Archive for April, 2010

Toyota exec urged automaker to ‘come clean’ (AP)

Thursday, April 8th, 2010 | Finance News

WASHINGTON – In the days leading up to its massive recall in January, Toyota executives debated when they should inform the public about safety problems with accelerator pedals, prompting one executive to urge the company to "come clean," according to documents obtained by The Associated Press.

Irv Miller, Toyota's then-group vice president for environment and public affairs, warned his colleagues in an e-mail on Jan. 16, 2010: "We are not protecting our customers by keeping this quiet. The time to hide on this one is over. We need to come clean."

Five days later, Toyota announced it would recall 2.3 million vehicles to address sticking pedals on popular vehicles such as the Camry and Corolla.

As Toyota deals with a spate of recalls, the e-mail reveals serious concerns within the Japanese company's public relations leadership that it wasn't dealing with the safety problems squarely and could be inflicting damage to its long-standing reputation for safety and quality. Months earlier, in September 2009, the automaker had announced a recall of more than 4 million vehicles to replace gas pedals that could get stuck in floor mats and cause sudden acceleration.

Toyota has recalled more than 6 million vehicles in the U.S. and a total of more than 8 million worldwide because of acceleration problems in multiple models and braking issues in the Prius hybrid.

"We better just hope that they can get NHTSA (National Highway Traffic Safety Administration) to work with us in coming (up) with a workable solution that does not put us out of business," Miller wrote in the Jan. 16 e-mail. He noted that Jim Lentz, president of Toyota Motor Sales USA, and Yoshi Inaba, president of Toyota Motor North America, were traveling to Washington to meet with federal regulators.

In a memo earlier that day, Katsuhiko Koganei, executive coordinator for corporate communications at Toyota Motor Sales USA, suggested the company should not discuss mechanical failures in accelerator pedals.

In an e-mail to Mike Michels, vice president of external communications, which was copied to other Toyota officials, Koganei wrote, "Now I talked with you on the phone, we should not mention about the mechanical failures of acc. pedal because we have not clarified the real cause of the sticking acc pedal formally, and the remedy for the matter has not been confirmed."

Koganei added that Toyota executives were concerned that news of the mechanical failures "might raise another uneasiness of customers."

Koganei's e-mail prompted a strongly worded response from Miller. "Kogi, I hate to break this to you but WE HAVE A tendency for MECHANICAL failure in accelerator pedals of a certain manufacturer on certain models," Miller wrote, adding his concerns about customer safety. The e-mail's subject line said it was about a draft statement to respond to an ABC News story.

The documents obtained by the AP were among 70,000 pages of papers turned over to government investigators.

Toyota, in a statement, said it "does not comment on internal company communications" and declined comment on Miller's e-mail. But the automaker said, "we have publicly acknowledged on several occasions that the company did a poor job of communicating during the period preceding our recent recalls."

"We have subsequently taken a number of important steps to improve our communications with regulators and customers on safety-related matters to ensure that this does not happen again," Toyota said, adding that it appointed a chief quality officer for North America.

"As part of our heightened commitment to quality assurance, we are fully committed to being more transparent," the company said.

Miller, reached by phone at his home in Los Angeles, said he had no comment. His retirement was announced by Toyota on Dec. 16 and his retirement was effective Feb. 1.

The Transportation Department has assessed a record $16.4 million fine on Toyota for failing to alert the U.S. government to the safety problems about the sticking accelerator pedals quickly enough. Transportation Secretary Ray LaHood said Tuesday that Toyota made a "huge mistake" by not disclosing the safety problems sooner.

Concerns about sticking gas pedals and complaints from Toyota owners in the U.S. were rising at the end of 2009, according to documents obtained by the AP. The documents show that on Sept. 29, Toyota's European division issued technical information "identifying a production improvement and repair procedure to address complaints by customers in those countries of sticking accelerator pedals, sudden rpm increase and/or sudden vehicle acceleration."

Distributors throughout Europe and in Russia, Georgia, Kazakhstan, Turkey and Israel received the technical information.

In mid-January, Toyota held internal meetings "to discuss status of production changes and to prepare for meetings with NHTSA" on Jan. 19, according to the timeline. Two days later, Toyota announced it would recall 2.3 million vehicles to address the sticking pedals.

The Japanese automaker was still weighing its options Wednesday about whether to accept or contest the fine. It has also been named in 138 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts.


BA and Iberia sign merger deal (AP)

Thursday, April 8th, 2010 | Finance News

LONDON – British Airways PLC and Spain's Iberia SA have signed a merger deal to create one of the world's biggest airline groups, the companies announced Thursday.

They expect the deal, which follows a provisional agreement reached at the end of last year, to be completed by the end of 2010.

