billion in market value since Jan. 21, when it began calling in autos to fix potentially sticky pedals. Long Time Building “Safety is involved here: this isn’t some spare-tire or a corroding tailgate recall,” Hossack said. The intensity of the backlash against Toyota was greater because the company denied that consumer complaints about sudden acceleration indicated a real engineering problem, said Clarence Ditlow , executive director of the Center for Auto Safety, a Washington-based advocacy group. “This has been building for a long time,” Ditlow said. “In Toyota’s drive to be the No. 1 manufacturer, it lost sight of the engineering that got it there in the first place.” Recalls aren’t a problem for consumers, as long as the problem is clearly identified and fixed, said Mike Quincy, an automotive specialist at Consumer Reports magazine, whose vehicle ratings influence sales. The Yonkers, New York-based magazine removed its recommendation from Toyota models that were suspended from sale in the U.S. The endorsements will probably be restored, Quincy said. Congress Awaits “It seems like the perfect storm right now for Toyota,” he said. “Is this a nationwide, blood-in-the-streets kind of catastrophe? No. It’s been blown out of proportion.” According to Safety Research & Strategies Inc., a Rehoboth, Massachusetts, group that provides data to plaintiffs’ attorneys and consumers, there were 2,262 documented incidents in the U.S. of unintended acceleration involving Toyota vehicles from 1999 through Jan. 29, 2010. NHTSA confirms at least 2,000 such U.S. complaints in that period. Safety Research found at least 19 deaths linked to sudden acceleration of Toyota vehicles. From 1999 through January 2010, Toyota sold 22.03 million Toyota, Lexus and Scion vehicles in the U.S. Using the safety group’s figure, the problem occurred in 0.01 percent of the vehicles Toyota sold in the period. The company got a temporary reprieve when the House Oversight Committee postponed because of snowstorms a hearing that was scheduled for today. The hearing was reset for Feb. 24, the day before another hearing by the House Energy and Commerce Committee. The Senate Commerce Committee announced yesterday a hearing for March 2. Once Congress gets involved, “they add theater,” said Hossack, a former engineer for Ford Motor Co. and Mazda Motor Corp. “It will be all to the aid of senators and congressman running for re-election. Not sure that it will yield anything of significance.” To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net .

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James Meigs: Target Toyota: Why The Recall Backlash Is Overblown

February 9, 2010

To judge by press accounts and statements from government officials, those innocuous looking Toyota sedans and SUVs in millions of American driveways are somehow kin to the homicidal ’58 Plymouth Fury in the Stephen King novel “Christine”–haunted by technological poltergeists and prone to fits of mechanical mayhem. In the midst of three major recalls, Toyota has been hammered by daily newspaper and TV pieces suggesting it has been slow to address safety problems. US transportation secretary Ray LaHood announced that anyone who owns one of the recalled vehicles should “stop driving it.” (He quickly backpedaled on that pronouncement, but warned, “We’re not finished with Toyota.”) Displaying a previously undisclosed concern for the safety of American owners of foreign-badged automobiles, the UAW quickly piled on. And now, Toyota’s North American president Yoshi Inaba must submit to ritual humiliation at the hands of the US Congress in a hearing on Wednesday. Does Toyota–or any car company–deserve this? Well, if they are knowingly selling an unsafe car, yes. But is that what’s going on here? Not so fast. There’s no question that unintended acceleration is a serious problem that needs to be fixed. But a little perspective is in order. As Popular Mechanics automotive editor Larry Webster has pointed out, every major carmaker receives occasional reports of sudden unintended acceleration (SUA). In the last decade, the National Highway Transportation Safety Agency logged some 24,000 SUA complaints. Less than 50 of these red flags were investigated. Why so few? The main reason is the nebulous nature of SUA. Often the problem occurs once, never to happen again. It’s tough to fix a defect that can’t be replicated. And then there’s the driver variable. As awful as this is to think about, it’s been shown that sometimes drivers simply mix up which pedal they’re pushing. In the late 1980s, the Audi 500 was the target of a barrage of SUA allegations, lawsuits and press reports (including a notorious “60 Minutes” episode that was later discredited). Then, as now, there were accusations that mysterious electronic gremlins somehow took over the car. In the end, NHTSA concluded that driver error was the only likely explanation for the incidents. But many safety concerns do have validity, and every carmaker has conducted numerous recalls involving critical safety features of their vehicles–brakes, steering, airbags, seat belts, and more. Still, the fact that some safety problems don’t emerge until cars have been on the road for months or years is not a sign that automakers are criminally cavalier about safety. Quite the opposite. The safety issues that lead to recalls generally occur in very small numbers, often barely rising above statistical noise. Toyota’s unintended acceleration problem, for instance, involved a handful of cases in literally billions of miles of driving. As those cases come to light, it is necessary for carmakers to take action, and it is natural for consumers to be concerned. But the intensity of the backlash against Toyota is almost unprecedented. Here’s what is being missed in most of the coverage of the issue: All cars are inherently dangerous. They propel their fragile human cargo at high speeds over unpredictable terrain. They combine thousands of parts that need to interact flawlessly–in environments ranging from Death Valley heat to Fairbanks cold–in order to maintain safe operation. Their radiators contain scalding fluids; their batteries are full of toxic acid; and their gas tanks hold explosive power equivalent to more than 100 sticks of TNT. And, by all accounts, Americans drive those cars faster than ever, on increasingly congested roadways. Nonetheless, driving gets safer every year. Fatalities per mile driven have fallen more than 25 percent since 1994, in part because cars themselves are safer. Compared to those of 20 years ago, the typical vehicle today has better brakes, better steering and more (not to mention smarter) airbags. Electronic stability-control systems have helped prevent countless accidents. Still, even the best cars are far from perfect. And much of the outrage over Toyota’s troubles seems based on the unrealistic expectation that cars should be infallible. That’s an unattainable goal; even well-designed components can wear out and fail in unexpected ways. Recalls are not a sign that carmakers are indifferent to the safety of their customers. On the contrary, recalls are part of the process by which automakers address safety or reliability issues that are often fairly subtle. So why did Toyota’s safety issues become front-page news when similar recalls by other automakers barely made the business pages? One is the scary nature of unintended acceleration itself, which taps into our almost instinctual fear that our machines will suddenly turn on us (HAL, anyone?). Another was the horrific 911 call from the passenger of a Lexus that crashed in Santee, Calif., in August of last year. And then there was timing. Toyota responded first to the problem of shifting floor mats (the likely culprit in the Santee crash), and only later to the much more subtle issue of accelerator pedals that are slow to return to idle . Those are two unrelated problems that needed to be addressed separately. Perhaps in a different climate, Toyota could have convinced the public that the accelerator pedal recall was an example of extreme diligence in pursuit of safety. Instead, the second recall struck the public as an admission of culpability–just another shoe dropping in a much larger scandal. By the time conversation got around to disconcerting glitches in the antilock brake system on Toyota’s high-tech Prius hybrid, there was no containing the outrage. (The fact is, most hybrids exhibit slightly twitchy braking as they try to manage the switchover from the electrical braking that recharges the batteries to the hydraulic braking needed for more aggressive stops. Conditions that engage the antilock braking system only complicate that challenge.) Without the previous incidents, news that Toyota was making a small change in its Prius braking software would have been a non-story. Instead, it completed the trifecta of bad news that has made this Toyota’s annus horribilis. Crisis managers will no doubt study Toyota’s handling of this issue, looking for lessons in avoiding that company’s predicament. After all, it took years for Audi’s sales to rebound after that company’s trip through the SUA gauntlet. Still, some good did come of Audi’s experience: Today all cars have interlock systems that make it impossible for drivers to move the shift lever out of park unless their foot is on the brake (thus preventing them from shifting into gear while accidentally flooring the accelerator). One likely outcome of the Toyota episode will be a requirement for a similar interlock that automatically disengages the throttle whenever the driver steps on the brake. And that would help make all cars just one, tiny increment safer than before. RELATED STORIES â¢ PLUS: Toyota Halts Production to Tackle Sticky Gas Pedals â¢ DRIVE SAFE: How to Stop Sudden Unintended Acceleration â¢ COMPARISON TEST: 2010 Toyota Prius vs. 2010 Honda Insight â¢ EARLIER: 2010 Toyota Prius Hybrid Electric Tech Exposed â¢ TEST DRIVE: VW Jetta Diesel vs. Prius Fuel-Economy Marathon

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Toyota Halts Lexus, SAI Hybrid Shipments on Same Brake Problems as Prius

February 8, 2010

By Makiko Kitamura and Tetsuya Komatsu Feb. 9 (Bloomberg) — Toyota Motor Corp. stopped shipments of its Lexus HS250h and SAI hybrids from a factory in southern Japan due to possible brake problems with the models, which use the same system as Prius hybrid cars. Shipments from the factory in Kyushu were stopped yesterday to inspect the models, Norifumi Wakikawa , a spokesman at Toyota Motor Kyushu, said by phone today. Toyota, the world’s biggest carmaker, is expected to recall the 2010 version of the Prius in Japan this week to repair a problem with the braking system. Scrutiny of the vehicles may further tarnish Toyota’s reputation after the Toyota City, Japan-based company recalled almost 8 million cars globally to repair separate defects linked to unintended acceleration. Those recalls have yet to include any cars in Japan, where the Prius was last year’s top-selling model. Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments where the car continues to coast for about a second after the brakes are applied because of the anti-lock brake system. The company plans to recall at least 270,000 Priuses in Japan and the U.S., a person familiar with the matter said, declining to be identified as the information isn’t yet public. Japan, U.S. Recalls Ririko Takeuchi , a Toyota spokeswoman in Tokyo, declined to say whether the company will recall the Prius. The carmaker may notify Japan’s Transport Ministry of plans to recall the model as early as today, followed by a similar action in the U.S., Nikkei English News said, without citing anyone. Juergen Stolze , a Toyota spokesman in Cologne, Germany, said yesterday the carmaker will decide by Feb. 10 whether to recall Prius cars in Europe. Toyota rose 1.8 percent to 3,340 yen as of 9:57 a.m. on the Tokyo Stock Exchange. The company has lost about $33 billion in market value since Jan. 21, when it announced a recall of 2.3 million U.S. vehicles for defects linked to unintended acceleration. To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

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Toyota Recall: 300,000 Prius Hybrids Recalled, SEE The Latest Details

