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Exclusive: U.S. federal safety regulators seek Takata whistleblowers

(Reuters) – U.S. vehicle safety regulators want to find whistleblowers with knowledge “of possible defects or any wrongdoing” by Takata Corp, stepping up pressure on the air bag maker whose products are linked to five deaths and dozens of injuries.

The National Highway Traffic Safety Administration (NHTSA) told Reuters it was urging potential informants to call its hotline at 1-888-327-4236, promising legal protection.

“We encourage all individuals with information about the manufacture or testing of Takata air bag inflators, or who have knowledge of possible defects or any wrongdoing by the company, to make this information available to NHTSA,” agency spokesman Gordon Trowbridge said.

Six former Takata employees interviewed by Reuters said they were asked to hide or alter data that showed certain parts and materials did not meet Takata’s specifications or indicated potential issues with key components such as inflators and cushions.

Two of these employees said they witnessed others hiding, altering or ignoring unfavorable test results.

Company officials last year testified at two U.S. congressional hearings, and the Japanese safety equipment maker remains the subject of at least two federal investigations and the target of dozens of lawsuits.

Asked for a comment, the company said in a statement: “Takata has a deep commitment to honesty and integrity. Since our founding in 1933, we have worked tirelessly to develop innovative and high-quality products that exceed our customers’ expectations, save lives and prevent injuries. Our number one priority is the safety of the traveling public.”

It added: “We are committed to working with NHTSA and our automotive customers to ensure the safety of the driving public.”

The company last year formed a quality assurance panel headed by former U.S. Transportation Secretary Samuel Skinner “to conduct a comprehensive review to ensure Takata’s current manufacturing procedures meet best practices in the production of safe inflators.”


Most former Takata employees who spoke with Reuters did not want to be named while discussing incidents and situations of a sensitive nature. But they related similar or shared experiences at Takata facilities in Washington, Georgia, Michigan and North Carolina.

Two former Takata employees, Mark Lillie and Michael Britton, have spoken to the New York Times, and Lillie also spoke to congressional investigators, about their concerns with the safety of propellant manufactured in a Takata facility in Moses Lake, Wash., and used to create the gas that inflates air bags in case of a crash.

In interviews with Reuters, Lillie, a chemical engineer who is now retired and living in New Mexico, disclosed new information, saying he left the company before it began manufacturing a new, more volatile type of chemical propellant, ammonium nitrate. Lillie said some Takata engineers thought the material was not thoroughly tested to make sure it was safe. He left the company in 1999.

“I literally said if we go forward with this, someone will be killed,” Lillie told Reuters. “I couldn’t in good faith pump this stuff out believing that it was unsafe to put in front of a passenger in a car.”

Ammonium nitrate was the principal propellant chemical used in hundreds of millions of Takata inflators made since 2000, including those installed in more than 24 million cars recalled in the United States, Japan, China and other global markets.

Britton described an incident in the late 1990s where a test batch of experimental propellant that had not been validated by Britton’s technical group was used without his knowledge in production because the company was running out of approved material.

The experimental batch had not been sufficiently tested to see if it would remain stable over the expected life of the vehicle’s air bags, but it was used in inflators that wound up in customers’ cars, Britton said, adding that he was not able to get the inflators recalled from the customer.

Britton, in an email on Thursday, said investigators from NHTSA and the Department of Justice have not contacted him. Lillie said Thursday he has not been contacted by federal officials, either.

Takata did not address specific allegations made by Lillie, Britton or other former employees.

Legal experts interviewed by Reuters said federal prosecutors could be examining a number of issues at Takata. A provision of the Sarbanes-Oxley Act prohibits destruction or alteration of documents with the intent of impeding an investigation, “even though one hasn’t started,” said Peter Henning, a professor at Wayne State University Law School in Detroit.

