Vienen los abogados...(BusinessWeek)

The Coming GM Ignition Litigation Storm: 4 Blunt Points

By Paul M. Barrett                                                                    March 13, 2014

Chevrolet Cruze sedans at a dealership in Englewood, Colo. on Feb. 19, 2012

General Motors (GM) faces a litigation plague of biblical proportions. Last month the manufacturer recalled 1.6 million vehicles because of an ignition switch defect that can cause cars to shut down—as in just go dead in the middle of 60-mile-an-hour freeway traffic. Not good. Unless you’re a plaintiffs’ lawyer, in which case, very good. Herewith, four blunt points on the incipient legal mess:

1. For GM, early signs look ominous. Companies make mistakes. We all do. Companies buy insurance to cover the costs of mistakes. This case, however, has the earmarks of something worse than mistakes. As my cousins at Bloomberg News arereporting, GM’s own engineers knew about the ignition problem a full decade before the manufacturer came clean with the recall. Thousands of pages of documents already in the hands of plaintiffs’ lawyers show worried internal discussions among GM employees. Combine consumer deaths—at least a dozen fatalities so far have been linked to ignition flaws in small Chevrolet, Pontiac, and Saturn vehicles—with corporate awareness and a failure to act promptly, and you’re bound to have lawyers alleging a coverup. Which top executives knew what, and when did they know it? GM is refusing to answer media inquiries about how many suits have been filed. You can bet that whatever that figure is today, it will grow in coming weeks.

2. Whatever the details or degree of GM’s liability, this case could be a plaintiffs’ bar dream come true. No one I’m aware of in the media has been tougher lately than I have in pointing out the foibles of the mass-litigation trial bar. In case after case—involving allegations of oil pollution, pesticide contamination, asbestos injury, even cruelty to circus animals—big-time plaintiffs’ lawyers have been slammed by judges for underhanded tactics. The attorneys bringing suit against GM can change that narrative. If the trial lawyers restrain themselves and stick to the facts of what happened with the faulty cars, the coming litigation could provide a vivid illustration of why we have expansive theories of liability in this country. Even at this late date, knowing what it has to know about how life-threatening defects play in the courts of law and public opinion, GM (apparently) did not move swiftly to address a mechanical problem its own people knew about for years. Moreover, as the New York Times has reported, since 2003 federal regulators received hundreds of ignition safety complaints about the GM models that have now belatedly been recalled. The National Highway Traffic Safety Administration repeatedly declined even to investigate. So, the standard corporate argument that heavy government regulation precludes the need for liability lawsuits doesn’t seem persuasive in this instance.

STORY: The End of Securities Class Actions: Four Blunt Points

3. Nevertheless, count on the plaintiffs’ bar to overplay its hand.Historically that’s what trial lawyers do, either out of greed or hubris or the seemingly irresistible American impulse that too much ain’t enough. Preliminary evidence comes from reports that some plaintiffs’ firms are exploring the idea of attacking GM’s 2009 bankruptcy court restructuring and federal rescue as, at least in part, a fraudulent scheme to conceal the ignition defects. I get where these clever lawyers are headed. They want to seek punitive damages. To do that they need to prove more than negligence. If they can show that executives involved in engineering the taxpayer-fueled resuscitation of a near-dead GM knew at the time—but didn’t disclose—that they faced future litigation over ignition failures, well, then, maybe the whole restructuring would have to be unwound. In other words, GM could end up back in bankruptcy court, not because it’s insolvent—the company, thank goodness, is profitable again—but because the restructuring was tainted in a procedural sense.

Here’s the problem with that approach: The rescue of GM was a good thing for the auto industry, hundreds of thousands of workers, and the entire American economy. If they threaten GM’s very existence by playing dangerous games in bankruptcy court, plaintiffs’ attorneys who should be seeking just compensation for provable injuries will make themselves the enemies of common sense and the larger societal good. And in the crudest possible terms, they’d risk killing their golden goose, which, as Aesop taught us, is a shortsighted strategy. Preserving a profitable GM, laying … er, producing new cars, is in everyone’s interest.

4.  A lot of the facts aren’t in, and it’s too soon to reach conclusions on culpability. Depositions will ensue. Stay tuned.