February 8, 2010

(TOKYO KELLY OLSEN, AP) – Toyota plans to recall about 300,000 Prius hybrids worldwide over a brake problem and will notify the U.S. and Japanese governments Tuesday, a news report said. The recall of the gas-electric Prius will cover cars that went on sale since May last year through January, Kyodo news agency reported late Monday. Kyodo, which did not identify its sources for the information, said the automaker will notify authorities in Japan and the U.S. of its plan, which will cover more than 270,000 of the hybrids sold in the two countries. Toyota spokeswoman Ririko Takeuchi said no decision on a Prius recall has been made. Kenji Sugai, an official in Japan’s Transport Ministry section in charge of recalls, said it had not been informed of any such plan by Toyota. The Kyodo report follows others in Japanese media recently that the world’s largest automaker has decided to announce a recall early this week. The company has only said it will soon announce plans to deal with the braking problem. At least 100 drivers of Prius cars in the U.S. have complained to the government that their antilock brakes seemed to fail momentarily while driving on bumpy roads. The Japanese government has also received dozens of complaints. Toyota plans to fix a software glitch to correct the problem. The government says the problem is suspected in four crashes that caused two minor injuries. Toyota says the brakes will work if the driver keeps pushing the pedal. Toyota has already recalled more than 7 million other cars for repairs in the U.S. and other countries over a sticky accelerator and floor mats that can get caught in the gas pedal. The Prius is the world’s top-selling gas-electric hybrid and its fuel efficiency has drawn intense interest amid concerns about global warming and dependence on fossil fuels. Toyota has sold 300,000 of the vehicles in about 60 countries. Kyodo reported recalls in other countries will follow those in Japan and the U.S. The company says it has already fixed vehicles that went on sale since last month. Though there have been reports that Toyota will recall the cars, the company has an option of a “service campaign,” in which the company would simply notify owners to bring their cars in for repairs. Separately, the company has told dealers in the United States it is preparing to repair the brakes on thousands of Prius vehicles there, according to an e-mail sent by a company executive. It was unclear whether Toyota planned a formal U.S. recall. “We will make an announcement soon on the action we plan to take,” spokeswoman Ririko Takeuchi said, commenting on media reports Sunday that the company has decided to issue a Japan recall. Takeuchi did not confirm those reports. The Prius is the world’s top-selling gas-electric hybrid and its fuel efficiency has drawn intense interest amid concerns about global warming and dependence on fossil fuels. Toyota decided Saturday on a recall in Japan covering its latest Prius model and has notified domestic dealers, Japan’s largest newspaper, the Yomiuri, reported without naming sources. It said Toyota would announce the move early in the coming week after consulting with the Japanese government. Japan’s Kyodo News agency and TV Asahi carried similar reports. Kyodo said Toyota had started notifying dealers and that at least 170,000 vehicles in Japan would be subject to the recall. Phone calls to the section at Japan’s transport ministry dealing with recalls went unanswered Sunday. None of about 10 Toyota dealers in Tokyo and the western Japanese city of Osaka said they had received any notification. Three dealers in the U.S. said the same thing on Sunday. Prius drivers in Japan and the U.S. have complained of a short delay before the antilock brakes kick in – a flaw Toyota says can be fixed with a software programming change. The brakes will work if the driver keeps pushing the pedal. The brake problem affects about 270,000 Priuses that were sold in the U.S. and Japan starting last May. The company says it has already fixed vehicles that went on sale since last month. Bob Carter, a Toyota group vice president, sent an e-mail message Friday night to U.S. dealers saying the automaker is working on a Prius repair plan and will disclose more details early this week. At least 100 drivers of Prius cars in the U.S. have complained to the government that their brakes seemed to fail momentarily when they were driving on bumpy roads. The government says the problem is suspected in four crashes and two minor injuries. Public awareness of the problem “has prompted considerable customer concern, speculation, and media attention due to the significance of the Prius image,” Carter said in the e-mail. “We want to assure our dealers that we are moving rapidly to provide a solution for your existing customers.” Toyota on Sunday morning began airing spots on U.S. television saying that the company is “working around the clock” to build the highest-quality vehicles and to restore the faith of its customers. “In recent days, our company hasn’t been living up to the standards that you’ve come to expect from us,” an unidentified announcer said in a voiceover. Carter wrote that the ads tell viewers of Toyota’s 50-plus years of building safe, reliable vehicles in the U.S. They were airing in prime time and on local, national and cable news shows, but will not appear during the Super Bowl, he wrote. Toyota’s response to the safety issues has drawn the attention of U.S. politicians. Toyota Motor North America Chairman and CEO Yoshi Inaba will appear before the House Committee on Oversight and Government Reform on Wednesday, as will Transportation Secretary Ray LaHood and National Highway Traffic Safety Administration Administrator David Strickland, the committee chairman announced Sunday. “There appears to be growing public concern regarding which Toyota vehicles may be problematic and how people should respond,” Chairman Edolphus Towns(D-NY)said in a statement. “Consumers want to know whether their cars are safe to drive and, if not, they need to know what to do about it.” A key committee member has asked that transportation officials who served under former President George W. Bush also appear. Besides a full-fledged safety recall, the company could simply ask owners to bring in their vehicles for repairs, since the brakes are not failing completely. The Yomiuri newspaper, however, said that Toyota decided on the more serious step of a recall for the Prius to give priority to restoring consumer trust. Toyota has acknowledged receiving dozens of complaints about the Prius in Japan, where there is high-level government concern about Toyota’s quality problems. Cabinet ministers have expressed alarm and urged the company to move more quickly to ease consumer worries. Media criticism of Toyota has intensified since a news conference on Friday by Toyota President Akio Toyoda in which he offered an apology for the defects, but few details about what the automaker would do about the Prius. The reports said the new Prius model was released in May, and more than 300,000 have been sold in about 60 countries and territories. Toyota plans to resume production Monday at U.S. factories that make the eight models recalled for sticky gas pedal systems, spokesman Brian Lyons said in an e-mail Sunday. The production halt involved the RAV4 crossover, Corolla, Matrix hatchback, Avalon, Camry, Highlander crossover, Tundra pickup and the 2008-10 Sequoia SUV. ___ Associated Press writers Yuri Kageyama and Jay Alabaster in Tokyo, Ken Thomas in Washington, and AP Auto writers Dee-Ann Durbin and Tom Krisher in Detroit contributed to this report.

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Obama Tells Democrats He Won’t `Walk Away’ From Health-Care Overhaul PlanO

February 7, 2010

By Julianna Goldman Feb. 6 (Bloomberg) — President Barack Obama vowed he won’t abandon his effort to overhaul the U.S. health-care system, as Democratic Party leaders try to figure out how to revive stalled legislation. “Just in case there’s any confusion out there, let me be clear, I am not going to walk away from health-insurance reform, I am not going to walk away from the American people,” Obama said today to about 450 people at the Democratic National Committee’s winter meeting in Washington. “Sometimes we may be moving forward against the prevailing winds, sometimes it may be against a blizzard.” Obama went forward with the address to party members even as the capital was buried by a major winter storm that dropped as much as 20-inches on the city. The president’s 15-car motorcade had to navigate snow-bound Washington streets to get to the Capital Hilton hotel, just blocks from the White House. An ambulance slid into one of the vehicles before leaving the White House grounds. On the way back the same vehicle was damaged when a tree branch fell under the weight of the snow. It’s “snowmaggedon in Washington D.C.,” the president said to the crowd. It may be appropriate that the DNC’s winter meeting would be held during the historic Washington snowfall, said Charlie Cook , publisher of the Cook Political Report. “A bad start to what’s almost certain to be a bad year,” Cook said. “They have to contemplate the increasing chance that they lose their House majority and most of their margin in the Senate.” Rallying Support Since his Jan. 27 State of the Union address, Obama on several occasions over the past few weeks, has addressed Democratic audiences to rally support around his proposals to boost jobs, tackle financial regulation and continue to fight for health care reform. Speaking the same week that Massachusetts Republican Senator Scott Brown was sworn in, ending the Democrats 60-vote supermajority that lets them overcome stalling tactics, Obama told today’s crowd, “when we are still digging ourselves out of an extraordinary recession, people are going to be frustrated and they’re going to be looking to the party in power to try and fix it.” The U.S. Labor Department yesterday reported that the unemployment rate dropped to 9.7 percent in January, the lowest level since August, and that employment fell by 20,000 jobs. Revised figures show the U.S. lost 8.4 million jobs since the recession began in December 2007. ‘Tough’ Task “We knew this stuff was tough,” Obama said. “But we decided we were going to take the responsibility of changing it.” In response to Obama’s comments, Senate minority leader Mitch McConnell warned the president against pushing ahead on health-care overhaul unless he commits to working with Republicans. “This particular bill deserves to be stopped. What we need to do is to start over, and get it right,” the Kentucky Republican said. “If they get past this arrogant phase that they have been in about a year, if they can work their way past that and concentrate on the real problem which is the cost, we are willing to look at it.” Obama this week also addressed two party fundraisers Feb. 4 which raised $2 million to $3 million for the DNC. He hasn’t limited himself to Democrats. Speaking about the need for bipartisanship, Obama took his message to the House Republican retreat in Baltimore on Jan. 29 where he took questions from party Congressmen for over 90 minutes. The president will also try to use sports to bridge the partisan divide. Among the Democratic lawmakers, Cabinet members and military service members who will join Obama to watch tomorrow’s Super Bowl at the White House, there will be a lone Republican: Representative Joseph Cao . The Louisiana Congressman was the only member of his party who voted in November to support Obama’s health care legislation. To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

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Toyota Prius Fix To Be Announced Next Week

February 6, 2010

DETROIT — Toyota has told dealers it’s preparing a plan to repair the brakes on thousands of hybrid Prius cars in the U.S. In a message sent Friday night to dealers, a Toyota group vice president, Bob Carter, said the company is working on a plan and will disclose more details early next week. More than 100 drivers of 2010 Prius cars have complained that their brakes seemed to fail momentarily when they were driving on bumpy roads. The U.S. government says the problem is suspected in four crashes and two minor injuries. Public awareness of the problem “has prompted considerable customer concern, speculation, and media attention due to the significance of the Prius image,” Carter said in the e-mail. “We want to assure our dealers that we are moving rapidly to provide a solution for your existing customers.” Toyota blames a software glitch and says it has already fixed vehicles in production. But it’s still deciding how to handle repairs on 270,000 Priuses that were sold in the U.S. and Japan starting last year. The company could announce a full-fledged safety recall or simply ask owners to bring their vehicles in for repairs, since the brakes aren’t failing completely. The problem isn’t related to separate recalls involving millions of Toyotas with defective gas pedals and floor mats that could cause unintended acceleration.

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

February 5, 2010

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

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Toyota Owners Ditch Recalled Vehicles for Loaners, If They Can Get Them

February 3, 2010

By Mike Ramsey and Tom Moroney Feb. 4 (Bloomberg) — Rudi Barth stopped driving his 2007 Toyota Avalon sedan without waiting to hear from U.S. Transportation Secretary Ray LaHood. As LaHood issued and then retracted a call for drivers to stop using recalled Toyota Motor Corp. autos until they are repaired, Barth said his wife had left their car at a dealership in Norwood, Massachusetts, a few days earlier. “If you’re nervous about it, you shouldn’t be driving,” said Barth, 81. Until his car is fixed, the dealer loaned him one. “I wouldn’t say I’m happy about it.” Toyota owners face a barrage of news about the risk of unintended acceleration in their vehicles. LaHood’s reversal highlighted a week of uncertainty about the safety of the 2.3 million U.S. vehicles most recently recalled by Toyota. The eight models covered by the safety action, including the popular Camry and Corolla sedans, are temporarily off the market. “This flip-flop is not helping concerned motorists who are being presented with confusing and contradictory information about the Toyota recall at every turn,” Jeremy Anwyl , chief executive officer of auto research Web site Edmunds.com, based in Santa Monica, California, said in a statement. Toyota, the world’s largest automaker, has recalled a total 7.6 million vehicles worldwide for two different flaws that could lead to unintended acceleration. One fix deals with slipping floor mats that could entrap the accelerator pedal. The other aims to prevent those pedals from sticking or returning slowly after being depressed. Kits Shipped Travis Hall, 31, can’t choose to stop driving his 2007 Toyota Tundra pickup until his pedal is repaired. “It makes perfect sense, but I don’t have that option,” said Hall, taking a break from baking bagels in Greensboro, North Carolina. He drives his truck about 14 miles (23 kilometers) round trip to his job at the Bruegger’s bagel chain. “I have to work.” Hall’s wife is at home with their 4-year-old son, and he prefers to be the one driving the vehicle that might take off uncontrollably. “I can’t risk it tearing up on them,” he said. He’s had no sticking of the accelerator pedal on the Tundra, which he’s owned for 1 1/2 years. He drives it only for work and uses the family’s Hyundai Motor Co. Santa Fe sport- utility vehicle elsewhere, he said. Toyota ‘Confident’ “Our message to Toyota owners is this — if you experience any issues with your accelerator pedal, please contact your dealer without delay,” Toyota said in a statement yesterday. “If you are not experiencing any issues with your pedal, we are confident that your vehicle is safe to drive.” A Transportation Department official said Feb. 2 the government is investigating whether an electronic throttle system is the cause, as at least 17 lawsuits allege. Toyota said this week it would fix the sticky-pedal defect by having dealers install a steel plate to reduce friction that can develop with wear and condensation. Repair kits have begun to be shipped to dealers around the country. The U.S. recall for pedals that stick applies to three SUVs from these model years, the 2009-2010 RAV4, 2010 Highlander and 2008-2010 Sequoia. Also covered by the safety action are the 2009-2010 Corolla and 2005-2010 Avalon sedans, some 2007-2010 Camry sedans, 2009-2010 Matrix hatchbacks, and 2007-2010 Tundra. 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. It includes the 2007-2010 Lexus ES350, 2006-2010 Lexus IS250 and 2006-2010 Lexus IS350. About 2.1 million Toyotas are covered by both recalls. ‘Unofficial Spokesperson’ Mike Stevens, 47, calls himself “the unofficial spokesperson for the Camry” after leasing 4 of the sedans in the last 12 years. LaHood’s comments urging Toyota owners to stop driving went too far, Stevens said, and he was happy for the retraction. “Someone probably gave him a smack on the side of the head,” said Stevens, of Northborough, Massachusetts, 30 miles west of Boston. A regional account representative for Sun Trust Mortgage Inc. , he spends part of most workdays driving a Camry. “They realized how many people might be driving to Toyota dealerships, and how inundated they might be.” ‘I’m Terrified’ Scott McLeigh, 42, doesn’t think it’s an overreaction. The Ormond Beach, Florida, man doesn’t want to drive his 2007 Tundra, and is dubious that either recall fixes the issue. “I’m terrified to even drive to the grocery store,” said McLeigh, who is married with two children, 4 and 6. “I definitely wouldn’t put the kids in it.” McLeigh’s concern about whether the recalls will prevent unintended acceleration also worries Susan Baker, 42, a Los Angeles resident with a 2005 Prius , which is covered by the floor-mat recall. “We’ve taken out the floor mat and we’ve practiced the method for shutting off the car — well, at least mentally — but still it does not leave us with very much confidence,” Baker said. “What makes us the most nervous is that when we first heard about this it didn’t make sense to us that this would cause the problem,” she said. “I just have a hard time believing that this is — the floor mat is — the issue.” To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net ; Tom Moroney in Boston at tmorrone@bloomberg.net .