(Editing by Joe White and Tomasz Janowski)

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Asian shares sluggish as growth concerns trump Wall Street

TOKYO (Reuters) – Asian shares got off to a lackluster start on Friday, as a late earnings-led surge on Wall Street was tempered by ongoing concerns about global growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was nearly flat in early trade. On Thursday, major U.S. indexes surged almost 1 percent or more as Apple Inc (AAPL.O) and Boeing Co (BA.N) extended their gains after strong earnings reports this week.

U.S. jobless claims figures also helped, with the number of Americans filing new claims for unemployment benefits last week marking its biggest weekly decline since November 2012, falling to its lowest since April 2000.

Japan’s Nikkei stock average .N225 rebounded about 1 percent in early trade, a day after shedding 1.1 percent to mark its biggest one-day drop in two weeks.

Data released before the market open showed the availability of jobs in Japan rose to the highest level in more than two decades and the jobless rate fell in December, while core consumer prices excluding an April sales tax hike were still lagging the Bank of Japan’s 2 percent inflation goal.

The U.S. dollar was steady against its Japanese counterpart, flat on the day at 118.28 yen JPY=.

According to Japanese government and central bank officials, the Bank of Japan has put monetary policy on hold and found backing for its wait-and-see stance from advisors to Prime Minister Shinzo Abe, who worry more easing could send the yen to damagingly low levels.

This newfound caution means Japan is set to be an outlier at a time when central banks from Canada to the euro zone to Singapore have eased policy in recent days to prop up faltering growth and defuse deflationary pressures. 

Expectations of further easing from the Reserve Bank of Australia sent the Australian dollar slumping to its lowest in over five years this week, with the Aussie falling as low as $0.7720 AUD=D4. It was last up about 0.2 percent on the day at $0.7775.

Ultimately, diverging monetary policy expectations should continue to support the greenback, as the U.S. Federal Reserve gears up to tighten policy later this year amid an improving U.S. economy.

“If there is one takeaway from the recent price action in the foreign exchange market, it should be that buying U.S. dollars is still the best bet in the global currency war,” Kathy Lien, managing director at BK Asset Management in New York, said in a note.

The euro inched up about 0.1 percent to $1.1333 EUR=, moving further away from this week’s 11-year low of $1.1098.

Oil prices rose on Friday, with U.S. crude edging up from a nearly six-year low touched overnight on data that showed a rise in already record-high U.S. oil inventories. U.S. crude CLc1 was up 0.2 percent at $44.60 a barrel.

Investors were likely to remain cautious ahead of fourth-quarter U.S. gross domestic product data later on Friday. A Reuters poll tipped the economy to have grown 3.0 percent.

(Editing by Shri Navaratnam)

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Amazon sales rise in holiday quarter, shares jump

SAN FRANCISCO (Reuters) – Inc reported stronger than expected earnings on Thursday as North American sales surged during the crucial holiday quarter, sending its shares up 9 percent.

The online commerce giant, which gets about a third of its revenue from October to December, reported earnings of 45 cents a share, trouncing Wall Street’s average prediction for 17 cents.

Revenue climbed 15 percent to $29.3 billion in the quarter, compared to an average analyst estimate of nearly $30 billion. However, revenue rose 18 percent if $895 million in an unfavorable impact from year-over-year changes in foreign exchange rates were excluded, executives said on a conference call.

The sharply higher profit was a welcome surprise for Wall Street, which has clamored for Amazon to come to grips with its growing investments in everything from Hollywood-style television productions, and cloud computing and consumer devices with mixed success.

In a conference call with reporters, Chief Financial Officer Tom Szkutak said Amazon is putting “a lot more energy around making sure we get great productivity around our various fixed and variable assets.”

Even so, few analysts expect Chief Executive Officer Jeff Bezos will rein in his spending significantly this year, especially as Amazon beefs up its $99-a-year Prime membership program, which offers standard two-day shipping, streaming video and unlimited photo storage among other perks.

“I did see some signs of expense control but it was more or less driven by top line growth into the holiday season,” SP Capital IQ analyst Tuna Amobi said. They haven’t indicated any kind of shift in terms of investments.

“It just seems like foreign exchange was not as much of a headwind as believed.”

Worldwide, paying Prime membership rose 53 percent in 2014, and 50 percent in the U.S. market. In 2014, Amazon paid billions for Prime shipping and put $1.3 billion into its Prime video service, Bezos said in a statement.

Net sales leapt 22 percent in North America, compared to 3 percent for everywhere else. Overall operating expenses rose 14.6 percent in the quarter to $28.7 billion. Net shipping costs represented 4.6 percent of worldwide net sales, slightly lower than the previous four quarters.

(Reporting by Deepa Seetharaman; additional reporting by Edwin Chan; Editing by Bernard Orr)

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Gap cuts design chief job as sales slowdown continues

CHICAGO (Reuters) – Gap Inc (GPS.N) said on Thursday it has eliminated the role of creative director Rebekka Bay, the latest in a slew of changes in strategy as the apparel retailer attempts to revive sagging sales.

Last week, the company announced plans to shut down its Piperlime brand, which sold designer shoes and clothing, by the end of April. Piperlime generated less than $100 million in annual sales.

The company, whose namesake brand saw a 4 percent drop in store sales in November and a 5 percent drop in December, said Bay will leave the company immediately. Instead of a new creative director, Scott Key will become senior vice-president, customer experience, overseeing a newly combined e-commerce and marketing business. Key is currently a senior executive with Gap.

The changes were announced after the company’s “Dress Normal” campaign failed to resonate with consumers last fall and analysts panned the company’s designs as unexciting.

Despite being one of the more popular apparel brands in the United States, the retail chain’s buyers have eluded its relatively expensive Gap and Banana Republic brands, for fast fashion brands like Zara, Hennes Mauritz AB HM (HMb.ST) and Forever 21.

Gap has nearly tripled its international store numbers in the last nine years while its U.S. core store count has declined around 7 percent, analysts say.

Analysts said the changes will bring a much needed fresh perspective to the brand and help re-engage customer demand.

“This announcement is further evidence of the management’s commitment to right the fashion and marketing problems of the Gap brand and that they will exercise little patience in the process,” Morningstar analyst Bridget Weishaar said.

In October last year, the company said it would replace chief executive Glenn Murphy, who ran the company for seven years. Gap’s new Chief Executive Art Peck starts on Feb. 1.

(Reporting by Nandita Bose; editing by Andrew Hay)

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Cheaper gasoline helps Visa report better-than-expected profit

(Reuters) – Visa Inc (V.N), the world’s largest credit and debit card company, reported a better-than-expected quarterly profit on Thursday as a strengthening U.S. job market and cheaper gasoline prices encouraged people to spend.

The company said e-commerce, which mainly uses cards, was “extraordinarily strong during the holiday season.”

But Chief Executive Charlie Scharf said consumer spending on the whole, while at “reasonable” levels, was not accelerating.

Shares of the company, which also announced a 4-for-1 split of its class A common stock, rose about 4 percent in extended trading.

Visa, which earns money from both the volume and value of transactions using its cards, said total volume increased to $1.90 trillion from $1.84 trillion.

The company stands to benefit from China’s recent decision to allow foreign card networks to clear domestic transactions, but Scharf said it remained unclear when the Chinese market would actually open and what the rules would look like.

Visa lost its right to process domestic payments in Russia in the middle of last year when Moscow hit back after the imposition of Western sanctions over its role in Ukraine.

Visa reaffirmed its revenue and margin forecasts for 2015 after taking into account an expected 2 percentage point negative impact from changes in foreign exchange rates.

About 60 percent of Visa’s transaction volumes are outside the United States.

“The stronger-than-anticipated U.S. dollar has led to substantially reduced travel into the U.S. from Europe, Canada, and Latin America,” Chief Financial Officer Byron Pollitt said on a conference call with analysts.

