30 April 2010

Extended Unemployment Benefits by End of May

Michigan Rep. Sander Levin says long-term federal unemployment benefit bill should be passed by Memorial Day

The House Ways and Means Committee, chaired by Michigan Rep. Sander Levin (D-12th District), released an updated statement regarding the unemployment extension bill, H.R. 4213, American Workers, State, and Business Relief Act of 2010.

The bill would extend eligibility to file for extended unemployment benefits until the end of this year. A short-term extension of extended federal unemployment benefits is scheduled to expire in early June.

Both the Senate and the House have passed versions of the bill but have yet to finalize how it will be paid for. No firm dates have been set regarding final action on the bill, although according to this statement from Levin, the House is shooting for action by Memorial Day.

    According to the House Ways and Means Committee release, “Chairman Levin has stated that he will continue working with the Senate to complete work on H.R. 4213 by Memorial Day to ensure the benefits included are available to families and businesses, particularly those benefits directed to workers who have lost their jobs through no fault of their own. We are committed to, and working toward, passing a longer-term extension of unemployment benefits as included in H.R. 4213.”

During the summer months, Congress has two recesses, so hopes for passage of the bill rest in what can get done in May and early June.

Opinion: Concrete Deal for DDA Parking Structure a Bad Taxpayer Deal

Ann Arbor / Tony Dearing

It looks bad and raises serious questions when a company managing construction of a major public project rejects a lower bid from a competitor and awards the work to its subsidiary.

So far, the answers provided have been unsatisfactory, including those from the Ann Arbor Downtown Development Authority.

The DDA is responsible for the underground parking structure being built on South Fifth Avenue, a project that has been dogged by questions about whether the structure is needed and what will be built on top of it.

The last thing the DDA and the city of Ann Arbor needed was the appearance of impropriety raised by having the construction manager give its own subsidiary Michigan concrete contracting company $22 million when a pre-qualified bidder said it was prepared to do the job for a half a million dollars less.

Granger Construction Co. of Lansing is crying foul after its bid of $21.5 million was rejected by Christman Co., the construction management firm hired by the DDA last fall. Christman also passed over the second-lowest bidder, Colasanti Construction, to give the work to its own subsidiary, and Colasanti is equally miffed.

In this tough economy, the competition among Michigan concrete contractors for a big-ticket project like this can be intense, and those who don’t get the work are likely to be disgruntled. But in this case, Granger has every right to be howling with outrage.

The bid in question was for complex concrete work to be done on an aggressive timeline, so there might be only a handful of firms in Michigan capable of doing the job. In general, experts say that prequalification means that all the firms are judged capable of doing the work. At that point, the price becomes primary, and the normal expectation - particularly when public funds are involved - is to go with the low bidder. It is rare that the low bid is rejected, and when two lower bids are rejected and the concrete construction manager awards the work to its subsidiary, that is virtually unheard of.

Christman has described Granger as inexperienced and said Granger “did not display an understanding of the project’’ that allowed Christman to have confidence in Granger’s ability to deliver the work. Granger finds that preposterous. Granger is a well-established firm with a good reputation that has done major concrete projects for the University of Michigan, Michigan State University and other public entities across Michigan. It may not have put its best foot forward in the bidding process, but its reputation and experience make it exceptionally hard to justify it being ruled out for this job.

Harder to accept, though, is the DDA’s rationalization for allowing this outcome. Susan Pollay, DDA executive director, has said she has no concerns about Christman giving the contract to a subsidiary and that the process was in the public’s interest. We could not disagree more.

When the DDA chose Christman as the construction manager, it got a guaranteed maximum price of $44.38 million from the company, and in turn, agreed to let Christman chose its subcontractors regardless of price. If the result is that the company can potentially add an additional $500,000 in cost to the project by giving itself the work, that is a bad deal for taxpayers.

The DDA did insist that Christman expand the list of qualified bidders, and did ask that the bids be opened in public, which wouldn’t have occurred otherwise. Those actions aside, the whole arrangement was set up in a way that gave the construction manager too much latitude and the DDA too little stewardship over the public dollars being spent.

We have spoken to many experts who find it hard to believe that a public entity would allow such an outcome, but this now appears to be a done deal. Because of the DDA’s autonomy on this project, we are not aware of any other entity that has the ability to step in after the fact and give this questionable bid award the level of review or scrutiny that the DDA failed to provide.

The guaranteed price committed to by Christman is a maximum, not a minimum, and whatever the final cost of the project is, we now know that it could cost $500,000 more than it might have if the pre-qualified low bidder had been chosen. The public deserved better.

Michigan to Receive $5M for Smart Grid Job Training

The Detroit Free Press
WASHINGTON – Michigan will receive just more than $5 million for two programs to train workers for jobs in electric utilities, the Obama administration said earlier this month.

The administration will provide $4.4 million to the state’s Electric Power Workforce Training Strategy, which aims to train 588 workers for electric sector jobs. Northern Michigan University will get $670,000 for another program that trains about 40 entry-level electrical technicians a year.

The money comes from a $4-billion pot from the economic stimulus law last year meant to spur the building of “smart grids” and other improvements in the electric grid.

“Through these training programs, people who are out of work can get training to enter a new field,” said U.S. Energy Secretary Steven Chu.

The grants are part of $100 million nationwide for 54 projects that the administration estimates will train about 30,000 workers.

U.S. Sen. Debbie Stabenow, D-Mich., said the grants were “about real people training for new jobs.”

29 April 2010

Ford, GM Promote Car Loans in China as 90% of Drivers Prefer to Pay Cash‏


Pi Wenhui would have bought a 249,800 yuan ($36,600) Mazda if she had gotten a loan. She couldn’t, so like 90 percent of Chinese drivers she paid cash -- and bought a cheaper car.

Carmakers including Ford Motor Co., Nissan Motor Co., Beijing Automotive Industry Holding Co. and Guangzhou Automobile Group Co. are anticipating that will change as China’s government is set to introduce policies to encourage auto lending in the world’s largest car market.

“We see a lot of potential in auto financing,” Joe Hinrichs, Ford’s president for the Asia-Pacific region, said in an interview at the Beijing Auto Show.

Automakers estimate sales growth in China will slow to as little as 10 percent next year from as much as 20 percent this year and 46 percent in 2009. Enabling more of China’s 1.37 billion people to borrow for vehicles would have a “big stimulus impact” on sales, Xu Changming, research director at China’s State Information Center, said in Beijing on April 22.

“For the next 5 to 10 years, auto financing will be the biggest thing for the industry and the most important booster,” said Yale Zhang, a Shanghai-based director at CSM Asia, an auto consulting company.

U.S., India

In contrast to China, 85 percent of car drivers in the U.S. take out loans and 65 percent of buyers in India borrow, according to the State Information Center, a government advisory body. The government may introduce policies to boost auto lending this year, including making it easier for car financing companies to raise capital by selling corporate bonds, the center’s Xu said.

Guangzhou Auto, a partner of Honda Motor Co. and Nissan in China, plans to open an auto financing unit this quarter, General Manager Zeng Qinghong said. Beijing Auto will begin offering financing this year, President Wang Dazong said.

“We’re counting on auto financing as a new way to generate growth,” Wang said in an interview in Beijing. “There is a lot of room to develop the business in China.”

Zhejiang Geely Holding Group Co is also planning to start an auto credit business, Chairman Li Shufu said.

Currently, auto financing companies in China mainly provide loans to dealers, 90 percent of which are independently owned, according to the China Automobile Dealers Association.

GM, Toyota

Ford, General Motors Co. and Toyota Motor Corp.’s local financing units provide loans to consumers as well as dealers, including those that are unable to borrow directly from banks.

Chen Guangjun, general manager of the Beijing Zhong Ye Toyota dealership, said about 12 percent of his customers buy on credit. The outlet accepts applications that are ultimately handled by Toyota’s financing unit.

Honda doesn’t have a financing business in China, so dealers such as Beijing Fanlv Business & Trading Co. introduce buyers to a bank if they need loans, general manager Wen Hai said.

In China, 80 percent of auto loans come from banks, while in other countries 80 percent are from auto financing companies, the State Information Center’s Xu said.

“The number of people using loans will rise,” said Tao Ye, president of the company that owns Beijing Zhong Ye. “In particular, there are a lot of people who use financing to buy second cars.”

