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Business and Financial News

The Free Press WV

►  Judge tosses $417M award against Johnson & Johnson

A judge on Friday tossed out a $417 million jury award to a woman who claimed she developed ovarian cancer by using Johnson & Johnson talc-based baby powder for feminine hygiene.

Los Angeles County Superior Court Judge Maren Nelson granted the company’s request for a new trial, saying there were errors and jury misconduct in the previous trial that ended with the award two months ago.

Nelson also ruled that there wasn’t convincing evidence that Johnson & Johnson acted with malice and the award for damages was excessive.

The decision will be appealed even though Eva Echeverria has died, said her attorney, Mark Robinson Jr.

“We will continue to fight on behalf of all women who have been impacted by this dangerous product,” he said in a statement.

Echeverria alleged Johnson & Johnson failed to adequately warn consumers about talcum powder’s potential cancer risks. She used the company’s baby powder on a daily basis beginning in the 1950s until 2016 and was diagnosed with ovarian cancer in 2007, according to court papers.

Echeverria developed ovarian cancer as a “proximate result of the unreasonably dangerous and defective nature of talcum powder,” she said in her lawsuit.

Her attorney contended that documents showed that Johnson & Johnson knew about the risks of talc and ovarian cancer for three decades.

The company said it was pleased with the ruling.

“Ovarian cancer is a devastating disease — but it is not caused by the cosmetic-grade talc we have used in Johnson’s Baby Powder for decades. The science is clear and we will continue to defend the safety of Johnson’s Baby Powder as we prepare for additional trials in the U.S.,” spokeswoman Carol Goodrich said in a statement.

Similar allegations have led to hundreds of lawsuits against the New Jersey-based company. Jury awards have totaled hundreds of millions of dollars.

However, on Tuesday a Missouri appellate court threw out a $72 million award to the family of an Alabama woman who has died, ruling that the state wasn’t the proper jurisdiction for such a case.

The court cited a U.S. Supreme Court ruling in June that placed limits on where injury lawsuits could be filed, saying state courts cannot hear claims against companies not based in the state where alleged injuries occurred.


►  Questions and answers on proposed ban on laptops in luggage

First the U.S. government temporarily banned laptops in the cabins of some airplanes. Now it is looking to ban them from checked luggage on international flights, citing the risk of potentially catastrophic fires.

The Federal Aviation Administration recently recommended that the U.N. agency that sets global aviation standards prohibit passengers from putting laptops and other large personal electronic devices in their checked bags.

The FAA says in a filing with the International Civil Aviation Organization that the lithium-ion batteries in laptops can overheat and create fires.

Some questions and answers about the shifting U.S. policy.

___

WHY IS THE FAA WORRIED ABOUT THIS DANGER NOW?

The FAA has long been concerned about the potential hazardous of lithium batteries. The agency’s tests of the risks of shipping large quantities of batteries as cargo on airliners showed that when a single battery overheats, it can cause other nearby batteries to overheat as well. That can result in intense fires and the release of explosive gases.

Based on those test results, the FAA was able to convince ICAO two years ago to ban cargo shipments of lithium batteries on passenger planes and to require that batteries shipped on cargo planes be charged no more than 30 percent. The risk of overheating is lower if the battery isn’t fully charged.

More recently, the FAA conducted 10 tests of fully charged laptops packed in suitcases. In one test, an 8-ounce aerosol can of dry shampoo —which is permitted in checked baggage — was strapped to the laptop. A heater was placed against the laptop’s battery to force it into “thermal runaway,” a condition in which the battery’s temperature continually rises. There was a fire almost immediately and an explosion within 40 seconds with enough force to potentially disable the fire suppression system.

Other tests of laptop batteries packed in suitcases with goods like nail polish remover, hand sanitizer and rubbing alcohol also resulted in large fires, although no explosions.

___

ISN’T THE GOVERNMENT CONTRADICTING ITSELF BY FIRST SAY LAPTOPS SHOULD BE CHECKED, THEN SAYING THEY SHOULDN’T?

The different messages are the result of two agencies with different missions: security versus safety.

Last March, the Department of Homeland Security imposed a ban on laptops in the cabins of planes coming into the U.S. from 10 Middle Eastern airports to prevent them from being used as a tool in an attack. Many passengers put their laptops in their checked bags instead. The ban was fully lifted in July after airports in the region took steps to improve security.

This ban is being sought by the FAA, which is focused on the risk of an accidental explosion more than the prospect of a terrorist attack.

___

WHEN WILL THIS GO INTO EFFECT?

There are no guarantees that there will be ban on packing laptops in checked bags.

The FAA is presenting its case at a meeting this week and next of ICAO’s dangerous goods panel. European aviation safety regulators, aircraft manufacturers and pilots’ unions have endorsed the proposal.