Visa, a Dow Jones Industrial Average component, recorded cross-border volume growth of 8 percent on a constant dollar basis, down from 12 percent in the year-earlier quarter.

The company’s net income rose to $1.57 billion, or $2.53 per Class A share, in the quarter ended Dec. 31 from $1.41 billion, or $2.20 per Class A share, a year earlier.

Analysts on average had expected earnings of $2.49 per share on revenue of $3.34 billion for the company’s first fiscal quarter, according to Thomson Reuters I/B/E/S.

Total operating revenue rose 7 percent to $3.38 billion.

Up to Thursday’s close of $248, Visa’s shares had gained about 15.5 percent since it last reported earnings on Oct. 29. The Dow Jones Industrial average .DJI rose about 2.6 percent in the same period.

(Reporting by Amrutha Gayathri in Bengaluru; Editing by Savio D’Souza and Ted Kerr)

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Alibaba quarterly revenue disappoints, shares fall

BEIJING/SHANGHAI (Reuters) – Alibaba Group Holding Ltd’s (BABA.N) shares fell more than 10 percent early on Thursday, wiping more than $25 billion of market value after third quarter revenue at the Chinese internet giant fell short of analysts’ expectations.

Revenue at the world’s largest e-commerce company rose 40 percent to $4.22 billion in the December quarter, short of the average analyst estimate of $4.45 billion, according to Thomson Reuters I/B/E/S.

Earnings per share (EPS), calculated to exclude one-off and extraordinary items, beat estimates of $0.75, coming in at $0.81.

But investors appeared to have other concerns, four months after the company’s $25 billion IPO.

“Today’s (stock price drop) is not about EPS, it’s about the top line growth,” said Tian Hou, a Beijing-based analyst with TH Capital.

“When Alibaba said they were expanding, investing, people’s expectations were for top line growth and the bottom line would shrink. However they did the opposite, so that was contradictory to expectations.”

Even strong numbers for mobile revenues and total value of goods sold on smartphones, closely watched metrics in the world’s biggest smartphone market, weren’t enough to stop the Wall Street-listed stock being hammered as trading began on the New York Stock Exchange.

Shares were down almost 10 percent at 10:28 a.m. ET at $88.75.

Alibaba did not address Tuesday’s announcement that its second-biggest shareholder Yahoo Inc (YHOO.O) plans to spin off its 15 percent stake in the Chinese company.

But Alibaba’s Executive Vice Chairman Joe Tsai did use the post-results conference call to take a shot at a Chinese regulator, after the watchdog called out the company in a report published on Wednesday for failing to do enough to stamp out illegal business on its platforms.

Tsai said the report was “flawed” and assured listeners that Alibaba had not seen the report before it was published, nor had it requested its publication to be delayed. The report by the State Administration for Industry and Commerce (SAIC) sparked concern that Alibaba had failed to disclose risk factors to its investors prior to its bumper listing in September.


Revenue growth, at its lowest level since at least 2013, and margins slipped as sales through mobile devices, typically smaller-ticket items, accounted for a bigger slice of total sales than in the previous quarter.

Gross merchandise volume (GMV), or the sum of all Alibaba’s online commerce transactions, rose 49 percent to $127 billion. Mobile GMV continued to grow, accounting for 42 percent of total GMV, up from 36 percent in the September quarter.

The number of mobile monthly active users nearly doubled from the same quarter the previous year to 265 million. Overall annual active buyers grew 45 percent to 334 million from 307 million in the September quarter – exceeding the population of the United States.

(Additional reporting by Supantha Mukherjee in Bengaluru, Edwin Chan in San Francisco and Vikram Subhedar in London; Editing by Saumyadeb Chakrabarty and Vincent Baby)

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Wall Street finishes higher in afternoon rally as oil gains

NEW YORK (Reuters) – U.S. stocks enjoyed a late afternoon rally and closed higher on Thursday as an upturn in oil prices and a rally in Apple and Boeing shares helped offset some disappointing earnings and lingering questions over U.S. monetary policy.

