News Archive

Faulty Takata air bags may not be replaced for months

WASHINGTON (Reuters) – U.S. safety regulators do not expect Japanese auto parts maker Takata Corp (7312.T) to be able to fully supply replacement parts for millions of defective air bags until January or later, and urged Takata and the automakers it supplies to seek additional parts from other companies.

The National Highway Traffic Safety Administration, which has come under fire for being too lax and slow in dealing with the defective air bags, also called on automakers to be ready to expand their recalls beyond the warm and humid regions believed to be the epicenter of the problem.

The defective air bags, which can launch metal shards into car occupants, have been tied to at least four deaths and many serious injuries. They have triggered the recall of more than 10 million vehicles since 2008 by 10 different manufacturers.

Takata must boost production and even tap competitors to address demand while car makers must do much more to aid the recall effort, a top safety official said in letters to manufacturers.

“More can and should be done as soon as possible to prevent any further tragedies,” the agency’s deputy director, David Friedman wrote to auto makers.

Car makers should boost advertising to alert drivers of air bag dangers and offer loaner cars during repair, he said. He said car makers should even test Takata air bags themselves, as regulators keep studying why the safety device has been involved in so many mishaps.

If test results indicate potential defects with inflators in other parts of the country, “you will need to act quickly to expand your recall,” he wrote, also asking if the companies are seeking to buy replacement parts from other suppliers.

Friedman will meet with Takata executives on Thursday and expects weekly updates on progress, the official wrote.

Regulators reached out to General Motors, Nissan, Ford, BMW, Honda, Mazda, Chrysler, Mitsubishi, Subaru and Toyota.

Separately on Thursday, lawmakers called for an independent review of NHTSA and asked whether the agency could do more to detect and snuff out design dangers. The agency briefed U.S. lawmakers earlier this week.

The agency released summaries of three meetings with Takata and vehicle manufacturers over the past three months. The summaries indicate that an estimated 3.1 million inflators would need to be replaced as part of the regional recall announced in June. By September, that estimate had grown to 4.3 million inflators.

In a letter to Takata Senior Vice President Kazuo Higuchi, NHTSA Deputy Director David Friedman demanded that Takata provide updated estimates of its ability to produce replacement parts and called on the Japanese firm to provide details about a program to test inflators “as soon as possible.”

(Corrects timing of replacement parts from “after February” to “January or later” in first paragraph)

(Reporting By Patrick Rucker in Washington, Christian Plumb in New York and Paul Lienert in Detroit; Editing by Chris Reese and David Gregorio)

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Wal-Mart and allies in face-off with Apple Pay over mobile payments

CHICAGO (Reuters) – Suddenly it’s Apple versus Wal-Mart in the fight for shoppers’ digital wallets.

With the development of a new mobile payment system, a group of retailers led by Wal-Mart Stores (WMT.N) is aiming to upend the $4.5 trillion credit card market and control the precious transaction data generated at the checkout line.

The difficulty of the task became clear this week when drugstore chains CVS Health Corp (CVS.N) and Rite Aid (RAD.N), in a move apparently aimed at shoring up the retailers’ pay system, stopped accepting payments on Apple Inc’s (AAPL.O) iPhones. That prompted consumers to complain that they were being denied a user-friendly payment option.

The “skirmish,” as Apple CEO Tim Cook put it this week, is the latest dispute to emerge from the Byzantine world of payment systems, which is dominated by banks and credit card firms.

Many payment experts said they are skeptical that the retailer-backed system, known as CurrentC, can gain traction, let alone thwart Apple Pay, a payment system launched by the iPhone maker last week. CurrentC is set to go live in 2015.

The retailers’ main objective appears to be to push credit card companies out of the payment equation, or at least get them to lower their costs.

“CurrentC is built for retailers, to help them cut out interchange fees,” said Nick Aceto, senior director at payment technology firm CardConnect, referring to the fees paid by retailers to credit card companies when a shopper makes a purchase. “It’s not a solution that will appeal to customers because it does not make their lives any easier.”

That’s not stopping the retailers from trying, and their consortium, the Merchant Customer Exchange (MCX), has clout, with $1 trillion in annual sales. In addition to Wal-Mart, its members include Best Buy Co (BBY.N) and Target Corp (TGT.N).

MCX officials said CurrentC will work on any phone, integrating loyalty programs and payments into one transaction. While the group’s focus is helping consumers, they said, it hopes to shake up the payment system.

“MCX and the merchants that founded MCX are challenging … an entrenched, very large status quo, a $500 billion ecosystem on the payments side,” Chief Executive Dekkers Davidson said on a conference call Wednesday.

Davidson said MCX has made arrangements with two credit card companies and wants to partner with large issuers. But he did not say whether MCX would be willing to work with the likes of Visa Inc (V.N) and Mastercard Inc (MA.N) and pay them conventional rates on interchange fees. Eventually, he said, “We expect that all cards will be welcome at CurrentC.”

Wal-Mart, which has made little secret of its disdain for paying processing charges, is suing Visa for $5 billion for what it says are excessive card swipe fees.

Credit card firms typically charge 2 percent to 3 percent of the value of each transaction. Retailers paid $66 billion in credit-card-related fees in 2013, out of $4.5 trillion in spending tied to major U.S. cards, according to the Nilson Report.

In contrast to Apple Pay, which encrypts payment data and keeps it out of the hands of retailers, CurrentC connects directly to a customer’s bank account. It will allow retailers to glean valuable data on spending patterns, which they can use to better target advertising and drive loyalty programs.

There would be no pooling of data across retailers, Davidson said, and shoppers can opt to remain anonymous. “Consumers will determine how they are marketed to or not marketed to,” he said.

MCX says CurrentC will be secure, an assertion that was tested on Wednesday when the group confirmed that hackers had obtained the e-mail addresses of some participants in a pilot program.

While Wal-Mart has said it has no plans to support Apple Pay, its rival Target is taking a more nuanced approach. Target has said it plans to use MCX for in-store checkout but is allowing Apple Pay for online purchases through its mobile app. Target is featured on the Apple Pay website.

MCX members have made up-front payments of $200,000 to $500,000 to join the group and signed multiyear agreements, according to people familiar with contract terms.

MCX said on Wednesday that when retailers join the consortium they do so on an exclusive basis, but there are no fines if they leave the group.

Walgreen Co (WAG.N), a rival to CVS and Rite Aid, said it decided to offer Apple Pay to give its customers more options.

“It is ultimately about providing the choice to customers because no one really knows how this space will evolve,” said Deepika Pandey, head of digital marketing at the pharmacy.

(Additional reporting by Deepa Seetharaman; Editing by Eric Effron and Douglas Royalty)

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Samsung Electronics third-quarter operating profit down 60.1 percent on year

SEOUL (Reuters) – Samsung Electronics Co Ltd (005930.KS) said third-quarter profit fell 60.1 percent from a year earlier to the lowest in more than three years, as earnings for the mobile division continued to shrink.

The world’s top smartphone maker on Thursday reported a July-September operating profit of 4.1 trillion won ($3.90 billion), in line with its estimates issued earlier in October.

Profit for the mobile division, which drove Samsung’s earnings growth in 2012 and 2013, shrank to 1.75 trillion won from 6.70 trillion won a year earlier. This was the weakest since the second quarter of 2011.

(Reporting by Se Young Lee; Editing by Stephen Coates)

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Visa sees mobile payment as big growth driver

(Reuters) – Visa Inc (V.N) reported a better-than-expected adjusted quarterly profit and said the mobile payment industry would be “a great driver” for business, sending its shares up nearly 4 percent in extended trading.

The world’s largest credit and debit card company and its competitors are turning their attention to mobile payments, an industry given fresh impetus by the entry of Apple Inc (AAPL.O).

Visa, along with Mastercard Inc (MA.N) and American Express Co (AXP.N), have partnered with Apple in the launch of a system – Apple Pay – that allows iPhone users to pay for anything from office supplies to burgers at the tap of a button.

Several analysts have estimated that mobile payments will be a $1 trillion global industry by 2017.

“We have our traditional ways of doing business but … we see the mobile opportunities in both the developing, the less developed and the developed world being great drivers,” Visa Chief Executive Charlie Scharf said on a conference call.

The company, along with its smaller rival MasterCard, is looking to expand in emerging markets, where cash is still the preferred means of doing business.

Earlier on Wednesday, China said it would open up its market for clearing domestic bank card transactions following its promise to reform and free its electronic payments market. The move is expected to benefit both Visa and MasterCard in a market worth over $1 trillion a year.

Visa’s shares rose to $223 in extended trading on Wednesday.


On a constant dollar basis, Visa forecast 2015 revenue growth in the low double digits in percentage terms. The company also announced a new $5 billion stock buyback program.

Cross-border transactions grew 10 percent on a constant dollar basis in the fourth quarter. Payment volume growth rose 11 percent to $1.2 trillion on the same basis.

“The quarter looked good. The most important thing is that we saw an improvement in cross-border transactions and the share buyback shows confidence,” said Gil Luria, analyst with Wedbush Securities Inc.

On an adjusted basis, Visa’s net income rose 14 percent to $1.4 billion, or $2.18 per Class A share, for the quarter ended Sept. 30. Total operating revenue rose 8.6 percent to $3.23 billion.

Analysts on average had expected a profit of $2.10 per share on revenue of $3.19 billion, according to Thomson Reuters I/B/E/S.

(Editing by Saumyadeb Chakrabarty and Robin Paxton)

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Wall St. ends with modest decline after Fed

NEW YORK (Reuters) – U.S. stocks closed with slight losses on Wednesday, finishing off their lows of the session, after the Federal Reserve ended its stimulative monthly bond-buying program and expressed confidence in U.S. economic prospects.

Major indexes were volatile following the central bank’s statement, with the SP 500 down as much as 0.8 percent before pulling back. Material shares .SPLRCM were lower throughout the session, a decline in Facebook pressured the Nasdaq, but strength in energy and financial shares helped the market recover.

In a statement after a two-day meeting, the Fed ended its quantitative easing program of bond purchases, as had been expected. At its peak, the program pumped $85 billion a month into the financial system. The Fed also dropped a characterization of U.S. labor market slack as “significant” in a show of confidence in the economy’s prospects.

“The Fed had a little more of a hawkish bent than the market expected, but any weakness that came from the statement was obviously viewed as a buying opportunity,” said Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta, Georgia.

The Dow Jones industrial average .DJI fell 31.44 points, or 0.18 percent, to 16,974.31, the SP 500 .SPX lost 2.75 points, or 0.14 percent, to 1,982.3 and the Nasdaq Composite .IXIC dropped 15.07 points, or 0.33 percent, to 4,549.23.

Material shares .SPLRCM fell 1.3 percent after DuPont (DD.N) said there were “competitive advantages” to keeping its businesses together. Activist investor Nelson Peltz has urged DuPont to separate its various businesses in a move that has supported the company’s shares. Shares of DuPont lost 1.7 percent to $66.80.

Facebook Inc (FB.O) fell 6.1 percent to $75.86 the day after the social network announced an increase in spending in 2015 and projected a slowdown in revenue growth this quarter.

After the market closed, shares of Visa Inc (V.N) rose 3.6 percent to $222.40. Visa reported its fourth-quarter results and announcing a stock buyback program of $5 billion.

Despite the turn lower, equities mostly held onto recent gains, with the SP 500 up 6.4 percent over the last nine sessions as earnings have mostly been strong. So far this reporting season, 75.3 percent of SP 500 companies have exceeded profit expectations, according to Thomson Reuters data, above the long-term average of 63 percent.

Declining issues outnumbered advancers on the NYSE by 1,763 to 1,322, for a 1.33-to-1 ratio on the downside; on the Nasdaq, 1,437 issues fell and 1,245 advanced for a 1.15-to-1 ratio favoring decliners.

The benchmark SP 500 index posted 65 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 114 new highs and 35 new lows.

About 7.08 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 7.86 billion.

(Editing by Nick Zieminski)

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Fed ends bond buying, shows confidence in U.S. recovery

WASHINGTON (Reuters) – The Federal Reserve on Wednesday ended its monthly bond purchase program and dropped a characterization of U.S. labor market slack as “significant” in a show of confidence in the economy’s prospects.

In a statement after a two-day meeting, the central bank largely dismissed recent financial market volatility, dimming growth in Europe and a weak inflation outlook as unlikely to undercut progress toward its unemployment and inflation goals.

“On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing,” the Fed’s policy panel said in an important departure from prior statements, which had described the slack as “significant.”

“The committee continues to see sufficient underlying strength in the broader economy,” it said.

U.S. stocks added to earlier losses after the statement but came back to close down only marginally, while the yield on the 5-year U.S. Treasury note jumped, putting it on track for its biggest one-day increase since mid-March. The yield on the benchmark 10-year U.S. Treasury note was little changed.

The dollar rose to a three-week high against a broad basket of currencies as traders pulled forward expectations of when the Fed would eventually raise interest rates.

Rate futures shifted to show better-than-even odds of a rate increase in September 2015; previously, they had pointed to a hike in October. The Fed has held rates near zero since December 2008 and has more than quadrupled its balanced sheet to $4.4 trillion through three separate asset purchase programs.

“The market is saying that the Fed has now stepped closer to tightening interest rates because of the labor market,” said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut.

The Fed also added broad, flexible language that ties the timing and pace of any future rate hike to incoming economic data, as Fed Chair Janet Yellen has stressed in recent remarks.

While the central bank retained its basic guidance that overnight borrowing costs would remain near zero for a “considerable time” following the end of bond purchases this month, the new phrase marks a turn toward a new regime.

“If incoming information indicates faster progress toward the committee’s employment and inflation objective than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated,” the statement said.


The changes in language seemed to accommodate the concerns of Fed officials worried the central bank was falling out of step with improvements in the economy. Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher, who dissented at the previous meeting last month, voted in favor of the statement this time.

Like investors, economists generally saw the new language as having a slightly hawkish tilt, downplaying risks the recovery will ebb and sticking with the underlying forecast of moderate U.S. economic growth and steady improvement in the job market.

“Despite the recent market volatility, the statement … was, if anything, more hawkish,” said Paul Ashworth of Capital Economics. “So, on balance, the Fed believes it is getting closer to meeting the full employment side of its mandate.”

Minneapolis Fed President Narayana Kocherlakota was the only one who broke ranks, arguing for the committee to make a bolder commitment to meet its 2 percent inflation target given a lack of price pressures.

A global stock market sell-off two weeks ago, a dip in inflation expectations and flagging growth in Europe had raised the risk that global weakness could hamper the U.S. recovery and undercut the Fed’s effort to move inflation higher.

The Fed made only slight reference to those events. It acknowledged that lower energy prices “and other factors” were holding inflation down. But it said risks to the economy were balanced, and it repeated its view that the likelihood of inflation undershooting its target had diminished since earlier this year.

The decision to shutter the bond-buying program was almost foregone. The monthly purchases had been steadily cut from $85 billion to $15 billion as part of the Fed’s gradual turn away from policies launched to fight the 2007-2009 recession and breathe more life into a tepid recovery.

The Fed will continue reinvesting the proceeds of securities that mature each month, meaning its balance sheet will remain intact for the time being.

(Reporting by Howard Schneider and Michael Flaherty; Additional reporting by Rodrigo Campos and Herb Lash in New York; Editing by Tim Ahmann and Paul Simao)

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Allstate profit beats estimates as premiums rise

(Reuters) – Allstate Corp (ALL.N), the largest publicly traded home and auto insurer in the United States, reported a higher-than-expected quarterly profit as it earned more premiums.

The insurer has raised insurance premiums aggressively in the last few years without any significant loss to its share of the highly competitive home and auto insurance markets.

Chief Executive Tom Wilson, however, said on Wednesday his company was seeing “less volatility” in pricing.

“Price increases are getting much smaller as most of the impact of severe weather has already been reflected in our pricing and profitability,” Wilson told Reuters.

Property and casualty insurers’ ability to raise rates have slowed, mainly due to a lack of major catastrophe losses in recent times.

Allstate’s net income available to common shareholders rose to $750 million, or $1.74 per share, in the third quarter ended Sept. 30, from $310 million, or 66 cents per share, a year earlier.

The year-earlier quarter included an after-tax loss of about $475 million on the sale of Lincoln Benefit Life Co, one of its life insurance businesses, for $600 million to Resolution Life Holdings.

For the latest third quarter, property-liability premiums earned rose 4.8 percent to $7.31 billion. Claims rose about 11 percent to $4.91 billion.

On an operating basis, Allstate reported earnings of $1.39 per share, topping the average analyst estimate of $1.33 per share, according to Thomson Reuters I/B/E/S.

Consolidated revenue rose about 5.6 percent to $8.94 billion. Catastrophe losses tripled to $517 million.

Rivals Travelers Cos Inc (TRV.N) and Chubb Corp (CB.N) reported better-than-expected results last week, partly helped by lower claims.

Allstate’s shares closed at $62.98 on the New York Stock Exchange on Wednesday.

(Reporting by Avik Das in Bangalore; Editing by Saumyadeb Chakrabarty and Maju Samuel)

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Kraft Foods profit falls as price hikes hit sales

(Reuters) – Kraft Foods Group Inc (KRFT.O) said quarterly profit fell nearly 11 percent as price hikes, designed to offset higher commodity costs, hit demand for its popular products such as Velveeta cheese and Jell-O desserts.

Kraft’s shares were down 1.8 percent at $55.87 in after-hours trading.

The company, which also makes Oscar Mayer meats and Kool-Aid beverages, said gross margin fell to 29.3 percent in the third quarter ended Sept. 27, from 33.8 percent a year earlier.

The company said sales growth at its cheese foods business, which makes up 21 percent of total revenue, was slower than that of the U.S. cheese market as it raised prices to counter “an unrelenting dairy cost environment”.

Kraft has been raising prices on more than half its products. At the same time, it has been offering discounts to boost sales at its meals and desserts business, where revenue fell 6.7 percent as consumers increasingly reach for healthier, organic food over desserts and processed items.

Rival General Mills Inc (GIS.N) reported a lower-than-expected quarterly profit last month on weak demand for its packaged foods and beverages such as Green Giant canned and frozen vegetables and Progresso soup.

General Mills CEO Ken Powell told Reuters at the time that sales of non-durable goods, which include food and beverage items, have been flat to down for the industry.

Kraft’s net income fell to $446 million, or 74 cents per share, in the third quarter, from $500 million, or 83 cents per share, a year earlier.

Revenue edged up 0.1 percent to $4.40 billion.

Analysts on average had expected a profit of 74 cents per share on revenue of $4.47 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Ramkumar Iyer in Bangalore; Editing by Robin Paxton and Maju Samuel)

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MetLife beats profit estimates as premiums rise

(Reuters) – MetLife Inc (MET.N), the largest U.S. life insurer, reported a better-than-expected quarterly profit, helped by higher premiums and gains tied to its derivatives program.

The company’s shares were up about 3 percent at $53.49 in extended trading.

Premiums rose 7 percent to $9.69 billion, while total operating revenue rose 6.5 percent to $17.92 billion in the third quarter ended Sept. 30.

“We delivered both top and bottom line growth, investment margins remained strong, and expenses were well controlled,” Chief Executive Steve Kandarian said in statement.

MetLife said earlier this month that it would fight a plan by the U.S. risk council to designate it as a firm whose demise could risk global finance, a tag that brings far greater regulatory scrutiny.

The U.S. risk council is considering designating MetLife as a non-bank systemically important financial institution (SIFI), the third insurer to be tapped for such a designation.

AIG (AIG.N) and Prudential Financial Inc (PRU.N) were designated as systemically important last year.

On an operating basis, MetLife earned $1.60 per share in the third quarter, topping the average analyst estimate of $1.38, according to Thomson Reuters I/B/E/S.

MetLife has tried to scale back on capital-intensive businesses such as annuities to focus more on traditional life insurance and pension products.

The company’s net profit rose to $2.06 billion, or $1.81 per share, in the quarter, from $942 million, or 84 cents per share, a year earlier.

MetLife’s profit in the latest quarter benefited from a $311 million derivative gain.

MetLife, like other insurers, is heavily exposed to persistently low interest rates. But it has long had a substantial derivatives program designed to smooth out that risk.

(Reporting By Neha Dimri in Bangalore; Editing by Maju Samuel)

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