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Apple Co-Founder Wozniak Says His Toyota Prius Accelerates Unintentionally

February 3, 2010

By Mehul Srivastava Feb. 3 (Bloomberg) — Count Apple Inc. co-founder Steve Wozniak among Toyota Motor Corp. car owners who say their vehicles accelerate unintentionally. Wozniak’s 2010 Toyota Prius can unintentionally accelerate to as much as 97 miles (156 kilometers) per hour when he uses cruise control to increase his speed, he said in an interview yesterday. Toyota and the U.S. National Highway Traffic Safety Administration haven’t responded to his complaints in the past two months on what may be a software-related glitch, he said. “It’s scary when it happens,” Wozniak, 59, said from San Jose, California. “I’ve had trouble getting both the government safety agency and getting Toyota to listen to me.” The world’s largest automaker has recalled millions of vehicles globally to fix mechanical flaws in accelerator pedals that could lead to sudden unintended increases in speed. The action led to a halt of U.S. sales and production of eight models and prompted Congress to schedule hearings. “I have never heard of this problem with cruise control on Priuses,” a Toyota spokeswoman, Ririko Takeuchi , said by phone from Tokyo Feb. 2. She said she doesn’t know whether the problem has been reported by anyone other than Wozniak or whether Toyota is investigating. The company began shipping to dealers on Feb. 1 steel attachments it says are a fix for sticky gas pedals, which will be replaced in as many as 2.57 million cars in the U.S. and Canada. The repairs will only fix possible mechanical flaws. U.S. Review “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.” U.S. safety officials have started to probe electronic throttle systems in Toyota cars as a possible cause of sudden acceleration, as alleged in at least seven lawsuits, according to an official of the Transportation Department, who asked not to be identified while a review of Toyota’s actions continues. Toyota was ordered today by Japan’s government to investigate brake-related problems in the latest Prius hybrid model. The Transport Ministry has received 14 complaints about the model’s brakes since it was introduced in May, said Masaya Ota , an official in the ministry’s recall division. The ministry contacted the company about the issue in August, said Shunsuke Miyaoka , who works in the same division. Electronics are “not part of the issue,” Lentz said during a conference call this week. The company’s credibility would be further damaged if it is proved wrong, said Rebecca Lindland , an analyst at IHS Global Insight. ‘Diehard Loyalists’ “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 as each new recall comes out.” The Japanese carmaker, based in Toyota City, has also recalled 5.35 million vehicles, including the 2004-2009 Prius, because of the risk of “floor mat entrapment” of the accelerator pedals, according to Toyota’s Web site. Wozniak’s 2010 model, which has a steering-wheel mounted dynamic radar cruise control, hasn’t been recalled by the company, but other Prius models he owns have. The safety agency as of Feb. 1 hadn’t found evidence that anything other than sticky or trapped accelerators caused the unintended acceleration, the transport 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. Electronic Signals At least 15 lawsuits seeking class-action status have been filed against Toyota on the issue, seven of which claim an electronic throttle system called ETCS-i is at fault instead of the pedals. While in cruise control, flicking the lever on the side of the steering wheel doesn’t always increase the speed of the car in increments as intended, Wozniak said. Instead, the vehicle would sometimes continue accelerating until one steps on the brake, he said. Wozniak, who owns four Priuses, said he took his car to a dealership, contacted Toyota and called the NHTSA about the issue. He said he believes the acceleration may be caused by a software glitch because the issue occurs in cruise control. Wozniak said he would buy another Prius. Toyota fell 5.7 percent to close at 3,400 yen in Tokyo trading today, the biggest decline in Japan’s Nikkei 225 Stock Average, which gained 0.3 percent. Wozniak made the comments after a Web log posted on the CNET News Web site reported he spoke about his Prius’s cruise control at the Discovery Forum 2010 in San Francisco. “Is my software bug also some code that is in the other Priuses and related to the deadly problem?” he said. To contact the reporters on this story: Mehul Srivastava in New Delhi at msrivastava6@bloomberg.net ; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

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Toyota Sales Freeze in U.S. May Have Driven Car Buyers to GM, Ford, Honda

February 1, 2010

By Mike Ramsey and Katie Merx Feb. 1 (Bloomberg) — Toyota Motor Corp. probably ceded U.S. market share in January as a sales freeze on eight models and a widening global recall kept the world’s largest automaker from taking advantage of improving demand. General Motors Co. , Ford Motor Co. and Chrysler Group LLC all may report gains tomorrow, according to estimates from five analysts surveyed by Bloomberg. Toyota’s deliveries fell 4.6 percent, dragging its share of U.S. deliveries to the lowest since March 2006, researcher Edmunds.com projected. Toyota’s sales suspension while fixing an accelerator-pedal flaw put popular sedans such as the Camry and Corolla off limits for the last five days of January. The Toyota City, Japan-based automaker said it will provide details this week on how it will fix the defect, which spurred a recall of 2.3 million vehicles. “It’s a little bit like Tiger Woods not playing in the PGA. It opens up the field,” said Rebecca Lindland , an analyst at IHS Global Insight in Lexington, Massachusetts, referring to the pro golfer taking a break from his sport. “Suddenly your No. 1 player is not able to sell 70 percent of their lineup.” Industrywide deliveries may have run at a seasonally adjusted annual rate of 10.5 million cars and light trucks, based on the average estimate of eight analysts. That would mark a third straight month of faster sales from a year earlier for the first time since 2005. Faster Pace The pace in January 2009 was 9.6 million vehicles as the U.S. industry began its worst sales year since 1982. Manufacturers, dealers and investors use the rate to compare monthly totals by taking into account seasonal buying patterns. GM, the biggest U.S. automaker, and No. 2 Ford both said last week that industry sales rose at least 10 percent, without giving a figure. Driving that advance was a jump in purchases by business customers of as much as 50 percent, helping offset a drop of 1 percent to 2 percent among individual consumers, said George Pipas , the sales analyst for Dearborn, Michigan-based Ford. “There’s no question the worst is behind us and we are in a period of expansion,” Pipas told reporters last week. “But it is not likely to be linear.” The automakers’ estimates and those of the analysts would still mean a U.S. market less than two-thirds of its size from 2000 through 2007, when annual deliveries averaged 16.8 million. ‘Encouraging Sign’ “January is typically a weak month,” said Jeff Schuster , executive director of global forecasting at J.D. Power & Associates in Troy, Michigan. “The sales pace has been improving as January continues, which is an encouraging sign for the recovering industry.” Last month’s gains were 16 percent for GM, 34 percent for Ford and 3.3 percent for Auburn Hills, Michigan-based Chrysler, based on the five analysts’ estimates. Honda Motor Co. and Yokohama, Japan-based Nissan Motor Co. may say deliveries rose 11 percent and 23 percent, according to Santa Monica, California-based Edmunds.com, while sales at Seoul-based Hyundai Motor Co. probably climbed 7.4 percent. The analysts’ estimates are based on daily selling rates. January had 24 sales days, 2 fewer than in 2009. Without the adjustment, the sales results reported by some automakers will be about 8 percent lower. Toyota’s American depositary receipts slid 67 cents to $77 on Jan. 29 in New York Stock Exchange composite trading for a sixth straight decline, the longest streak since October. Ford fell 57 cents, or 5 percent, to $10.84. The ADRs are down 15 percent since Toyota announced the recall of the eight models on Jan. 21, compared with Ford’s 3 percent drop. Market Share The Japanese automaker ranked second in U.S. market share for all of 2009, with 17 percent, according to industry researcher Autodata Corp. of Woodcliff Lake, New Jersey. That trailed GM’s 19.9 percent and led Ford’s 16.1 percent. Toyota’s sales cutoff covers the Avalon and Matrix cars; Highlander, RAV4 and Sequoia sport-utility vehicles; and Tundra pickup in addition to the Camry and Corolla, which were the two top-selling cars in the U.S. last year. Collectively, the eight models made up 56 percent of Toyota’s 2009 U.S. deliveries , according to Autodata. Vehicles still on sale include the Prius hybrid, Sienna minivan and Yaris subcompact. Consumers’ initial reaction to the Jan. 26 sales suspension suggested some Toyota customers might be having second thoughts, Edmunds.com said, citing an analysis of Web-site visits by people who described themselves as poised to buy a car. Toyota’s share of so-called purchase intenders on Jan. 27 fell to 10 percent from 13 percent a day earlier, while GM and Tokyo-based Honda each rose 1 percentage point to 15 percent and 12 percent, according to Edmunds.com. The same day, Detroit-based GM and Ford disclosed incentive programs to attract Toyota owners concerned that their vehicles be unsafe, with $1,000 cash rebates. The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from January 2009. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles. The estimates are based on daily selling rates. January had 24 selling days, 2 fewer than in 2009. To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net ; Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net

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Toyota’s Plan for Accelerator Repair Clears Review by U.S. Safety Agency

January 30, 2010

By Angela Greiling Keane and Daniel Whitten Jan. 31 (Bloomberg) — The U.S. Transportation Department didn’t object to a remedy Toyota Motor Corp. proposed for flawed gas pedals, a department official said, clearing the way for the company’s plan to fix millions of recalled vehicles. The government didn’t balk at Toyota’s approach during a meeting last week, according to the official, who declined to be identified discussing the session with company representatives. The department’s National Highway Traffic Safety Administration , which oversees recalls, doesn’t formally approve specific remedies, the official said. Toyota , the world’s largest automaker, recalled 2.3 million cars and light trucks in the U.S. on Jan. 21 after reports of unintended acceleration in the vehicles. Toyota accelerator defects have been linked to 19 deaths in the past decade, Representative Henry Waxman , a California Democrat, said in a statement last week. Toyota has said it will give customers information this week on a fix to the pedals. “We believe we are close to announcing an effective remedy,” the company says in an advertisement in the Washington Post today. President Akio Toyoda has apologized for the widening defects crisis. Parts supplied by CTS Corp. will be either replaced or new assemblies will be installed, Brian Lyons , a Toyota spokesman, said. The House Energy and Commerce Committee will hold a hearing Feb. 25, in part to examine the response to the reports of sudden acceleration by NHTSA, Waxman, the panel’s chairman, said Jan. 28. ‘Simply Unacceptable’ “Incidents of sticking accelerators have been ongoing with Toyota vehicles for up to a decade, and have led to a disproportionately high number of deaths,” said Representative Bart Stupak of Michigan, chairman of the subcommittee on oversight and investigations. “Failure to take every possible step to prevent future deaths or injuries is simply unacceptable.” The House Committee on Oversight and Government Reform plans its own hearing on Feb. 10. “The public is unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it,” Representative Edolphus Towns , a New York Democrat and chairman of the panel, said in a statement. Toyota City, Japan-based Toyota has separately recalled more than 5 million vehicles to prevent pedals from getting trapped by floor mats. “I am deeply sorry that we’re giving cause for concern to customers,” Toyoda said in an interview with Japan’s NHK television network in Davos, Switzerland, posted to U.S. broadcaster ABC News’ Web site. “I’d like people to believe we’re taking this step to further assure them.” Information Sought Democrats Waxman and Stupak said in a letter to David Strickland , who heads NHTSA under Transportation Secretary Ray LaHood , that they want a report on every Toyota model the safety agency has received a consumer complaint about since 2000. They also want the date on which NHTSA became aware of the acceleration issue and actions taken to examine each allegation. Waxman and Stupak also wrote to Yoshimi Inaba , president of Toyota North America, requesting similarly detailed responses. Toyota last week stopped making and selling eight models in the U.S. because of the defects. “Toyota appreciates the opportunity to inform the committee” about the problem and the company’s efforts to address it, Ed Lewis , a Toyota spokesman in Washington, said in a statement. In an interview Jan. 29 in Bloomberg’s Washington office, Transportation Secretary LaHood said, “We’ll take responsibility if something should have occurred that didn’t. I don’t know if that’s the case, but we’re doing a lot of reviews right now.” Repair Timing Before Strickland was confirmed as administrator this month, NHTSA’s acting administrator Ron Medford traveled to Japan to meet with Toyota, LaHood said. The trip was in December, according to department spokeswoman Jill Zuckman . U.S. dealers who sell Toyota’s namesake brand may lose as much as $2.47 billion in combined monthly revenue because of the sales halt, said John McEleney , the chairman of the National Automobile Dealers Association and owner of McEleney Toyota in Clinton, Iowa. The automaker said it would also recall eight models in Europe, including some Corolla and Avensis cars. The move may cover as many as 1.8 million vehicles. Toyota’s effort to fix the pedals doesn’t extend to Japan, where it uses different parts makers. Too Slow? U.S. regulators and Toyota both moved too slowly to pinpoint the problem and advise consumers about dangerous pedal- related defects, Joan Claybrook , a former NHTSA administrator, said in an interview. “They weren’t doing much with enforcement,” Claybrook, a former head of the Washington-based advocacy group Public Citizen, said of the safety agency. “They’re supposed to review, analyze and go back to the companies and say, ‘What’s going on here?’” The accelerator pedals drew attention after a California Highway Patrol officer and three family members were killed in an August accident. A floor mat on a Lexus sedan he was driving may have jammed the pedal and caused the car to speed out of control, according to Toyota. Public Clashes NHTSA and Toyota clashed publicly over the recalls last year. In November, the safety agency said Toyota was “inaccurate and misleading” in comments the company made on the problem. Toyota had issued a statement two days earlier saying U.S. safety investigators found no defect existed in vehicles “in which the driver’s floor mat is compatible with the vehicle and properly secured.” The agency said Toyota’s remedy didn’t “correct the underlying defect,” which it said was related to the accelerator pedal and floor pan design. LaHood urged Toyota owners to remove floor mats. “The problem is that NHTSA always has the underdog role” in dealing with automakers, said Sean Kane , president of Safety Research & Strategies Inc., a safety advocacy group in Rehoboth, Massachusetts. NHTSA’s office of defects investigation has a staff of only 20, has no expertise in electronics and has a “long history of missing unintended-acceleration complaints that can’t be easily identified,” Kane said in an interview. “They relied a lot on Toyota to tell them what the issues are and that’s not uncommon. The sophistication of Toyota is at a much greater level than that of the agency.” The defect investigations office has 57 employees, Zuckman said yesterday in an e-mail. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Daniel Whitten in Washington at dwhitten2@bloomberg.net .

