Car detectives crowd around Monday’s runaway Prius (AP)

Tuesday, March 9th, 2010 | Finance News

EL CAJON, Calif. – A Toyota Prius that sped out of control on a California freeway was towed to a dealership Tuesday while federal and company inspectors converged on the car to determine whether a stuck gas pedal was to blame.

The National Highway Traffic Safety Administration sent two investigators to examine the car after Monday's incident, said Olivia Alair, a spokeswoman for the Department of Transportation, which oversees NHTSA. Toyota Motor Corp. spokesman Brian Lyons said the automaker is sending three of its own technicians to investigate.

James Sikes, 61, of Jacumba, told authorities that the accelerator malfunctioned Monday as he drove his Prius on Interstate 8 in San Diego County. The car reached 94 mph during the 20 minutes before a California Highway Patrol officer helped get the Prius driver to slow down and turn off the engine.

The CHP held the car overnight but it was towed to the dealership Tuesday, CHP Officer Brian Pennings said.

"There's no collision, so our investigation's done," Pennings said. "There's no crime. ... We're just glad it ended safely."

The incident comes while Toyota is fighting fears over the safety of its vehicles, which had been revered for their safety and reliability.

It was about 12 miles from where Sikes' Prius started speeding where a deadly crash last year sparked scrutiny into the Japanese company's vehicles.

CHP Officer Mark Saylor, his wife, her brother and the couple's daughter died after their Lexus' accelerator became trapped by a wrong-size floor mat on a freeway in La Mesa. The loaner car hit a sport utility vehicle and burst into flames.

Since then, Toyota has recalled some 8.5 million vehicles worldwide — more than 6 million in the United States — because of acceleration problems in multiple models and braking issues in the Prius. Regulators have linked 52 deaths to crashes allegedly caused by accelerator problems.

On Monday, Toyota assembled a group of experts at its North American headquarters in Torrance, Calif., to refute studies by an Illinois professor who revved Toyota engines simply by short-circuiting the wiring. Toyota's experts say the experiments were done under conditions that would never happen on the road.

The company has blamed the issue on mechanical problems and floor mats that can wedge the gas pedal.

"It wasn't the floor mat. The floor mat we have has hooks on it," Sikes' wife, Patty, said in a telephone interview Tuesday.

Patty Sikes said the family's 2008 Prius appeared to have an accelerator malfunction a few weeks ago but it was brief.

"It took off for a second, and then it just stopped. It was like a little hiccup or something," she said.

The family got a recall notice and took it to Toyota of El Cajon about two weeks ago but the dealership refused to examine the car, Patty Sikes said.

"They said it must be a mistake because we weren't on the (recall) list," she said.

The dealership declined to comment and referred requests for comment to Toyota's corporate representatives.

Toyota spokesman John Hanson confirmed that the 2008 Prius is part of Toyota's recall to address unintended acceleration due to floor mat entrapment. The recall, affecting 5.6 million vehicles, was first announced in October.

Hanson said a recall of this magnitude takes time, and Toyota first sends a preliminary notice to owners saying their vehicles are subject to a recall. A second notice comes later detailing how and where the vehicle can be fixed.

"I believe what could have happened is Mr. Sikes could have received his preliminary notification which says, 'Hello, your car is going to be recalled, and we will notify you when to bring it in.'"

At a news conference Monday, Sikes said he called 911 about 1:30 p.m. Monday after accelerating to pass another car on Interstate 8 near La Posta.

"I pushed the gas pedal to pass a car and it did something kind of funny. ... It jumped and it just stuck there," he said.

A patrol car pulled alongside the Prius and the officer told Sikes over a loudspeaker to push the brake pedal to the floor and apply the emergency brake.

The braking, coupled with a steep rise on the freeway, slowed the car to about 50 mph. Sikes then shut off the engine and the car coasted to a stop. CHP Officer Todd Neibert then moved his vehicle in front of the Prius to block it as a precaution.

Neibert is a 14-year veteran but he had no special training in halting runaway cars, Pennings said.

"Officers are trained to adapt and overcome. You can't train for every type of situation," he said. "Fortunately, the first thing he tried worked."

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Associated Press writers Stephen Manning in Washington, D.C., and Greg Risling in Los Angeles, and AP Auto Writer Dan Strumpf in New York contributed to this report.

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If drivers band together, cost to Toyota could be huge (AP)

Tuesday, March 9th, 2010 | Finance News

MIAMI – Toyota owners claiming that massive safety recalls are causing the value of their vehicles to plummet have filed at least 89 class-action lawsuits that could cost the Japanese auto giant $3 billion or more, according to an Associated Press review of cases, legal precedent and interviews with experts.