Even if the panel were to agree with the proposal, it would still need to be adopted at higher levels of ICAO. And it would only apply to international flights.

___

WILL THE U.S. IMPOSE A BAN ON CHECKING LAPTOPS ON DOMESTIC FLIGHTS?

This is unclear. Individual countries can decide whether to implement domestic bans. The United States has not indicated if it will do so.

The effect of such a ban may not be great, since many passengers don’t check bags to avoid surcharges, and those that do often prefer to carry on electronics.

___

WILL THE U.S. CONTINUE TO PUSH FOR THE INTERNATIONAL BAN?

This is also unclear. The FAA, which favors the ban, is handling negotiations for the U.S. at the ICAO meeting. But, for future meetings, Transportation Secretary Elaine Chao is having another agency, the Pipeline and Hazardous Materials Safety Administration, take the lead.

It’s not clear if that agency, known as PHMSA, will share the FAA’s position.

PHMSA previously led dangerous goods negotiations, but the Obama administration put the FAA in charge after congressional Democrats complained that PHMSA officials were too cozy with the industries they regulated.

The Transportation Department said in a statement that PHMSA “has a unique and highly effective” approach to regulating the transportation of hazardous materials, and that it will consider what impact any change in aviation rules might have on transportation. The statement also said PHMSA will collaborate with the FAA.

U.S. Market Weekly Summary – Week Ending 10.20.2017

S&P 500 Posts 0.9% Weekly Gain to New Closing High, Led by Financials, Health Care, Utilities; Staples Weigh
The Free Press WV

The Standard & Poor’s 500 index rose 0.9% this week to a fresh closing high, with the financial, health-care and utilities sectors leading the climb amid a number of better-than-expected Q3 reports.

The S&P 500 closed Friday’s session at 2,575.21, up from last week’s closing level of 2,553.17. The closing level was just shy of the benchmark’s new intraday record high, 2,575.44, which was also reached in Friday’s session.

The financial, health-care and utilities had the biggest percentage increases of the week, up 2.0%, 1.8% and 1.4%, respectively. Meanwhile, the consumer-staples sector had the biggest percentage drop of the week, down 1.2%. Just two other sectors ended the week in the red: real estate, with a 0.8% drop, and energy, down 0.4%.

The financial sector’s gain came as a number of banks and financial-services companies released Q3 results above Street views.

Among them, Goldman Sachs Group (GS) shares rose 2.6% on the week amid the company’s report of higher-than-expected Q3 earnings per share and revenue that were also above the year-earlier period’s results. Synchrony Financial (SYF) shares jumped 7.2% this week as the consumer-financial-services company reported Q3 earnings and revenue above analysts’ expectations.

The health-care sector’s advancers included Johnson & Johnson (JNJ), which posted a 4.4% gain this week as the health-care, pharmaceutical and medical-devices company reported Q3 adjusted earnings per share and revenue above analysts’ expectations and raised its guidance for fiscal 2017 above the Street consensus view.

Danaher’s (DHR) shares rose 4.5% this week as the manufacturer of professional, medical, industrial and commercial products also reported Q3 adjusted EPS and revenue above Street consensus estimates and boosted its guidance for fiscal-year EPS.

Abbott Laboratories (ABT) shares posted a 3.1% weekly increase as the health-care products company’s Q3 adjusted EPS from continuing operations and net sales also topped analysts’ expectations and its 2017 EPS guidance also got a boost.

The utilities sector’s gainers included Pinnacle West Capital (PNW), whose shares increased 1.6% this week as the energy-holding company raised its quarterly dividend by 6.1%.

On the downside, the consumer-staples sector’s decline included a 3.9% weekly drop from Philip Morris International (PM) as the manufacturer of cigarettes and other tobacco products reported Q3 results below analysts’ expectations and trimmed the top end of its guidance range for 2017 adjusted EPS growth.

Business and Financial News

The Free Press WV

►  What would happen if Amazon brought 50,000 workers to your city? Ask Seattle

Amazon has driven an economic boom in Seattle, bestowing more than 40,000 jobs upon a city known for Starbucks coffee and Seahawks fandom. Its growth remade a neglected industrial swath north of downtown into a hub of young workers and fixed the region, along with Microsoft before it, as a premier locale for the Internet economy outside of Silicon Valley.

Seattle is the fastest-growing big city in America, a company town with construction cranes busily erecting new apartments for newly arriving tech workers. Google and Facebook have joined Amazon in locating large offices here.

When Amazon made a surprise announcement last month that it planned to open a second headquarters with even more jobs, it set off an unprecedented race among cities to lure the tech giant their way. Amazon said it ultimately will need 8 million square feet in a second region, making it the biggest economic development target experts can remember.

But as Seattleites will say, keeping up with the Internet juggernaut has not always been easy, providing a word of caution for officials from other cities willing to pursue the company at great expense.

Over the past decade, Amazon and its founder, