News Archive


U.S. auto safety regulator poised for action on Takata, Jeep recalls


WASHINGTON (Reuters) – The National Highway Traffic Safety Administration expects to be ready to take action within two weeks to accelerate product recalls to reduce the safety risks associated with gas tank fires in older Jeep sport utility vehicles and exploding Takata Corp (7312.T) airbags, the agency’s top official said on Tuesday.

NHTSA Administrator Mark Rosekind told reporters that he expects agency staff to present a plan of options in each case early next month and vowed to be as aggressive as possible to minimize dangers posed by the deadly defects.

“We’re going to look at every option, and we’ll be as aggressive as possible,” he told reporters on the sidelines of a NHTSA conference to examine ways to increase the effectiveness of automotive recalls.

Rosekind, a former member of the National Transportation Safety Board, spoke most forcefully about Fiat Chrysler (FCHA.MI).

Regulators have considered reopening an investigation into whether the automaker needs to take more action and has examined the most recent data on how fast it is adding hitches to the Jeeps to help protect the fuel tank from low-speed rear-end collisions.

“To be explicit, the situation has gotten worse … the numbers came out, they’re horribly low,” he said. “Those translate into lives at risk, and more lives have been lost and people hurt. That’s unacceptable.”

Earlier this month, a jury awarded $150 million to a family that sued Fiat Chrysler for the 2012 death of their four-year-old son in a 1999 Jeep Grand Cherokee with a fuel tank mounted behind the back axle.

The 1999 Grand Cherokee was not included in a June 2013 recall of 1.56 million Jeep SUVs. It would have been had NHTSA not agreed with FCA to limit the recalls. The agency had earlier pushed for a wider recall of 2.7 million Jeeps.

Rosekind was also critical about Takata’s actions on air bag inflators, which have been linked to at least six deaths and dozens of injuries, adding the Japanese manufacturer has provided significant help to investigators sifting through 2.5 million company documents.

Takata air bags have been found to explode, sending shards of metal into passenger compartments. An air bag recall has affected about 25 million vehicles from about a dozen automakers globally since 2008.

Rosekind has raised expectations for reform of an agency blamed for missteps on auto defects over the past decade. But he expressed concern about flagging enthusiasm in Congress to grant the funding and authority he says NHTSA needs to reduce the annual U.S. toll of highway deaths and injuries.

On Tuesday, a House appropriations panel proposed raising NHTSA funding by $6.5 million in fiscal 2016, compared with a $78 million increase sought by the Obama administration.

“It raises pretty significant concerns,” Rosekind said of the legislation. “We’re talking about a pretty big gap.”

(Reporting by David Morgan; editing by G Crosse and Susan Heavey)

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

Citigroup leaders win shareholder support as stock lags


NEW YORK (Reuters) – Citigroup Inc (C.N) shareholders re-elected directors and overwhelmingly sided with the board on proposals at their annual meeting on Tuesday even as their stock traded for less than the company thinks it is worth.

A resolution endorsing the company’s executive pay for this past year won 84 percent support, according to a preliminary tally, the company said. Shareholders turned down proposals that were opposed by the company and that had called for more disclosure of spending for lobbying government officials and more reporting on stock vesting for employees who leave for government posts.

CEO Mike Corbat, in response to a question from stock analyst Mike Mayo, said the company wanted to continue repurchasing its stock while it was trading below tangible book value, but would not be hasty in selling additional assets and drawing down capital.

Corbat said the company had the “right sense of urgency” about the buybacks while meeting capital requirements from regulators.

In March, the Federal Reserve said it would allow the company to buy back $7.8 billion of stock after it stress-tested the company’s capital plan. The decision was a boost to Corbat after the regulator last year rejected the company’s buyback plan.

Citigroup has pegged its tangible book value per share, a measure of its net worth, at $57.66, as of the end of March. The stock traded at $52.72 early Tuesday afternoon.