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Toyota Dealers May Lose $2.47 Billion in Monthly Revenue as Sales Halted

January 29, 2010

By Mike Ramsey and Doron Levin Jan. 29 (Bloomberg) — U.S. dealers who sell Toyota Motor Corp. ’s namesake brand could lose as much as $2.47 billion in combined monthly revenue because of the halt of sales of eight models, including the popular Camry and Corolla sedans. The 1,234 Toyota brand dealers would miss out on $1.75 million to $2 million a month in revenue from new and used versions of the models that aren’t allowed to be sold, said John McEleney, the chairman of the National Automobile Dealers Association and owner of McEleney Toyota in Clinton, Iowa. “We’ve never really dealt with anything like this with any manufacturer,” said McEleney, who also owns a Chevrolet dealership in Clinton. Hyundai Motor Co. yesterday joined Ford Motor Co. and General Motors Co. in offering discounts to lure Toyota owners, while consumer Web site Edmunds.com said fewer shoppers are aiming to buy Toyotas. The company’s U.S. market share may fall to 14.7 percent in January, its lowest since March 2006. At the same time, dealers are preparing to replace accelerator pedals in 2.3 million recalled vehicles that have a part that may be defective. The pedal flaw also triggered recalls of models in Europe and China. Service Work Profit from that service work may blunt the damage from lost new and used car revenue, said dealers. Toyota remained the top-selling brand in the U.S. last year, while the parent company was again the world’s largest automaker. The estimated loss of revenue per dealership assumes the vehicles affected account for 56 percent of the new-car volume and 30 percent of the used-car sales at an average dealer with a transaction price of around $30,000, McEleney said. The loss of revenue from new cars would be $1.25 million to $1.5 million with the rest coming from lost used-car sales. “We’re still selling cars,” said Billy Rinker, general manager of Toyota of Santa Monica in California. Many customers are asking about the recall and focusing on the information in the media, he said. “We’ve been explaining to customers that it’s something happening in a small percent of high-mileage vehicles,” Rinker said. Warranty work can be highly profitable for franchised dealers, which typically bill at least $75 an hour for labor and could realize a gross profit of $100 to $150 for each accelerator that needs to be replaced, said Marc Cannon , spokesman for AutoNation Inc. , the nation’s biggest Toyota dealer with 25 franchises. ‘More Profitable’ “Once the fix gets announced it will be a positive for our business,” said Tony Pordon , a spokesman for Penske Automotive Group Inc., based in Bloomfield Hills, Michigan. “Parts and service work is much more profitable than selling vehicles, comprising almost half of gross profit.” PAG operates 17 Toyota dealerships in the U.S. Toyota has told dealers it will help to offset the interest expense on loans for vehicles in inventory that can’t be sold, McEleny said. As well as the Camry and Corolla, the vehicles that Toyota has prohibited selling include the Avalon, Highlander, Matrix, RAV4, Sequoia and Tundra. The eight models accounted for 106,012 sales in December and about $2.5 billion in revenue to dealers, according to data from vehicle research firm Edmunds.com. Sales Impact “It’s a little premature to guess or estimate the impact on sales at this point,” said Celeste Migliore , a spokeswoman for Toyota’s U.S. sales unit in Torrance, California. The company will discuss sales in detail on Feb. 2, when it releases figures for the entire month of January, she said. Rivals Honda Motor Co. and GM probably are gaining buyers as consumers shy away from Toyota brands, Edmunds.com said. The share of people intending to purchase a Toyota-brand model fell to 10 percent Jan. 27 from 13 percent a day earlier, while GM and Honda each rose 1 percentage point to 15 percent and 12 percent, according to Edmunds.com. The analysis is based on visits to the Edmunds.com Web site. To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net ; Doron Levin in Southfield, Michigan, at dlevin5@bloomberg.net

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GM Discounts: Saturn, Pontiac Cars Get $7000 Rebate

December 29, 2009

NEW YORK — General Motors Co. is offering deep discounts on its remaining Saturn and Pontiac vehicles as it looks to move the leftover inventory of the soon-to-be-dead brands, according to a published report. The automaker will pay dealers $7,000 for every new Saturn or Pontiac left on their lot if the vehicle is moved to dealer-operated rental or service fleets, according to The Wall Street Journal, which cited a letter mailed to dealers. This allows the dealers to sell the cars and trucks to consumers at a discount, although the vehicles would be labeled as used because the dealer would technically be the first owner. The offer expires Jan. 4, according to the newspaper. GM spokesman Tom Henderson confirmed the details of the incentive plan Tuesday. “That was the purpose of the programs – to help dealers reduce those inventories,” he said. The decision to discount Saturns and Pontiacs comes as GM closes down both brands under the Detroit automaker’s restructuring plan. The shutdown of Pontiac was announced earlier in the year. GM announced this fall it would discontinue Saturn after a deal collapsed to sell the brand to Penske Automotive Group Inc. Besides Pontiac and Saturn, GM is selling Hummer to a Chinese heavy equipment maker and is likely shuttering Swedish brand Saab. That will leave the automaker with four core brands: Buick, Chevrolet, GMC and Cadillac. Sales of Saturn and Pontiac have declined sharply this year. Saturn sales have plunged 61.5 percent through November, according to Autodata Corp. Pontiac sales have slid 32.3 percent. GM’s companywide decline is 31.8 percent. With a $7,000 discount, the manufacturer’s suggested price of Pontiac’s cheapest vehicle, the G3 hatchback, falls to $7,335. The incentive brings Saturn’s cheapest vehicle, the Astra compact car, to $9,495. Henderson, however, cautioned that the final price of the vehicles might be different. GM’s typical offers discounts that are much smaller. According to the auto research Web site Edmunds.com, GM’s incentive spending in November totaled $4,270 per vehicle, on average.

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China Squeezes Property Speculators, Extends Stimulus for Consumer Sales

December 9, 2009

By Bloomberg News Dec. 10 (Bloomberg) — China issued policies to curb property speculation after home prices rose at the fastest pace in more than a year and Premier Wen Jiabao pledged support for affordable housing. The government will impose a sales tax on homes sold within five years of their purchase, increasing the time period covered by the charge from two years, the State Council, the nation’s cabinet, said yesterday after a meeting chaired by Wen. China reduced the penalty period of the tax to two years from five in January of this year to stem falling prices. A record $1.3 trillion of bank lending that helped revive Chinese economic growth to 8.9 percent in the third quarter has also fueled concerns of a bubble in the nation’s property market. Home prices in 70 major Chinese cities climbed at the fastest pace in 14 months in October, according to government data. “The Chinese central government wants to gradually control the bubble in the real estate market,” Andy Xie , former Morgan Stanley chief Asian economist, said by phone. November sales for China Vanke Co. , the nation’s biggest developer by market value, rose 46.5 percent from a year earlier to 5.23 billion yuan ($766 million), the company said this week. Sales in the first 11 months rose 36.2 percent. A measure of property developers traded in Shanghai has more than doubled this year. Property Speculation Premier Wen said Nov. 28 in Shanghai that the government will support the development of affordable housing for low- and middle-income earners, the official Xinhua News Agency reported. Property speculation must also be suppressed to promote a healthy real-estate industry, Xinhua cited Wen as saying. China will curb “speculative” home purchases, Xinhua reported yesterday before the State Council announcement, citing National Development and Reform Commission Chairman Zhang Ping . China announced plans to reduce the real estate sales tax and extend preferential lending rates for buyers of second homes in December 2008. Prices in 70 major Chinese cities fell for the first time on record that same month and didn’t post an increase until June this year, according to government data. “The reinstatement of the property tax period to five years is an early signal that the government is concerned about speculative demand in the property market,” Jun Ma , Deutsche Bank AG’s Hong Kong-based chief economist for Greater China, said by phone. China’s economy still faces many difficulties and challenges next year, yesterday’s State Council statement said. The nation needs to continue expanding the role of consumption in driving economic growth, according to the notice. The government will also scale back preferential tax rates offered for purchases of vehicles with engines of 1.6 liters or smaller, according to the statement. China in January cut the sales tax on the vehicles to 5 percent from 10 percent between Jan. 20 and Dec. 31. It introduced the incentive to revive demand after auto sales rose at the slowest pace in a decade last year. The rate will be 7.5 percent next year, the statement said. Government support helped fuel a 42 percent jump in nationwide vehicle sales to 12.2 million in the year through November, putting China on course to surpass the U.S. as the world’s largest auto market. China’s full-year auto sales may be about 13 million, according to Booz & Co., which advises carmakers and investors in China. Alternative-Energy Cars China will also pick five cities for trials of subsidies designed to encourage individuals to buy alternative energy and energy efficient cars, the State Council said. The government will increase automobile trade-in subsidies to between 5,000 yuan and 18,000 yuan, according to the statement. “The government is refining its policy to promote domestic consumption,” said Deutsche Bank’s Ma. China will extend subsidies for purchases of automobiles, appliances and farming equipment in rural areas, according to the statement, which didn’t give a time frame for the program. China will continue appliance trade-in subsidies beyond May 2010, when it had been set to expire. Subsidies for motorcycle purchases will be extended to the end of January 2013, the State Council said. Yesterday’s announcement came after the central government held its annual economic work meeting to plan policies for the coming year. The government said it will add flexibility to some monetary economic policies next year and rein in new investment projects after the conclusion of the meetings on Dec. 7 For Related News and Information: Stories about China’s real estate market: TNI CHINA REL BN Most-read stories about China today: MNI CHINA 1D China economic statistics: ECST CH

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China Puts Squeeze on Property Speculators With Tougher Sales Tax Penalty

December 9, 2009

By Bloomberg News Dec. 10 (Bloomberg) — China issued policies to curb property speculation after home prices rose at the fastest pace in more than a year and Premier Wen Jiabao pledged support for affordable housing. The government will impose a sales tax on homes sold within five years of their purchase, increasing the time period covered by the charge from two years, the State Council, the nation’s cabinet, said yesterday after a meeting chaired by Wen. China reduced the penalty period of the tax to two years from five in January of this year to stem falling prices. A record $1.3 trillion of bank lending that helped revive Chinese economic growth to 8.9 percent in the third quarter has also fueled concerns of a bubble in the nation’s property market. Home prices in 70 major Chinese cities climbed at the fastest pace in 14 months in October, according to government data. “The Chinese central government wants to gradually control the bubble in the real estate market,” Andy Xie , former Morgan Stanley chief Asian economist, said by phone. November sales for China Vanke Co. , the nation’s biggest developer by market value, rose 46.5 percent from a year earlier to 5.23 billion yuan ($766 million), the company said this week. Sales in the first 11 months rose 36.2 percent. A measure of property developers traded in Shanghai has more than doubled this year. Property Speculation Premier Wen said Nov. 28 in Shanghai that the government will support the development of affordable housing for low- and middle-income earners, the official Xinhua News Agency reported. Property speculation must also be suppressed to promote a healthy real-estate industry, Xinhua cited Wen as saying. China will curb “speculative” home purchases, Xinhua reported yesterday before the State Council announcement, citing National Development and Reform Commission Chairman Zhang Ping . China announced plans to reduce the real estate sales tax and extend preferential lending rates for buyers of second homes in December 2008. Prices in 70 major Chinese cities fell for the first time on record that same month and didn’t post an increase until June this year, according to government data. “The reinstatement of the property tax period to five years is an early signal that the government is concerned about speculative demand in the property market,” Jun Ma , Deutsche Bank AG’s Hong Kong-based chief economist for Greater China, said by phone. China’s economy still faces many difficulties and challenges next year, yesterday’s State Council statement said. The nation needs to continue expanding the role of consumption in driving economic growth, according to the notice. The government will also scale back preferential tax rates offered for purchases of vehicles with engines of 1.6 liters or smaller, according to the statement. China in January cut the sales tax on the vehicles to 5 percent from 10 percent between Jan. 20 and Dec. 31. It introduced the incentive to revive demand after auto sales rose at the slowest pace in a decade last year. The rate will be 7.5 percent next year, the statement said. Government support helped fuel a 42 percent jump in nationwide vehicle sales to 12.2 million in the year through November, putting China on course to surpass the U.S. as the world’s largest auto market. China’s full-year auto sales may be about 13 million, according to Booz & Co., which advises carmakers and investors in China. Alternative-Energy Cars China will also pick five cities for trials of subsidies designed to encourage individuals to buy alternative energy and energy efficient cars, the State Council said. The government will increase automobile trade-in subsidies to between 5,000 yuan and 18,000 yuan, according to the statement. “The government is refining its policy to promote domestic consumption,” said Deutsche Bank’s Ma. China will extend subsidies for purchases of automobiles, appliances and farming equipment in rural areas, according to the statement, which didn’t give a time frame for the program. China will continue appliance trade-in subsidies beyond May 2010, when it had been set to expire. Subsidies for motorcycle purchases will be extended to the end of January 2013, the State Council said. Yesterday’s announcement came after the central government held its annual economic work meeting to plan policies for the coming year. The government said it will add flexibility to some monetary economic policies next year and rein in new investment projects after the conclusion of the meetings on Dec. 7 For Related News and Information: Stories about China’s real estate market: TNI CHINA REL BN Most-read stories about China today: MNI CHINA 1D China economic statistics: ECST CH

