Wednesday PM January 27th, 2010

Toyota recall limits dealership sales…Sales of new homes falls 7.6 percent…Air tests reveal two Texas natural gas sites with "extremely high" levels of cancer-causing benzene…

A House Democrat is expressing concern about a massive Toyota recall that has led the automaker to stop manufacturing and selling vehicles linked to problems with gas pedals. Michigan Representative Bart Stupak, who leads an investigative subcommittee, says his staff is meeting with Toyota. Stupak says “we want to find out what Toyota knows” about the problem with sudden acceleration and what the company will do to protect consumers. Transportation Secretary Ray LaHood told WGN radio in Chicago that the government pressed the company to stop building vehicles linked to the massive recall. LaHood said “the reason Toyota decided to do the recall and to stop manufacturing was because we asked them to.”

Texas economist Ray Perryman says dealers will suffer at a time when car sales are sluggish, and manufacturing plants could eventually be affected.

“Well, this is a very difficult time. Obviously the industry’s been through quite a bit, and particularly now for Toyota dealers, they have to deal with a large part of the inventory not being salable at the moment. And then I think, you know, a bigger issue is they’ve always had a reputation for quality and this may tarnish that reputation. On the other hand, the fact that they very quickly responded to it in an effective manner may actually help them in the long run.”

The supplier of gas pedals used in Toyota’s eight recalled car and trucks says it knows of only a few cases of drivers having problems with accelerators. CTS Corporation says Toyota told it about fewer than a dozen cases in which drivers struggled with pedals. The supplier also says it is not aware of any cases where the pedal became stuck after drivers pushed it down, potentially causing unwanted acceleration. Toyota has decided to shut down production of recent models, like Camry and Corolla sedans, while it fixes the faulty gas pedals. It says it’s rare for pedals to get stuck, but it could happen. CTS says it is working with Toyota to design a new pedal.

No immediate layoffs are planned at the two Indiana factories that build Toyota models included in the company’s production halt as it looks to fix sticking gas pedals. About 4,200 people work at Toyota’s southern Indiana plant near Princeton, making the Highlander and Sequoia SUVs that are among the troubled models. Toyota also is suspending its Camry assembly line at the 3,300-worker Subaru plant in Lafayette. Princeton plant spokeswoman Kelly Dillon says the production lines will be shut down for a week beginning Monday, but that all employees will do training and plant improvement work. Subaru of Indiana Senior Vice President Tom Easterday says all its employees will have eight hours of work each day.

Sales of new homes unexpectedly fell 7.6 percent last month, capping the industry’s weakest year on record. The Commerce Department says December sales fell to a seasonally adjusted annual rate of 342,000 from an upwardly revised November pace of 370,000. Economists surveyed by Thomson Reuters had forecast a pace of 370,000 for December. The results were the weakest since March and indicated demand remains sluggish despite newly expanded tax incentives to spur sales. Only 374,000 homes were sold last year, down 23 percent from a year earlier and the weakest year on records dating back to 1963. The median sales price of $221,300 was down nearly four percent from $229,600 a year earlier, but up about five percent from November’s median of $210,300.

A Congressman says a ship channel at Port Arthur closed since a collision between a tanker and a towing vessel needs to be expanded. Cleanup of the oil spill continues. U.S. Representative Ted Poe says Saturday’s accident highlighted a long-standing need to deepen and widen the channel, something not done since 1962. Poe says “ships have gotten a lot bigger since then.” At least three oil-coated birds are getting a special cleanup, after the spill dumped an estimated 462,000 gallons of crude. A cormorant, a black crown night heron and a brown pelican were placed under heat lamps in a wildlife response services trailer inside at a warehouse in Port Arthur. The damaged 800-foot tanker Eagle Otome on Tuesday afternoon began inching down the Sabine-Neches waterway to help clear the accident scene.

