News Archive

Honda says defective Takata air bags in 2002 used different design

DETROIT (Reuters) – Honda Motor Co said it was aware of a ruptured Takata air bag inflator in a car that was covered by a 2002 recall but the inflator design was different from one that ruptured in a 2004 accident.

The 2004 accident, which was not publicly disclosed until 2009, had previously been the first disclosed instance of a ruptured Takata inflator in a Honda car.

A Honda spokesman on Thursday said the 2002 recall “is unrelated to all later ruptures” and “involves a prior generation of air bag inflators than the ones that are the subject of subsequent recalls.”

The air bags in both Honda cars were supplied by Japan’s Takata Corp, which made the air bags installed in more than 10 million cars from Honda and other manufacturers that have been recalled since 2008.

A Takata spokesman on Thursday confirmed that the ruptured inflator involved in the 2002 Honda recall was of a different design that the ones involved in later recalls that began in 2008.

Inflators in the later-model Takata air bags have been susceptible to rupture, especially when exposed to moisture, and can spray hot metal fragments into vehicle occupants. The defective air bags and inflators have been linked to at least five deaths, all in Honda cars.

U.S. government safety records showed that Honda recalled a small number of cars equipped with Takata air bags in March 2002, two years before the first known injury that Honda and Takata have linked to a defective inflator, Reuters revealed on Wednesday.

In its official recall notice in 2002, Honda told the National Highway Traffic Safety Administration that inflators in passenger air bags in the 2000 Honda Accord and 2000 Acura TL could rupture because of improper welds.

In the same notice, Honda said a dealer in November 2001 reported an “improper deployment” of a Takata air bag in an Accord, and that Honda and Takata immediately began an investigation and inspected the vehicle. No passenger was seated in the car when the air bag deployed, Honda said, and no injuries were reported.

A senior Honda executive told a U.S. Senate hearing last week that the automaker first learned of an inflator rupture in 2004.

“This remained the only rupture we were aware of until three years later,” Rick Schostek, Honda North America executive vice president, told the hearing.

On Thursday, a Honda spokesman said Schostek was referring to the later-model inflators, not the ones involved in the 2002 recall. That recalled involved 2000 model year cars. The spokesman said the inflator design was changed for the 2001 model year.

The 2001 accident involved in the 2002 recall is the first incident of a ruptured Takata inflator in a Honda vehicle that Honda is aware of, the Honda spokesman said Thursday.

“The issue identified in the 2002 inflator recall is quite different from the propellant-related issues identified” in later-model inflators referenced by Schostek, the spokesman said.

The ruptured inflator involved in the 2002 Honda recall was not mentioned by Schostek in the Senate hearing because “it is not relevant to the issues associated with the Takata air bag inflator ruptures that were the subject of the hearing,” the spokesman said.

The spokesman also said the propellant in the inflators involved in the 2002 recall “is of a different formula and physical shape than the propellant used in later designs that have been recalled.”

A congressional subcommittee has scheduled a hearing next Wednesday on the Takata recalls.

(Reporting by Paul Lienert in Detroit; Editing by Cynthia Osterman)

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WTO clinches first global trade deal in its history

GENEVA (Reuters) – The World Trade Organization adopted the first worldwide trade reform in its history on Thursday, after years of stalemate, months of deadlock and a final day’s delay following an eleventh-hour objection.

The agreement means the WTO will introduce new standards for customs checks and border procedures. Proponents say streamlining the flow of trade will add as much as $1 trillion and 21 million jobs to the world economy.

“We have put our negotiations back on track,” WTO Director-General Roberto Azevedo told a news conference held after trade diplomats applauded the end of their 19-year wait for a deal.

However, he said WTO members needed to find a way to speed up negotiations in the future. “We cannot wait another 17 or 18 years to deliver again,” he said.

U.S. Trade Representative Michael Froman said the agreement could substantially reduce transaction times and costs and would unlock new opportunities for both rich and poor countries.

He said it was a “particularly important win for small and medium-sized businesses in all countries”.