Corbat said the shares would rise as the company met his goal of producing better profits more consistently. He said his performance on the goal so far “is mixed.”

(Reporting by David Henry in New York; Editing by Ted Botha)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4Xc1G-vrCXc/story01.htm

MasterCard seen stealing a march on Visa as China opens doors


(Reuters) – MasterCard Inc’s (MA.N) strong association with Chinese bank card behemoth UnionPay is expected to help it reap more benefits than larger rival Visa Inc (V.N) as the country opens up its $7 trillion bank card payments market to foreign players.

The world’s largest debit and credit card issuers have so far been barred from operating independently in the China bank card market – projected to become the world’s biggest by 2020.

But that is set to change.

China’s State Council said last week foreign firms would be allowed to apply to the central bank for licenses for bank card clearing businesses from June 1.

The measure is set to end a near-monopoly held by UnionPay.

It will take at least a year for foreign card issuers to start operations in China, but investor expectations are high.

Shares of MasterCard and Visa rose 4 percent in the three days following the announcement.

“It’s pretty close … but MasterCard has a little more leeway than Visa because of its existing relationship with China UnionPay,” Wedbush Securities analyst Gil Luria told Reuters.

The U.S. companies currently use UnionPay’s network when accepting yuan payments and have to pay network access fees.

MasterCard and UnionPay signed an agreement in 2010 to issue co-branded cards that Chinese people could use when traveling overseas.

The agreement gives MasterCard a strong headstart, as the company has cornered a large chunk of the co-branded cards market in the past few years. (reut.rs/1HzMxVQ)

Chief Executive Ajay Banga said last year that more than 90 percent of new co-branded card deals issued in China went to MasterCard.

Barclays analyst Darrin Peller estimated that a 1 percent shift in purchase volume from UnionPay would boost MasterCard’s earnings per share by 3-6 cents, compared with 2-4 cents for Visa.

“Given that MasterCard is starting off at a smaller base, incremental growth in China may be more impactful to MasterCard’s economics than Visa’s over the next few years,” Peller said.

The opportunities for both MasterCard and Visa are immense.

UnionPay’s transaction volumes rose the most last year, according to the Nilson Report, an industry publication. Of every $100 worth of transactions swiped, UnionPay’s cards accounted for $38, ahead of Visa’s $37 and MasterCard’s $18.

Both Visa and MasterCard said they were awaiting details on how the regulations would be implemented.

(Editing by Saumyadeb Chakrabarty)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/09oicOdpD78/story01.htm

Goldman sees $1 trillion lift in 2015 via U.S. stock buybacks, dividends


NEW YORK (Reuters) – Investors will rake in more than $1 trillion in 2015 as U.S. companies increase stock buybacks and boost dividends, Goldman Sachs Group Inc said, with benefits coming soon as many SP 500 companies exit a blackout period for repurchases next week.

The firm forecasts an 18 percent jump in buybacks and 7 percent climb in dividends for the year.

“Corporate activity in early 2015 supports our view that the SP 500 will return more than $1 trillion of cash to investors this year,” said David Kostin, chief U.S. equity strategist at Goldman in New York said in an April 24 note to clients.

Next week more than 80 percent of the Standard Poor’s 500 market cap companies will have exited the “blackout period” in which share repurchases are put on hold prior to quarterly results announcements.

Companies that make those cash infusions see an automatic increase in their per-share earnings and dividend yield, Goldman noted. That tends to raise their share prices, which will bolster the broader market, it added.

Goldman has highlighted Allstate Corp (ALL.N), Apple Inc (AAPL.O) and Northrop Grumman Corp (NOC.N) as cash-rich companies likely to repurchase their own shares. Apple announced on Monday a $50 billon boost to its buyback authorization and an 11 percent increase to its quarterly dividend.

Cohanzick Management in New York, which runs a strategy that focuses on shorting investment grade bonds that would be hurt by buybacks and dividends, said it is watching McDonald’s Corp (MCD.N) and Monsanto Co (MON.N), among others.