STORY: Dole Food's Victory in Pesticide Case Echoes Chevron's Pollution Win

Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, which tells the story of the Chevron oil pollution case in Ecuador, will be published by Crown in September 2014. His most recent book is GLOCK: The Rise of America’s Gun.

Apple Car Play...(TechRepublic)

Apple CarPlay: A boon for mobile workforces

By Patrick Gray                                                                March 11, 2014, 7:28 AM PST

The killer feature of Apple's new CarPlay technology may be its ability to work with existing iOS applications, which will highly benefit mobile workforces. 

Apple recently unveiled its new CarPlay technology, which allows an iPhone to drive the in-dash display in vehicles from Ferrari, Volvo, Mercedes-Benz and several others coming soon. There are several detailed overviews of the technology, including one on TechRepublic, but it essentially turns the car’s head unit into an external display for the iPhone, much in the same way that Apple’s AirPlay technology lets an iPhone or iPad drive a television screen. Google and others have similar technologies in the works or in a current product, and they represent two opposing architectures in the battle for connected vehicles.

At stake is what many consider the future of mobile devices, where cars can communicate over high-speed networks and do anything from automatically reporting diagnostic information, scheduling a service appointment, and guiding you to the nearest repair shop, to notifying you about a special at your favorite burger joint and paying for the bacon double-stack via the car itself. The possibilities for entertainment, information exchange, and data that get marketers drooling are endless, especially when many of us spend hours as a captive audience in our vehicles.

A tale of two dashboards

Based on the nearly limitless potential services (and the corresponding revenue streams) available from connected vehicles, most manufacturers have been hesitant to relinquish control of the platform and user interface of their vehicles. This gives the auto manufacturer full control of their connected vehicle platform, allowing them to choose which vendors can create applications or offer services; however, it also puts on them the full responsibility for building and maintaining a highly complex set of technologies on a massive scale. 

Most automakers have struggled to enter what amounts to the consumer electronics business, with drivers who are used to Androids and iPhones becoming disappointed by in-car technologies that are dated and sluggish. Automakers also have encountered the “chicken and egg” problem that’s toppled many entrants into the tablet and smartphone market: automakers want lots of rich applications available on their connected vehicle platforms to draw users, but developers don’t want to create those rich applications without an existing, large user base.

Making the vehicle a secondary display for a smartphone solves lots of these problems. Apple or Google now “owns” the complex servers and infrastructure required for the in-vehicle experience, manages functionality upgrades, and brings along a significant number of applications. Users gain a familiar interface, and developers can extend their existing applications to connected vehicles. In the case of Apple’s CarPlay, developers can enable the technology just like enabling their application for AirPlay, essentially putting their apps in the car with far less additional work versus creating and maintaining a new version of the application for an unfamiliar platform.

The Faustian bargain for the automaker who adopts a technology like CarPlay is that they’re now merely a dumb screen, rather than the gatekeepers to an end-to-end set of technologies and services.

The enterprise and the auto

CarPlay in particular represents a great opportunity for enterprises that are already developing applications for the iOS platform. Rather than needing to rewrite an application for an entirely new operating system, existing iOS applications can be extended for CarPlay. If you have in-house apps that might benefit a highly mobile sales force, for example, CarPlay quickly gets you in the car. This also applies to applications your company routinely uses, and the ease of extending applications to the car may be the killer feature for CarPlay technology.

Observing the “battle for the dashboard” is also instructive, even for companies that have no interest in delivering applications or content to a connected vehicle. These technologies are rapidly changing the automobile from a means of conveyance that might offer music and mapping to a fully-connected, intelligent device. This change suddenly has companies that were not even in the same industry competing directly with each other. Automakers are now in the consumer electronics market, and vice versa. Other industries are bound to experience similar shifts, and your quiet little IT shop or company may wake up to find its future riding on the likes of an unlikely bedfellow.

Patrick Gray works for a global Fortune 500 consulting and IT services company, and is the author of Breakthrough IT: Supercharging Organizational Value through Technology, as well as the companion e-book 

Correlations: Internet Connectivity and Income

By Mark Glassman                                                                     March 06, 2014

Less than one-third of the population of developing nations has access to the Internet, according to the United Nations. A recent Pew Research report suggests Internet access in emerging and developing nations is associated with higher per capita income.