Still, the agreement is just a fraction of the original Doha Round of trade talks begun in 2001, which eventually proved impossible to agree on. The WTO cut back its ambitions and aimed for a much smaller deal.

Even that was blocked by a four-month standoff caused by India, which had vetoed adoption of the reform package as the original deadline passed at midnight on July 31.

India demanded more attention be given to its plans to stockpile subsidized food, in breach of the WTO’s usual rules. A compromise on wording reached by the U.S. and Indian governments broke the deadlock.

India’s WTO ambassador Anjali Prasad declined comment.

The reform package adopted on Thursday was agreed at a WTO meeting in Bali in December last year. Its passage is widely seen as opening up progress toward further global negotiations, the content of which is due be laid down by July 2015.

That should reassure smaller nations in the 160-member WTO. Many had feared India’s tough stance would prompt the United States and the European Union to turn their backs on the WTO and concentrate on smaller trading clubs instead, ending hopes of trade reforms benefiting all.

European Trade Commissioner Cecilia Malmstrom said the agreement had confirmed the WTO’s role at the center of international trade policy.

“In short: the WTO is back in business.”

(Reporting by Tom Miles; Editing by Larry King)

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Oil slumps to four-year low as OPEC shuns output cut

LONDON (Reuters) – Oil hit four-year lows around $70 a barrel on Thursday and commodity currencies were sent tumbling, as OPEC resisted the temptation to cut back production following the more than 30 percent plunge in prices since June.

Asked whether the oil producer group, which provides around a third of world supply, had decided not to reduce production, Saudi Arabian Oil Minister Ali al-Naimi told reporters: “That is right.”

The meeting had lasted over five hours and as the decision emerged both Brent and U.S. crude prices were sent sliding as traders saw it as sign that OPEC members were effectively now in price war with each other.

Brent dropped to $71.58 and U.S. crude sank to $68.20 a barrel as both headed for $5 drops on the day, their biggest falls since May 2011. [O/R]

“Oil prices are now completely in the hands of the market,” Dominic Chirichella, director of New York-based Energy Management Institute, told Reuters Global Oil Forum.

Europe’s stock markets extended their gains on the day to 0.25 percent as the prospect of cheaper energy costs for both firms and strapped consumers added to Wednesday’s signals from the European Central Bank that it is edging closer to government bond buying.

The case for ECB action had been underlined earlier as Spain and Germany both reported weaker-than-expected inflation figures. It points to another decline in the overall euro zone reading when it is published on Friday.

Lending to euro zone households and companies also fell again.

Speaking in Finland, ECB head Mario Draghi said the euro zone needs a “comprehensive strategy” including reforms by governments to get it back on track. Last week, Draghi in effect backed U.S.-style quantitative easing.

The comments and the data lowered the euro to $1.2463 and triggered a new set of record-low bond yields for the euro zone’s biggest economies, with France’s 10-year yields dropping below 1 percent for the first time.


Most market action, however, centered on the slide in oil.

Oil-rich Norway’s crown hit a three-week trough of 8.6530 crowns per euro, Russia’s rouble took another dive and Nigeria’s naira continued to fall despite an 8 percent devaluation on Tuesday.

The huge slump in oil prices since June had made OPEC’s meeting its most closely watched in decades. One member of the cartel told Reuters it will next meet in June.

Besides pushing down inflation in Europe, already close to deflation, the fall in prices is also hurting the economies, currencies and financial markets of many producer countries.

Ehsan Ul-Haq, a senior oil market consultant at KBC Energy Economics, in Vienna for the OPEC meeting, said he expected oil prices to now stay under $80 a barrel for the foreseeable future with a chance they could go below $70.

While the plunge in prices is bad for oil producing countries, it is generally viewed as a positive for global growth as it makes energy cheaper giving consumers more money to spend and reducing costs for firms.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3 percent. Shanghai shares hit a three-year high, extending a rally that began after China cut interest rates last week. They are up 8.2 percent so far this month.

“The rate cut clearly showed the Chinese authorities are very much keen to support the economy. So even though Chinese economic data has been pretty weak, investors are convinced that there will be no hard landing,” said Naoki Tashiro, the president of TS China Research.