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Moneyed Interests Lining Up For Battle Over Accounting Standards

November 16, 2009

In the midst of what was supposed to be a Congressional push for increased financial regulation and accountability, a powerful coalition of moneyed interests is increasing pressure on Congress to undermine the independence of accounting standards. Banks and major real-estate players are pushing for a system that would actually relax accounting rules in times of economic distress. Instead of treating a fever, suspending accounting standards when the economy is in turmoil is like telling a patient that 104 degrees isn’t so bad and that they’ll be just fine. The group behind the move sent a letter to members of the House Financial Services Committee on Monday, pushing them to back an amendment that will be introduced by Rep. Ed Perlmutter (D-Colo.) and could be voted on as early as Wednesday. The letter was obtained by HuffPost and is signed by representatives of eight major players that would benefit from looser accounting standards: the American Bankers Association, Commercial Mortgage Securities Association, Council of Federal Home Loan Banks, the Financial Services Roundtable, the National Multi Housing Council, the National Apartment Association, National Association of Home Builders and the Real Estate Roundtable. The bank and real estate interests, however, have gone too far in the eyes of their usual allies, leading to a corporate rumble of epic proportions. Accountants, investors, the Chamber of Commerce and regular businesses with tangible products are lining up against it. An unusually potent opposition has formed, including Ernst & Young, the American Council for Capital Formation, American Institute of Certified Public Accountants, CalPERS, Center for Audit Quality, Center for Capital Markets Competitiveness, CFA Institute Centre for Financial Market Integrity, Committee on Capital Markets Regulation, Council of Institutional Investors, Deloitte Touche Tohmatsu, Financial Accounting Standards Advisory Council, Financial Executives International, Grant Thornton LLP, Institute of Management Accountants, Investment Company Institute, KPMG LLP and the U.S. Securities and Exchange Commission. “The Perlmutter accounting amendment is fundamentally flawed,” reads a separate letter from E&Y CEO Jim Turley to committee members. “Under the amendment, financial institution regulators — through their majority membership on the underlying bill’s systemic risk council — would be able to set or suspend generally accepted accounting principles for the entire corporate community.” The amendment has yet to be introduced but an advance copy that was floating around K Street was forwarded to HuffPost . A Perlmutter spokeswoman confirmed it is authentic. The amendment would give bank regulators the power to, “either publicly or privately,” order the “suspension, modification or elimination of such accounting principles, standards or procedures as they may apply to the stability of the financial system or the safety and soundness of financial companies, as a whole, for such duration as is reasonable and appropriate.” Perlmutter and Committee Chairman Barney Frank (D-Mass) said that community banks were driving the change hard. That may be, but the Independent Community Bankers of America, the small banks’ leading lobby shop, didn’t sign on to the letter. The ABA, while it mainly represents big banks, also includes smaller ones in its association and did sign the letter. Other signers of the missive — the Commercial Mortgage Securities Association and the Financial Services Roundtable — are Wall Street groups. “We don’t have anything against Perlmutter['s amendment], but we’re focusing on amendments that are a higher priority,” said Steve Verdier, director of the congressional relations group for ICBA. “We think that to the extent that it raises an issue and challenges FASB, that’s a positive, but it doesn’t really address the problems that community banks have with mark-to-market accounting.” Verdier was referring to the Financial Accounting Standards Board, which is the bane of bankrupt banks because it sets standards that say that they are, in fact, bankrupt. Banks would prefer that a regulator who had other interests, beyond accurate accounting, be put in charge of accounting standards. Frank and other committee Democrats say that community banks are the financial institutions with real clout in the House, because Wall Street has been discredited by the collapse and continue massive bonus payouts. The fate of the Perlmutter amendment, if small banks don’t get strongly behind it, will be a test-case of that theory. Former Fed Chairman Paul Volcker, who has been a critic of the mark-to-market accounting that the banks despise FASB for enforcing, is cited by the financial institutions in their letter praising the Perlmutter amendment. But Volcker himself hates it. “That’s a terrible idea,” he told the New York Times on Monday, when asked about the amendment, which could come up for a vote as early as Wednesday. On the Senate side, Banking Committee Chairman Chris Dodd (D-Conn.) rejected the bank entreaties and left the FASB with the independence it currently has. The letter supporting the Perlmutter amendment:: November 16, 2009 The Honorable Barney Frank Chairman, Committee on Financial Services U.S. House of Representative 2129 Rayburn House Office Building Washington, DC 20515 The Honorable Spencer Bachus Ranking Member, Committee on Financial Services U.S. House of Representative B371A Rayburn House Office Building Washington, DC 20515 Dear Chairman Frank and Ranking Member Bachus: The undersigned trade associations representing home builders, the top owners and investors of U.S. commercial and multifamily real estate, traditional banks and other financial companies urge you to support the Perlmutter-Lucas amendment, expected to be offered at the Committee’s mark up of the Financial Stability Improvement Act of 2009. The Perlmutter-Lucas amendment would have no effect on the role of the Financial Accounting Standards Board (FSAB) in setting accounting policy or the oversight of accounting issues vested in the Securities and Exchange Commission (SEC). If an accounting principle or standard poses systemic risks that threaten the stability of the United States financial system, the Financial Oversight Council (Council) would work with the SEC to ensure that those risks are mitigated. The Perlmutter-Lucas amendment: * Retains existing oversight of FASB by the SEC. * Preserves FASB’s existing independence. * Provides the Council with oversight authority to address accounting issues that pose systemic risk in a similar manner as its oversight of other financial issues. * Provides the Council with authority to review any accounting principle or standard that poses a systemic risk. Based on the majority view, the Council may make a recommendation to the SEC that it take action to ensure that systemic risk concerns are mitigated. The SEC is a member of the Council and would be a party to any determination made by the Council. * Provides the Council with authority to act on a systemic risk issue if the SEC fails to do so. The Perlmutter-Lucas amendment would help address global concern that accounting standards can exacerbate systemic risk and instability in the financial system. For example: * The Group of 30, chaired by Paul Volcker (former Chairman of the Trustees of the International Accounting Standards Board and former Chairman of the Federal Reserve), noted the importance of examining the effect on the credit markets before implementing a proposed accounting standard.(1) * The G20 provided recommendations for strengthening the financial system, which included the need to improve specific accounting standards and the need to reduce the procyclicality of certain of the standards. It further recommended that the Financial Stability Board(2) and others work with the accounting standards setters to implement changes by year-end 2009.(3) * Financial Stability Forum (which includes central banks, supervisory authorities, finance ministries, international financial institutions, and international regulatory and supervisory groups) identified a number of accounting issues as being problematic with respect to procyclicality, and the FSF noted ways to mitigate the problems in order to strengthen the financial system.(4) We believe it is extremely important that Congress address accounting policy as part of financial reform. Although the SEC is responsible for accounting oversight, it has not been charged with systemic risk issues. Since the SEC’s mandate is too narrow to take into consideration potential systemic risk created by accounting standards, the Council should be able to review and make recommendations on any accounting principle or standard that it believes poses a systemic risk. The SEC is a member of the Council, and would be engaged in, and vote on, all Council actions. Without providing the Council with the ability to address systemic risk relating to accounting, the Council will not be able to address one of the significant issue areas that exacerbated the nation’s current financial problems. We appreciate your consideration of our view on this most important issue. American Bankers Association Commercial Mortgage Securities Association Council of Federal Home Loan Banks Financial Services Roundtable National Multi Housing Council National Apartment Association National Association of Home Builders Real Estate Roundtable Footnotes (1) “Off-Balance-Sheet Vehicles: Pending accounting rule changes for the consolidation of many types of off-balance-sheet vehicles represent a positive and needed improvement. It is important, before they are fully implemented, that careful consideration be given to how these rules are likely to impact efforts to restore the viability of securitized credit markets.” Financial Reform – A Framework for Financial Stability, The Group of 30, January 2009. (2) The membership of the Financial Stability Forum was recently expanded and is now the Financial Stability Board. (3) “…the FSB [Financial Stability Board], BCBS [Basel Committee on Banking Supervision], and CGFS [Committee on the Global Financial System], working with accounting standard setters, should take forward, with a deadline of end 2009, implementation of the recommendations published today to mitigate procyclicality, including a requirement for banks to build buffers of resources in good times that they can draw down when conditions deteriorate.” Declaration on Strengthening the Financial System, G20, April 2009. (4) Addressing Procyclicality in the Financial System, Financial Stability Forum, April 2009. From a letter opposing the Perlmutter amendment, from Ernst & Young CEO Jim Turley: The Perlmutter accounting amendment is fundamentally flawed. Under the amendment, financial institution regulators – through their majority membership on the underlying bill’s systemic risk council — would be able to set or suspend generally accepted accounting principles for the entire corporate community. The amendment confuses the roles of the Securities and Exchange Commission and prudential supervisors of financial institutions. The primary objective of accounting standards is to meet the needs of investors and capital markets with transparent financial information. On the other hand, the primary objective of prudential oversight is to foster the safety and soundness and financial stability of regulated financial institutions. The amendment wrongly confuses who is responsible for what and ignores the existing authority of prudential regulators and the SEC to act as warranted. While the amendment has received backing from representatives of the financial services industry, it is opposed by a wide variety of corporate, investor, and capital market players including American Council for Capital Formation, American Institute of Certified Public Accountants, CalPERS, Center for Audit Quality, Center for Capital Markets Competitiveness, CFA Institute Centre for Financial Market Integrity, Committee on Capital Markets Regulation, Council of Institutional Investors, Deloitte Touche Tohmatsu, Financial Accounting Standards Advisory Council, Financial Executives International, Grant Thornton LLP, Institute of Management Accountants, Investment Company Institute, KPMG LLP, U.S. Securities and Exchange Commission and the U.S. Chamber of Commerce.