The government is considering encouraging auto loans even as it targets a 22 percent reduction in overall new lending from a record $1.4 trillion last year. Earlier this month, the government announced curbs on loans for third-home purchases, increased down-payment requirements and higher mortgage rates as it stepped up efforts to prevent a bubble.

Good Savers

Persuading customers to take out loans may be challenging because the Chinese traditionally use cash for big-ticket purchases like cars, CSM’s Yale said.

“The Chinese are very good savers,” said Robert Graziano, head of Ford’s China operations. “It will be a relatively slow process.”

The cost of the credit approval process is often too high for small loans to be profitable for lenders. About 69 percent of car sales in China last year was for vehicles with engines no larger than 1.6 liters, which cost as little as 21,800 yuan.

Boosting financing may also require making it easier for customers to get credit approval. Because reliable credit information on consumers is often lacking, some banks hire outside specialists to gather information about applicants, said Beijing Fanlv’s Wen. Sometimes the specialists go to the applicant’s house or workplace to gather and verify information.

About half of applications are rejected, as many of them fail to provide enough information, said Zheng Xinhe, general manager of the Beijing Yinghua Lexus dealership. Once accepted, defaults are very rare, he said.

‘Totally Worn Out’

Pi, the would-be Mazda buyer, gave up trying to get credit for a Mazda6 car. To get the loan, she needed to own real estate in Beijing, which she doesn’t.

If Pi, 28, wanted to use her parents’ property as security for the loan, the bank would need to pay home visits to both her and her parents to interview them, she said. She disliked the idea as her parents aren’t used to buying things on credit, she said.

Pi also decided against using a friend who owns property as a guarantor, because the car would then need to be registered in her friend’s name. She didn’t qualify for a credit card suggested by the Mazda dealer.

“Applying for automobile financing is way too complicated,” said Pi, who wound up paying cash for a Kia Motors Corp. Sportage sport-utility vehicle, which cost her 203,000 yuan including taxes. “I was totally worn out by the difficulties of getting a loan.”

Prosecutors: Huron Township Man Shot Dog with Bow and Arrow

The Detroit News

Huron Township -- A 51-year-old man is to be arraigned this morning on charges he shot the family pet using a bow and arrow after the dog ran out of their home.

The man faces one count of animal killing, a four-year felony. His daughter was present at the time of the Tuesday incident, according to the Wayne County Prosecutor's Office and Huron Township police.

Authorities do not believe the dog posed a threat at the time the man shot it, according to the prosecutor's office.

The man allegedly shot the dog after his daughter could not catch the animal as it ran out of their home and into the yard, according to broadcast media reports.

Injuries from the shooting were so severe the animal had to be euthanized, according to broadcast media reports.

The prosecutor's office early today was unsure if an arrest warrant had been signed by a judge and would not identify the man. The office does not release names of defendants without a signed warrant.

Business Briefs

The Detroit News

Midland -- Dow Chemical Co., the largest U.S. chemical maker, reported Wednesday that its first-quarter profit surged more than fivefold to $718 million from a year earlier.

First-quarter net income rose to $551 million, or 41 cents a share, from $24 million, or 3 cents, compared with a year ago, Dow said.

"This quarter was indeed a pivotal point in giving the world a glimpse of our earnings' power," Dow CEO Andrew Liveris said in a conference call.

Federal-Mogul sales surge 20 percent

Auto parts supplier Federal-Mogul Corp. posted a $17 million first-quarter profit as sales surged 20 percent.

Net income was 15 cents a share, compared with a loss of $101 million, or $1.02, a year earlier, the Southfield-based company said Wednesday. The per-share results, excluding a charge for a Venezuelan currency devaluation of 35 cents, beat the 22-cent average of three analyst estimates compiled by Bloomberg.

Sales rose to $1.49 billion, benefiting from improved demand worldwide.

Mitsubishi, Peugeot reach SUV deal

Mitsubishi Motors Corp. and PSA Peugeot Citroën announced Wednesday that they have come to an agreement to collaborate on a compact SUV.

These new compact SUVs will have specific designs for Peugeot and Citroën while sharing many components with the Mitsubishi vehicle, named RVR in Japan and ASX in Europe.

Obama to appoint Yellen to Fed board

President Barack Obama today will name Janet Yellen as vice chairwoman of the Fed board of governors, according to two people familiar with the decision.

Obama also will name Sarah Bloom Raskin, Maryland's commissioner of financial regulation, and Peter Diamond, an economics professor at the Massachusetts Institute of Technology, for the two remaining open seats on the seven-person board, according to the people, who spoke on condition of anonymity before the announcement.

The nominations are subject to Senate confirmation.

Fed vows to hold line on rates for 'extended' period

Washington -- The Federal Reserve in a 9-1 decision Wednesday retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery.

GE glimpses light after conglomerate's cloudy year

Houston -- General Electric says the broader economy and its own business have stabilized, and that the "clouds are breaking" after one of the worst years ever for the conglomerate. The company, at its annual meeting in Houston, is telling investors that key economic indicators like housing and unemployment have stabilized, and that capital markets are improving. General Electric Co . says losses have peaked in its GE Capital lending unit and that the division should return to profit growth soon. GE Capital was the source of many of the company's problems last year, hit by the downturn in areas like credit cards, mortgages and commercial real estate.

Google's brand value of $114B tops global list

Google Inc . topped the 2010 BrandZ ranking of the 100 most valuable global brands by Millward Brown Optimor, with an estimated brand value of $114 billion. International Business Machines Corp . and Apple Inc . advanced to second and third place from fourth and sixth last year. Research In Motion Ltd .'s BlackBerry moved two spots to 14th place. Technology companies accounted for 6 of the top 10 brands. Apple, Hewlett-Packard Co ., Amazon .com Inc ., Verizon Communications Inc . and Baidu Inc . all gained more than 25 percent in brand value.

28 April 2010

Another Recall Announced by Toyota

NY Times

DETROIT — Toyota announced a second recall Wednesday related to the vehicle stability control system on its sport utility vehicles, this one concerning the 2003 model year Sequoia.

Toyota said it would upgrade the stability control system on 50,000 Sequoias built in the early part of the 2003 model year. It said no accidents or injuries had resulted.

The National Highway Traffic Safety Administration opened a preliminary investigation into the problem in December 2008, and broadened the investigation last April.

In all, Toyota has recalled more than nine million vehicles worldwide since November, including two major recalls involving sticking accelerator pedals on a variety of its models.

On April 18, Toyota agreed to pay a $16.4 million fine imposed by the Transportation Department, which charged that the company deliberately hid information about one of the pedal-related recalls. Toyota has not admitted fault in the situation.

The stability control system is meant to control a loss of traction on the front or rear tires while the vehicle is going through a corner. Toyota said that on some of the Sequoias, the system could activate at low speeds and prevent the driver from accelerating as quickly as he or she might like.

It said it had made a design change on the vehicles during the model year, and that it had already repaired about half the vehicles involved in the recall under warranty. The vehicles were built at Toyota’s plant in Princeton, Ind., between April 2002 and April 2003.

Toyota said it had responded to individual drivers’ complaints by replacing a skid control engine control unit. It first sent dealers a technical bulletin about the matter in fall 2003.

The Sequoia recall comes a week after Toyota said it was recalling 2010 models of the Lexus GX 460, a luxury sport utility that had been deemed “not safe to drive” by Consumer Reports magazine.

In mid-April, Consumer Reports said the GX, a luxury sport utility vehicle that is new for the 2010 model year, failed to prevent its rear end from sliding sideways during sharp turns.

Toyota has temporarily stopped building and selling the vehicle, and it recalled the GX 460 and the Land Cruiser Prado, an S.U.V. sold overseas.

In the wake of the magazine’s report, the company has been testing the stability control systems across its S.U.V. lineup. But the Sequoia recall comes about 18 months after the N.H.T.S.A. opened its investigation.

At the time, the agency had received 50 complaints about problems with the stability control system, with 13 drivers saying that they had almost been involved in crashes, documents from the N.H.T.S.A. showed.

According to agency documents, Toyota initially told the N.H.T.S.A. that several issues could be involved in those complaints.