Japan’s Nikkei shed 0.8 percent as the yen recovered some ground against the dollar. The index has gained 5.1 percent so far this month, becoming the second-best performing market in the region after China.

Though trading was lighter than usual due to the Thanksgiving holiday in the United States, the dollar crept up as it fetched 117.54 yen, off last week’s seven-year high of 118.98 yen, but still up more broadly.

It also saw gold, which is priced in dollars, dip for a second session as it held below $1,200 an ounce.

Outflows resumed from the top bullion exchange-traded fund, while a referendum in Switzerland on Sunday also kept the market cautious: a “yes” vote would force the Swiss central bank to buy about 1,500 tonnes of gold in coming years, analysts said.

(Addtional reporting by Hideyuki Sano in Tokyo; Editing by Andrew Roche)

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ECB’s Draghi warns countries to reform as clouds gather over euro zone

HELSINKI/ MADRID (Reuters) – Failure to reform and shield weaker members threatens to divide the euro zone, the head of the European Central Bank warned on Thursday, amid fresh signs the currency bloc’s economy is losing speed.

Delivering a blunt message to political leaders, Mario Draghi urged the 18 countries that share the single currency to consider ways to support struggling members, warning of the perils should fears that some might quit the euro be revived.

“Lack of structural reforms raises the specter of permanent economic divergence between members,” Draghi told an audience at the University of Helsinki, choosing unusually frank language.

“And insofar as this threatens the essential cohesion of the Union, this has potentially damaging consequences for all.”

Draghi’s remarks were not limited to reforms in individual countries but also encouraged a rethink of a basic principle underlying the fractious currency alliance — that strong countries are not obliged to help weak ones.

His comments came as the economic clouds over the region darkened. Lending in the euro zone shrivelled further in October while price inflation, a key yardstick of economic health, is very low.

Annual price inflation in Germany, the euro zone’s biggest economy by far, slowed to 0.5 percent in November, its lowest in nearly five years. Spanish consumer prices also dropped for the fifth month running.


Yet enforcing order across the politically divided region in areas such as government spending has proven difficult. On Friday, the European Commission will tell France and Italy — the bloc’s second and third-largest economies — and smaller Belgium that their 2015 budgets risk breaking EU rules.

Nowhere is the contrast between north and south more visible than with France, which has put off reforms, and Germany, committed to not spending more than it earns.

“The biggest danger we see right now is a period of window-dressing where lip service is paid to grand projects and reforms, but no real steps are taken,” leading French and German economists said on Thursday as they proposed a package of reforms and investment.

Draghi’s message comes less than a week after he pledged to take further steps if needed to shore up the flagging euro zone economy and weeks ahead of a meeting of European leaders in Brussels to consider measures to bolster growth in the region.

Draghi would like them to break with the tradition of protecting national interests first and foremost, by forming a united front that would support the bloc’s economic weaklings.

Unlike the United States, the euro zone does not have a system of ‘fiscal transfers’ by which richer members such as Germany can aid poorer states such as Greece.

“Countries need to invest more in other mechanisms to share the cost of shocks,” Draghi said.

“Some form of cross-country risk-sharing is essential to help reduce adjustment costs for those countries and prevent recessions from leaving deep and permanent scars.”

Draghi even broached the sensitive issue of creating what he called “some form of backstop for sovereign debt”, a possible reference to joint guarantees for new debt.

Such ideas are strongly opposed by Germany, the euro zone’s biggest and strongest member, whose politicians fear it could be left on the hook for reckless borrowing by other countries.

Earlier, the ECB warned in a report of the risks that investors were taking in the hunt for return. It cited ‘froth’ in property prices, although Draghi said such bubbles would not stop the ECB from loosening its purse strings if required.

(Writing by John O’Donnell; Additional reporting by Jonathan Gould in Frankfurt and Paul Taylor in Paris; Editing by Catherine Evans)

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Low food inflation tightens squeeze on Europe’s grocers

BERLIN/LONDON (Reuters) – Subdued food price inflation in Europe is unlikely to pick up any time soon, adding to the pressure on mainstream grocers as they struggle with changing shopping habits and competition from discounters.

