NEWS BRIEFS FOR THE WEEK OF OCT. 6, 2005

NEWS BRIEFS FOR THE WEEK OF OCT. 6, 2005IRS Increases Deductible Mileage Rates Through Year End

WASHINGTON (Sept. 9, 2005) - In the wake of rising fuel prices following Hurricane Katrina, the Internal Revenue Service (IRS) announced that the optional standard mileage rates for the final four months of 2005 will be 48.5 cents per business mile driven. The IRS also delayed setting the 2006 rate, saying gas prices may decline before the start of the New Year.

In addition, the new four-month rate for computing deductible medical or moving expenses will be 22 cents a mile, up from 15 cents for the first eight months of 2005. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

IRS Commissioner Mark Everson explained, "This is about fairness for taxpayers. People are entitled to deduct the real cost of operating a vehicle. We've responded to the recent gas price increases by making this special adjustment so taxpayers get the tax benefit they deserve." 

The new rate increase of eight cents a mile for all business-use miles driven between Sept. 1, 2005 and Dec. 31, 2005 is up from the 40.5-cent rate that was in effect for the first eight months of 2005.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use as an alternative to tracking actual costs. This rate is also used as a benchmark by the U.S. government and some businesses to reimburse employees for business related mileage.

(Source: IRS - Announcement IR-2005-99)

NEW YORK CITY (Sept. 15, 2005) - Legislation aimed at strengthening and clarifying U.S. domestic anti-counterfeiting laws was introduced into the Senate (S. 1699) by Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT). Central to the discussion is the protection of trademarks and the promotion of brands as indicators of quality and reliability.

The proposed legislation has direct impact on the entire supply chain of the automotive industry, from automaker to parts manufacturer to WD/jobber to shops and, ultimately, to consumers. In an environment where raw materials, parts, components and even entire vehicles are sourced offshore, S.1699 provides for forfeiture and destruction of counterfeit goods, as well as forfeiture of property and assets derived from counterfeiting. Essentially, the bill aims to ensure that consumers at every level of the chain are assured that the products they purchase are truly the genuine article.

According to the International Trademark Association (INTA), there are estimates that counterfeiting is a $500 billion worldwide industry. Based in New York City, the INTA is an association of more than 4,700 member companies from more than 180 countries, dedicated to the support and advancement of trademarks and related intellectual property as elements of fair and effective national and international commerce. 

INTA Executive Director Alan Drewsen said, "The threat posed by counterfeit goods is very real and very dangerous. Counterfeits steal jobs, lead to lost revenue for the public and private sector and, most importantly, represent a significant threat to the health and safety of consumers." Counterfeit products are typically made with inferior materials, and one example he cited was the use of sawdust to make bogus brake pads that fall apart easily and lead to accidents.

(Sources: INTA, U.S. Senate)

WASHINGTON (Aug. 31, 2005) - Prices for steel, other precious metals and petrochemicals used in the manufacture of vehicles and automobile parts are expected to rise, due to Hurricane Katrina-related shortages.

According to the U.S. Department of Commerce (DoC), 44 percent of the available hydrogen supply for America was lost as a consequence of the shutdown of the two largest plants in North America. Katrina caused widespread damage at the Air Products and Chemicals (APC) New Orleans plant, which led production with 31 percent of the industrial hydrogen supply. Prior to Katrina, APC's Canadian plant had been forced to shutdown for at least two months, due to a feed gas supply problem. The Canadian plant produced 13 percent of America's supply.

Liquid hydrogen is an essential commodity for the steel, molybdenum, petrochemical, semiconductor, food and healthcare industries, as well as for public utilities. For example, the New Orleans plant had supplied 50 to 60 percent of the U.S. steel industry's hydrogen fuel needs. Since Katrina, several companies producing galvanized and cold-rolled steel have announced layoffs, citing hydrogen shortages.

After liaising with other government agencies and remaining suppliers and determining that only part of the loss can be made up, the DoC has requested that the federal government make a priority effort to get the hydrogen production facility in New Orleans operating as quickly as possible. 

(Source: U.S. Department of Commerce, APC)

WASHINGTON and FAIRFAX, VA (Sept. 12, 2005) - As proposed asbestos settlement legislation is being considered in Congress, the search for credible and accurate information widens. Ironically, the focus of that search is on both companies and claimants.

Last week, the U.S. Senate Judiciary Committee (SJC) approved using a subpoena if necessary to acquire certain information from companies sued over asbestos claims. Though the SJC has been asking for more data from the industry for months, companies and insurers have been reluctant to discuss the issue over fears it could make them susceptible to more lawsuits. 