It said it believed the vehicle stability control system was operating as designed, and that the problem most likely lay in the way drivers used the traction control system. It said it had not determined that a safety-related defect existed.

Eventually, the agency and Toyota received a total of 153 complaints about the issue while the company issued five service bulletins to dealers, in all, dealing with the stability control system.

In April 2009, the investigation was upgraded to an engineering analysis, so the agency could examine the “scope, frequency and safety-related consequences” of the problem, according to the N.H.T.S.A documents.

In December, the agency asked Toyota for more in-depth information about the issue, which the automaker provided to the agency in February.

Toyota said it would begin mailing letters in late May to Sequoia owners, including those whose vehicles had already been serviced. It said it would reimburse those who paid to replace the engine control unit.

2010 Michigan Green Leaders

The Detroit Free Press

16 who are leading the state toward Earth-friendly future

In a world with lots of talk about going green, the Detroit Free Press today honors our inaugural group of Michigan Green Leaders who deliver more efficient vehicles, healthier food, cleaner waterways, greenway paths — and new jobs for a struggling economy.

The 16 leaders will accept their awards on Earth Day Thursday at a sold-out breakfast on Belle Isle. Their contributions are as low-tech as planting trees and recycling trash into art supplies, and as complex as making campuses, industrial sites and a resort into environmental models.

These Green Leaders, selected by a panel of independent judges, range from huge corporations to tiny nonprofits and individuals. They work on land and water, in city and suburb and rural districts. They are united by their passion and persistence in making Michigan a cleaner, greener place to live.

As one of the judges, Rick Plewa, senior vice president for sustainability for Comerica, said, “I was simply amazed at how many people are working on green issues and have been for a long time. It filled me with optimism for Michigan’s future.”

If, in the future, you drive a cleaner car, and enjoy more shade trees and bicycle paths, and swim or fish in a cleaner Detroit River, in many ways you can thank the first-ever class of Free Press Green Leaders.

These real-world impacts on the lives of everyday Michiganders will pay off not only in cleaner air and water, but in new jobs and tax base for the Michigan economy.

The Free Press will honor these 16 individuals, community groups and businesses in the first-ever Michigan Green Leaders awards program at a breakfast on Belle Isle on Thursday -- the 40th annual Earth Day.

By any measure, the sort of green products and strategies fostered by these Green Leaders will play an important part in Michigan's future resurgence.

"I think one can predict that at some point green jobs will definitely become much more important in Michigan," says Timothy Bartik, senior economist with the W.E. Upjohn Institute for Employment Research in Kalamazoo.

Charles Ballard, an economist with Michigan State University, agrees.

"A mosaic with many pieces is likely to be what we will get. I think alternative energy and green-economy stuff is likely to be one important part of that," he says.

What is the green economy? In Michigan, it ranges across several fields: Agriculture and natural resource conservation; clean transportation and fuels; increased energy efficiency; pollution prevention or environmental cleanup, and renewable energy production.

The Michigan Department of Energy, Labor and Economic Growth estimates that as of 2009, the state boasted 109,067 private-sector green jobs. Clean transportation and fuels was the largest green economy area in Michigan, composing just over 40% of green jobs and reflecting Michigan's automotive heritage.

Indeed, if Michigan's hopes are fulfilled for leading the nation in developing alternative fuel, hybrid and electric vehicles, that sector could grow significantly.

The state labor economists see a huge potential for growth throughout the green economy. Today, green jobs represent just 3% of Michigan's overall private sector employment of 3.2 million. But from 2005 to 2008, a sample of 358 green-related firms added more than 2,500 jobs to Michigan's economy, an employment expansion rate of 7.7%, compared with a 5.4% average loss in the total Michigan labor market.

And green jobs tend to pay well, too. The state reported that 13 of the top 15 sectors of green employment have weekly wages above the overall private sector weekly average in Michigan.

"Michigan's move to a clean energy, green economy will create all kinds of jobs for all kinds of people. These are the jobs that will reshape our economy and accelerate our recovery," Gov. Jennifer Granholm said last year.

The Free Press Green Leaders practice environmentalism in many different forms and in many places. But they all demand of themselves that they make a difference in real lives, delivering cleaner products as well as cleaner air and water.

Certainly the best known of the Green Leaders is Bill Ford, who has promoted environmentalism inside and outside of Ford Motor long before current concerns over climate change made alternative fuel vehicles a must for all carmakers.

In the 1990s, Ford mused recently, "100% of our effort was to only be compliant with the law." Today, Ford says the company's culture has completely changed as he had long been urging.

"We are going to be the fuel economy leader in every segment that we participate in," Ford says.

Other individual winners show that same lifelong commitment to real-world impacts. Consider John Hartig of the U.S. Fish and Wildlife Service, who has worked for many years to restore Detroit River habitats. In no small measure, both wildlife and people are returning to the Detroit River because of efforts like Hartig's to restore the river's ecology.

Or there's the Rev. Faith Fowler, executive director of Cass Community Social Services. She improves lives along with the environment, for example, by leading a vocational training effort through which homeless men have collected 40,000 abandoned tires in Detroit and turned them into mud mats that are sold.

Lots of organizations talk about green buildings, but Lawrence Technological University, spurred by a need to reduce its storm water runoff, has become a leader in sustainable design of campus buildings. LTU has integrated these efforts into its architecture and engineering curriculum, furthering the common goal of pushing a greening approach deeper into everyday life.

The winners, all of which are featured in subsequent pages of this section, make a real-world impact on the small scale, too.

Arts & Scraps, based in Detroit, recycles 28 tons of industrial materials per year for use as learning and creative materials. That improves the landscape in the city and helps the next generation of future green leaders.

Nonprofits lead the way in many communities.

The Community Foundation for Southeast Michigan has promoted a healthier urban lifestyle with its support for greenways as a non-motorized transportation system, featuring bicycle lanes and walking paths. As judge Robin Boyle, chair of Wayne State University's department of urban studies and planning, says, "They were there before others."

That could sum up the reasons these individuals, groups and companies are honored as first-ever Green Leaders. They were there before others.

The 2010 Michigan Green Leaders:

    * Arts & Scraps
    * Bill Ford
    * Community Foundation for Southeast Michigan
    * Crystal Mountain Resort
    * Green Garage
    * Greening of Detroit
    * Herman Miller
    * John Hartig
    * Lawrence Tech
    * Mind Body & Spirits
    * Orin Gelderloos
    * Shaun Nethercott
    * The Rev. Faith Fowler
    * Thomas Haas
    * WARM
    * Wildlife Habitat Council

27 April 2010

Bill Ford Jr: Let Our Technology Build a Greener World

The Detroit Free Press

Technological breakthroughs hold the promise to create a cleaner, greener future for Michigan and the world, automaker and civic leader Bill Ford told the first annual Free Press Michigan Green Leaders awards ceremony this morning.

“More than a hundred years ago, our city became the global center of excellence for an emerging industry that went on to change the world. The time has come for us to do that again,” the Ford Motor executive chairman told 300 people gathered for the sold-out awards breakfast at the Detroit Yacht Club on Belle Isle.

Listing solar panels, green roofs, wind energy and other technologies, Ford, who himself was one of the 16 winners of the inaugural Free Press-sponsored Michigan Green Leaders awards, said, “As these technologies mature, and they will, I think they offer incredible promise to clean up our planet.”

The Michigan Green Leaders awards, given for the first time today, honored a range of people and individuals for their contributions to a more sustainable future for the state. The winners ranged from the Herman Miller furniture company and Lawrence Technological University to small local efforts like the Mind Body & Spirits restaurant in Rochester.

Reflecting the diversity of the award winners, Ford told the audience, “No one industry or organization can solve these challenges. It’s going to take all of us working individually and collectively to keep our state growing, green and great. But these awards are proof that it’s happening…. Keep it going.”

Free Press Editor and Publisher Paul Anger made clear that this first Michigan Green Leaders awards ceremony will be followed by many more.

“This will be an annual event far into the future,” Anger told the audience.

Consumers Energy Opens $7 Million Service Center

The Detroit Free Press

Consumers Energy has opened a new $7 million service center in Livingston County.

The Livingston County Daily Press & Argus in Howell reports employees moved in last month and a grand opening was scheduled for today. Crews completed the 21,000-square-foot Genoa Township facility three months ahead of schedule.