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Ford Posts $1B Profit In Third Quarter, Forecasts A "Solidly Profitable" 2011

November 2, 2009

DEARBORN, Mich. — Ford, the only Detroit automaker to dodge direct government aid and bankruptcy court, surprised investors with net income of nearly $1 billion in the third quarter and forecast a “solidly profitable” 2011. The automaker said Monday earnings were fueled by U.S. market share gains, cost cuts and the Cash for Clunkers program, which drew flocks of buyers to showrooms this summer. Ford’s shares rose 68 cents, or 9.8 percent, to $7.68 in morning trading. The latest results signal that Ford’s turnaround is on more solid ground. The company lost more than $14.6 billion last year and hasn’t posted a full-year profit since 2005. While it made a profit in the second quarter, that was mainly due to debt reductions that cut its interest payments. Ford, based in Dearborn, Mich., reported third-quarter net income of $997 million, or 29 cents per share. Its profit forecast for 2011 was a step above previous guidance of break-even or better for the year. Ford’s key North American car and truck division posted a pretax profit of $357 million, the division’s first quarter in the black since early 2005. Ford cited higher pricing, lower material costs and increased market share for the improvement. Excluding one-time items, Ford earned 26 cents per share, blowing away analysts’ expectations of a loss of 12 cents. The earnings came despite an $800 million revenue drop. But Ford said it cut costs by $1 billion during the quarter, accomplished through layoffs in North America and Europe, reduced pension and retiree health care costs and improvements in productivity and product development. Chief financial officer Lewis Booth said the company took in $1.3 billion more than it spent in the quarter, an improvement over its $1 billion cash burn in the second quarter. “That’s a huge deal,” Booth said. Ford’s plan to create demand and get better prices for its products, coupled with cost cuts, gave the company confidence that it will make money in 2011, Booth said. But Ford still faces obstacles in its turnaround. Last week, workers overwhelmingly rejected an agreement with the United Auto Workers that would have brought Ford’s labor costs in line with rivals General Motors Corp. and Chrysler LLC. Workers objected to clauses limiting their right to strike and freezing entry-level wages, and felt the company was healthy enough and didn’t need further concessions. The rejected deal also would have changed rules so skilled tradesmen such as electricians and pipefitters work in teams and perform more than one task. Rejection of the deal isn’t likely to place Ford at an immediate cost disadvantage to its crosstown rivals because savings from the concessions are longer-term, said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. Neither the company nor the UAW has released any cost savings numbers. The third-quarter profit makes it extremely unlikely that the company will push to head back to the bargaining table before the current UAW contract expires in the fall of 2011, and union leaders also are unlikely to take another deal to the membership, Chaison said. “I think the company has no credibility asking for concessions now, and I think the leadership is quite embarrased for making a case for concessions,” he said. Chaison said Ford could make some noise about moving new vehicle production to Canada, where unionized workers on Sunday approved a package of concessions, but it’s more likely that Ford will live with the current contract until 2011. The other area where Ford has a cost disadvantage is debt. Ford reported $26.9 billion in debt, up $800 million from the second quarter. The company avoided the same fate as rivals Chrysler and GM by mortgaging its factories and even the familiar blue oval logo to borrow $23.5 billion before credit markets froze last year. Ford didn’t quantify the impact of Cash for Clunkers, which offered buyers rebates to trade in their vehicles. The program helped Ford cut costly incentives and raise production. It also won buyers; the fuel-efficient Ford Focus sedan and Ford Escape, a small SUV, were among the top five sellers under clunkers. Ford sales climbed 17 percent in August thanks to the program. Ford’s revenue fell $800 million for the quarter, to $30.9 billion, due mainly to its financial services arm, Ford Motor Credit, making fewer loans. But the division still posted a pretax profit of $677 million, and revenue from auto operations rose slightly to $27.9 billion. Ford also has benefited from consumer goodwill after it declined government bailout money and didn’t go into bankruptcy over the summer as GM and Chrysler did. Ford grabbed sales from its rivals, posting the largest increase in market share of any automaker in September. Ford expects an overall gain in U.S. market share in 2009, a feat it hasn’t accomplished since 1995. (This version CORRECTS 5th graf that Ford’s North American car and truck division posted the first pretax profit since the first quarter of 2005 sted company’s first pretax profit since first quarter of 2005)

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California’s Push for Electric Cars May Make Residents Pay More for Power

October 23, 2009

By Alan Ohnsman and Mark Chediak Oct. 23 (Bloomberg) — California’s push to lead U.S. sales of electric cars may result in higher power rates for consumers in the state, as a growing number of rechargeable vehicles forces utilities to pay for grid upgrades. The impact of the vehicles on electricity fees is being reviewed this month by California’s Public Utilities Commission as the most populous U.S. state will require Toyota Motor Corp. , General Motors Co., Honda Motor Co. , Ford Motor Co. and Nissan Motor Co. to sell more vehicles that can be powered at electric outlets from late 2011. Power companies including Southern California Edison, the state’s largest, have to install new transformers and meters to handle greater demand and prevent blackouts from circuits being overloaded by too many vehicles plugging in. The utilities will boost rates to recover investment costs, said Travis Miller , an analyst at Morningstar Inc. in Chicago. “If you look at the kind of money that will be needed for a full smart grid and support for electric vehicles, then you are talking about a substantial amount,” Miller said in a phone interview. The spending may total “multiple billions” of dollars over a decade or more, he said. From model years 2012 through 2014, the largest carmakers by volume in California must sell about 60,000 plug-in hybrids and electric cars combined, according to the state Air Resources Board. President Barack Obama is aiming for 1 million plug-in cars on U.S. roads by 2015 to curb tailpipe emissions and cut dependence on foreign oil. Overload Rosemead, California-based Edison International , the owner of Southern California Edison, has identified Santa Monica, California, as a community with many potential battery-car customers that may require transformer upgrades. A typical Santa Monica circuit, which serves about 10 households, may be overloaded should two or three customers on that circuit charge vehicles simultaneously, even if they do so overnight during off-peak hours, Ted Craver , Edison’s chief executive officer, said in a phone interview on Oct. 20. While surplus power is available at night at cheaper rates, the grid needs adjustments to handle such charging, Craver said. For example, additional or larger transformers may be needed in neighborhoods with numerous plug-in car owners. “If all those people do it at off hours, in the middle of the night, a lot of our system is designed so the transformers cool down at night,” Craver said. “That’s part of how they are able to function at full capacity during the day.” Rates Edison, PG&E Corp. , owner of Pacific Gas & Electric Co., and Sempra Energy’s San Diego Gas & Electric have said in filings with the state utilities commission they’ll have to make infrastructure investments related to plug-ins, without proving specific figures. Expenses will start next year for plug-in “readiness efforts, and will require a reasonable process for seeking recovery of these costs,” Edison said in its filing . Utilities providing power to recharge vehicles are set to receive “low-carbon fuel” credits that may be sold to oil companies. Edison, PG&E and San Diego Gas all said they’ll use revenue from the credits to moderate potential rate increases. A decision by the commission on rate changes linked to plug-ins isn’t likely for “several months,” Craver said. ‘Urgent Imperative’ The Edison Electric Institute , the main industry group for U.S. investor-owned utilities, said Oct. 21 its members are increasing efforts to prepare for electric vehicles, calling it an “urgent imperative.” Minneapolis-based utility Xcel Energy Inc. helped fund and install “ Smart Grid City ,” a $100 million project in Boulder, Colorado, designed for electric-vehicle charging. Toyota said this week it will supply 10 plug-in Prius hybrids for testing on the Boulder system in a program by the University of Colorado and the Energy Department. In addition to transformers, so-called smart meters and upgrades to public chargers installed in California a decade ago, individual customers will also have costs if they install home- use charging units, Craver said. Edison estimates that by 2020, as many as 1.6 million cars recharged by the grid may be in use in its 50,000-square-mile coverage area , about the size of Alabama. Edison is making system-wide upgrades to improve efficiency and doesn’t have a cost estimate for modifications related solely to battery vehicles, Craver said in an Oct. 15 interview at the company’s Electric Vehicle Technology Center in Pomona, California. “I don’t think you can really isolate and say this is just the pure incremental case related to electric vehicles,” he said. In preparation for vehicles such as Nissan’s Leaf electric car and GM’s Chevrolet Volt, due in late 2010, Edison is trying to estimate how much demand there will be, where most of the vehicles will be in use, and potential impacts on its system. “It’s important that the customer experience with plug-in electric vehicles be a good one,” Craver said. To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net ; Mark Chediak in San Francisco at mchediak@bloomberg.net

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Boeing’s Muilenburg Targets Power-Grid Business as U.S. Cuts Hurt Defense

October 13, 2009

By Susanna Ray and Gopal Ratnam Oct. 13 (Bloomberg) — Boeing Co. defense chief Dennis Muilenburg is seeking to enter the potential $20 billion U.S. power-grid market as the second-largest military contractor’s key programs are being canceled or face budget cuts. After a month in the job, Muilenburg, 45, said he’s accelerating plans to expand beyond aerospace and defense that were started by his predecessor, Jim Albaugh , who was named head of the commercial-jet division on Aug. 31. “We know that we have to reposition our business, and that repositioning is something we are very aggressively doing,” Muilenburg said in an interview in his office overlooking the Pentagon. “One idea is to take some of our defense technology and use it to help solve problems in the energy sector.” Energy projects would put Boeing in competition with General Electric Co. , International Business Machines Corp. and Cisco Systems Inc. for $4.5 billion of U.S. stimulus spending aimed at improving the grid. The planned “smart-grid” technology seeks to lower costs and prevent disruptions with systems that allow energy providers to communicate. The market for the grid’s communications segment may be worth $20 billion in the next few years, Boeing spokesman Chris Haddox said. Boeing proposes using network and integration technologies from its missile-defense program and the Army’s Future Combat Systems to “add a certain level of intelligence to the grid and allow efficiency and reliability improvements” for utilities, Muilenburg said. Boeing fell 9 cents to $51.57 at 10:27 a.m. in New York Stock Exchange composite trading . The shares gained 21 percent this year through yesterday. ‘Trepidation’ “I would have some trepidation about Boeing’s ability to manage program risk in these new areas as this would be unfamiliar territory versus defense,” Rob Stallard , an analyst with Macquarie Capital Inc. in New York, said in an e-mailed response to questions. “The past is littered with examples of defense companies trying to diversify and the outcomes being less than optimal for shareholders.” Stallard has a neutral rating on the shares. Boeing has partnered with Consolidated Edison Inc. in New York and Southern California Edison Co. Boeing already has helped military bases reduce energy consumption and worked to improve the fuel efficiency of military planes, Muilenburg said. Boeing submitted three proposals on Aug. 26 for grants from the stimulus money to study the smart grid. The Department of Energy is expected to award the grants this year, Muilenburg said in the Oct. 9 interview. About $600 million of the Department’s funds will be distributed to smart-grid demonstration projects and $3.3 billion will support manufacturing, purchasing and installing equipment, the department said in June. Future Combat Systems The extra business would be a boost to Chicago-based Boeing, which has faced losses in the Pentagon’s new spending plans. The company’s Future Combat Systems and Airborne Laser programs were canceled, as was a ground-based missile-defense site in Europe it would have built. The company is fighting for a $35 billion contract for aerial-refueling tankers against a group including the parent of Airbus SAS. Defense Secretary Robert Gates in May called the $159 billion Future Combat Systems — manned and unmanned vehicles joined by a wireless network — “messed up” and split it into five programs. Boeing, which had been leading the effort, was left with one of the five. Army Communications Boeing will continue to have a role in the communications part of that program, which has worked “exceptionally well,” Muilenburg said, allowing it to be deployed on the existing fleet of Army vehicles. “That’s why we are now able to take that technology and move it to adjacencies,” he said. Muilenburg, who has been with Boeing since 1985, led the Future Combat Systems program in its early years. The company, which also is the world’s second-largest commercial-jet builder and is entering the commercial-satellite market, aims to use its expertise to expand in other areas as well, Muilenburg said. Boeing is offering supply-chain management services and has other expansion plans, he said, declining to give details. Boeing was founded in 1916, when Bill Boeing built a float plane on the shores of Seattle’s Lake Washington. The company bought McDonnell Douglas in 1997, expanding the defense side of the business to help counter the cyclical air-travel market. Defense Unit Boeing’s defense unit is leading the effort to enter the energy market, with help from the commercial side, and there are no plans to create a separate division, Muilenburg said. He and Albaugh, 59, are “very much focused on leveraging commonalities” in their new positions, he said. Boeing also is seeking growth from the helicopters, unmanned-drone, cyber-security and intelligence businesses, Muilenburg said. U.S. purchases of the company’s C-17 transport planes and F/A-18 fighter jets depend on yearly decisions by Congress, and the F-15 program relies largely on foreign buyers. “Any progress in taking on Department of Energy projects is likely to be initially very small, especially when compared to headwinds” like the conclusion of Boeing’s C-17 production, Stallard said. Boeing’s international sales will rise to 20 percent to 25 percent of revenue from 15 percent in the next five years as U.S. defense budget growth stalls and the company pushes for overseas contracts, Muilenburg said. Boeing is expanding international marketing of its Chinook transport and Apache attack helicopters, he said. Demand for the company’s ScanEagle drone is increasing, and customers are seeking unmanned aircraft that offer “significantly longer endurance, measured in days and weeks, not hours,” he said. The company is making internal investments to meet those needs and will seek acquisitions where needed, he said. “It’s not really a sea change in the strategy or approach but adding a sense of urgency,” Muilenburg said. To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net ; Susanna Ray in Washington via sray7@bloomberg.net .

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GM Saturn Shutdown: Automaker To Shut Down Brand After Penske Walks Away

September 30, 2009

DETROIT — General Motors Co. said Wednesday it would shut down its Saturn brand after an agreement with Penske Automotive Group Inc. to acquire it fell apart. Penske, citing concerns of whether it could continue to supply vehicles after a manufacturing contract with GM ran out, ended talks with GM Wednesday to acquire the brand. GM CEO Fritz Henderson said in statement that Saturn and its dealership network will be phased out. “This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality,” Henderson said in a written statement. “PAG’s announcement explained that their decision was not based on interactions with GM or Saturn retailers.” In a statement, the Bloomfield Hills, Mich.-based auto retailer says an agreement with another manufacturer to continue producing Saturn vehicles after GM stopped making them fell through, leading Penske to terminate talks with GM. Penske said it negotiated terms and conditions to make Saturn cars with another manufacturer, but that company’s board of directors rejected the agreement. Penske spokesman Anthony Pordon would not identify the other manufacturer. “Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction,” the company said in a statement. In June, GM and Penske agreed to take over the Saturn brand and related dealerships, although GM would produce the vehicles for a limited period of time. GM said Saturn vehicle owners can still go to their Saturn dealer for service and would be able to go to a certified GM dealer for service once Saturn dealerships are closed. It was expected that GM would announce the completion of Saturn’s sale to Penske in the coming days. Share of Penske fell $1.93 to $17.25 in after hours trading. They rose $1.32, or 7.4 percent to $19.18 in regular trading Wednesday.

