News Archive


GM to recall 1.5 million vehicles to fix electric power steering issue


(Reuters) – General Motors Co (GM.N) is recalling more than 1.5 million vehicles because they may unexpectedly lose power steering, the company said on Monday

This brings to 6.26 million the number of vehicles recalled by GM since the start of this year.

“Steering control can be maintained because the vehicle will revert to manual steering, but greater driver effort would be required at low vehicle speeds, which could increase the risk of a crash,” GM said in a statement.

Of the 1,508,445 vehicles involved in the recall, more than 1.3 million are in the United States.

Three of the six models recalled on Monday are also involved in a massive ignition switch recall of 2.6 million vehicles worldwide. The defect is linked to 13 deaths.

Those models are the 2010 Cobalt compact, the Chevrolet HHR compact from model years 2009 and 2010, and the Saturn ION compact from model year 2004 to 2007.

The company also said on Monday it expects to take a charge of up to $750 million in the first quarter, primarily related to recalls announced in the quarter. This includes a previously disclosed $300 million charge for three recalls announced on March 17, and the ignition switch recall on February 25. (r.reuters.com/suz97v)

In addition to the safety recalls announced on Monday, GM is offering lifetime warranties for replacement of electric power steering motors in 405,484 other cars. They include HHR compacts from model years 2006 to 2008 along with some 2009 models, and Saturn ION compacts from the 2003 model year.

“With these safety recalls and lifetime warranties, we are going after every car that might have this problem, and we are going to make it right,” said Jeff Boyer, vice president of GM Global Vehicle Safety. “We have recalled some of these vehicles before for the same issue and offered extended warranties on others, but we did not do enough.”

Also involved in the power steering recall announced Monday are all Chevrolet Malibu sedans from 2004 and 2005 model years and some from the 2006 and 2008 model years, and Saturn Aura sedans from 2008 and 2009 model years, and all Pontiac G6 sedans from the 2005 model year plus some from 2006, 2008 and 2009.

(Corrects amount of previously disclosed charge to $300 million, instead of $30 million in paragraph seven)

(Reporting by Bernie Woodall in Detroit and Thyagaraju Adinarayan in Bangalore; editing by Sriraj Kalluvila and Matthew Lewis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/8w6LW-EpiL0/story01.htm

Yellen takes case for Fed’s easy money policies to the public


CHICAGO (Reuters) – Federal Reserve Chair Janet Yellen on Monday took a page from a politician’s playbook to defend the U.S. central bank’s easy-money policies, citing the struggles of three Americans in a speech and touring a college workshop to shake hands with students and teachers.

It was her first public address since becoming Fed chair two months ago, and the tour of a manufacturing laboratory at Daley College on Chicago’s southwest side was her first high-profile effort to lend an empathetic ear to the concerns of Americans five years into a frustratingly slow U.S. recovery from recession.

At the lab, Yellen leaned in to watch as Masson Covington, a 29-year-old student, demonstrated how to precision-cut an aluminum bowling pin with a computer-numerical-controlled lathe.

“Oh, that’s great!” the head of the U.S. central bank said as the machine’s luminescent coolant splashed behind a glass guard. “It’s really simple,” replied Covington. “I learned it all from these classrooms here.”

Ostensibly, the excursion to Daley College, a community college that is part of the City Colleges of Chicago, was meant to highlight promising efforts to train skilled workers and to explain that the economy remains “considerably short” of the Fed’s of goal of maximum sustainable employment and stable inflation, as Yellen put it in her morning remarks.

But behind the polite questions about course studies and job prospects, the trip around Chicago may have been as much about protecting the central bank’s cherished independence from political interference.

If Yellen can convince college students that her sometimes perplexing institution serves the public’s interest, the Fed has a better shot at beating back efforts in Washington it argues could erode its ability to make unfettered decisions on monetary policy.

“The Fed has been under attack because of some of the bailout policies that were followed during the financial crisis, and there is no vocal constituency on the Fed’s side,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta who is now chief monetary economist with Cumberland Advisors.

“So, such outreach activities are simply an attempt to show that the Fed does care about the public,” he added. “Whether it will work or not is a different story.”

This year, the Republican-led House of Representatives Financial Services Committee is holding what it calls an “aggressive” series of hearings on the Fed examining everything from the role its stimulus has played in swelling the nation’s debt to the impact it has had on seniors’ savings.

Meanwhile, Republican Senator Rand Paul, a potential 2016 presidential candidate, is pushing a bill that would open up the Fed’s monetary policy deliberations to congressional audit. A similar bill passed the House in 2012.

While an overhaul of the 100-year-old Fed is unlikely, the debate could amplify as the November midterm elections approach.

Asked in the lab how well the Fed is understood, Covington, a married father of three, admitted he knows little beyond the fact that it “gets the money and deals with the money.”

DORINE, JERMAINE, VICKI

Since the 2007-2009 recession, the Fed has effectively printed some $3 trillion. It has kept interest rates near zero for more than five years, and this month said it will keep them there for a considerable time even after it ends its bond-buying program, which is to be wound down later this year.

In her speech to some 1,100 people at a downtown convention center, Yellen said the “recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics.”

She said “considerable” slack still exists in the job market and said further monetary stimulus could be effective.

“I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers,” Yellen said.

In an unusual move, she cited by name three workers who lost their jobs or absorbed sharp pay cuts when the recession hit, including one who “scrambled for odd jobs and temporary work.”

“This is not just an academic debate,” she said. “For Dorine Poole, Jermaine Brownlee and Vicki Lira, and for millions of others dislocated by the Great Recession who continue to struggle, the cause of the slow recovery is enormously important.”

“HOW POLITICAL THE FED HAS BECOME”

Road trips are common for the presidents of the Fed’s regional banks, who are supposed to gather information on the economy to bring to policy-setting meetings in Washington.

But they have not been for the head of the central bank, until Yellen’s predecessor, Ben Bernanke, broke that mold with a concerted public campaign to address the Fed’s critics.

In his last few speeches before retiring, Bernanke said the U.S. central bank needed to show it is working in the public’s interest or risk losing its policy independence.

Yellen, herself, who was the Fed’s vice chair before becoming the central bank’s chief, was previously president of the San Francisco Fed and did many such road trips.

Getting the message out “is all well and good, but I think the average American is more concerned about the value of their money, how much things cost, and whether or not they have a job,” Representative Patrick McHenry, a Republican who heads the House Financial Services Committee’s oversight panel, said in a telephone interview.

“This type of tour might further highlight how political the Fed has become in intervening in the economy and the outsized role they play,” he said.

In House testimony in February, Yellen strongly rejected the “Audit the Fed” bill, warning of how it could bring “political pressures to bear on the committee’s judgment about what is the appropriate way to implement monetary policy.”

The pressure could cool if the economy keeps improving. U.S. economic growth picked up in the second half of last year, and the unemployment rate has dropped from a post-recession high of 10 percent in 2009 to 6.7 percent last month.

That drop is due in part to the droves of Americans who have given up the search for work.

Some economists and more hawkish Fed officials believe the decline in unemployment means little slack remains in the labor market and that inflation will soon rise.

Yellen disagreed, pointing to the unusually large proportion of long-term unemployment and the elevated number of Americans working part time who want full-time work. She also noted that there has been little upward pressure on wages.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama and Leslie Adler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/1yb9FX7ThP0/story01.htm

Macy’s chief merchant named president in possible succession move


NEW YORK (Reuters) – Macy’s Inc (M.N) said on Monday it promoted its chief merchandising officer, Jeffrey Gennette, to president of the company, in a move that positions him to potentially become the retailer’s next chief executive.

In addition to continuing to serve as Macy’s Inc’s chief merchant, Gennette will manage Macy’s in-house brands, such as INC, which generate 20 percent of company revenue. Gennette also oversees the department store chain’s marketing and e-commerce.

The chief executive of Macy’s, Terry Lundgren, who is giving up the title of president, declined to say whether the appointment was connected to the company’s succession planning. But he said the promotion was an endorsement of Gennette’s importance to the retailer.

“It’s a clear message that this is one of our top-performing individuals to give him such as huge responsibility,” Lundgren, 62, told Reuters in an interview.

Lundgren has been CEO since February 2003. On his watch, Macy’s has pulled ahead of rivals such as J.C. Penney Co Inc (JCP.N), Kohl’s Corp (KSS.N) and Sears Holdings (SHLD.O) in terms of growth.

Gennette’s promotion shows Macy’s continues to see merchandising skills as essential in a future CEO, said Walter Loeb, president of retail consulting firm Loeb Associates, noting Macy’s long tradition of naming merchants to its top job.

“They’ve appointed an excellent merchant,” Loeb said. “The only way a retailer has a direction, a point of view for the consumer, is through the merchandise.”

Gennette, 52, will continue to be based in New York. In his new role, he will have no responsibility for the upscale Bloomingdale’s chain, which is owned by Macy’s Inc.

Gennette has been Macy’s chief merchant since 2009. He started with Macy’s in 1983, when he worked at Macy’s West as an executive trainee. Since then, his stints at the company have included CEO of Macy’s West and Macy’s Northwest.

(Reporting by Phil Wahba in New York; Editing by Steve Orlofsky and Leslie Adler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/PmfIqdkWjwQ/story01.htm

Japan diaper shortage shows how China demand can relieve tax pain


(Reuters) – For evidence that Japan’s economy could avoid a steep decline after a sales tax increase takes effect on Tuesday, consider diaper sales.

Retailers across Japan have reported shortages of Kao Corp’s (4452.T) ‘Merries’ brand diapers in recent months, with many stores sold out even after imposing rations.

At midnight, Japan’s sales tax rose to 8 percent from 5 percent. A crush of demand ahead of the first sales tax hike in 17 years has been credited with lifting sales of everything from condominiums to luxury cars — and raised fears of a sharp downturn in spending over coming months.

That was certainly the experience of 1997, when the sales tax rose to 5 percent from 3 percent — and spending promptly fell off a cliff.

Economists trying to assess the payback have focused on soft goods — items such as cigarettes, office supplies and diapers — where sales surged in the final weeks of March. Sales of consumables account for about a quarter of private consumption.

The thinking goes that the bigger the rush ahead of the tax hike, the bigger the drop in spending will be in this quarter, and the bigger the risk that the economy will disappoint already modest expectations of less than 1 percent growth for 2014.

“Real household income will be squeezed after April by a greater degree than last time because of the bigger rise in the sales tax rate,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

“As such, there’s a risk of the pullback turning out deeper this time.”

A deep slump could increase the pressure on the Bank of Japan to expand an already massive program of monetary stimulus by mid-year.

CHINESE DEMAND

But behind the diaper sales surge, many retailers say, is a factor that did not figure in 1997: increasingly affluent Chinese consumers.

Demand from a grey market of brokers who buy Japanese-made diapers and send them to China was behind the disappearance of Merries and other diapers from store shelves in recent weeks, according to brokers and store managers.

Some stores, such as the Papasu drug store chain, found it almost impossible to keep the Merries brand on shelves.

“We have Chinese customers buying packages of Merries, and even when we set a one-package-per-person limit, they come back again to buy more,” Koji Toyama, a Papasu employee, said last week.

The reputation of Japanese-made products means that some Chinese consumers are willing to pay a premium for them, even preferring them over Kao’s Chinese-made Merries.

And that changing nature of consumption patterns, many economists say, means the pain in Japan will be more limited than 1997, when the sales tax hike coincided with the start of the Asian financial crisis and a recession.

Kenji Yumoto, vice chairman of the Japan Research Institute, said he was cautiously optimistic that the drop-off in consumer demand will not be as extreme as it was the last time. While auto sales rose by proportionally more than they did in 1997, other categories had not seen such an outsized run-up, he said.

“I expect that the pullback in demand will be smaller than it was in 1997,” he said.

For appliances and home electronics, for example, official data shows little change in sales over the past two years — in stark contrast to 1997.

Then, ahead of the tax increase, sales rose steadily for four quarters before a spike in the final three months when they were 40 percent higher than two years earlier — and immediately crashed back to below their 1995 levels.

As well, spending on services, which accounts for around 60 percent of private consumption, is seen as less vulnerable to boom-and-bust swings.

But while world’s third-largest economy may be able to weather the sales tax rise, Japan’s diaper brokers see tough times ahead.

An Osaka-based diaper broker said the sales tax, along with rising costs for gasoline, shipping and the shoppers he hired in Japan were all eroding his margins. Made-in-Japan Merries can fetch the equivalent of as much as $27 in China, compared with about $13 in Japan.

“This business used to be profitable,” he said.

(Additional reporting by Tetsushi Kajimoto and Leng Cheng; Editing by John Mair)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/0KIUh30-E1M/story01.htm

Caterpillar’s Swiss unit dodged $2.4 billion of U.S. taxes: Senate panel


WASHINGTON (Reuters) – Caterpillar Inc avoided paying $2.4 billion in U.S. taxes from 2000 through 2012 by moving profits from sales of replacement parts through a low-tax unit it set up in Switzerland, a congressional panel said on Monday.

In the latest example of a major U.S. corporation’s offshore tax strategies going under the congressional microscope, the Senate Permanent Subcommittee on Investigations issued a report focused on a complex 1999 restructuring by Caterpillar.

The world’s largest mining and construction equipment maker’s restructuring negotiated a low tax rate with Switzerland for a unit it set up there to book taxable profits from sales of Caterpillar-branded replacement parts made by third parties under contract with the Peoria, Illinois-based company.

“This is a prime example of a tax avoidance strategy, which is costing the U.S. Treasury billions of dollars,” said Senator Carl Levin, the Democratic chairman of the subcommittee, which has a hearing scheduled for Tuesday on the report’s findings.

Caterpillar makes no replacement parts and has no warehouses in Switzerland, but 85 percent of its parts business’s profits went through the Swiss unit, where the company pays a tax rate of between 4 percent and 6 percent, the subcommittee said.

The top U.S. corporate tax income rate is 35 percent.

Caterpillar’s Swiss structure continues to save the company about $300 million a year in U.S. taxes, the subcommittee said.

In a response to the Levin report, Caterpillar said its Swiss unit, known as Caterpillar Sarl, or CSARL, has a large marketing and sales presence in Geneva, Switzerland.

“CSARL is no mere shell, but rather a major operating company employing hundreds of personnel in Geneva,” said Julie Lagacy, vice president of Caterpillar’s finance services division, according to prepared testimony released ahead of the hearing.

Along with three Caterpillar executives, representatives of Big Four accounting firm PricewaterhouseCoopers LLP (PwC), which advised Caterpillar on the restructuring, are expected to testify.

A spokeswoman for PwC defended the firm’s tax advice to Caterpillar. “We stand by the work we did for them,” the spokeswoman said in a statement.

Levin’s panel has also held hearings on the tax strategies of Apple Inc, Hewlett-Packard Co and Microsoft Corp.

“This (Caterpillar) investigation demonstrates just how shifting profits to a tax haven is not just the province of high-tech companies,” Levin said.

(Additional reporting by James Kelleher; Editing by Kevin Drawbaugh and Grant McCool)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yiOMDCh6h7Y/story01.htm

Aston Martin in talks with Mercedes-Benz for its first SUV: report


(Reuters) – Luxury sports car maker Aston Martin is in discussions with Mercedes-Benz over building its first SUV and hopes to have the SUV in showrooms within three to four year, the Financial Times reported, citing sources.

An Aston Martin spokeswoman told Reuters that the automaker does not have any such plans. “We do not currently have a plan to add an SUV to the model line-up.” She declined to elaborate on product discussions. (link.reuters.com/wuz97v)

The FT said a possible SUV collaboration is one of a number of potential areas of collaboration between Aston and Mercedes. The paper cited people who declined to be identified.

“The parties are working to conclude the terms of an additional cooperation for the supply of electric electronic components,” Mercedes-Benz, owned by Daimler AG (DAIGn.DE) told Reuters.