The CMS Energy Corp. subsidiary said it outgrew its former area location, which was built in 1966.

The center has about 60 employees and takes care of 66,000 customers in Livingston County and western Oakland County.

26 April 2010

Chevy Breaks from Longtime Ad Firm Campbell-Ewald

The Detroit Free Press

Move is latest creative shift for automakers

In another painful blow to Detroit's advertising community, Chevrolet is ending its 90-year relationship with Campbell-Ewald, the agency that drummed "See the USA in Your Chevrolet," "Baseball, Hotdogs, Apple Pie and Chevrolet" and "Like a Rock" into the national consciousness.

Chevrolet is shifting its truck advertising to Publicis Groupe offices in Dallas and Seattle four months after that agency took over the account for Chevy's passenger cars and crossover vehicles. Chevrolet's creative account is estimated at $30 million a year, according to trade publication AdWeek.

"This is a big deal, another cultural shift for this town that's been rocked by a number of them over the last five years," said Peter DeLorenzo, a former Campbell-Ewald creative director and founder of Autoextremist.com.

Earlier this year, Chrysler ended a 65-year relationship with Troy-based BBDO as part of a strategy to choose separate agencies for its four brands.

"This was the knockout punch," said Mike Bernacchi, a University of Detroit Mercy marketing professor. "It goes to prove that it's a business, period. Relationships today unfortunately don't mean that much."

Jim Campbell, Chevrolet marketing vice president and no relation to the agency's founder, issued a statement thanking Campbell-Ewald for "their many years of dedicated and loyal service."

Bill Ludwig, Campbell-Ewald CEO, said the agency will continue to diversify its portfolio, 75% of which comes from clients other than Chevrolet.

Among those clients are GM's OnStar, Ghirardelli chocolates, Minneapolis-based Medtronic, Kaiser Permanente, a major health insurance company on the West Coast, the U.S. Navy, the U.S. Environmental Protection Agency and the Wyndham Worldwide hotel and resort operator.

Campbell-Ewald has about 1,100 employees working in Warren, Los Angeles and San Antonio. A company spokeswoman said it was too soon to know how many jobs might be lost as a result of the Chevrolet decision.

Less than a year after their historic bankruptcy restructurings, General Motors and Chrysler have reached out to new agencies to reinvigorate brands that suffered through the uncertainty and shrinking market share that was part of their reinvention.

In January, Cadillac selected Bartle Bogle Hegarty of New York and London to succeed Modernista, a Boston-based shop that took over the account in 2006. Chrysler selected Fallon of Minneapolis to craft ads for the Chrysler brand and Portland-based Wieden and Kennedy to resuscitate Dodge's brand image.

Whether agencies from outside Detroit can change perceptions of domestic carmakers remains to be seen.

"Clients inevitably get the advertising they deserve," said Autoextremist's DeLorenzo. "It's only as smart and visionary as they are able to muster. It's easy to find fault with the agency, but it's much harder for any company to transform itself."

State to Push for Jail for Kilpatrick, not Prison

The Detroit Free Press

Former Detroit mayor is to be sentenced May 25

Kwame Kilpatrick has earned time in the county jail, but not a stretch in prison, a state corrections official said Friday.

"I think we are going to recommend incarcerated in jail, as opposed to prison," said Russ Marlan, spokesman for the Michigan Department of Corrections.

However, the ex-Detroit mayor's New York City spokesman said that faith and prayer may be the keys that open the jailhouse door. Mike Paul said the ex-mayor will hold his comments until his scheduled sentencing May 25.

Yet, Paul said there could be some special intervention.

"We also know that anything can happen between then and now, especially with faith, prayers and an open mind for other solutions," Paul said.

Wayne County Circuit Judge David Groner found Kilpatrick guilty of violating his probation from the text message scandal during a hearing Tuesday, saying Kilpatrick didn't meet financial reporting obligations and didn't turn over tax refunds.

As part of his original sentence, Kilpatrick served 99 days in jail in 2008 and 2009.

If Kilpatrick is ordered back into custody in May, he would go to the Wayne County Jail if the sentence is one year or less. Any sentence of more than a year must be served in prison. Probation officials likely won't ask for a specific sentence, Marlan said.

The Wayne County prosecutor will weigh in as well, but the office is not tipping its hand.

"Prior to the sentence hearing, we will prepare a sentencing memorandum that will be filed with the court," said spokeswoman Maria Miller.

In the jail versus prison debate, Marlan said Kilpatrick has factors in his favor: He has made some payments on his $1-million restitution, he has a job, and this is his first probation violation.

Marlan said that if Kilpatrick goes to jail, there could be a work-release program, but that would be up to the judge and county sheriff. He said probation officials probably would be asked for their opinion, but no one has raised the issue.

Kilpatrick lives in Southlake, Texas, and is a sales representative for Covisint, a subsidiary of Detroit-based Compuware.

"No one has talked to Compuware about a work-release program," said company spokesman Bill McGraw.

25 April 2010

Chrysler's Losses Down Dramatically in First Quarter

USA Today

Chrysler Group still is bleeding, but says it got a whole lot healthier in the first quarter. The company today made its first report on its finances since it was created out of bankruptcy court last June 10. The company lost a staggering $3.8 billion from then through the end of the year, but reported it cut its net loss to $197 million from January through March  -- and actually made money from selling cars and trucks, before interest and taxes.

The company, now run by Fiat, said it had an operating profit of $143 million in the quarter, helped particularly by truck sales. It also generated $1.5 billion in cash, padding its reserves to $7.4 billion and raising odds it can stay afloat as it replenishes the product pipeline. It predicted its operations would at least break even  this year.

Chrysler made its report this morning in Michigan as Fiat began unveiling its five-year business plan in Turin, Italy. Drive On will bring you details, which should include products coming to Chrysler showrooms and plants, as they unfold. Sergio Marchionne, CEO of both, issued this statement on Chrysler: "This positive operating result in the first quarter is a concrete indication to our customers, dealers and suppliers that the 2010 targets we have set for ourselves are achievable."

Still, there was plenty in the report to depress those of you rooting for Chrysler to make it:

Chrysler's U.S. market share grew from 8.1% in 2009 to 9.1%, but U.S. sales grew just 5% vs. growth overall in the market of 15.5%. And about 40% of Chrysler sales were lower-profit sales to rental agencies and other fleets.

Naysayers remain skeptical that the company will survive until it can replenish its aging lineup. Max Warburton, an industry analyst at Sanford C. Bernstein in England, wrote that the positive cash flow is "almost irrelevant" and "being driven by dealer restocking and stretching payables. We remain unconvinced Chrysler will survive in its current form despite Marchionne's blood, sweat and tears."

While Marchionne's cost cuts have been impressive, Warburton wrote that the company's capital investments have been minimal, and it has been arguing with parts suppliers about payments for machinery to build future products.

Marchionne took a shot at such gloom-mongers as he began his presentation in Turin today on Fiat's five-year financial plans in Turin. He compared analyst reports putting down Chrysler's operating profits to the  "Boulevard press," meaning the tabloids. "As we all know, in business it is ultimately only facts that prevail," he said.

For those of you keeping score at home: Chrysler's last annual profit was in 2005, when it made $1.8 billion, and the last quarter with a profit was the second quarter of 2006, when it earned $65 million.

Obama Links Auto Industry Woes, Financial Overhaul

USA Today

Celebrating signs of a turnaround in the U.S. auto industry, President Obama said Saturday the financial system must be overhauled to prevent a repeat of the economic crisis that pushed carmakers to the brink.

Senate Democrats have set a test vote Monday on a bill that aims to protect the overall economy by imposing tighter regulations on the financial sector.

The auto industry was one of the biggest casualties of a recession fueled by risky lending and speculative trading practices of major financial institutions. But after shedding 400,000 jobs in 2008, bailed-out U.S. automakers are rebounding.

General Motors Co. said this week it will repay $8.1 billion in U.S. and Canadian government loans five years ahead of schedule. Chrysler LLC, now run by an Italian company, said it boosted its cash reserves by $1.5 billion despite a first-quarter loss of almost $200 million.

In his weekly radio and Internet address, Obama said that while the auto industry is on more solid footing, it will take more time for the economy to recover from the loss of 8 million jobs. He blamed the downturn on irresponsible risk-taking by Wall Street firms.