Prices paid in Europe for fast-moving consumer goods rose at their slowest pace since 2010 in the third quarter, and fell in Spain, France and Italy, according to consumer data firm Nielsen, weighing on retailers’ revenues and share prices.

The cost of fresh fruit and vegetables in particular has tumbled due to bumper harvests, a surplus caused by Russia’s ban on food imports from the West, currency effects and fierce competition among grocers, stoked by the advance of discounters.

Falling inflation has laid bare problems supermarkets were already facing as shopping habits shift. After decades investing in large out-of-town sites, grocers are struggling to adapt to more fickle consumers, who like to hunt for a bargain while also demanding more convenience stores and online shopping.

“For a few years, those underlying challenges … were partially masked by inflation which meant (grocers) still had absolute top line growth,” said Will Hayllar of OCC Strategy Consultants. “As that inflation has stabilized, the true picture of what’s going on beneath has become more apparent.”

There is little sign of imminent relief, especially as oil prices — a key input cost for farmers — have dropped by a third since June, although potentially easier monetary policies and a weaker euro and sterling could help rekindle inflation.

“Harvests this year have been pretty good. So you would expect that deflationary environment to exist for at least the next 12, probably 18 months,” Mike Coupe, boss of UK grocer Sainsbury’s, said in a recent results presentation.

Low food inflation is toughest for mid-market players such as France’s Carrefour and Britain’s Tesco as it makes it harder for them to pass on rising wage and rental costs to shoppers, squeezing their profit margins.


“Discounters have less wage impact, that is why it is a competitive weapon,” said Bernstein analyst Bruno Monteyne, a former senior Tesco supply chain executive.

“Low food inflation is good for the low-labor guys,” he said, referring to the fact discounters employ fewer workers.

The rise of discounters such as Germany’s Aldi and Lidl and shoppers’ heightened price sensitivity since the financial crisis has meant supermarket groups are struggling to keep any benefits from lower commodity costs for themselves.

“If you looked at 2008, you’ll have seen an impact of some retailers taking advantage of price inflation through commodity price falls … that’s not a game we’re going to play,” said Andy Clarke of Asda, the British arm of Wal-Mart.

Asda, which has lower wage costs than its main rivals, was the first of Britain’s leading grocers to cut prices, helping it stem the flow of shoppers to discounters.

Carrefour, Europe’s biggest retailer, said cheaper fruit and vegetables — which make up 6 percent of sales in hypermarkets and 8 percent in supermarkets — dragged down quarterly sales.

Ahold, meanwhile, said the Russian import ban contributed to Dutch fruit and vegetable prices falling by 6-7 percent in the third quarter, although it sees that effect abating and has been helped by its exposure to the inflationary U.S. market.

Executives expect the world’s growing population to eventually prompt a recovery in global food prices, even if European price wars could still intensify.

Lower prices are already helping sales volumes grow at their fastest pace since 2011, according to Nielsen, which expects volumes to rise further in the first quarter of 2015.

A return of food inflation could drive a recovery in the sector, now the cheapest it has been relative to the broader market in 10 years, trading on 12-13 times forward earnings.

“The last few times inflation was at these levels, the sector re-rated over the subsequent 12-18 months relative to market,” said Citi analyst Pradeep Pratti.

“We are getting closer to the point where a sector re-rating is increasingly looking likely.”

(Additional reporting by Robert-Jan Bartunek in Brussels, Martinne Geller in London; Editing by Mark Potter)

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EU lawmakers urge regulators to break up Google

BRUSSELS (Reuters) – European Union lawmakers overwhelmingly backed a motion on Thursday urging anti-trust regulators to break up Google, the latest setback for the world’s most popular Internet search engine.

Google has been in the EU’s regulatory sights since 2010, and is also grappling with privacy issues, requests to scrub search results to comply with a court ruling, copyright concerns and tax controversies.