The merger will save the airlines euro400 million ($530 million) a year by the fifth year and will benefit shareholders, customers and employees, the carriers said. Both will continue to operate under their individual brands.

With 408 aircraft flying to 200 destinations, carrying more than 58 million passengers each year, the merged group would become the third largest in Europe and the sixth largest worldwide.

"The merged company will provide customers with a larger combined network," said BA Chief Executive Willie Walsh. "It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services."

The announcement of a firm deal comes as loss-making BA fights an acrimonious battle over pay and working conditions with its 13,000 cabin crew. Staff went on strike twice for a total of 10 days last month, costing the airline some 40 million pounds.

Like other airlines, both BA and Iberia have been hit by a downturn in passenger demand since the global credit squeeze and they acknowledge that more consolidation of the industry is likely.

They said the merger deal, which is subject to regulatory approval from the European Commission and to approval by both British Airways and Iberia shareholders, is structured to take advantage of that anticipated further consolidation.

"This is an important step in the process towards creating one of the world's leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation," said Antonio Vazquez, Iberia's chairman and chief executive.

Both airlines will retain their current operations and operate under their individual brands.

The transaction will be implemented through the creation of a new holding company called International Consolidated Airlines Group SA which will be known as International Airlines Group.

British Airways shareholders will receive one new ordinary share in International Airlines Group for every existing British Airways ordinary share held and Iberia shareholders will receive 1.0205 new ordinary shares for every existing Iberia ordinary share held.

The treasury shares held by Iberia and the cross-shareholdings held by British Airways and Iberia in each other will not be eligible for International Airlines Group shares.

International Airlines Group will be listed on the London Stock Exchange.

The pair plan to hold shareholder meetings for approval in November.


United, US Airways in merger talks (AP)

Wednesday, April 7th, 2010 | Finance News

MINNEAPOLIS – The CEOs of United Airlines and US Airways have both been up front about their desire to merge with another airline. Now it appears they're talking to each other.

The two are in talks about a combination that would create the nation's second-biggest airline, a person with knowledge of the situation told The Associated Press on Wednesday. The person insisted on anonymity because of the sensitive nature of the talks, which the person said appear to be getting more serious.

This person said a deal would be modeled on the Delta-Northwest combination, which was a stock swap without a cash component.

United Chairman and CEO Glenn Tilton and US Airways Chairman and CEO Doug Parker were both involved when their companies talked about combining in 2008. They walked away then citing high fuel prices, but didn't rule out a future deal. That same year, Continental Airlines Inc. rejected United's attempt at a combination.

"We don't comment on rumors or speculation," United spokeswoman Jean Medina said Wednesday. "We've been consistent on our position on consolidation generally for several years, and that position is well known."

US Airways spokesman Jim Olson also said the airline doesn't comment on rumors.

Integrating their unionized work forces would be one of the most difficult tasks if United Airlines and US Airways got together. The person who spoke to AP said the companies have a plan for dealing with that issue.

US Airways, which is based in Tempe, Ariz., still runs separate pilot and flight attendant groups after it was bought in 2005 by America West. And its pilots formed their own union after leaving the Air Line Pilots Association, the union that represents United aviators.

Executives at Delta and Northwest put their deal on hold in early 2008 so their pilots could work out an agreement on combining their ranks.

Pilots at US Airways have not been involved in any talks with United, said James Ray, a spokesman for the US Airline Pilots Association.

"We'll support anything that would be good for our pilot group," he said.

A spokesman for the United branch of the Air Line Pilots Association did not immediately return a phone message seeking comment.

"Mergers in the airline business are notoriously difficult," said Doug Abbey, an independent airline consultant in Washington. He added, though, that Delta's purchase of Northwest has gone well.

"The discussions certainly wouldn't surprise me," he said. "This is a combination that has been embraced as plausible by a lot of people."

Based on 2009 traffic, a combined United-US Airways would be nearly as big as Delta Air Lines Inc., which became the world's largest airline after buying Northwest. It is unclear which name would survive, where the combined company would be based, or who would run it.

Like Northwest before it, one of United's main attractions is its Pacific routes, which it bought from Pan-Am in 1985.

Both airlines have been shrinking to cope with the recession. United cut capacity 7.4 percent last year, while US Airways shrank 4.6 percent. US Airways is cutting most flying that doesn't pass through either Washington or its hubs in Charlotte, N.C., Philadelphia, or Phoenix.

US Airways lost $205 million in 2009, and revenue fell almost 14 percent to $10.46 billion. UAL lost $651 million, while revenue fell 19.1 percent to $16.34 billion.

Shares US Airways rose $1.39, or 20.4 percent, to $8.21 in after-hours trading Wednesday. United parent UAL Corp. fell 18 cents to $18.77.