Investors who short a financial instrument borrow it to sell while betting that the price will drop, so they can buy it back for less to repay the lender and pocket the difference.

“It’s certainly logical at this point having reported their quarterly numbers for them to now be back in the market through their share buyback program,” said Bruce Falbaum, a principal at Cohanzick.

McDonald’s posted quarterly earnings on April 22 and said in May it planned to return $18 billion to $20 billion to shareholders through stock repurchases and dividends over the next two years. Monsanto, which announced a $10 billion share repurchase plan in June 2014, reported earnings on April 1.

BUYBACKS NOT A PANACEA

The lift from buybacks could fuel an extended rally, or at least continue to keep a floor under equities as companies pursue them more aggressively. Data from Birinyi Associates in Westport, Connecticut, suggest no slowdown in corporate buybacks, with $337 billion in stock repurchase plans announced through April 24, well above the $251 billion through the same period last year.

But as buybacks increase, investors may want to exercise restraint in chasing companies with large repurchase programs. Goldman notes that with high valuations and a strong dollar, corporate cash may best be used overseas instead of on share repurchases.

Tobias Levkovich, chief U.S. equity strategist at Citigroup in New York, cautions that while buybacks affect stock prices, they are not the only piece of the puzzle.

“It’s a little bit optimistic to believe that you can define the moves in stocks purely on the basis on stock buyback activity,” said Levkovich.

“It’s too neat a package to tie up and tie a little bow around of and say ‘perfect.’ I wish it were that easy.”

(Reporting by Chuck Mikolajczak; editing by Linda Stern and Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ds7-TuDz9nY/story01.htm

Apple’s blockbuster quarter eases doubts about growth


(Reuters) – Apple Inc’s (AAPL.O) blowout second quarter, coming after record iPhone sales in the holiday shopping season, laid to rest doubts that the company could sustain its scorching pace of growth.

Shares of the most valuable publicly traded U.S. company – which have risen more than 60 percent in the past year – hit a record high of $134.54 in early trading on Tuesday.

The stock later slipped to trade 0.5 percent down at midday.

But few analysts expressed any doubts about Apple’s prospects on Tuesday after the company comfortably beat Wall Street’s revenue and profit forecasts. [ID:nL4N0XO6CU]

“With a lot of good news baked into shares, we are seeing some investors take a pause,” FBR Capital Markets analyst Daniel Ives told Reuters. “We fully believe shares have significant upside from here.”

Some analysts and investors had worried that iPhone sales may have peaked in the first quarter, when sales hit 74.5 million. The company sold 61.2 million iPhones in the latest quarter, beating the average analyst estimate of 57.3 million, according to market research firm StreetAccount.

Apple shares are attractively valued at 14.6 times forward earnings, well below the SP 500 average of 17.2, Citigroup analyst Jim Suva wrote in a client note.

“We believe consensus does not give Apple the full benefit of its new iPhone 6 positive boost to sales and EPS,” Suva said.

At least 16 brokerages raised their price targets on the stock, to as much as $195. That implies an almost 50 percent jump in Apple’s shares by the end of the year, giving the company a market value of more than $1.1 trillion.

Thomson Reuters StarMine estimates show that the market-implied five-year EPS growth rate for Apple is 10.5 percent. StarMine’s own calculations, which give more weight to more accurate analysts, suggest growth of 13 percent.

Analysts took note of Chief Executive Tim Cook’s comment that only about a fifth of active iPhone users have upgraded to the company’s latest models.

That, they said, suggested potential for a lot of growth.

Morgan Stanley analysts estimated there were about 425 million existing iPhone users, and speculated that more than half of them would upgrade before the end of the year.

Many analysts say there could be at least half a billion iPhones in use by the end of the year, in part because more users of Google Inc’s (GOOGL.O) Android-run smartphones are switching to iPhone 6 and 6 Plus.