The non-binding resolution in the European Parliament is the strongest public signal yet of Europe’s concern with the growing power of U.S. tech giants. It was passed with 384 votes for and 174 against.

German conservative lawmaker and co-sponsor of the bill Andreas Schwab said it was a political signal to the European Commission, which is tasked with ensuring a level playing field for business across the 28-country bloc.

“Monopolies in whatever market have never been useful, neither for consumers nor for the companies,” he said.

Schwab said he had nothing against Google and was a regular user. “I use Google every day,” he said.

Google declined to comment. European Competition Commissioner Margrethe Vestager has said she will review the case and talk to complainants before deciding on the next step.

Her predecessor rejected three attempts by the company to settle complaints that it unfairly demoted rival services and stave off a possible fine of up to $5 billion.


The resolution did not mention Google or any specific search engine, though Google is by far the dominant provider of such services in Europe with an estimated 90 percent market share.

The lawmakers called on the Commission to consider proposals to unbundle search engines from other commercial services.

Some politicians criticized the proposal.

“Parliament should not be engaging in anti-Google resolutions, inspired by a heavy lobby of Google competitors or by anti-free market ideology, but ensure fair competition and consumer choice,” said lawmaker Sophie in’t Veld from the Parliament’s ALDE liberal group.

Google is the target of a four-year investigation by the Commission, triggered by complaints from Microsoft, Expedia, European publishers and others.

Lobbying group Computer Communications Industry Association, whose members include Google, eBay Facebook, Microsoft and Samsung, said unbundling was an “extreme and unworkable” solution that made no sense in rapidly changing online markets.

“While clearly targeting Google, the parliament is in fact suggesting all search companies, or online companies with a search facility, may need to be separated. This is of great concern as we try to create a digital single market,” it said.

(Additional reporting by Alastair Macdonald; editing by Keith Weir)

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EU’s Juncker survives no-confidence vote over tax deals

BRUSSELS (Reuters) – The European Commission’s new president, Jean-Claude Juncker, comfortably survived a no-confidence vote on Thursday brought over news that Luxembourg had lured multinational businesses with super low tax rates during his period as prime minister.

The censure motion in the European Parliament in Strasbourg, France, was resoundingly defeated by 461 votes to 101.

However, the vote was hardly an auspicious start for Juncker, under fire in his first month in office both over his role when Luxembourg leader and over a potential conflict of interest as head of a Commission examining tax avoidance.

The censure motion, brought by far-right and anti-EU parties, said Juncker bore responsibility for Luxembourg’s tax policies as its long-serving prime minister.

The motion said a person who had been responsible for aggressive tax avoidance policies should not head the executive EU Commission, which upholds the laws of the 28-nation bloc.

The Commission is now investigating several tax schemes offered by Luxembourg to global companies to see whether they broke European Union laws on state aid. Ireland and the Netherlands are also under investigation.

Juncker has said Competition Commissioner Margrethe Vestager will conduct the investigation and that he will not discuss the case with her to avoid being seen as trying to influence the outcome, which would harm his authority.

Juncker has billed his new Commission as “Europe’s last chance” to show citizens the EU can act in their interests.

However, a near-record unemployment rate of 11.5 percent and an economy that has barely grown in seven years have left many EU citizens disillusioned, leading to large victories by Eurosceptic parties in May’s European Parliament election.

The enlarged Eurosceptic alliance is now easily able to pass the threshold of 10 percent of the 751-seat chamber to put a motion on the agenda. Thursday’s censure motion would have required two-thirds of votes cast to dismiss the Commission.

It means Juncker’s five-year term could prove a choppy one, punctuated by potentially embarrassing no-confidence motions.

Steven Woolfe, a lawmaker for the anti-EU United Kingdom Independence Party (UKIP) in the European Parliament, said his party would keep up the pressure on Juncker.

“The European Parliament has voted to protect the scandal-soaked Commission president rather than to protect their own people,” he said in a statement. “But the scandal of what Juncker did as the friend of big business will not go away.”