Those estimates do not include potential payouts for wrongful death and injury lawsuits, which could reach in the tens of millions each. Still, the sheer volume of cases involving U.S. Toyota owners claiming lost value — 6 million or more — could prove far more costly, adding up to losses in the billions for the automaker.

Such class-action lawsuits "are more scary for Toyota than the cases where people actually got injured," said Tom Baker, a University of Pennsylvania law professor. "A super-big injury case would be $20 million. But you could have millions of individual car owners who could (each) be owed $1,000. If I were Toyota, I'd be more worried about those cases."

As Toyota continues to deal with the recalls and wavering public confidence in its vehicle safety, its biggest financial fight may be in the courtroom. A key decision could come at a March 25 hearing in San Diego, where a panel of federal judges will consider whether to consolidate the mushrooming cases into a single jurisdiction.

After that, a judge will decide whether all claims filed by Toyota owners nationwide can be combined in a single legal action — known as "certifying a class" — and whether the claims have enough merit to move toward either trial or settlement.

Toyota owners suing the company contend their vehicles have dropped in value because of the recalls and that Toyota knew all along about safety problems but concealed them from buyers. They point to evidence such as Kelley Blue Book's decision this month to lower the resale value of recalled Toyotas an average of 3.5 percent, ranging from $300 less for a Corolla to $750 less for a Sequoia.

The lawsuits started appearing on state and federal dockets last fall, when Toyota began recalling some 8 million vehicles worldwide because of persistent complaints about sudden unintended acceleration. The National Highway Traffic Safety Administration reports that 52 people have died in accelerator-related crashes.

The AP conducted an extensive review of federal court filings and uncovered a total of 89 class-action lawsuits filed nationwide as of Monday. Toyota attorneys said last week in a court filing that the company is aware of 82 such cases.

One leading attorney in the class-action effort, Northeastern University law professor Tim Howard, said the number of owners claiming economic damages because of the recalls could reach 6 million. If each were awarded $500 — likely a conservative estimate — Toyota would have to fork over $3 billion in economic loss damages alone.

This does not include possible payouts in wrongful death or injury cases as well as lawsuits filed by shareholders claiming losses from share prices that have tumbled more than 16 percent since January.

Corporations often settle big cases rather than risk an even bigger damage award at a trial.

Automakers in the past have been forced to pay vehicle owners for lost value because of safety problems. Ford, for example, agreed in 2008 to compensate 800,000 Explorer owners who sued because of rollover dangers. That settlement provided owners only with vouchers of between $300 and $500 to buy new Ford products.

In that case, the lawyers received about $25 million in fees and costs, and the Toyota case could result in a similar windfall for attorneys. A study by the Federal Judicial Center concluded attorneys in class-action lawsuits typically get fees between 27 percent and 30 percent of what they recover in damages — which could reach $1 billion in a $3 billion settlement.

Toyota could end up facing an even bigger payout if a judge decides attorneys' fees should be added to any plaintiffs' award.

The San Diego hearing will be conducted before the seven-member Judicial Panel on Multidistrict Litigation, which decides whether similar lawsuits filed in multiple federal districts should be centralized in one location for pretrial motions, hearings and the like. A federal judge would be chosen to determine whether the Toyota cases should be certified as a class action and make other key rulings, such as deciding on a likely Toyota motion to dismiss.

Under federal law, a class action must have 100 or more plaintiffs, damages sought must exceed $5 million and the judge must be persuaded the claims are identical or very similar. If a class is not certified, each lawsuit would have to be pursued on its own.

Toyota has so far recalled 5.6 million vehicles in the U.S. because of problems caused by what it says are accelerator pedals that become sticky or get trapped under floor mats. Another 437,000 Prius models have been recalled worldwide for what Toyota says is an antilock-braking glitch.

The vast majority of lawsuits claiming economic loss stem from the accelerator problems, and many contend the company's effort to fix floor mats or accelerator pedals are insufficient. Dozens of lawsuits claim Toyota has ignored problems with its electronic throttle system.

Separately, NHTSA is looking into claims from more than 60 Toyota owners that their vehicles continue to surge forward unexpectedly despite having their vehicles repaired.

Toyota has denied that its electronic throttle is to blame and has been focused on dealing with the recalls — a strategy that could affect the outcome of the lawsuits.

"Toyota's strategy (should be) to fix them, fix them immediately and at no cost, and do it as quickly and effectively as you can so after the dust settles, your car's value won't have depreciated much," said Edward C. Martin, a law professor at Cumberland School of Law at Samford University in Birmingham, Ala.

"We do not believe that electronics are at the root of this issue," Toyota spokesman Mike Michels said Monday.

In some of the lawsuits, Toyota owners seek additional damages because they're afraid to drive what they call "defective and dangerous" cars, while still others claim insurance premiums will likely go up.