Daimler Chief Executive Dieter Zetsche told Reuters in January that the company would be open to sharing its GL offroader platform with Aston Martin, and that would depend on Aston’s product plans.

Last year, Aston Martin teamed up with Daimler’s high-performance Mercedes-AMG GmbH division to develop a new generation of bespoke V8 engines, and its Mercedes-Benz unit for electronic components supply to the British firm.

Daimler in return took a non-voting stake of up to 5 percent in the 100-year-old British firm, which achieved its greatest fame with the 1963 launch of the DB5 sports car featured in early James Bond movies.

(Reporting by Aashika Jain in Bangalore, Laurence Frost in Paris and Edward Taylor in Frankfurt; Editing by David Gregorio)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/7eu0wdxnpC8/story01.htm

Republican Paul Ryan to unveil U.S. budget plan on Tuesday


WASHINGTON (Reuters) – U.S. Representative Paul Ryan on Tuesday plans to unveil a 10-year balanced budget plan that seeks to bolster Republicans’ campaign credentials as the party of fiscal prudence but also leaves them open to fresh attacks over deep cuts to social programs.

The House Budget Committee, which Ryan chairs, said in a statement that it has scheduled a vote on a budget resolution on Wednesday. Under House rules, the document must be made public at least 24 hours before it can be considered by a committee.

Ryan has revealed no details of his plan, but Republican leaders in the House of Representatives have said it would achieve balance within 10 years, as Ryan’s budget plan proposed last year. It is widely expected to contain many elements of his past budgets, including deep cuts to social safety net programs such as Medicaid health care for the poor and food stamps.

The task of eliminating deficits within a decade, however, is expected to be more difficult this year because of slower economic growth forecasts from the Congressional Budget Office, which predict $1.4 trillion less in tax revenue collections over a decade compared to forecasts made a year ago. Many Republicans are also clamoring for increased defense spending in the wake of the Ukraine crisis.

If passed by the Republican-controlled House, Ryan’s budget would face certain death in the Democratic-controlled Senate, relegating it to service as a campaign talking-point for November’s congressional elections.

But even in a divided House Republican caucus, the desire to shrink government spending and the $17.5 trillion national debt remains strong and is viewed as a key differentiator that can help Republicans gain ground against Democrats.

Democrats, however, view the Ryan budget as a rich source of material for attack ads against Republicans focusing on the painful spending cuts that they would have to make to balance the budget in 10 years.

(Reporting by David Lawder; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9ADbeWTi_B4/story01.htm

Wall Street gets lift from Yellen remarks, tech rebound


NEW YORK (Reuters) – U.S. stocks rose on Monday, putting the SP 500 on track for a second straight advance, led by technology and financial shares following comments from Federal Reserve Chair Janet Yellen.

Each of the 10 major SP indexes was in positive territory, led by technology .SPLRCT, up 1.1 percent, and financials .SPSY, up 1 percent. Microsoft Corp (MSFT.O) gained 2.3 percent to $41.22 and JPMorgan Chase Co (JPM.N) rose 1.5 percent to $60.96 as the two biggest boosts to the SP 500.

Yellen said the U.S. central bank’s “extraordinary” commitment to boosting the economy, especially the still struggling labor market, will be needed for some time to come.

“I don’t think she is going to be pull back on the taper, she is just being realistic in recognizing the fact things are still slow, but they are going to continue down the path,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.

Equities also received a boost from end-of-quarter “window dressing,” when money managers adjust their positions to improve the look of their portfolios.

“It’s absolutely the end of the quarter, last day of the month, trying to close it at the high – so it’s a big push just to try and keep it at least flat to slightly positive (for the quarter),” said Polcari.

With Monday’s advance, the SP 500 .SPX is up 0.7 percent for the month and up 1.3 percent for the quarter, which would mark the worst quarterly performance for the benchmark index since the last quarter of 2012.