The SP 500 had fallen as much as 0.6 percent earlier, led by energy stocks, which reversed direction along with oil.

While the afternoon rise in crude was not huge, it was enough to cheer up the market, said Randy Frederick, managing director at Charles Schwab in Austin.

“Technically the market was a little oversold, so we were in a pretty good position to bounce, so we just needed a little bit of positive news to spark an afternoon rally,” he said.

The market has been advancing and retreating within a range of 200 to 300 points for some time as traders grapple with mixed earnings, a strong dollar and weak oil prices as well as interest rate uncertainty, said Dennis Dick, head of markets structure at Bright Trading LLC.

“There’s a lot technical trading going on,” he said. “When the fundamentals are confusing and the macro is confusing, you have to lean on the technicals.”

Investors also continued to digest Wednesday’s Federal Reserve statement, which failed to clarify when rates would rise.

Senate Democrats said Federal Reserve Chair Janet Yellen told them at a private meeting this afternoon that the U.S. economy is strong but the U.S. was not going to raise rates immediately, according to reports.

Shares in Visa Inc rose 4.4 percent after the market closed when it reported better than expected earnings and a 4-for-1 split of its class A common stock.

Harman International (HAR.N) shares rose 23.8 percent, making it the top SP gainer after it beat profit and revenue expectations. Dow component McDonald’s (MCD.N) added 5 percent after announcing its CEO’s retirement.

Shares in Chinese internet giant Alibaba Group (BABA.N) fell 8.8 percent after revenue missed expectations and Qualcomm (QCOM.O) fell 10.3 percent after trimming its 2015 outlook.

The Dow Jones industrial average .DJI rose 225.48 points, or 1.31 percent, to 17,416.85, the SP 500 .SPX gained 19.09 points, or 0.95 percent, to 2,021.25 and the Nasdaq Composite .IXIC added 45.41 points, or 0.98 percent, to 4,683.41.

Apple Inc (AAPL.O) closed up 3.1 percent and Boeing Co (BA.N) finished 5.8 percent higher.

Supporting stocks, data showed weekly applications for unemployment insurance fell to their lowest in almost 15 years, adding to bullish signals on the labor market.

The energy sector .SPNY finished up 0.17 percent with U.S. crude oil turning around to settle up 8 cents at $44.53.

About 7.7 billion shares changed hands on U.S. exchanges, above the 7 billion average for the last five sessions, according to BATS Global Markets.

NYSE advancing issues outnumbered decliners 2,074 to 1,000, for a 2.07-to-1 ratio; on the Nasdaq, 1,823 issues rose and 893 fell for a 2.04-to-1 ratio favoring advancers.

The SP 500 posted 16 new 52-week highs and 26 lows; the Nasdaq Composite recorded 37 new highs and 101 lows.

(Additional reporting by Rodrigo Campos; Editing by Nick Zieminski and Phil Berlowitz)

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Occidental CEO jokes Chevron is an unsuitable buyer; lifts stock

WILLISTON, N.D. (Reuters) – Occidental Petroleum Corp (OXY.N) Chief Executive Stephen Chazen quipped on Thursday that his larger rival Chevron Corp (CVX.N) was too poor to buy the No. 4 U.S oil producer, but the offhand remark sent Oxy’s stock up anyway.

During a conference call to discuss the company’s fourth-quarter results, an analyst asked Chazen if his company was on the market.

The question was to be expected. With oil prices down by half since June and profits slipping, bankers are readying for a wave of mergers and acquisitions that can be made on the cheap.

“Have you considered selling Oxy?” Wolfe Research’s Paul Sankey said.

Chazen, an Oxy employee since 1994 and CEO since 2011, responded, “Right now, people are cash flow challenged so I suspect selling Oxy is probably not likely.”

