Tuesday PM March 2nd, 2010

KBR snags $2.8 billion contract for work in Iraq…Continental calculates $25 million in lost revenue from New England snow delays…Postal Service increases pressure for dropping Saturday home delivery…

Military authorities say KBR has been awarded a contract potentially worth $2.8 billion for work in Iraq as U.S. forces continue to leave the country. KBR was notified of the award a day after the company told shareholders it lost about $25 million in award fees because of flawed electrical work in Iraq. The Houston-based company was charged with maintaining the barracks where a Green Beret was electrocuted in 2008 while showering. The company has denied wrongdoing. But the uproar that followed triggered a review of 17 other electrocution deaths in Iraq and widespread inspections of electrical work in Iraq, much of it performed by KBR. An army spokesman said that the contract is for one year, with an option for four more.

A jury in Houston has ordered a chemical manufacturer to pay nearly $8.4 million in a negligence verdict over a 2004 industrial fire. The blaze at the Control Solutions pesticides warehouse forced some Pasadena and other nearby residents to take cover for hours. A jury Friday decided negligence by India-based Gharda Chemicals, and its seller, Gharda USA, caused the March 9th, 2004, blaze. The bulk of the verdict was to Control Solutions and company president Mark Boyd. The verdict also awarded $1 million to United Phosphorus. The Houston Chronicle reports Gharda Chemicals was accused of selling the Texas company contaminated drums of chemicals.

A spokesman for a politically influential Houston homebuilder is calling a $51 million Tarrant County jury verdict in a consumer lawsuit against the builder “jackpot justice.” Anthony Holm is a spokesman for Perry Homes and major political contributor Bob Perry. Holm calls the award to Robert and Jane Cull of Mansfield “equivalent to every single resident in Texas depositing $2 into the lawyer’s bank account” and said it would be appealed. The Culls sued Perry Homes over problems with their home’s foundation and construction. The verdict came after the Texas Supreme Court overturned an $800,000 arbitration award. Perry has given millions of dollars to state and federal candidates. He won the 5-4 Supreme Court ruling in May 2008 to overturn the arbitration award. The nine judges on the all-Republican panel, who overturned two lower-court rulings, had each received contributions totaling more than $260,000 from Perry’s family.

Continental Airlines says back-to-back snowstorms that closed its New York hub twice last month added up to $25 million in lost revenue. Despite the storms, Houston-based Continental is reporting a large increase in February traffic. Analysts say Continental also will benefit from a rebound in business travel. A trade group for airlines said January demand for international air travel rose 6.4 percent–compared with a year earlier. That topped a 1.6 percent improvement in December. The International Air Transport Association says it can finally look ahead with “cautious optimism.” Winter storms caused Continental to stop operations at the Newark Liberty airport in New Jersey in early February. But the storms hit in a traditionally weak month for air travel.

Air Force Secretary Michael Donley says a plan to use the Pentagon’s marquee fighter jet, the F-35 Joint Strike fighter, will probably be delayed by two years. Donley also said the project is expected to cost significantly more than initially expected. Donley told reporters the F-35, made by Lockheed Martin in Fort Worth, isn’t likely to be ready for the Air Force until 2015. The jet had been scheduled to be operational in 2013 before the Pentagon uncovered serious problems. Defense Secretary Robert Gates recently announced that at least one senior manager would be fired and $614 million in performance bonuses would be withheld from Lockheed Martin. Donley says the Air Force remains fully committed to the F-35 program. But he says waiting until late in the 2015 budget year for the jet to reach a milestone–known as initial operating capability–is “the best estimate today on where we’ll be.”

The U.S. Postal Service is increasing the pressure for dropping Saturday home delivery as it seeks to fend off massive financial losses. Postmaster General John Potter is also raising the possibility of higher rates. The agency was $297 million in the red in period from October through December, usually its best season because of holiday mailings. The Postal Service has previously proposed eliminating delivery six days a week, but got a cold reception in Congress. The renewed effort comes with a series of consultant reports supporting that idea, as well as other changes.

Republican Senator Jim Bunning is again blocking the Senate from extending unemployment benefits and health insurance subsidies for the jobless. He said he opposes the extension because it would add $10 billion to the budget deficit. And Bunning is again attacking Democrats for abandoning promises to pay for legislation instead of contributing to rising deficits. Bunning suggested that the extension be paid for with unspent money from last year’s economic recovery package, but Democratic leaders object. And his stance isn’t being welcomed by some fellow Republicans, including Susan Collins of Maine–who says hundreds of people from her state will lose their unemployment benefits this week. But with Bunning leaving the Senate at the end of the year, his fellow party members have little leverage to try to get him to change his mind. He’s been feuding with fellow Kentucky Republican Mitch McConnell, the party’s Senate leader.