(Additional reporting by Devika Krishna Kumar; Editing by Sayantani Ghosh and Ted Kerr)

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

Icahn says Apple still undervalued


(Reuters) – Apple Inc (AAPL.O) remains undervalued and misunderstood, activist investor Carl Icahn tweeted, even as the company posted stellar quarterly results on Monday.

The billionaire investor said he expects to put out an “in-depth” report within two weeks.

Apple beat Wall Street’s revenue and profit forecasts on Monday as it sold more iPhones in China than the United States for the first time.

The most valuable publicly traded U.S. company also raised its quarterly dividend by 11 percent to 52 cents per share and boosted its share buyback program to $140 billion from $90 billion.

Icahn, who has been vocal about his belief that Apple is undervalued, has urged the company’s board to buy back more shares using its huge cash pile. He has also pledged to keep his own stock out of any repurchase.

The 79-year-old, one of Apple’s top 10 investors, said in February that Apple stock should be trading at $216.

Apple’s shares were marginally down at $132.62 by midday. The stock had fallen as much as 2.3 percent earlier in the day.

(Reporting by Devika Krishna Kumar in Bengaluru; Editing by Saumyadeb Chakrabarty)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/9U5dEYhHdRc/story01.htm

U.S. homeownership dips, but household formation rises


WASHINGTON (Reuters) – U.S. homeownership slipped to a 25-year low in the first quarter, but sustained strong gains in the pace at which Americans are setting up homes supported the view that the housing sector will boost economic growth this year.

The seasonally adjusted home ownership rate dipped to 63.8 percent, the lowest since the fourth quarter of 1989, the Commerce Department said on Tuesday. The rate, which peaked at 69.4 percent in 2004, was 64.0 percent in the fourth quarter.

Household formation, however, increased by 1.5 million in the first quarter from the same period in 2014. It was up 1.7 million in the fourth quarter.

“This is a signal of something very positive that should flow through the economy. We should see better numbers in terms of home sales, housing starts and spending around housing than we are now,” said Steve Blitz, chief economist at ITG Investment Research in New York.After a lackluster performance in the past year, housing is expected take the baton from weak business investment – especially energy-related capital expenditure – and together with consumer spending drive the economy in 2015.

With many Americans still showing an aversion to homeownership, the gains in household formation largely are being driven by renters. That should provide a boost to home building, especially in the multi-family segment of the market.

A strengthening labor market is encouraging young adults to move out of their parents’ homes, as well as from accommodation shared with friends and relatives.

“A long overdue upturn in household formation, as more young adults leave the parental home, could provide a significant boost to home building over the coming years,” said Ed Stansfield, chief property economist at Capital Economics in London.

While the residential rental vacancy rate rose one-tenth of a percentage point to 7.1 percent in the first quarter, it remained near 20-year lows. That could put some upward pressure on inflation later this year, economists said.

Homeownership dipped in three of the four regions in the first quarter, falling almost across all age groups.

Some economists, however, believe the homeownership rate will probably start stabilizing in the coming quarters, citing moves by the government to ease credit conditions for first-time home buyers as well as the firming labor market.

“With credit conditions now loosening and employment set to continue growing strongly, we suspect this long downward trend may not last for much longer,” Stansfield said.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/6VpaLuHK0Kc/story01.htm

Talks on EU-U.S. trade deal to stretch into 2016: EU says


BERLIN (Reuters) – Talks between the European Union and United States on a transatlantic trade accord will stretch into 2016, the EU’s chief negotiator said on Tuesday, adding that the discussions were about to enter a “more difficult” and “intense” stage.

This year is seen as crucial in making progress on the Transatlantic Trade and Investment Partnership (TTIP), with the U.S. presidential election set for 2016 and President Barack Obama leaving office in January 2017.

Nothing has been agreed so far and expectations of a rapid deal are low.