Glassman is a producer for Bloomberg TV.

La Caja Negra de los Aviones...siempre dificil de encontrar...

Why Do Airlines Keep ‘Black Box’ Flight Data Trapped on Planes?

By Justin Bachman                                                                       March 10, 2014

The flight data recorder from the 2009 Air France flight that went down in the mid-Atlantic, found in 2011

To solve the mystery of what happened to Malaysia Airlines (MAS:MK) Flight MH370, investigators need the airplane’s data and voice recorders. In an airplane tragedy, however, the information stored in the so-called black box inevitably ends up inside a wreck. This seems like a terrible place to keep the clue you need to find most.

As investigators scour the Gulf of Thailand and waters as far north as Hong Kong for debris from the Boeing (BA) 777-200 that vanished en route to Beijing on Saturday, there’s almost no indication yet of what doomed the flight and the 239 passengers on board. So far, at least, no wreckage or jet fuel has been found. Without recovering the black box, there’s little way to know what caused a plane cruising at 35,000 feet to disappear from radar.

Why not transmit this flight data off the plane so it’s accessible almost instantly? Airlines, after all, track each of their flights everywhere in the world and can advise crews on course adjustments, security alerts, quick weather changes, and a host of other situations. Passengers are routinely offered in-air Wi-Fi and live television these days. So why keep vital data trapped on the plane?

VIDEO: How Does an Airplane Completely Disappear?

The answer is mostly about one issue: cost. Sending all the data from each flight in real time via satellite would be enormously expensive. A 2002 study by L-3 Aviation Recorders (LLL) and a satellite provider found that a U.S. airline flying a global network would need to spend $300 million per year to transmit all its flight data, even assuming a 50 percent reduction in future satellite transmission costs. And that’s just a single airline. Commercial airline disasters, meanwhile, are becoming even more uncommon as technology and techniques improve—in part thanks to lessons from past crashes—so there’s little incentive for investing heavily in real-time data.

Businessweek last explored this question in July 2009 as French and Brazilian authorities searched a wide section of the Atlantic Ocean for a missing Air France(AF:FP) flight. The data recorders aboard the Airbus (AIR:FP) A330 remained missing for almost two years, some 2 miles beneath the surface, before searchers finally recovered them.

If the Malaysia Airlines flight did go down at sea, as searchers believe, waters in the suspected crash area are much shallower than in the region of the Atlantic where the French jet went down. In both cases, meanwhile, the flight data and cockpit voice recorders were made by Honeywell (HON) Aerospace. Despite the conventional term “black box,” the Honeywell recorders and most others in use are actually bright orange in color.

STORY: Four Reasons So Many People Survived the Asiana Crash

Of course, there remains the possibility that a powerful enough calamity could have obliterated the data boxes on the Malaysia flight, leaving investigators without their best hope for discovering what went wrong. No data recorders were ever recovered from the two Boeing airplanes that crashed into the World Trade Center.

STORY: Missing Malaysian Air Flight Highlights Stolen Passport Epidemic

Bachman is an associate editor for Businessweek.com.

Las billonarias pérdidas en Crimea: Los rusos y Louis Vuitton (BusinessWeek)

By Nick Summers                                                                    March 04, 2014

Gennady Timchenko in Saint Petersburg on Sept. 10, 2013

Markets tanked worldwide yesterday as the crisis in Crimea escalated. Plutocrats were hit especially hard. If you look at the top five money losers on earth, as measured by the Bloomberg Billionaires Index, a certain pattern emerges. They are:

1. Gennady Timchenko (Russia)

2. Leonid Mikhelson (Russia)

3. Vladimir Lisin (Russia)

4. Bernard Arnault (France)

5. Vagit Alekperov (Russia)

Wait, what’s a French guy doing in there? Oh: He’s chairman of LVMH Moet Hennessy Louis Vuitton (MC:FP), the luxury brand favored by ostentatious Russian oligarchs.

VIDEO: Can Russia’s Economy Handle Fallout From Crimea?