Also last week, the Manville Trust, through its subsidiary Claims Resolution Management Corp. (CRMC) suspended accepting claims based on reports from nine doctors and several X-ray screening clinics. The truthfulness of these claims has been challenged and is the subject of both federal grand jury and congressional investigations. The trust also published the names of the blacklisted doctors in its press release.

The trust was set up years ago by Johns Manville, the biggest U.S. producer of asbestos. CRMC President David Austern in a statement said, "Pending completion of the grand jury and congressional investigations and the litigation in which the reports were challenged, CRMC will no longer accept reports prepared by these doctors and facilities."

In prior testimony before the SJC, it was stated that Manville Trust had received more than 620,000 claims and has paid more than $3.1 billion to approximately 530,000 claimants - substantially more than any other asbestos trust has paid to beneficiaries. However, testimony also stated that only 27,000 of the 530,000 paid claimants have received the full value of their claims. The practice of paying out pennies on the dollar has been the overall norm of settlements to date. The discrepancies rested on determining the future value of a claim and the difference in severity of claims - more serious malignant cases verses non-malignant claims.

When John M. Engler, president of the National Association of Manufacturers testified before the SJC, he stated that, "First and foremost, this is about asbestos victims and their families who have been victimized twice, first by a disease and second by a broken system. The heart of the problem is that too many claims are filed on behalf of people who are not sick and may never become ill from asbestos. These questionable claims force real victims to wait longer and longer for what is often reduced compensation. We cannot continue with a system that is hurting those it should be helping the most." 

He later added, "Since the start of the litigation, an astounding 730,000 asbestos claims have been filed. A large percentage of those claims were filed on behalf of people who are not sick and may never become ill. This wave of questionable asbestos claims has forced more than 70 companies into bankruptcy, half of them since 2000."

With the sponsors of the Senate legislation looking for a vote in early October, making sense of all of this is a daunting task that will impact bonafide victims, auto industry companies and their employees.

(Sources: U.S. Senate Judiciary Committee, NAM, CRMC)

LONDON, UK (Sept. 11, 2005) - The United Kingdom's Department of Transport has provided funding of more than $1.4 million for a consortium of firms to research adaptive safety features related to the bone mechanics of vehicle occupants. The list of collaborators includes the U.K. Vehicle Safety Research Center (VSRC), Nissan, Jaguar Cars Ltd., TWR Systems Ltd., Johnston Control Automotive Ltd., as well as two leading British universities, Cranfield University and Loughborough University.

Accident research by the VSRC and other agencies has shown that older drivers and passengers may have weaker bones or medical conditions, such as osteoporosis, that can result in more frequent and severe injuries than younger drivers. The injuries are the result of the deployment and impact of airbags and fixed point seatbelts.

The basic objective of the research project, "Bone Scanning for Occupant Safety (BOSCOS)" aims to take on-board vehicle safety to the next level. To analyze and measure the bone density, occupants will place one of their fingers into a sensor with a ultrasound reader when starting the vehicle. The results would guide the deployment of the various safety devices by calculating the optimum level of deployment to protect the occupants, while keeping their risk of injury to a minimum. Seatbelt pretensioners. load limiters and airbags would deploy in stages, so as to cause minimum harm to the occupants. 

(Source: United Kingdom Vehicle Safety Research Center)

FRANKFURT, GERMANY (Sept. 12, 2005)- DaimlerChrysler AG spokesperson Thomas Weber said that the company has revised plans to begin production and sales of hydrogen fuel cell vehicles earlier than previously projected. 

Weber said that the company would produce and sell hydrogen powered Mercedes-Benz B-Class vehicles between 2012 and 2015, at prices affordable to those running on conventional fuels. 

(Source: DaimlerChrysler)

FRANKFURT, GERMANY (Sept. 12, 2005) - At the International Motor Show, Mercedes-Benz (M-B) introduced two concept cars that improve fuel consumption and reduce emissions: the gasoline-powered "Direct Hybrid" and the diesel-powered "Bluetec Hybrid" vehicles. Both vehicles are based on the S-Class chassis.

"For the drive concepts of the near future, the objective is to make gasoline cars as efficient as diesels, and diesels as clean as petrol cars" stated Dr. Thomas Weber, member of the board of management of DaimlerChrysler AG responsible for research and technology and for development at the Mercedes Car Group. 

For the Direct Hybrid, the main emphasis is on reducing fuel consumption even further. With the second-generation spray-guided gasoline injection system, the engineers at M-B have achieved a considerable fuel savings, using the current 3.5-liter V6 drivetrain.