“At this point in time I don’t want to rule in or rule out anything in terms of what is possible before the end of this year,” the EU’s chief negotiator Ignacio Garcia Bercero told a news conference in Berlin.

“But it is clear that a completion of the negotiations, a conclusion of the agreement, that is something that will require more time than 2015,” he said, adding that he did not believe the forthcoming U.S. election campaign would derail the talks.

“The United States has been telling us very clearly that they can continue negotiating with us in 2016.”

Obama has called for trade talks with Europe to make major progress this year following an agreement on trade promotion authority in Congress.

One of the major stumbling blocks for the deal, which seeks to reduce trade barriers and harmonize regulations, is an investor protection clause wanted by the Americans.

Many in Europe fear U.S. multinationals will use a so-called investor-to-state dispute settlement (ISDS) mechanism to challenge Europe’s food, labor and environmental laws on the grounds that these restrict free commerce.

Talks on ISDS have been suspended since last year. But Bercero signaled the EU Commission was gearing up to set out its suggestion on how the mechanism could be reformed.

Proponents of a deal say it could add $100 billion in annual economic output on both sides of the Atlantic, but the pact has also faced opposition, with thousands of people marching through German cities earlier this month to protest against the talks.

(Reporting by Caroline Copley; Editing by Erik Kirschbaum and Crispian Balmer)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/N9A5UWTbpBM/story01.htm

Ford first-quarter profit misses expectations, 2015 profit outlook affirmed


DEARBORN, Mich. (Reuters) – Ford Motor Co (F.N) reported a first-quarter profit that was less than analysts expected, selling fewer vehicles in North America as it worked to increase production of the redesigned F-150 pickup truck, and losing money in South America.

The No. 2 U.S. automaker on Tuesday also maintained its full-year forecast of pretax profit between $8.5 billion and $9.5 billion.

The company raised its forecast for North American operating margin to 8.5 percent to 9.5 percent from 8 percent to 9 percent as the F-150 launch goes better than expected, but Ford said business conditions were worsening in South America.

“The external environment in South America has deteriorated compared to where we were just a few months ago,” Ford Chief Financial Officer Bob Shanks told reporters.

Instead of reporting a “substantial” improvement from last year’s $1.16 billion loss in South America, as it had forecast in January, Ford dropped “substantial” from its outlook.

Ford’s overall first-quarter net income fell 7 percent to $924 million, or 23 cents a share, from $989 million, or 24 cents a share, a year earlier. Analysts expected earnings of 26 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 5.6 percent to $33.9 billion, matching expectations.

Ford said 2 cents of the 3-cent profit shortfall was due to a tax rate that was higher than analysts expected.

Shanks said the company’s operating profit margin of 6.7 percent in North America would have topped 10 percent, if two highly profitable models now being relaunched with new designs – the F-150 and Edge – had matched year-ago sales levels.

Ford’s North American profit would have increased more than $1 billion from its reported $1.34 billion operating profit if sales of the relaunched vehicles had been the same as last year, he said.

Ford shipped 40 percent, or about 60,000, fewer F-150 pickup trucks in the quarter than a year ago, and about 15,000, or more than 50 percent, fewer Edge vehicles than a year ago, Shanks said.

North American market share fell by six-tenths of a point to 6.7 percent due to the launches, but Shanks said that will rise through the rest of the year.

(For graphic on Ford earnings, click:

here)

The loss in South America narrowed to $189 million from $510 million last year as it pushed through higher prices, but Shanks said the region’s economies were “clearly in recessionary conditions.” Ford will keep cutting costs and matching production with the weaker demand as it rides out the downturns.

The loss in Europe narrowed to $185 million from $194 million, while profits in Asia Pacific dropped to $103 million from $291 million last year due to the cost of product launches.

Its shares fell 0.3 percent to $15.86.

(Editing by Alden Bentley and Jeffrey Benkoe)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/hLK1J1X4-Cg/story01.htm