In a speech Thursday in New York in the shadow of Wall Street, Obama argued for new rules to protect consumers and hold financiers accountable. The changes would end taxpayer bailouts, bring complex financial dealings into the open and extend new rights and protections to consumers and shareholders.

"That's how after two very difficult years we'll not only revive the economy, but help to rebuild it stronger than ever before," he said Saturday.

The White House, in a report timed to GM's loan repayment, said the past nine months had produced the auto industry's strongest job growth in nearly a decade, with the addition of 45,000 jobs.

Democratic Senate Majority Leader Harry Reid has set a test vote on the financial overhaul bill for Monday, but conceded that the timetable could slip if bargaining with Republicans proved fruitful. Republicans say they don't agree the bill would end government bailouts and they want to keep negotiating.

Without an agreement with the Republicans, Democrats would need 60 votes to move forward in the Senate. They have 59 votes.

In the weekly Republican message, Sen. Kay Bailey Hutchison said Republicans aren't trying to block the bill but want to make sure it would end taxpayer bailouts.

"It's time for the name-calling to stop," Hutchison said. "Getting our economy back on track is too important to allow political games to sidetrack these efforts. Both parties agree that any financial regulation should do one essential thing: No company should be considered too big to fail.' And never again should taxpayers be expected to bail out those who made risky financial bets with other people's money."

23 April 2010

Toyota Halts Sales of Lexus SUV

The Washington Post

Toyota temporarily halted sales of its 2010 Lexus GX 460 on Tuesday after Consumer Reports labeled the sport-utility vehicles a "safety risk."

In a rare move, the influential magazine warned consumers against the vehicles because of the way the car slides during certain maneuvers, noting that those slides could be a prelude to rolling over. The publication has not issued such a warning since 2001.

"We believe that in real-world driving, that situation could lead to a rollover accident, which could cause serious injury or death," Consumer Reports said in a blog post.

Some auto safety advocates said the finding by the magazine highlights weaknesses in the federal government's system for reviewing new models.

NHTSA has not yet completed safety testing of the 2010 GX 460, according to the Web site SaferCar.gov.

Moreover, critics said, the type of problem turned up by the magazine would not have been found by the government because its tests are less involved.

"The government has a rollover course that they send vehicles through, but it's not a very rigorous test," said Clarence Ditlow, executive director of the Center for Auto Safety.

The National Highway Safety Traffic Administration "advises drivers of the 2010 Lexus GX 460 SUV to use care and caution," the agency said in a statement. It said it is conducting tests to verify the vehicle's adherence to federal standards and to better understand the results of the magazine test.

In a statement late Tuesday, Toyota said engineering teams were testing the GX 460 using Consumer Reports' methodology.

"We are taking the situation with the GX 460 very seriously and are determined to identify and correct the issue Consumer Reports identified," said Mark Templin, Lexus Group vice president and general manager.

The company sold 4,787 of the SUVs in the first three months of this year, 1 percent of Toyota sales, according to Edmunds.com.

The Consumer Reports finding follows months of bad publicity for Toyota stemming from the recall of millions of vehicles linked to unintended acceleration. It comes as Toyota has spent millions on consumer discounts and television advertising in an effort to revive its reputation.

In the magazine's tests, drivers take the car through a situation like one a driver might experience when exiting a highway and entering an off-ramp. At about 60 miles per hour, the driver enters a turn and then quickly lifts his or her foot off of the accelerator.

The tests were conducted by four different drivers, and in each case, the back end of the vehicle slid out.

"It was unanimous," said Jake Fisher, senior engineer at Consumer Reports and one of the test drivers. "We asked each other, 'Did you have that happen, too?' It was quite surprising."

"I've been testing cars for Consumer Reports for 11 years," he said. "I've tested hundreds of vehicles. No SUV has ever had a tail slide out so abruptly or so far."

It is not the first time the magazine has weighed in during the controversy over Toyota safety. In the wake of a recall earlier this year related to sticky gas pedals, Consumer Reports suspended its "recommended" status on eight models and has yet to reinstate it.

The nature of the problem with the GX 460 differs from unintended acceleration, but is potentially very dangerous, the magazine said. With the GX 460, the vehicle's high center of gravity heightens concerns that it could roll over in such a situation, reviewers said.

The GX460 is equipped with electronic stability control, a system that is supposed to prevent such handling difficulties through selective braking and reductions of engine power. But the system doesn't intervene quickly enough, the magazine said.

"We're in the process of testing the 2010 Lexus GX 460 SUV to ensure it complies with NHTSA's safety standard for electronic stability control, and to understand better the results obtained by Consumers Union," the federal safety agency said. "It is our belief that electronic stability control should prevent the kind of fishtail event described."

22 April 2010

Gas in the Tank: GM Repays $8.1 Billion in Government Loans

WASHINGTON (AP) - Fallen giant General Motors Co. accelerated toward recovery Wednesday, announcing the repayment of $8.1 billion in U.S. and Canadian government loans five years ahead of schedule.

The Obama administration crowed about the "turnaround" at GM and fellow bailout recipient Chrysler LLC, saying the government's unpopular rescue of Detroit's automakers is paying off.

Much of the improvement comes from GM slashing its debt load and workforce as part of its bankruptcy reorganization last year. But the automaker is a long way from regaining its old blue-chip status: It's still losing money - $3.4 billion in last year's fourth quarter alone. And while its car and truck sales are up so far this year, that's primarily due to lower-profit sales to car rental companies and other fleet buyers.

Chrysler, now run by Italy's Fiat Group SpA, said Wednesday it lost almost $200 million in the first quarter. But it said it boosted its cash reserves by $1.5 billion, reducing the likelihood that it will need more government aid.

"This turnaround wasn't an accident of history," said White House economic adviser Larry Summers. "It was the result of considered and politically difficult decisions made by President Obama to provide GM and Chrysler - and indeed the auto industry - a lifeline, if they could demonstrate the will to reshape their businesses."

GM CEO Ed Whitacre, a former telecommunications executive who was tapped to lead the automaker's revival, announced the loan playback at the company's Fairfax Assembly Plant in Kansas City, Kan. He also said GM is investing $257 million in that factory and the Detroit-Hamtramck plant in Michigan. No new jobs will be added, but workers at both plants are gaining job security because they will build the next generation of the popular midsize Chevrolet Malibu.

Whitacre said GM was rebuilding through the sale of gas-sipping midsize cars and crossovers and investing more than $1.5 billion in 20 plants since leaving bankruptcy protection, preserving 7,500 jobs.

"We've developed a healthy, clean balance sheet and we've developed a cost structure that allows us to be competitive," Whitacre said before leaving for Washington to provide an update on GM's progress to Treasury Secretary Timothy Geithner, House Speaker Nancy Pelosi and Michigan's congressional delegation.

A GM official said Whitacre was paying for the chartered flight from Kansas City to Washington out of his own pocket. U.S. auto executives received a scolding from Congress last year when they took private jets to Washington to seek a taxpayer-funded bailout.

Bruce Clark, senior vice president of Moody's Investors Service, said the loan payback is one step in a longer improvement process for GM. It's also a sign of positive changes that include GM reducing its debt load and rolling out better vehicles.

"I wouldn't cite that as sort of the bellwether, but things certainly are? moving in their favor," Clark said. He said the biggest threat to GM's recovery is another slowdown in auto sales.

GM lost $88 billion between 2004, when it last turned a profit, and last year when it declared bankruptcy. It endured years of painful restructuring, closing 14 factories and shedding more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs.

GM received $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments starting in 2008. At first the entire amount of U.S. aid was considered a loan as the government tried to keep GM from going under and pulling the fragile economy into a depression.

But during bankruptcy, the U.S. government reduced the loan portion to $6.7 billion and converted the rest to company stock that gave it a 61 percent ownership control. Canadian governments also converted part of their debt to shares, reducing its loan balance to $1.4 billion. The final installments on those loans were repaid Tuesday, comfortably beating a 2015 deadline.

GM had made about $2.4 billion in loan payments in December and March, and had promised to repay the full loans by June. But company officials said sales of newer models have improved GM's cash flow and allowed it to make the remaining payments early.