Cash for insulation–that’s the latest federal rebate program coming to consumers once the Obama administration and Congress hash out the details. Consumers would be eligible for between $1,000 and $1,500 in on-the-spot rebates for buying insulation, water heaters or other equipment to help their homes burn energy more efficiently. Rebates of $3,000 would be available to consumers who get a home energy audit and then make the changes needed to produce an energy savings of 20 percent. Obama has said such a rebate program will create jobs, reduce energy consumption and save money for consumers.

Intuit Payroll’s Small Business Employment Index indicates nearly 39,000 new jobs have been created in February and about 150,000 since June of last year. The report says last month, the average monthly compensation for small businesses employees averaged $2,559—a slight decrease of 0.1 percent. The Intuit report data is based on nearly 50,000 small businesses nationwide.

Executive job creation remains positive, according to ExecuNet’s February survey of 183 executive recruiters. Companies plan to cautiously expand leadership teams in the coming six months, according to the report. But recruiter confidence of 53 per cent in February was a retreat from January’s 18-month high of 64 percent.

The Offshore Technology Conference is presenting its 2010 Distinguished Achievement Awards to Hugh Elkins for advances in subsea drilling technology and to the Independence Hub for the coordinated solution to accessing ultra-deepwater reserves. The two awards will be presented at the annual OTC awards luncheon at Reliant Center. The conference is set for May 3rd through the 6th at Reliant Park.

The government says it has received complaints of 52 deaths connected to reports of sudden acceleration in Toyota vehicles since 2000. The Transportation Department released an updated number of deaths before a Senate hearing on the massive recall. The government had previously reported receiving allegations of 34 deaths because of sudden acceleration in Toyotas during the past decade. The latest data is through the end of February. Transportation Secretary Ray LaHood and three Toyota executives are expected to testify before the Senate panel, the third Congressional hearing in a week on Toyota’s recall of 8.5 million vehicles.

Toyota is repairing nearly a million vehicles in the U.S. and Japan for potentially leaky oil hoses–the latest in a spate of quality problems battering the world’s biggest automaker. A Toyota spokesman says the fix, which has already been rolled out in Japan since late last year, is not considered a recall there. It’s categorized as a “service campaign,” with owners receiving notices through dealers about the needed repair. Toyota says the faulty hoses can cause engine noise and light up the oil pressure light on vehicle dashboards. In the U.S., the repair for an oil-supply hose is being expanded to the 2007 and 2009 model year Rav4 sport utility vehicles and some Avalon sedan models, totaling 217,800 vehicles, lifting the total number of vehicles affected in the U.S. to 934,000. It also affects the best-selling Camry and two Lexus models.

General Motors says it will notify the owners of 1.3 million Chevrolet and Pontiac compacts that are being recalled when the parts are available to fix power steering motors. The recall affects 2005 to 2010 Chevrolet Cobalts, 2007 to 2010 Pontiac G5s, 2005 and 2006 Pontiac Pursuits sold in Canada and 2005 and 2006 Pontiac G4s sold in Mexico. GM says the cars are still safe to drive and never lose their steering, but it may be harder to steer them when traveling under 15 mph. It told the National Highway Traffic Safety Administration about the recall. Nhtsa says it started investigating the problem in late January after getting 1,100 complaints that the cars lost their power steering assist. The complaints included 14 crashes and one injury.

Transportation Secretary Ray LaHood said his agency may recommend that all new vehicles come equipped with brakes that can override the gas pedal. The safety measure is designed to prevent cases of unintended acceleration that have been a huge problem for Toyota and the source of the recall of more than eight million Toyota cars and trucks worldwide. Toyota says it will install the brake systems in most of its new vehicles and many already on the road. During testimony this morning before a Senate committee investigating Toyota’s woes, LaHood said federal safety regulators may recommend the brake override system on cars made by other automakers. The backup safety system overrides the accelerator if the gas and brake pedals are pressed at the same time.


Toyota’s American rivals have been benefiting from the Japanese automaker’s recent troubles. Despite the snowstorms that plagued much of the country in February, the auto industry reported higher U.S. sales in February–with the American companies scooping up customers from Toyota, which saw its own U.S. sales fall nine percent last month. Ford, GM, Nissan and Honda all reported double-digit sales growth last month compared with a year earlier. The gains might have been even higher had it not been for the blizzards. Ford posted a 43 percent jump, and outsold GM for the first time in nearly a dozen years. GM saw sales rise nearly 12 percent, and an official says the company is getting its “fair share of the Toyota business.” It was the first full month since Toyota’s January decision to stop sales of some of its vehicles in the U.S. because of safety concerns.

GM’s top sales executive says the company will not reopen any closed factories to build more of its hotter-selling new models. Vice President of Sales Susan Docherty says GM needs to use its current factories to the maximum rather than taking the expensive step of reopening a closed plant. Dealers have reported shortages of new models such as the Chevrolet Equinox and GMC Terrain midsize crossover vehicles. Some GM executives have raised the possibility of reopening a factory while the models are hot. But Docherty told reporters that the company is seeing benefits from adding third shifts at plants that make the new vehicles. She also says gm is getting higher prices for the new cars and crossovers that are in demand.

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