The Bluetec Hybrid is meant to retain the fuel economy advantage, while reducing nitrogen oxide (NOx) emissions. Other emissions are well under limits in current S-Class diesels, due to a particulate filter introduced as standard equipment. Bluetec incorporates a new exhaust gas purification technology that reduces the NOx by nearly 80 percent through selective catalytic reduction (SCR). According to Weber, this technology makes the Bluetec Hybrid the cleanest diesel in the world. 

Both of the drive systems in the concept cars introduced are combined with a compact, high-torque electric motor integrated in the drivetrain, thereby becoming what are called "mild hybrids." This makes it possible to once more significantly reduce fuel consumption of the optimized combustion engines, especially in urban stop-and-go traffic. 

With mild hybrid technology, the internal combustion (IC) engine will switch off whenever it is not needed. At other times, the combination of IC engine and high-torque electric motor act in concert to ensure a powerful and silky-smooth start when pulling away, says M-B. Moreover, the electric motor reclaims energy during coasting and braking. 

Compared to existing models, Weber said that the combined features enable a 25 percent reduction of gasoline consumption in the Direct Hybrid and a 20 percent reduction in diesel fuel consumption in the Bluetec Hybrid.

The two drive systems are designed to provide a dynamic driving performance coupled with fuel efficiency and compliance with the most stringent emissions standards worldwide. The drive system of the vision S 320 Bluetec Hybrid can accelerate from zero to 62 mph in 7.2 seconds and its top speed is electronically limited to 155 mph. The vehicle is extremely fuel efficient - rated at 30.5 mpg. The corresponding values for the S 350 Direct Hybrid are zero to 62 mph in 7.5 seconds, a top end of 155 mph and a mileage rating of 28.3 mpg.

In the coming years, the hybrid - either in its mild or full hybrid configuration - can supplement the combustion engine in certain regions and traffic situations where it represents a reasonable and economical option for increasing dynamics, comfort and fuel efficiency, adds M-B. 

With the recent collaborative agreements, such as DaimlerChrysler/General Motors/BMW and Audi/VW/Porsche, one thing is clear: Global automakers are pooling their expertise for the rapid and efficient development of future hybrid drive systems. 

(Source: DaimlerChrysler)

RESEARCH TRIANGLE PARK, NC (Sept. 13, 2005) - The board of directors of the Equipment and Tool Institute (ETI) have announced that ETI will no longer use a management company to administer the daily affairs of the institute. 

ETI has contracted with Management Services Group (MSG), a wholly owned subsidiary of the Motor and Equipment Manufacturer's Association (MEMA) since 1999. The separation is scheduled to take effect as of Jan. 1, 2006. Future correspondence from ETI will alert the industry to the new mailing address and other pertinent contact information for the organization.

Charlie Gorman, ETI executive manager, thanked both organizations and reiterated the desire to continue working together on joint projects. ETI will continue to work towards its mission to "advance the vehicle service industry by providing technical data and open dialog between the manufacturers of transportation products, government regulators and the providers of tools, equipment and service information."

(Source: ETI)

WASHINGTON (Sept. 27, 2005) - The Occupation Safety and Health Administration (OSHA) released a list of the 10 most violated national safety standards, based on citations from Oct. 1, 2004 to Aug. 30, 2005. The top ten list for 2005 , ranked by number of violations over the period is:

* Scaffolding - 8,130 Violations

* Hazard communication - 6,641 violation

* Fall protection-general requirements - 5,504 violations 

* Respiratory protection - 3,904 violations 

* Lockout/tagout - 3,711 violations 

* Powered industrial trucks - 2,871 violations 

* Electrical-wiring methods, components and equipment for general use - 2,785 violations 

* Machine guarding-general requirements - 2,743 violations 

* Electrical-general requirements - 2,120 violations 

* Ladders - 2,054 violations.

(Source: OSHA)

WASHINGTON (Sept. 28, 2005) - Buck Consultants released the findings of its "National Health Care Strategy Survey." The study was conducted over the second quarter of 2005 and surveyed 395 employers with an average of 11,000 employees. 

Sixty percent of employers who responded ranked health care costs as their first or second greatest cost concern. In addition, 82 percent of respondents are very concerned or greatly concerned about current health care costs, even more (86 percent) are worried about the future health care costs over the next five years.

The three factors that employers think have the largest effect on current health care costs are employees' attitude that they are entitled to benefits; employees' insensitivity to the real cost of health care; and poor employee health habits and lifestyle. Respondents also believe obstacles exist in giving employees more accountability for managing health care decisions. The most common obstacles include employees' lack of preparedness for added financial risk, employees' sense of benefit entitlement, employees' current inability to make informed health care decisions and the lack of reliable data on quality of care.