(Editing by Gareth Jones)

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Exclusive: France, Italy, Belgium may break budget rules, EU to revisit in March

BRUSSELS (Reuters) – The European Commission will tell France, Italy and Belgium on Friday their 2015 budgets risk breaking EU rules, but it will defer decisions on any action until early March.

At that point, France could face a multi-billion euro fine and Italy and Belgium be put on a disciplinary program.

Draft documents seen by Reuters show the three countries are part of a group also comprising Spain, Portugal, Austria, and Malta at risk of busting budget limits.

The Commission urges all of the countries not to break their budget limits, but picks out Rome, Paris and Brussels for a second review of compliance in March.

This gives the three more time to adjust policy before the EU executive must decide whether to fine France for missing targets or put Italy and Belgium under a disciplinary procedure because of their debt levels.

“Overall, the Commission is of the opinion that the Draft Budgetary Plan of France, which is currently under the corrective arm, is at risk of non-compliance with the provisions of the Stability and Growth Pact,” said a draft document, seen by Reuters.

“The Commission will examine in early March 2015 its position vis-à-vis France’s obligations under the Stability and Growth Pact in the light of the finalization of the budget law and of the expected specification of the structural reform program announced by the authorities,” it said.

The wording for Italy and Belgium is the same.

Reacting to the news, French Finance Minister Michel Sapin told Reuters that Paris understood the Commission wanted to know more about “the exact reality of the budget in 2014 and the forecasts for 2015.”

“I can clearly say that for 2014 France will respect the conditions that allow us to be in line with the application of the rules. The advantage of March is that we won’t be working with hypothesis but with real data,” he said.


The Commission will publish the assessments of all of the draft budgets of the 18 euro zone countries, except Greece and Cyprus which remain under bailout programs, on Friday.

The assessments are a new power the EU executive obtained last year in the wake of the sovereign debt crisis to make sure governments did not ignore EU rules that set limits on the size of public debt and deficit.

France has angered the European Commission and euro zone peers because in June 2013 EU finance ministers gave Paris two extra years, until 2015, to bring its budget deficit below the EU ceiling of 3 percent of gross domestic product.

But Paris said in September it would miss also the 2015 deadline and would need until 2017 to comply, citing lower than expected growth and inflation.

If the Commission decides Paris did not take action to meet the targets set by the ministers, France would face a fine of up to 4.2 billion euros.

Italy and Belgium are in the spotlight because under EU rules they should be reducing their large public debt, which, instead of falling, is expected to rise. The focus is on the pace of the deficit reduction over the business cycle, which in the Commission’s view is too slow next year.

If the view is confirmed in March, both countries could be placed in a disciplinary process which involves setting annual targets for fiscal policy, closer monitoring and the risk of fines for non-compliance.

(Additional reporting by Leigh Thomas in Paris)

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Euro zone economic sentiment rises slightly in November

BRUSSELS (Reuters) – Morale in the euro zone rose for the second straight month in November as a pick-up in industry sentiment just outweighed increased pessimism among consumers, offering a tentative sign that the bloc is avoiding outright stagnation.

The European Commission said on Thursday that economic sentiment in the 18 countries sharing the euro rose to 100.8 this month from 100.7 in October and 99.9 in September. Economists polled by Reuters had expected a decline to 100.3.

The optimism was mirrored by a rise in the business climate indicator for the euro zone, which the Commission said stood at 0.18 in November, up from a revised 0.06 in October.

Following a crisis that nearly broke up the bloc, the euro zone is suffering from very low inflation and a recovery so fragile that it is dragging on global growth, while unemployment remains near record levels.

That was clear in the Commission’s data, which showed consumer confidence falling to a nine month low in November, although it typically lags in a recovery.

The Commission expects the euro zone economy, which generates almost a fifth of global output, to avoid a recession this year, but it will not reach stronger growth until 2016, a year later than the EU executive had previously predicted.

Industry showed the way in November, improving for the second month in a row. Retail trade faired well, while services were flat. Construction was down.

“The positive development in industry confidence was fueled by an important improvement of managers’ assessment of overall order books,” the Commission said in its statement.

(Reporting by Robin Emmott; editing by Philip Blenkinsop)

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