This chart shows the combined losses of the five Russians who were hit hardest:

The seventh- and eighth-biggest losers for March 3, Sergey Galitskiy and Vladimir Evtushenkov, are also Russian. Timchenko saw $1.7 billion evaporate yesterday, bringing his 2014 losses to $2.7 billion, while Evtushenkov lost nearly $880 million. Altogether the Russian billionaires saw $13 billion disappear, thanks to Russian President Vladimir Putin’s decision to send some 16,000 troops to the Crimean peninsula. Russia’s Micex index fell 10.8 percent on March 3, its biggest drop in five years. It rebounded 5.2 percent on March 4.

STORY: Putin’s Gamble: Crimea Land Grab Will Be Met With Western Inaction

Nick Summers covers Wall Street and finance for Bloomberg Businessweek. Twitter:@nicksummers.

The New Great Game: Why Ukraine Matters to So Many Other Nations (BusinessWeek)

Global Economics

By Peter Coy, Carol Matlack, and Henry Meyer                                               February 27, 2014

Ukraine doesn’t seem like the kind of place that world powers would want to tussle over. It’s as poor as Paraguay and as corrupt as Iran. During the 20th century it was home to a deadly famine under Stalin (the Holomodor, 1933), a historic massacre of Jews (Babi Yar, 1941), and one of the world’s worst nuclear disasters (Chernobyl, 1986). Now, with former President Viktor Yanukovych in hiding, it’s struggling to form a government, its credit rating is down to CCC, a recession looms, and foreign reserves are running low. Arseniy Yatsenyuk, head of the opposition party affiliated with former Prime Minister Yulia Tymoshenko, said on Feb. 24 in Parliament, “Ukraine has never faced such a terrible financial catastrophe in all its years of independence.”

But Ukraine is also a breadbasket, a natural gas chokepoint, and a nation of 45 million people in a pivotal spot north of the Black Sea. Ukraine matters—to Russia, Europe, the U.S., and even China. President Obama denied on Feb. 19 that it’s a piece on “some Cold War chessboard.” But the best hope for Ukraine is that it will get special treatment precisely because it is a valued pawn in a new version of the Great Game, the 19th century struggle for influence between Russia and Britain.

Russia, which straddles Europe and Asia, has sought a role in the rest of Europe since the reign of Peter the Great in the early 18th century. An alliance with Ukraine preserves that. “Without Ukraine, Russia ceases to be a Eurasian empire,” the American political scientist Zbigniew Brzezinski wrote in 1998. Russian President Vladimir Putin wants Ukraine to join his Eurasian Union trade bloc, not the European Union. Russia’s Black Sea naval fleet is headquartered in Sevastopol, a formerly Russian city that now belongs to Ukraine. Last year Russia’s state-controlled Gazprom (OGZPY) sold about 160 billion cubic meters of natural gas to Europe—a quarter of European demand—and half of that traveled through a maze of Ukrainian pipelines. Those pipelines also supply Ukrainian factories that produce steel, petrochemicals, and other industrial goods for sale to Mother Russia. “Ukraine is probably more integrated than any other former Soviet republic with the Russian economy,” says Edward Chow, a senior fellow at the Center for Strategic and International Studies in Washington.

STORY: Seven Reasons Putin Won't Give Up Ukraine

China looks to Ukraine as a secure source to satisfy its ravenous appetite for food and energy. It’s lending the country billions of dollars to upgrade farm irrigation and develop coal gasification. In December, Yanukovych and Chinese President Xi Jinping gripped and grinned while signing a “treaty of friendly cooperation.” According to the official China Daily, in addition to agriculture and energy, they agreed to collaborate on infrastructure, finance, high-tech, aviation, and aerospace.

Western nations want to keep Ukraine from becoming a failed state and to discourage Putin from retaking the nation by force. The U.S., busy with conflicts from Syria to Afghanistan, regards Ukraine as mainly the EU’s problem. The EU hopes eventually to welcome a stable Ukraine as a member, but not yet. On Feb. 25, EU policy chief Catherine Ashton stressed to reporters “the importance of the strong links between Ukraine and Russia.” Even Poland, which identifies with Ukraine because it too was once under the Soviet thumb, isn’t prepared to rescue its eastern neighbor unconditionally. “Poland will not sweat its guts out” providing foreign aid that just props up oligarchs, Prime Minister Donald Tusk said on Feb. 24, according to the New York Times.