The Dow Jones industrial average .DJI rose 138.42 points, or 0.85 percent, to 16,461.48, the SP 500 .SPX gained 15.29 points, or 0.82 percent, to 1,872.91 and the Nasdaq Composite .IXIC added 48.372 points, or 1.16 percent, to 4,204.13.

The Institute for Supply Management-Chicago business barometer was at 55.9 in March, its lowest level since August and down from 59.8 in February. Economists’ median forecast in a Reuters poll was 59.0.

U.S.-listed shares of Prana Biotechnology Ltd (PRAN.O) plunged 70.9 percent to $2.87 after the company said its experimental drug to treat Alzheimer’s disease failed to meet the main goal of a mid-stage study in patients with a mild form of the condition.

Many biotechnology stocks have come under pressure recently, and the Nasdaq Biotechnology index .NBI fell 7 percent last week, its fifth consecutive week of declines.

Logistics company UTi Worldwide Inc (UTIW.O) reported a bigger-than-expected quarterly loss, hurt by weak demand for air freight as customers opted for cheaper modes of shipping. Its shares slumped 8.6 percent to $10.29.

(Editing by Bernadette Baum)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/8GUYBeamQfM/story01.htm

Japan mega banks must help regional peers lend abroad: new banking head


TOKYO (Reuters) – Japan’s biggest banks must do more to involve smaller peers when seeking partners to finance overseas projects, to support a regional banking sector facing an uncertain future without a wider pool of borrowers, Japan’s new banking head said.

Many of Japan’s more than 100 local banks have long been stuffed with deposits but starved of loan customers caused by two decades of economic stagnation – a state the government, in office since December 2012, has promised to end.

Fearing loan profit being squeezed to an unsustainable degree, the banking regulator has urged small banks to merge or broaden their lending scope through, for instance, participating in overseas project finance with the help of majors such as Mitsubishi UFJ Financial Group Inc (MUFG) (8306.T).

Some regional lenders are eager to take part in financing overseas energy or infrastructure projects, say bankers at major lenders, but lack expertise as well as access to foreign currency. The regulator wants majors to bridge the gap – as does the new banking head, who is also president of MUFG.

“It is desirable for Japanese financial institutions with ample funds to participate in these projects,” said Nobuyuki Hirano, who became chairman of the Japanese Bankers Association on April 1.

Infrastructure development in Asia alone needs $8 trillion in financing this decade. Regional banks have the funds, so inviting them to join syndicates is “worth the effort,” Hirano told Reuters in an interview.

Japan’s biggest regional bank by assets is Fukuoka Financial Group Inc (8354.T), based on the southwest island of Kyushu, followed by Bank of Yokohama Ltd (8332.T), Chiba Bank Ltd (8331.T) and Hokuhoku Financial Group Inc (8377.T), showed data from Thomson Reuters.

NO.1 GLOBAL ARRANGER

Global banks often take the lead in arranging syndicates of lenders to finance projects such as the construction of power plants and roads. Syndicates can comprise just a few banks to over 30, with each participant extending loans of varying amounts for projects costing billions of dollars.

Japan’s MUFG, Sumitomo Mitsui Financial Group (8316.T) and Mizuho Financial Group Inc (8411.T) have arranged syndicates for an increasing number overseas projects in recent years, helped in part by European rivals retreating during the euro zone sovereign debt crisis.

MUFG, Asia’s biggest private bank by assets, ranked first among global arrangers last year in terms of amount raised, showed data from Thomson Reuters. SMFG and Mizuho ranked fourth and fifth respectively.

One recent syndicate for a $5 billion oil refinery in Vietnam involved Japanese regional lenders Shizuoka Bank Ltd (8355.T), Yamaguchi Financial Group (8418.T) and Chiba Bank.

Diversifying into overseas project finance strengthens loans portfolios which at regional lenders are concentrated in local economies, a Financial Services Agency official told a recent meeting of regional bank heads, according to an attendee.

“We would like to provide support to financial intuitions actively participating in overseas project finance,” the official said, according to the attendee who was not authorized to discuss the matter publicly and so declined to be identified.

(Editing by Christopher Cushing)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/jlf3rMoudKo/story01.htm