As employer strategies for controlling rapidly rising health care costs evolve, the study says that employers will likely shift more costs to employees. "Interestingly, our study found that cost-shifting to employees is the most common strategy currently used to control costs," said Dr. Phillip Polakoff, a Buck Principal and head of its Lifetime Health Strategy practice. 

Employers believe the most successful strategies will be employee-centric. Employee education, involvement and buy-in are key components needed to bridge the gap between rising health care costs and managed solutions. The poll indicated that future health care cost strategies will be aimed at giving employees more accountability for health care choices and decisions, helping employees to be knowledgeable consumers of care, and providing incentives to adopt healthy lifestyles.

(Source: Buck Consultants)

FRANKFURT (Reuters) (Sept. 13, 2005) - Caught between a rock and a hard place, automotive suppliers say they are determined to pass on steep rises in raw material costs to their customers even as carmakers step up pressure for lower manufacturing costs. "There is no reason why we should subsidize the carmakers for higher raw material prices," Thierry Morin, the chief executive of Valeo, Europe's largest listed car parts maker, said on Wednesday at the Frankfurt motor show. 

His comments echo those of other suppliers, large and small, who are willing to continually reduce their production costs but are refusing to act as a cost shock absorber for manufacturers. With carmakers, especially in the United States, suffering from debt downgrades or a negative debt outlook, purchasing bosses are trying to wring out even more cost reductions. 

"It has always been like that and it will not go away," Morin said about the pressure exerted by carmakers. He added that the answer was a constant effort to raise efficiency and improve products to justify profit margins. 

John Gardner, a vice president at aluminum producer Novelis, said his company quotes its customers a price for manufacturing on top of the price of raw materials. "We charge for our work. The client can either hedge for the raw materials itself or we can do it at their request, and for a fee," he said. France's Michelin continues to raise tire prices to reflect the higher costs of rubber and steel. Rival Continental also is passing on price hikes but is at the same time putting pressure on its steel suppliers to cut costs, threatening to look for cheaper sources, such as China. "We are currently broadly reviewing the market so that we have alternatives in place," Continental Chief Executive Manfred Wennemer told Reuters on Tuesday. 

The world's largest auto parts supplier, unlisted Robert Bosch GmbH, has fully hedged against rising steel prices and Chief Executive Franz Fehrenbach told reporters he expected no impact on operating profits this year. 

But smaller German supplier ZF Friedrichshafen was less optimistic. Chief Executive Siegfried Goll told Reuters the firm was "helplessly held hostage to higher steel prices." 

Still, while carmakers can use their buying clout to pummel the suppliers, they need to keep them alive or their own production would be in danger. "For the very short term, that [price] is the subject of negotiation between us, our clients and our suppliers, and we'll see what comes of it. With carmakers whose financial health is not at its best, that is not easy to negotiate," Faurecia Chief Executive Pierre Levy told Reuters last week. "But in the longer term, when the wave of raw material price rises has gone over us, our clients need us and we need them. We have to make clear that we need to have normal profitability on the products we make." 

This was a feeling shared at the other side of the table. Gilles Michel, head of purchasing at PSA Peugeot Citroen - which has a 71.39 percent stake in Faurecia - told Reuters that putting price pressure on suppliers was one way for the group to reduce costs, next to its own efficiency programs. 

But the effectiveness of squeezing suppliers depended on the quality of the relationship - the better the ties the easier it was to agree long-term cost reductions and performance improvements.

(Sources: MEMA, Reuters)

WESTLAKE VILLAGE, CA (Sept. 12, 2005) - Michelin ranks highest in original equipment (OE) tire satisfaction, according to the J.D. Power and Associates "2005 Original Equipment Tire Customer Satisfaction Study." 

The study measured five factors - tire wear, appearance, traction, ride and handling - in four customer markets: luxury/sport; mass-market/non-luxury; pickup/full-size van; and SUV. Based on owners' experiences with their tires during the first year of ownership, Michelin led all four segments in the five factors contributing to customer satisfaction. 

"Michelin has continually received high ratings from customers in our study," said Carolyn McBeth, director of automotive component research for J.D. Powers and Associates. "By listening to its customers and paying attention to market demand trends, Michelin has fostered strong customer satisfaction and thus higher customer repurchase intention."

Tire wear continues to be the most important factor among consumers. Achieving high levels of customer satisfaction in the OE market is vital for tire manufacturers, said McBeth. "Consumers may not have much say in which tires come standard with their new vehicle, but they definitely have a choice when it comes time to replace those tires."

(Source: J.D. Powers & Associates)