GM wiped out most of its staggering $95 billion debt in bankruptcy, closing last year with $15.8 billion in debt. As the industrial giant was reorganized, the United Auto Workers agreed to concessions, including a plan to shift $50 billion in retiree health care costs to a union-run trust. New hires and white-collar workers now don't get the same rich health benefits.

With a much leaner total U.S. work force of 77,000, GM is small enough to break even if the U.S. auto market remains sluggish.

The automaker is counting on a public stock offering, perhaps later this year, to allow the U.S. government to begin recouping its remaining $45.3 billion investment in GM. The Canadian government's $8.1 billion stake, which equals a 12 percent ownership interest, also could also be unlocked if GM sells shares to the public.

GM officials said it likely will take years for the governments to divest themselves fully.

The stock offering also hinges on GM posting a profit, which Whitacre has said could come this year. GM posted a $3.4 billion loss for the fourth quarter of 2009, but its operations in Asia, South America and other regions made money.

With the GM loan payment, the Treasury Department said total repayments under the Troubled Asset Relief Program, or TARP, now stand at $186 billion, with less than $200 billion in bailout money outstanding for what started out as a $700 billion fund.

But taxpayers are still expected to lose about $36 billion on the bailouts of automakers, and $34 billion on that of insurer AIG, according to the Congressional Budget Office. Propping up mortgage finance companies Fannie Mae and Freddie Mac has cost taxpayers another $126 billion so far.

GM's sales rose 16.8 percent in the first quarter, topping the overall 15.5 percent increase in U.S. car and truck sales. GM is getting close to sticker prices for several of newly redesigned models such as the Chevrolet Equinox small SUV, the Buick LaCrosse luxury sedan and the Malibu, helping to generate more cash than the company had expected.

Yet the company still faces difficulty. Much of its sales increase was due to heavy sales to rental car companies and other lower-profit fleet buyers. Pickup truck sales, a big part of GM's normal revenue stream, also haven't bounced back as fast as the overall market.

GM could be helped by an improving image for U.S. car makers. An Associated Press-GfK survey found that 38 percent of Americans say U.S.-made vehicles are the best, compared to 33 percent who preferred autos made by Asian companies.

In a December 2006 AP-AOL poll, 46 percent said Asian countries made superior cars, while just 29 percent preferred American vehicles, reflecting a perception of U.S. automotive inferiority that began taking hold about three decades ago.

The White House, in a report issued to coincide with GM's loan repayment, said it and Chrysler are on the road to recovery. The American auto industry lost more than 400,000 jobs in 2008 and analysts estimated another 1 million would have been lost had GM and Chrysler liquidated. The past nine months have produced the industry's strongest job growth in nearly a decade, with 45,000 new jobs, the White House said.

GM's investments in the Kansas and Michigan amount to a big bet on the Malibu. The Kansas plant, which employs 3,869 workers, also builds the midsize Buick LaCrosse luxury sedan. The Detroit-Hamtramck plant, which has 1,048 employees, now builds the Cadillac DTS and Buick Lucerne large sedans and is gearing up to make the Chevrolet Volt rechargeable electric car.

Scott Sweet, senior managing partner at IPOBoutique.com, said he doesn't think a GM initial public offering will happen this year. But if it does, he said, it would be best to have the government involved.

John Fitzgibbon, founder of IPOScoop, said the stock would immediately become more attractive if the government sells its stake. By then, the government would have accomplished what it set out to do, he said.

"The goal was to bail out an industry," Fitzgibbon said, adding that once the government gets out of the business it can say, "Job done, move on."

21 April 2010

Texting While Driving Ban Closer to Reality

The Detroit News

Lansing -- A texting-while-driving ban came closer to passage today after the House concurred with two bills passed in the Senate but failed to agree on a third.

The three bills in the package are linked together, meaning all three have to pass for the ban to take effect. Once they are all approved, the ban will take effect July 1.

A bill banning texting while driving, and another setting fines, are on their way to Gov. Jennifer Granholm's desk for signing. A vote on the third bill, which would prohibit making the offense part of the driving record, was postponed for the day.

The bills ban texting as a primary offense, meaning officers can pull somebody over just for texting. The House originally banned texting as a secondary offense, requiring another reason to pull a driver over.

State Rep. Shanelle Jackson, D-Detroit, urged her colleagues not to pass the ban as a primary offense. She said that would make it easier for police to use it to target drivers based on race.

"We need to acknowledge racial profiling is an important issue in the state," Jackson said, shortly before voting on the third bill was postponed for day. "Yes, we believe texting while driving is wrong, but we believe racial profiling also is wrong."

The ban is supported by the Michigan State Police, auto insurance companies and other groups concerned about the dangers of thumbing at the wheel.

Violating the law will be punishable by up to a $200 fine for the first offense, and up to $500 for additional offenses, with no points.

20 April 2010

Ford Uses Profits to Chase Rivals in Emerging Markets

Business Week

Ford Motor Co., profitable last year for the first time since 2005, is stepping up spending in fast- growing markets in South America and South Africa to help catch up to General Motors Co. and Toyota Motor Corp.

“Ford was very, very unhealthy just a few years ago, but now they are able to start investing again,” Rebecca Lindland, an IHS Global Insight Inc. forecaster, said in an interview today. “The places they are investing are seen as the growth markets.”

Spending to retool factories will increase by $207 million in South Africa, $282 million in Brazil and $250 million in Argentina, Ford said this week. Industrywide global sales may rise 4 percent to 66.9 million autos in 2010, researcher J.D. Power & Associates estimates.

After shunning a U.S. bailout and avoiding bankruptcy, Ford reported $2.7 billion in net income in 2009, ending losses totaling $30 billion in the three previous years. Capital spending may increase $1 billion in 2010, Chief Financial Officer Lewis Booth said in a February interview.

“Despite being a top-five automaker in the world, Ford trails the top players such as Volkswagen and GM in many emerging markets,” said Brian Johnson, a Barclays Capital analyst, who rates Dearborn, Michigan-based Ford “equal weight.”

Ford has about half the sales of GM, Volkswagen AG and Fiat SpA in South America and is well behind in South Africa, said Johnson, who is based in Chicago. Toyota is the world’s largest automaker.

Ford rose 9 cents to $12.72 in New York Stock Exchange composite trading. The shares have gained 27 percent this year after surging more than fourfold in 2009. About 46 percent of Ford’s $118.3 billion in 2009 revenue came from outside North America.

Ford’s 7.45 percent notes due in July 2031 rose 0.625 cent to 93 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Overseas Investments

The $739 million in new spending in South Africa and South America follows investments of at least $1.49 billion spread among China, India and Thailand to bolster sales in Asia.

Deliveries in Asia may increase 9 percent this year to 25.9 million vehicles, led by 12 percent growth in India and 8 percent in China, according to Westlake Village, California- based J.D. Power said.

South Africa may post a 14 percent gain this year, according to Lexington, Massachusetts-based IHS Global Insight.

Ford will upgrade and expand its assembly plant in the South African capital, Pretoria, and its engine factory in Port Elizabeth, according to a statement yesterday.

The 3 billion rand ($415 million) investment will boost annual capacity at the Pretoria factory to 110,000 vehicles, with two-thirds expected to be exported to countries in Africa and Europe, Ford said. Production on a new compact pickup truck is scheduled to start next year, Ford said.

South America

Auto sales may rise 15 percent this year in South America, J.D. Power projected. Brazilian sales may rise 12 percent this year to push the country past Germany as the world’s fourth- largest auto market, after China, the U.S. and Japan, J.D. Power projected.

Ford is investing $3 billion in the region through 2015. Chief Executive Officer Alan Mulally said yesterday in Brazilia that Ford will spend 500 million reais more than planned in Brazil from 2011 through 2015, pushing the total to 4.5 billion reais ($2.54 billion).

Ford is developing a small sport-utility vehicle there for domestic sales and for export, its first Brazil-engineered model to be sold outside the country.

Capital spending at the automaker is expected to be in the range of $4.5 billion to $5 billion this year, Controller Bob Shanks said in a conference call with investors last week.

Building less-expensive vehicles on the same platforms worldwide saves money that Ford can use to expand output and allows for exports to more markets, Johnson, the Barclays analyst, said in an interview.

“This is where their plans start to pay off,” he said.