"My wife has been worried about it for a while. She's eight months pregnant and she's terrified to drive the car now," said Jerry Borbon, a Miami lawyer who is still driving his 2008 Toyota Prius and is a plaintiff in a potential class-action lawsuit.

"We thought about trying to get rid of it, but we're stuck with it," he said, adding Toyota's damaged reputation has made it hard to sell the vehicle. "I don't feel secure in the car and I don't want my wife driving it."

"There are a lot of unknowns and the big questions are what did Toyota know when," said Catherine Sharkey, a professor at the New York University School of Law. "If it turns out that Toyota had knowledge of these defects and did not act soon enough, then the best strategy is settlement."

In a sign of the widespread impact of the recalls, a Los Angeles federal judge who has been assigned many of the potential Toyota class-action cases is concerned his ownership of a Toyota might force him off the cases.

U.S. District Judge A. Howard Matz put a one-paragraph statement into the dockets of more than two dozen cases:

"The court owns a 2000 Toyota Avalon SLX. In addition, the adult son of the court who has not lived in the court's home for many years owns a 2005 Prius."

Matz's statement also asks whether he or his son could be considered plaintiffs if the cases are certified as class actions. If so, the judge would not be able to preside over the cases because of a possible conflict of interest.

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Bluestein reported from Atlanta. AP Business Writer Dan Strumpf in New York contributed to this story.

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On the Net:

http://www.jpml.uscourts.gov/Hearing_Info/hearing_info.html

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Stocks trade mixed on 1-year anniversary of low (AP)

Tuesday, March 9th, 2010 | Finance News

NEW YORK – Stocks are trading in a tight range, a year after major market indexes hit 12-year lows.

With little in the way of economic reports or earnings to help drive shares higher, investors are taking a breather Tuesday. Technology shares are higher and financial stocks are lower.

Investors are searching for the next driver of stocks on the one-year mark since the Dow Jones industrial average hit a 12-year low. It's up 61.2 percent since then.

At midday, the Dow is up 20 at 10,574. The Standard & Poor's 500 index is up 3 at 1,141. The Nasdaq composite index is up 9 at 2,341.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

NEW YORK (AP) — A year after major stock indexes tumbled to 12-year lows, investors are still asking what will lift the market higher.

A year ago, the questions were more urgent as the Dow Jones industrial average skidded to 6,547. Back then, investors just wanted something to prop up the market and halt the selling. Now, with stocks up so much in a year, traders want to know what it might take to keep the market going. The only thing that is certain is that the second year of the market's recovery will be tougher.

Another day of quiet trading Tuesday made clear that investors are still searching for something to drive buying. Stocks fluctuated in a tight range as technology shares rose and financial stocks fell.

The Dow rose 15 points in late morning trading. It's up 61.2 percent since March 9 last year.

The gains of the past year were so big that a break for the market is a good thing, analysts say. But as the Dow trades within 2 percent of a 15-month high set in January, the question remains whether stocks can push higher or whether they will start sliding.

When stocks were so low a year ago, the early gains were easiest because prices were so low. Now, the gains will be harder to come by.

"The character of the market changes from a market where everyone who buys a ticket wins to much more of a discerning stock-pickers market," said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors.

In late morning trading, the Dow rose 15.19, or 0.1 percent, to 10,567.71. The Standard & Poor's 500 index rose 1.69, or 0.2 percent, to 1,140.19, while the Nasdaq composite index rose 7.73, or 0.3 percent, to 2,339.94.

Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.71 percent from 3.72 percent late Monday.

The dollar rose against other major currencies, while gold fell.

Crude oil fell 83 cents to $81.04 per barrel on the New York Mercantile Exchange.

In corporate news, Merck & Co. and Sanofi-Aventis SA said they are combining their animal health businesses. The joint business will control about 29 percent of the $19 billion market for pet and livestock medicines. Merck fell 41 cents to $36.94, while Sanofi fell 5 cents to $38.10.

Major indexes were narrowly mixed on Monday. The Dow dipped 14 points. The uneven trading came as investors saw no big reasons to move the market in either direction. It also came one trading day after the Labor Department said the employers cut fewer jobs in February than expected, which helped the market charge higher Friday.

While the report was better than expected, investors are likely to stay cautious until they see actual job growth. High unemployment remains a major stumbling block to a sustained economic recovery.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 311.3 million shares, compared with 298.9 million traded at the same point Monday.

The Russell 2000 index of smaller companies rose 1.94, or 0.3 percent, to 669.05.

In afternoon trading, Britain's FTSE 100 slipped less than 0.1 percent, Germany's DAX index rose 0.1 percent, and France's CAC-40 rose 0.1 percent. Earlier, Japan's Nikkei stock average dipped 0.2 percent.

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