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Pimco Save-More-Spend-Less Economy Brings Total Return to 5%, Gross Says

September 29, 2009

By Thomas R. Keene and Susanne Walker Sept. 30 (Bloomberg) — Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings. “Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.” Officials at Newport Beach, California-based Pimco say the “new normal” for the global economy will be characterized by heightened government regulation, lower consumption and slower growth. The Standard & Poor’s 500 Index increased 13 percent on average in the five years ended in 2007, before falling 37 percent last year as economies slid into recession. During the last two bull markets, the S&P 500 posted an average total return of 18.5 percent a year. The U.S. savings rate rose to 6 percent of disposable income in May, the highest level since 1998. Only 8 percent of U.S. adults plan to increase household spending, almost one- third will spend less, and 58 percent expect to “stay the course,” a Bloomberg News poll showed Sept. 17. More than three in four adults said they cut outlays in the past year. GDP Forecast The world’s largest economy likely shrank at a 1.2 percent annual rate from April to June, more than the originally reported 1 percent contraction, according to a Bloomberg News survey before the Commerce Department’s report today. The jobless rate climbed to 9.8 percent this month, from 9.7 percent in August, according to a separate Bloomberg survey before the Labor Department reports figures on Oct. 2. Gross said he’s been buying longer maturity Treasuries in recent weeks as protection against deflation. “There has been significant flattening on the long end of the curve,” Gross said “This reflects the re-emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.” Consumer prices fell 1.5 percent in August from a year ago, according to the Labor Department in Washington. Prices have declined on an annual basis every month since March. Yields on U.S. inflation-protected debt show there’s little concern about consumer prices eroding the value of bonds’ fixed payments. The difference in rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, is 1.73 percentage points. While up from 0.04 points in November, the level is below the average of 2.18 points over the past five years. Breakeven Rates The U.S. has the lowest so-called breakeven rates of any major sovereign debt market except Japan. The difference between three-year maturities is 0.6 point, below the average of about 2.21 points this decade. Gross had said during the midst of the seizure in credit markets that Treasuries offered little value as investors seeking a refuge from turmoil in global financial markets drove yields to record lows in December. He has since boosted the $177.5 billion Total Return Fund’s investment in government-related bonds to 44 percent of assets, the most since August 2004, from 25 percent in July, according data released earlier this month on Pimco’s Web site . The fund cut mortgage debt to 38 percent from 47 percent. “We’ve exchanged our mortgages for the government’s check” as the Federal Reserve winds down purchases of agency debt, Gross said. “Mortgages are expensive compared to Treasuries and other vehicles.” Program Extended Fed policy makers last week committed to complete their $1.45 trillion in purchases of mortgage securities and extended the end of the program to March from December. Pimco’s Total Return Fund handed investors a 17.85 percent gain in the past year, beating more than 90 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.94 percent, outpacing more than 55 percent of its competitors. Pimco is a unit of Munich-based insurer Allianz SE. In July Pimco reversed a policy to steer clear of U.S. debt when it said it would buy five- to 10-year Treasury securities. “With Treasury yields near the top of our expected range, Pimco plans to overweight duration and take exposure to the five- to 10-year portion of the yield curve,” the firm said July 20 in a report on its Web site. On that day, the yield on the 10-year note touched an intra-day high of 3.72 percent and a low of 3.57 percent. The note yielded 3.29 percent yesterday in New York, according to BGCantor Market Data. Gross said intermediate- to long-term bonds will perform well as long as policy rates and inflation remain low, after minutes of the Federal Open Market Committee’s Aug. 11-12 meeting was released on Sept. 2. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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Steve Parker: Biggest-ever Toyota Recall Announced; 3.8 Million Cars and Trucks

September 29, 2009

Toyota has announced the largest recall of vehicles in its US history. According to the Associated Press, “Toyota says it will recall 3.8 million vehicles in the United States to address problems with a removable floor mat that could interfere with the vehicle’s accelerator and cause a crash. The company says it will be the largest recall in its history. Owners could learn about the safety campaign as early as next week. 2004 Prius Toyota and the government warned owners of Toyota and Lexus vehicles about safety problems tied to the removable floor mats. They say the mats could interfere with the vehicle’s accelerator and cause a crash. The recall will affect 2007-2010 model year Toyota Camry, 2005-2010 Toyota Avalon, 2004-2009 Toyota Prius, 2005-2010 Tacoma, 2007-2010 Toyota Tundra, 2007-2010 Lexus ES350 and 2006-2010 Lexus IS250 and IS350. Owners should take out the floor mats on the driver’s side and not replace them. When Toyota develops a “fix” for the problem, the affected cars and trucks will be recalled to dealerships for replacement or retrofitted floor mats. Toyota’s previously largest recall was about 900,000 vehicles in 2005 to fix a steering issue.” (end AP quote) Lexus IS250 at the 2008 Paris Auto Show Automotive News also reported: “NHTSA said it issued the warning because of continued reports of vehicles accelerating rapidly after drivers released the accelerator. “This is an urgent matter,” U.S. Transportation Secretary Ray LaHood said in the statement. “We strongly urge owners of these vehicles to remove mats or other obstacles that could lead to unintended acceleration.” The reported acceleration problems appeared to be related to with unsecured mats, the configuration of the accelerator pedal and the process for shutting off engines in some vehicles that have keyless ignitions. Toyota recalled in September 2007 an all-weather floor mat from some 2007 and 2008 Lexus ES 350 and Toyota Camry vehicles because of similar problems, NHTSA said.” (end Automotive News quote) The Los Angeles Times reported: “Last month, a San Diego man and three passengers were killed in a high-speed crash that the driver, in a call to 911 prior to the accident, said was being caused by a floor mat wedged into the accelerator. “A stuck open accelerator pedal may result in very high vehicle speeds and make it difficult to stop the vehicle, which could cause a crash, serious injury or death,” the company said in a statement. Toyota said the vehicles would be recalled once it develops a remedy to the problem. Until then, the automaker said owners of the affected vehicles should take out any removable driver’s side floor mats and not replace them with any other floor mat.” (end LA Times quoute) It’s not clear when Toyota and Lexus dealers will replace or retrofit the removed floor mats. Lexus RX This recall comes on the heels of another large Toyota recall announced last month, when the company launched a voluntary Safety Recall with the National Highway Traffic Safety Administration (NHTSA) involving approximately 95,700 Toyota and Scion vehicles sold in the United State for a problem affecting vehicles in cold-weather parts of the country which could cause increased braking distances. Recalls are the bane of all carmakers; they are embarrassing, expensive and often remain in the public’s consciousness for a long time. In a recall done in concert with or at the order of the government, all owners of the affected vehicles must be contacted by the carmaker, an expensive proposition in itself, and all repair work must be done by authorized dealers at no cost whatsoever to the consumer. Carmakers often issue “TSBs” or Technical Service Bulletins to their dealer repair departments which list defects the manufacturer has found with vehicles, but which have not risen, at that point, to the level of necessitating an official recall. 2007 Toyota Camry These TSBs are sometimes called “secret recalls” because the manufacturer does not have to make the information available to all affected vehicle owners nor fix the problem for free when a vehicle with the problem comes in for service. Owners usually don’t know about these TSBs and the carmaker does not have to contact owners with TSB information. If an owner does not report the specific problem described in the TSB when bringing a vehicle in for service, the dealer does not have to inform the owner or make that specific repair. This floor mat recall is a bit unusual because owners are being asked to “make a fix” right away and on their own; this tell us the government considers the problem an immediate and important safety risk. Toyota and Lexus will recall the affected vehicles to dealers when a full repair is developed. In most instances of recalls, we recommend calling an authorized dealer to check on whether or not your car is part of the recall, and, if it is, to make an appointment with the dealer so the bug can be fixed in reasonably fast time. As with all recalls, the vehicle owner pays nothing for the service performed by the dealer and the dealer can not ask for any payment. Full recall and TSB information for all cars and trucks sold in the US is available at the National Highway Traffic Safety Administration’s website, www.NHTSA.gov.

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GM Recalls About 2,400 Workers

September 22, 2009

DETROIT — General Motors Co. will go to 24-hour operations at factories in Kansas, Michigan and Indiana to handle an expected increase in demand and to make up for production lost from a large-scale factory consolidation announced earlier in the year. The automaker says it will add a third shift at its Fairfax plant in Kansas City, Kan., in January. That will be followed in March or April by third shifts at factories in Delta Township, Mich., near Lansing, and Fort Wayne, Ind. About 2,400 production workers will be recalled as a result of the added shifts, and another 600 will be recalled at parts factories across the country, said Tim Lee, group vice president for global manufacturing. The increases announced Tuesday, coupled with other production increases unveiled during the summer, will allow GM to raise North American production from about 1.9 million vehicles this year to 2.8 million in 2010, Lee said. The increase also is necessary because of an expected sales increase next year and because GM’s inventory of cars and trucks was at a record-low level of 378,000 at the end of August, said Mark LaNeve, vice president of U.S. sales. The Fairfax plant makes the midsize Chevrolet Malibu, Saturn Aura and Buick LaCrosse, while Delta Township makes the Buick Enclave, GMC Acadia and Saturn Outlook large crossover vehicles. The Fort Wayne factory makes pickup trucks. GM says in a statement that Fairfax will get all production of the Malibu when a midsize car factory in Orion Township, Mich., closes Nov. 25. It will be converted to a small-car plant and reopen in 2011. Delta Township will get production of the Chevrolet Traverse large crossover when the Spring Hill, Tenn., factory that now makes the vehicles closes, also on Nov. 25. That plant will go on standby in case demand increases. Fort Wayne will add production of heavy-duty versions of the GMC Sierra and Chevrolet Silverado pickups that are being made in Pontiac, Mich. That factory is to close at the end of September, the company said in a statement. Lee said GM will not hire new workers to staff the additional shifts. Instead, the company generally will first offer the jobs to workers at the plants that will be closed. After that, they will be offered to workers in the region and then across the nation, he said. GM, under its contract with the United Auto Workers union, will pay to move workers from other cities, he said. Although the company’s dealer inventory is low now, it will take a minimum of three months to add the shifts because workers must be moved and because machinery must be disassembled and moved from Spring Hill and Pontiac, the company said. “This is a massive move for us in terms of the transference of people,” Lee said. GM’s September sales have been slow following the end of the government’s Cash for Clunkers program, LaNeve said. The company, though, predicts an increase in total U.S. sales from 10.5 million this year to 11.5 million to 12 million next year, he said. Currently GM has about a 40-day supply of large crossover vehicles, a 52-day supply of Malibus and a 60-day supply of Silverado pickups, according to Ward’s AutoInfoBank. Jeff Schuster, executive director of forecasting at J.D. Power and Associates, said GM has a low supply of many models and should have 1.5 to 2 times what is now on dealer lots. The low inventory, combined with an expected uptick in sales starting next year, means the production increase is justified, he said. “They’ve got some successful vehicles now. The new products are doing well,” Schuster said, adding that it’s reasonable to assume GM will pick up a share of any increase in overall U.S. sales. Brian Fredline, president of the UAW local at the Delta Township crossover plant, said the increase at his factory is not just due to the closure of the Tennessee plant. “It’s because we have increased demand for our product,” he said. “We build a world-class vehicle and the marketplace is responding to it.” Workers at the plant, while unhappy that Spring Hill is closing, are happy to get the additional work, Fredline said. “It creates job and income security for our UAW workers,” he said. “Any job and income security in this economic climate is a good thing.” GM plans to move tooling for the Traverse from Spring Hill later this year, and hopes to begin build Traverses, which are similar to the GMC and Saturn crossovers, by January of next year. About 800 workers will be recalled at Delta Township, 900 in Kansas City and 700 in Fort Wayne, Lee said. Last month GM announced it would add shifts at factories in Ingersoll, Ontario, and Lordstown, Ohio, mainly in the fourth quarter. The Ontario plant makes the brand-new Chevrolet Equinox and GMC Terrain crossover vehicles, both of which get 32 mpg on the highway. Lordstown makes the Chevrolet Cobalt small car, GM’s highest mileage vehicle at 37 mpg on the highway. Production also was to be boosted at other North American factories, including those that make the Chevrolet HHR small wagon, the Chevrolet Colorado and GMC Canyon midsize pickups, the Chevrolet Camaro muscle car, Buick LaCrosse sedan and the Cadillac SRX and CTS Wagon. (This version CORRECTS in 7th graf the year in which an Orion Township, Mich., factory will reopen from 2010 to 2011.)