19 April 2010

Toyota to Pay $16.4 Million Fine

NY Times

Toyota is expected to tell the Transportation Department on Monday that it will pay a $16.4 million fine, the largest government penalty ever against an automaker, for concealing information related to its sticking pedal recall.

A senior Transportation Department official said late Sunday that legal documents were still being drafted, but Toyota executives were expected to sign them at the start of business Monday. The person spoke on the condition of anonymity because Toyota has not made its intentions public.

Toyota is not expected to admit wrongdoing, and the fine does not release Toyota from civil or criminal actions. Numerous lawsuits have been filed against the carmaker, by crash victims and relatives of people killed in crashes, seeking billions of dollars.

Toyota’s actions are also under investigation by the Justice Department and the Securities and Exchange Commission.

“By paying the full civil penalty, Toyota is accepting responsibility for hiding this safety defect,” the official said.

A Toyota spokesman, Mike Michels, declined to comment.

The fine is the maximum amount allowed by law. If not for that cap, Toyota could have been ordered to pay $13.8 billion instead — $6,000 for each of 2.3 million vehicles sold with defective pedals — the agency’s chief counsel told the company in a letter this month. The letter also said the agency was considering a second $16.4 million fine against Toyota, based on evidence suggesting the pedals might have had two separate defects.

An investigation into the company’s November recall of 5.4 million vehicles, to fix pedals that could become trapped under floor mats, could also result in additional fines.

The regulators, which received more than 70,000 pages of documents from Toyota, said company officials either knew or should have known the pedals were problematic for at least several months before announcing a recall Jan. 21. By law, automakers have five days after discovering a safety defect to begin a recall.

Toyota issued repair procedures in 31 European countries on Sept. 29, but executives in the United States told Congress that they did not know of reports of sticking pedals until January.

In mid-January, five days before the sticking pedal recall began, an American Toyota executive sent an e-mail message to colleagues in Japan urging them to “come clean” about the defective pedals. The company issued a recall after meeting with federal regulators Jan. 19.

An Homage to Hummer

The Wall Street Journal

Comedian Penn Jillette laments the passing of the 'big, stupid' vehicle

There's a feeling one gets when one sits behind the wheel of a really big stupid military-lite American Hummer. You have that feeling of being strong and safe, high on your pleather throne, above the fray, above the danger, not having to listen to anyone or anything, the rumble of a too-big motor giving you a wiggle and jiggle and tickle inside you. You have the power to run over anyone else on the road, if they dare monkey with you and your Hummer. Don't tread on you. Kill one of ours, we'll kill 100 of yours. You're Arnold Schwarzenegger before he was a wimpy whining begging politician in a state where he has to smoke his cigars in a tent. Put the Hummer bumper against a small building, put the lead Terminator foot down on the Hummer pedal, and the Hummer will move that small building. The Hummer is the four-wheel "heavy metal thunder" that Steppenwolf (the band, not the book or the artsy Chicago theater company) sang about. The Hummer is "Born in the U.S.A.," not the ambivalence that Springsteen slid into the lyrics, but the "Born in the U.S.A." we all knew from the straightforward title and the 2 and 4 of the drums. Do you know that feeling?

I don't. I don't know that feeling at all. I got my Massachusetts driver's license the day I was legally able, but only so I could safely drive my mom's little Ford Falcon 100 miles to see Zappa and the Mothers of Invention in Boston. I like Steppenwolf, the band, the book and the artsy Chicago theater company. I liked Springsteen right up until "Born in the U.S.A.," and I drive a little tiny pink Mini Cooper. The Cooper is engineered for 6'6" max, so I have only one extra inch to squeeze in. I didn't even get the stick shift. My little Mini doesn't go way fast, but even in drive-fast-take-chances Nevada I rarely go faster than 55 miles per hour.

The Mini has a comfortable heated seat and I had some guy in a heavy-metal T-shirt add in a great after-market stereo. I can ride my 20 minutes to work and back contentedly. I can pull into my "Penn & Teller" designated parking space at any sloppy angle I happen to land at, and the Mini fits easily with plenty of space all around. It fits sideways in my big stupid garage. I never have to back up and straighten it out. I never scrape the side mirrors. My Mini gets high enough MPG that I never get dirty looks…for that. My license plate reads "ATHEIST" and when friends drive my car, they report plenty of dirty looks, but I've never seen any of that. I drive oblivious. I don't ever notice the world around me. I'm in a little moving chair with loud music, nut talk or slanted news.

Cars mean nothing to me. I'm not a car guy. I let my motorcycle license lapse as soon as I could afford something more comfortable than my Vespa motor scooter to get me to gigs. I don't need the top down and the wind in my hair. I don't desire fast and furious or low and slow as the tempo. I don't crave rumble. I've never revved my car at a light for an attractive woman or an auto-rival, not even as a joke. I've painted most of my cars bright pink. My heart is so much closer to multilevel-marketed Mary Kay pink than speed-freak Motörhead chrome and black. I don't even know which "O" to put the umlaut over in "Mötorhead." I've seen Mötörhead live a couple times, but I couldn't get the exact pronunciation from Lemmy at that glorious ear-ringing volume.

Now it looks like the Hummer will be no more. General Motors has set a deadline of May 1 for any last-minute bids to save the brand, but it seems unlikely anyone will step up. Meanwhile President Obama has taken over GM and is jacking fuel economy standards up to 35 miles per gallon. The Hummer gets like 10 miles per gallon. The new standards would barely allow a Hummer unicycle. American auto manufacturers are thinking in terms of electric vehicles so the disgusting smoke will come out of coal smokestacks many, many miles away, and not right out of the tailpipe where you can see it, smell it and enjoy it.

Having a Hummer is stupid. It's stupid to waste that much gas. It's stupid to waste that much money on gas. It's stupid to parade your insecurities on public roads. Hummers are stupid looking. You don't need an attack vehicle for the Krispy Kreme drive through. My wife and I saw Adrien Brody in a Hummer at the Beverly Hills Four Seasons and it made him seem less like an eccentric pianist and more like a…Hummer. When Carrot Top came by my house to do my radio show, he drove up in a Hummer. It fit well with his big muscles. I have a friend who made his father turn around and take his new Hummer right back to the lot. My friends have to be able to take a great deal of embarrassment, but even they have to draw the line somewhere.

Hummers are stupid and wasteful and if they go away because no one wants to buy one, that'll be just a little sad. It's always a little sad to lose some stupid. I love people doing stupid things that I'd never do—different stupid things than all the stupid things I do. It reminds me that although all over the world we humans have so much in common, so much love, and need, and desire, and compassion and loneliness, some of us still want to do things that the rest of us think are bug-nutty. Some of us want to drive a Hummer, some of us want to eat sheep's heart, liver and lungs simmered in an animal's stomach for three hours, some us want to play poker with professionals and some of us want a Broadway musical based on the music of ABBA. I love people doing things I can't understand. It's heartbreaking to me when people stop doing things that I can't see any reason for them to be doing in the first place. I like people watching curling while eating pork rinds.

But if any part of the Hummer going belly-up are those government rules we're putting in on miles per gallon, or us taking over of GM, then I'm not just sad, I'm also angry. Lack of freedom can be measured directly by lack of stupid. Freedom means freedom to be stupid. We never need freedom to do the smart thing. You don't need any freedom to go with majority opinion. There was no freedom required to drive a Prius before the recall. We don't need freedom to recycle, reuse and reduce. We don't need freedom to listen to classic rock, classic classical, classic anything or Terry Gross. We exercise our freedom to its fullest when we are at our stupidest.

There's a lot of bad stupid around. Really bad stupid. But we can't stop the real horror by stopping just-plain-stupid stupid. We're not going to stop overseas wars by stopping people from driving big stupid cars. As long as we think that "nation building" is part of our destiny, no amount of independence from foreign oil is going to stop us from getting into meddling, expensive, immoral foreign wars. As long as we let terrorism fill us with terror, we're not going to get our nonstupid freedoms back. Our government declaring that we need alternative energy sources, and betting our money on who might get a smart idea, is not going to give smart people smart ideas. It's really easy to see stupid all around us, but I don't think we want to be too quick to stop it. We need to protect other people's stupid to save freedom for all of us.