The Sabine-Neches waterway in southeast Texas has opened to limited traffic following a weekend oil spill when two vessels collided. The U.S. Coast Guard said the waterway next to Port Arthur has reopened. The Coast Guard says about 534,000 gallons of an oil and water mixture have been recovered. Work continues to recover oil.

Texas environmental regulators say air testing reveals two sites with “extremely high” levels of cancer-causing benzene in one of the nation’s biggest natural gas fields. The Texas Commission on Environmental Quality said that both drilling sites on the Barnett shale in Northern Texas had mechanical problems that have been fixed. One site was a gas well with a valve leak. The other was a compressor station that needed repairs. Both sites were halfway between Decatur and Dish, where residents have voiced concern about elevated levels of benzene. The sites are about 50 miles northwest of Dallas. Officials said 19 more of the 94 sites tested showed elevated levels of benzene that didn’t require immediate action.

Bank of America is explaining its cancellation of a jobs contract that a recent acquisition had with the state. It says it killed Countrywide Home Loans’ deal because a severe mortgage business decline prevented Countrywide from adding 7,500 jobs promised to Texas. The Charlotte, North Carolina-based company said the complexities of its merger with Countrywide also factored in the contract cancellation as of December 31st. Countrywide had a $20 million deal to create 7,500 new jobs by the end of 2010 and maintain them for a year. Bank of America spokesman Rick Simon says the bank’s keeping a large presence in Texas, with almost 23,000 employees. Meanwhile, Governor Rick Perry said the Texas Enterprise Fund has been highly successful in bringing jobs to the state and has adequate safeguards and oversight.

Leaders from world politics and business are joining with thinkers, artists and more at the five-day World Economic Forum in the Swiss alpine resort of Davos. The forum is bringing in some 2,500 people–ranging from Jordan’s King Abdullah to Canadian author Margaret Atwood–to discuss and debate a host of issues facing the planet. They range from how to keep a nascent economic recovery on track to streamlining humanitarian and disaster aid in the aftermath of the brutal Haiti earthquake. The annual gathering, now its 40th year, has long been a beacon for talks and debates and draws a who’s who of the world’s public figures.

President Barack Obama’s allies in the Senate are acknowledging they can’t pass an $83 billion jobs package. Instead, they’re making plans to advance a small, first piece of his jobs agenda next month: a tax credit for new hires. It’s a bow to the political realities of a voting public that’s increasingly worried about government spending. And the first initiative is aimed at winning over Republicans now that Democrats have lost their filibuster-proof majority. A top Senate Democratic aide said the jobs tax credit would anchor a $15 billion to $30 billion measure that would be voted on next month. It would also include tax breaks for small businesses and subsidies for infrastructure bonds issued by state and local governments.

The Federal Reserve has decided to hold interest rates at a record low and pledged to keep them there for an “extended period” to nurture the economic recovery and lower high unemployment. One member–Thomas Hoenig, president of the Federal Reserve Bank of Kansas City–dissented from the Fed’s decision to retain the pledge to hold rates at record lows. He says the economy has improved sufficiently to drop the pledge, which has been in place for nearly a year. The Fed made no changes to an economic support program aimed at driving down mortgage rates and bolster housing, even as reports on home sales this week pointed to a fragile housing market.


America’s largest independent petroleum refiner says it lost almost $2 billion in 2009 as it struggled to pass higher oil prices along to consumers. Valero Energy reported a loss of $1.4 billion for the final three months of 2009. For the full year, the loss was $1.98 billion. Excluding a massive $1.2 billion loss from the shutdown of Valero’s refinery in Delaware, Valero said the quarterly loss came to $182 million. Quarterly revenue increased six percent to $18.9 billion.

ConocoPhillips says it earned $1.2 billion in the fourth quarter as higher oil prices offset lower prices for natural gas. Revenue fell three percent to $43.6 billion. Analysts expected revenue of $40.5 billion. For the full year, ConocoPhillips posted earnings of $4.85 billion, compared with a loss of $17 billion in 2008.

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