The geopolitical struggle comes down to money. Russia pledged $15 billion in loans to pull Ukraine into its nascent Eurasian Union, but after paying out $3 billion it has put further funds on hold. On Feb. 26, Secretary of State John Kerry said the U.S. was organizing a stopgap $1 billion loan guarantee—far short of the $35 billion in aid Ukraine is seeking. The Institute of International Finance, which represents big banks, estimates that with no change in policy Ukraine would need $30 billion in foreign assistance this year alone. The IIF predicts that the International Monetary Fund will insist as a condition for aid that Ukraine cut natural gas subsidies to consumers and industry, and allow its currency, the hryvnia, to fall further, shrinking the trade deficit. The problem: Those measures will be so unpopular that they will jeopardize any new government.

PHOTO ESSAY: Uprising in Ukraine

The risk is that Ukraine will disintegrate. Opposition parties united only in their hatred of Yanukovych range from Europhile democrats to rightist nationalists. If the West doesn’t manage to stabilize Ukraine, Putin could plausibly present himself as the nation’s savior a year or two from now.

Ukraine stumbled after the Orange Revolution of 2004-05; the oligarchs kept power. The rebellion that brought down Yanukovych is a second chance. “The awakening of the people is much stronger this time,” says Oleh Shamshur, a former ambassador to the U.S. For those who want a free and democratic Ukraine, says Timothy Ash, chief emerging-market economist at Standard Bank in London, “it’s now or never.”

STORY: Ukraine's Elite: Living in Luxury, All Across Europe

The bottom line: Ukraine desperately needs aid, but Russia has suspended its loans and Western lenders will demand painful conditions.

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

Matlack is a Paris correspondent for Bloomberg Businessweek.

Meyer is a reporter for Bloomberg News in Moscow.

JPMorgan Chase se muda a Brooklyn (BusinessWeek)

Banks

JPMorgan Chase Moves to Brooklyn

By Sheelah Kolhatkar   February 26, 2014

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First there was the string of regulatory investigations, almost too many to count, of its business and the accompanying $23 billion in fines. Then a shareholderproposal suggesting that the company should split its chairman and chief executive roles. Yesterday came the announcement of thousands of layoffs. But neither are likely to compare with JPMorgan Chase’s (JPM) most recent indignity, its decision to move approximately 2,000 employees from Manhattan to downtown Brooklyn.

It isn’t because they’ve gotten cool. According to Bloomberg News, the country’s largest bank by assets is planning to relocate employees from its 60-story Manhattan tower 1 Chase Manhattan Plaza to Brooklyn’s MetroTech Center, after reviewing its real estate portfolio with an eye toward cutting expenses. The move is expected to occur by the end of the year. The bank will still keep some space inside 1 Chase Manhattan Plaza, its skyscraper that was sold to a Chinese company called Fosun International in 2013.

It has been an eventful year for JPMorgan—in January, the company reached a deferred prosecution agreement with U.S. Attorney Preet Bharara’s office over claims it had ignored signs of Bernard Madoff’s Ponzi scheme and agreed to pay $1.7 billion in fines. In November, the bank reached an agreement with the Department of Justice over sales of mortgage securities that went bad during the financial crisis, which was accompanied by a $13 billion fine—the largest ever paid to the government by a company. Investigations are continuing into the company’s hiring practices in China. Before that was the London Whale, the trader in London who caused the bank billions in losses. In between was the embarrassing Twitter(TWTR) fiasco.

STORY: JPMorgan’s Profit Is Bruised Ever So Slightly by Madoff Settlements

Regardless of the optics, Brooklyn—ground zero for hipster beard implants, artisanal pickles, and more street fairs than one might care to count—welcomes the bank’s employees. “Were they to come, it would be a validation of our office market here,” Tucker Reed, president of the Downtown Brooklyn Partnership, toldBloomberg News. “The only drawback, if you can call it that, would be the challenge it creates. It means there would be even less office space for us to grow into. It makes our space dilemma a little more acute, but that’s a good problem to have.”

STORY: JPMorgan Has a Few Words for the Government

Kolhatkar is a features editor and national correspondent for Bloomberg Businessweek. Follow her on Twitter @Sheelahk.