Then, without Sankey or any other analyst mentioning Chevron, Chazen casually mentioned he had reviewed the second-largest U.S. oil producer’s books.

“I looked at Chevron and they don’t have any free cash,” Chazen said on the call.

Laughter was audible in the background, but eyebrows were raised by the mention of a specific company, which is three times Oxy’s size with $14.3 billion cash in the bank and could probably buy Oxy if it wanted.

After Chazen’s comments, shares of Occidental, which had been falling, reversed course. They finished up 2.4 percent at $78.31 per share on a day when most energy stocks were flat.

“Mr. Chazen’s comments were made in jest,” Oxy spokeswoman Melissa Schoeb said when asked for comment after the call.

A tie-up, however unlikely, might be difficult since the companies have not had especially warm relations.

Both have California roots; Oxy only recently moved its headquarters to Houston. But as recently as last year, there were legal wranglings between Chevron and the U.S. government over oil-rich acreage in California that the government sold to Occidental.

The saga strained relations between the two companies, especially because the land is considered one of California’s largest oilfields with about 1 billion barrels of reserves.

Chazen, who also said on the call that Oxy was not interested in making acquisitions, declined through a spokesperson to be interviewed.

Chevron, based in San Ramon, California, declined to comment. The company is due to report quarterly financial results on Friday.

“We’re not going to comment on rumor or speculation on MA,” Chevron spokesman Kurt Glaubitz said.

(Reporting by Ernest Scheyder; Editing by Terry Wade, Toni Reinhold)

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Shake Shack IPO prices far above expected range

(Reuters) – Growth-hungry investors snapped up shares offered by Shake Shack Inc (SHAK.N), setting the stage for a sizzling debut for the New York-based burger chain when its stock starts trading on Friday.

Shares of the company, which has won a cult following for its rich milkshakes and hormone- and antibiotic-free burgers, priced at $21 each, an underwriter said, valuing the chain that started as a hotdog cart in a park at about $745 million.

Shake Shack raised $105 million from the initial public offering of 5 million shares.

Underwriters had set an expected price range of $17-19 per share, raised from an initial $14-$16 due to strong demand.

The IPO market has been particularly fruitful recently for so-called fast-casual restaurant operators hoping to replicate the scorching growth of Chipotle Mexican Grill Inc (CMG.N).

Shares of Habit Restaurants Inc (HABT.O), another gourmet burger chain, have risen more than 80 percent since their market debut two months ago.

Customers in Manhattan and Chicago often wait in long lines to get into Shake Shack’s restaurants.

“It’s a cult,” said Bob Goldin, an executive vice president at consulting firm Technomic.

The chain attracts a relatively affluent clientele, which spends roughly $30 for a meal for two – considerably more than diners spend at struggling fast-food giant McDonald’s (MCD.N).

Shake Shack’s challenge, Goldin and other experts said, is not to expand too quickly.

Ubiquity, they said, often works against cult chains.

Shake Shack has 63 restaurants, more than half outside the United States. The company has said it plans to open 10 U.S., company-operated restaurants each year and could eventually grow to at least 450 locations.

Shake Shack, founded by restaurateur Daniel Meyer in 2001, waited five years to open its second restaurant.

When Chipotle went public in 2006, it had almost 500 U.S. restaurants. The chain is known for its simple, customizable food made from antibiotic-free meats and fresh produce.

Investors love Chipotle’s rapid growth. The company, which had about 1,700 U.S. restaurants, is known for cranking out ever-higher unit sales without increasing costs.

While Shake Shack has been slower to add restaurants, its domestic average annual sales of $5 million per location for 2013 were about double Chipotle’s.

J.P. Morgan and Morgan Stanley were lead underwriters for the IPO.

(Additional reporting by Anil D’Silva in Bengaluru; Editing by Lisa Von Ahn and Ted Kerr)

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