Yeah, Adrien Brody and Carrot Top wasted gallons of gas driving their stupid cars. I can feel smug about my Mini Cooper's sexy 37/28/32 MPG measurements. But I don't think we should be too quick to feel happy about the stupid Hummers going away. We're all making bad choices all the time, and most of mine are way stupider than driving a Hummer. I love my freedom of stupid. I bumped into Adrien one time and had a great talk with him, we got along great. I know Carrot Top well enough to call him "Scott." I know that they're both a lot thinner than me. They're both in a lot better shape. They eat better than me, and they can do a lot more push-ups and sit-ups. They can run farther and faster than me. So, in the near future, with us all being involved in each other's health care, Adrien and Scott might make up for their wasted gas mileage paying for my high-blood-pressure meds. If we're all getting together to stop the stupidity of driving a Hummer, will we have to stop the stupidity of eating Krispy Kreme doughnuts and pie? Freedom is freedom to be stupid.

They came first for the Hummers.

Then they came for the pie.

—Penn Jillette is the larger, louder half of Penn & Teller and co-host of Showtime's "Penn & Teller: BS!"

18 April 2010

Senator Levin: Regulators didn't force WaMu to Fix Problems

USA Today

WASHINGTON (AP) — The chairman of a Senate panel investigating the causes of the financial crisis said federal bank regulators ignored mounting risk at Washington Mutual and then fought among themselves as the bank collapsed in the largest U.S. bank failure.

Sen. Carl Levin said regulators "saw the shoddy lending practices, saw the high-risk lending, saw the shoddy securitizations, understood the risk, but let the bank do it anyway."

The Michigan Democrat chairs the Permanent Subcommittee on Investigations. Friday's hearing focuses on regulatory failures that contributed to WaMu's failure. It follows an 18-month investigation by the subcommittee.

Levin aimed his harshest criticism at the Office of Thrift Supervision, WaMu's main regulator, which he said "was more of a spectator on the sidelines, a watchdog with no bite, noting problems and making recommendations, but not trying to correct the flaws and failures it saw."

"OTS wrung its hands as the bank sank into deeper and deeper waters," he said.

A Treasury Department watchdog told the panel that regulators trusted the executives of Washington Mutual to correct risks at the bank but did little to force a change — leading to the biggest U.S. bank failure.

Treasury Inspector General Eric Thorson said that OTS officials "accepted assurances from WaMu management and its board of directors that problems would be resolved."

Thorson said "OTS did not ensure that WaMu corrected those weaknesses."

WaMu engaged in increasingly risky lending starting in 2002. The bank originated some of the highest-risk mortgages — those that allow borrowers to pay so little their debt level actually increases over time.

It also bought loans from outside mortgage brokers, often without ensuring the loan applications were complete and accurate, the Senate panel charges.

Thorson emphasized that the problem at WaMu was not unique. He said other regulators had made the same mistakes elsewhere.

The mortgages had high rates of default but WaMu nevertheless packaged them into investments and resold them through the financial system.

"Together, WaMu and (its mortgage lender) Long Beach dumped hundreds of billions of dollars of toxic mortgages into the financial system like polluters dumping poison in a river," Levin said.

Decrying the cozy relationship between regulators and bankers, Levin pointed to an e-mail in which then-OTS chief John Reich called WaMu CEO Kerry Killenger "my largest constituent assetwise."

OTS was funded with fees from WaMu and other regulated banks. WaMu's fees made up 12% to 15% of the agency's budget — more than any other bank's.

Reich will testify later Friday. Also appearing will be OTS acting director John Bowman and Sheila Bair, chairman of the Federal Deposit Insurance Corp.

The hearing is part of a series of probes into the causes of the financial crisis. The panel sparred with WaMu executives Tuesday.

Documents released by the panel show OTS officials found glaring problems with WaMu's lending and risk management starting in 2002 but relied on the bank to correct the issues voluntarily. WaMu repeatedly failed to do so, but the OTS never forced a change, documents show.

Fueled by the housing boom, Washington Mutual's sales to investors of subprime mortgage securities leapt from $2.5 billion in 2000 to $29 billion in 2006. The 119-year-old thrift, with $307 billion in assets, was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the FDIC.

The FDIC administers the fund that insures regular bank deposits and has backup oversight of all insured banks. Like the OTS, the FDIC recognized problems with WaMu years before the bank's failure. FDIC officials pressured OTS to take more aggressive action but did not invoke their enforcement authority.

FDIC officials have said they were constrained by a 2002 agreement under which FDIC examiners could enter banks only after they were deemed to be unhealthy. FDIC wanted OTS to downgrade WaMu's rating but OTS refused to do so, documents show.

But the FDIC's own watchdog said the agency could have done more.

"FDIC could have taken enforcement action to remedy or prevent unsafe or unsound practices" given OTS reluctance to crack down, FDIC inspector general Jon Rymer said.

The agency was critical of WaMu's practices and pressed the OTS to take tougher action, the report said. It said OTS blocked the FDIC's efforts to perform its own examinations.

A separate report issued jointly by Thorson and Rymer faulted the two agencies for infighting that delayed action. But it said OTS bears more blame because it blocked the FDIC's examiner from accessing information needed to assess the bank's strength.

"OTS' supervision did not adequately ensure that WaMu corrected those problems early enough to prevent a failure of the institution," the inspectors general wrote.

Former WaMu executives and regulators criticized the OTS' oversight in interviews Thursday.

"The regulators did not possess the right technical resources or expertise to oversee the complexity of institutions" like WaMu, said Clifford Rossi, a top risk officer at WaMu in 2007 who worked at OTS in the 1990s.

As a result, Rossi said, OTS provided "by far the softest" oversight of any federal bank regulator.

16 April 2010

State Jobless Rate Stays Flat at 14.1% in March

The Detroit News

The state unemployment rate for March remained unchanged from February, at a seasonally adjusted rate of 14.1 percent. Total employment edged up by 8,000 jobs, while unemployment dipped by 2,000.

The state Department of Energy, Labor & Economic Growth pointed out that Michigan's labor force in March increased for the third consecutive month. It was the first three-month gain in Michigan since 2006.

The rate -- which is 1.5 points above the March 2009 level -- continues a trend that emerged last summer, when Michigan's unemployment rate stabilized around 14 percent after making huge jumps in the aftermath of the auto industry's massive restructuring.

The U.S. unemployment rate also was unchanged in March, at 9.7 percent.

Senator Urges Government not to Assume GM Pension Plans

The Detroit News

Detroit -- Two Ohio members of Congress urged the Obama administration today to ensure that General Motors Co. meets its pension obligations.

In a letter to Treasury Secretary Timothy Geithner, Sens. Sherrod Brown and Tim Ryan -- both Ohio Democrats -- urged the administration not to assume GM's underfunded pension plans.

"As a majority owner in General Motors, the U.S. government must not put itself in the pension," the pair said in the letter. "It also would be a poor outcome for the U.S. taxpayer to sell our interests in the auto sector, only to have the U.S. government to assume the unfunded liabilities in their pension plans."

The Treasury swapped about $42 billion of its $50 billion bailout of GM for a 61 percent majority stake in the automaker.

Last week, GM disclosed under new accounting rules, the company's worldwide unfunded pension liabilities are $27 billion as of Dec. 31.

GM's U.S. obligations grew by $3.5 billion to $17.1 billion as of the end of 2009, while it owes $10.3 billion for pension obligations elsewhere.

Treasury spokeswoman Meg Reilly said the department didn't have an immediate comment.

The Obama auto task force warned last year that GM's future pension costs -- which include $6 billion in payments due in 2013 and 2014 -- are "unsustainable" and would require GM to sell 900,000 additional cars each year to meet the obligation.

The fate of GM and Chrysler's underfunded pension plans has drawn more interest after the Government Accountability Office released a report on the status of the pensions.

The report said auto sector participants could lose as much as $35 billion if suppliers and automakers terminated pension plans and were assumed by the Pension Benefit Guaranty Corp.

The GAO report "raised a number of alarming concerns about the conflicting roles and responsibilities of the Treasury Department and the potential impact on retirement security in the auto sector."

Delphi Corp. terminated its pension plans in July, saddling the PBGC with a $6.2 billion liability for plans covering 70,000 people. Retirees and employees stand to lose $1.2 billion in pension benefits because of maximum benefit levels covered by the PBGC.