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Toyota Gets Biggest Boost in Car Sales From U.S. `Cash for Clunkers’ Plan

August 27, 2009

By Kae Inoue and Angela Greiling Keane Aug. 27 (Bloomberg) — Toyota Motor Corp. , the worldâ€™s biggest automaker, got the largest boost from the U.S. governmentâ€™s â€œcash for clunkersâ€ vehicle trade-in program, topping the list of new auto sales. Toyota accounted for 19 percent of the almost 700,000 sales under the rebate program, according to the U.S. Transportation Department. Rebate applications valued at $2.88 billion were submitted by the Aug. 24 deadline. The initiative helped restore demand for the slumping auto industry, prompting General Motors Co., Ford Motor Co. and Chrysler Group LLC to boost production plans. Toyota , which is predicting a second consecutive year of losses, may be able to revise earnings outlooks based on the sales gain. â€œToyota hasnâ€™t included the impact from incentive programs in its forecasts,â€ said Yoshihiro Okumura , who helps oversee the equivalent of $365 million at Chiba-gin Asset Management Co. â€œIt will probably lift their results this year.â€ Toyota has forecast a net loss of 450 billion yen ($4.8 billion) in the year ending March 2010, compared with an earlier forecast of 550 billion yen, the Toyota City, Japan-based carmaker said Aug. 4. The automaker expects its North American vehicle sales to drop 16 percent to 1.86 million vehicles this fiscal year from last year. Toyota fell 2 percent to 4,030 yen in Tokyo morning trading, compared with a 1.6 percent decline in the benchmark Topix index. Honda, Nissan Vehicles from GM, Ford and Chrysler made up about 39 percent of sales under the program. That compares with the three companiesâ€™ 45 percent combined share of the U.S. market this year through July and trails the combined sales of Toyota, Honda Motor Co. and Nissan Motor Co. , which made up 41 percent of new auto sales through the rebate plan. Honda accounted for 13 percent of sales under the program, and Nissan Motor Co. made up 8.7 percent. Toyotaâ€™s Corolla compact car was the most popular model sold under the rebate plan, followed by Hondaâ€™s Civic and Toyotaâ€™s Camry. Dearborn, Michigan-based Fordâ€™s Focus compact car was the only vehicle from a U.S.-based company among the top five. Hyundai Motor Co. â€™s Elantra came in fifth. The â€œcash for clunkersâ€ program offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The government granted dealers an extra day to file repayment applications. 58 Percent Improvement The U.S. had estimated the programâ€™s initial $1 billion would spur 250,000 sales. That amount was exhausted less than a week after the initiative began. Congress added $2 billion to keep it going through Labor Day, which is Sept. 7. The Transportation Department formally kicked off the effort in late July. Total sales of cars and light trucks in the U.S. were 997,824 in July, according to Autodata Corp. in Woodcliff Lake, New Jersey. The average fuel economy of the vehicles traded in was 15.8 miles per gallon, while the average for vehicles purchased was 24.9 mpg — a 58 percent improvement, the Transportation Department said. The program will save 9 million to 10 million barrels of crude oil over the next five years, with consumers saving $700 to $1,000 annually at the gasoline pump, according to George Pipas , Fordâ€™s sales analyst. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Kae Inoue in Tokyo at kinoue@bloomberg.net

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Auto Inventories Depleted at U.S. Dealers as Clunkers Program Spurs Sales

August 10, 2009

By Angela Greiling Keane and Craig Trudell Aug. 7 (Bloomberg) — Auto shoppers may not find their preferred colors or accessories when they visit U.S. showrooms this weekend as the governmentâ€™s â€œcash for clunkersâ€ program depletes inventories. Automakers may need four to six weeks to rebuild supplies, said John McEleney , chairman of the National Automobile Dealers Association. General Motors Co. and Chrysler Group LLC dealers may be most affected because those companies slashed production as they went through bankruptcy, he said. â€œWith this quick spike in sales, it has wiped out a lot of inventory,â€ McEleney, who owns dealerships in Iowa City and Clinton, Iowa, said in an interview yesterday. â€œThe selection wonâ€™t be quite as great.â€ Cash for clunkers offers credits of as much as $4,500 for the purchase of a new, more fuel-efficient vehicle when buyers turn in an older one to be junked. The Transportation Department had received 245,384 dealer applications for funds totaling $1.03 billion through today, meaning the initial $1 billion has been exhausted. President Barack Obama today signed into law an infusion of $2 billion that Transportation Secretary Ray LaHood has said would keep the program running through the end of the month. Clearing Lots The discounts are helping dealers clear their lots of 2009 vehicles as automakers ramp up production for the 2010 model year, said Gary Dilts , senior vice president at Westlake Village, California-based research firm J.D. Power & Associates. â€œYouâ€™ve got to purge the system to really get it right,â€ Dilts said. â€œGetting down to the bottom of inventories like this is a very healthy thing for the industry at this time of year.â€ Neale Kuperman, owner of a Toyota Motor Corp. dealership in Blauvelt, New York, said he usually keeps at least 75 Corollas, 20 RAV-4s, and 10 Priuses on the lot. The store was down to 10 Corollas and two RAV-4s and lacked a single Prius yesterday. â€œWe have 7 1/2 acres here, and you could play a game of touch football right now and not run into a car,â€ Kuperman said. â€œWeâ€™re absolutely depleted on models.â€ The program has invigorated sales, Jessica Caldwell , director of industry analysis for Edmunds.com in Santa Monica, California, said in a report yesterday. â€œOf course, this level of activity will not continue, as it reflects the behavior of those anxious and able to participate in the program — and that is a limited set of people,â€ she said. Ford Prices Rise Ford Motor Co. , the only U.S. automaker to avoid bankruptcy, credited lower inventory for a $2,000 rise from a year earlier in prices per vehicle sold in the second quarter. â€œHaving inventories under control means thereâ€™s not a push to move the metal,â€ Chief Financial Officer Lewis Booth told reporters Aug. 5 at a conference in Traverse City, Michigan. â€œWeâ€™ve all lived with too many stocks and itâ€™s a lousy way to run a business.â€ Ford posted its first monthly sales gain since 2007 in July. General Motors and Chrysler, the U.S. automaker run by Fiat SpA, have lower inventories than Ford because they cut production further. Chrysler closed all of its assembly plants when it filed for bankruptcy April 30, and kept some of them closed until July, after emerging in June. GM said on April 23 that it would temporarily stop production at 13 U.S. assembly plants for several weeks to trim inventory after sales dropped in this yearâ€™s first three months. GM filed for bankruptcy on June 1 and exited on July 10. Third Shifts GM will look at introducing third shifts, paying overtime and reopening closed plants as a result of the clunkers discounts being extended, Mike DiGiovanni , a sales analyst for the company, said today in a Bloomberg Television interview. â€œWe are looking at the cash-for-clunkers as a booster shot to get us through the fragile economic recovery to the other side, where the economy has legs under it, which we think will happen as the year moves on and then we will not need cash-for- clunkers anymore,â€ he said. Chrysler, the U.S. automaker run by Fiat SpA, was down to a 40-day supply of vehicles on dealer lots at the end of July, a 68 percent decline from a year earlier, the Auburn Hills, Michigan-based company said on Aug. 3. Its assembly plants are operating at full production, Kathy Graham, a Chrysler spokeswoman, said on Aug. 4. The clunkers program is protecting dealersâ€™ used-car lots because of the requirement that vehicles traded in be scrapped, not sold, said Paul Taylor , chief economist of the dealers association, based in McLean, Virginia. Used-Car Boost â€œIt will help used-car values,â€ Taylor said. â€œThese donâ€™t put used cars in the marketplace.â€ Used-car sales may have gotten a boost from the program because some consumers who donâ€™t qualify for the government discount buy a previously owned vehicle instead, said Robert Sacks, spokesman for Lithia Motors Inc. , a Medford, Oregon, company that operates 88 dealerships. â€œItâ€™s a big side benefit,â€ Sacks said in an interview. â€œYou have a lot of people who are now suddenly becoming aware there are some great deals out there.â€ David Kelleher, who owns David Dodge in Glen Mills, Pennsylvania, and David Chrysler Jeep in Philadelphia, said the scrapping requirement has prevented a buildup of used inventory that could have forced him to dump the vehicles at a loss. â€œYouâ€™ve got to get rid of them before they become worthless,â€ he said of used vehicles. The dealer associationâ€™s McEleney said he isnâ€™t sure whether the additional $2 billion would last through the month. â€œI would expect the pace will slow down a little bit because youâ€™ve had the early adopters and a lot of people that wanted to move fast,â€ he said. Clearing Backlog After adding contractors to process the submissions, the agency has worked through a backlog of applications and caught up, said Rae Tyson , spokesman for the National Highway Traffic Safety Administration, which administers the program, in an interview. â€œEverything seems to be flowing very nicely right now,â€ he said yesterday. The computerized system, set up by Oracle Corp. , can now process as many as 30,000 transactions simultaneously, up from 12,000 when the program began, Tyson said. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Craig Trudell in Southfield, Michigan at ctrudell@bloomberg.net

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`Cash for Clunkers’ Getting $2 Billion More Under Measure Sent to Obama

August 6, 2009

By Holly Rosenkrantz and Angela Greiling Keane Aug. 7 (Bloomberg) — Congress sent President Barack Obama an emergency measure giving $2 billion to the â€œcash for clunkersâ€ discount program, which lawmakers said was helping ailing automakers and the U.S. economy. The Senate voted 60-37 to extend the program last night, six days after the House took the same action. Obama, who lobbied for the measure, issued a statement after the vote calling the government initiative â€œa proven success.â€ The Senate rejected a series of amendments that would have halted the program for at least a month. The program has boosted sales for the ailing auto industry while removing pollution-belching cars from U.S. roads, said Senator Debbie Stabenow , a Michigan Democrat. This is the â€œsingle most effective stimulus plan to date,â€ Stabenow told reporters after the vote. Some economists, such as Dean Maki , chief U.S. economist at Barclays Capital Inc. in New York, have boosted forecasts for growth in the second half of the year due in part to the influence of the cash for clunkers program on manufacturing and consumer spending. Sales for Ford Motor Co . rose for the first time since 2007 after the program began in July. Vehicle sales for General Motors Co. and Chrysler Group LLC fell during the month, compared with a year earlier. Some Republicans tried to halt the program, saying it was expensive and so poorly administered that it was unclear whether the initial funding was exhausted or how many cars had been sold. â€˜Cash for Golf Clubsâ€™ Senator John McCain , an Arizona Republican, described the program as arbitrary and expensive, saying Congress should next embark on a â€œcash for golf clubsâ€ offer. Seven amendments, including one that would have imposed an income limit for participants and another to temporarily halt the program to clear a backlog of discount applications, were rejected before the final vote. Any alterations to the program would have forced a suspension in the auto discounts until September, when the House returns from a monthlong recess. The Car Allowance Rebate System provides credits of as much as $4,500 for the purchase of a new car when turning in an older vehicle to be scrapped. Lawmakers had expected the first $1 billion to generate about 250,000 vehicle sales and last until about Nov. 1. The infusion of funds is intended to extend the program through August. Stabenow said it wouldnâ€™t need a third allocation. GM, the largest U.S. automaker, has the most sales under the program, according to Transportation Department data released this week. Toyota, Ford The Detroit-based company sold 18.7 percent of the cars purchased under the plan. Toyota Motor Corp. based in Toyota City, Japan, had the second-most sales with 17.9 percent. Dearborn, Michigan-based Ford, was third with 16 percent. The agency released data on each automakerâ€™s overall share a day after providing a list showing that four of the top five models sold were made by foreign automakers. Toyotaâ€™s Corolla was the top model purchased by clunkers buyers through Aug. 5, surpassing Fordâ€™s Focus, which had been No. 1, according to the data. The Transportation Department had received 184,304 dealer applications for funds totaling $775 million through Aug. 5, as the agency works through a backlog that reached hundreds of thousands of online submissions. Three Largest Vehicles made by the three largest U.S. automakers — GM, Ford and Chrysler — comprised fewer than half of sales under the program through Aug. 5, according to the Transportation Department data. The companies accounted for 45 percent of the clunkers transactions. Some vehicles sold by foreign companies are manufactured in the U.S. Fordâ€™s Explorer was the most popular trade-in vehicle, followed by Fordâ€™s F150 pickup and Chryslerâ€™s Jeep Grand Cherokee. All of the top 10 trade-in models are made by the three U.S. automakers. The average fuel economy of the vehicles purchased is 25.3 miles-per-gallon, a 60 percent improvement over the 15.8 miles- per-gallon average of the trade-ins. To contact the reporters on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

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Cash For Clunkers: Obama Pushes Senate To Refuel Funding

August 3, 2009

WASHINGTON — The Obama administration appealed to the Senate on Monday to bail out the cash for clunkers rebate program, arguing it has already made striking gains in fuel efficiency and is a “wildly popular” economic boost.

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Andy Ostroy: How to Fix the U.S. Auto Industry

July 29, 2009

I own a marketing business.

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Tom Matlack: Wining the War at Home

July 22, 2009

Rogers preparing to drop into Iraq Like Baghdad, if you look hard enough in Detroit you can still see the vestiges of opulence.

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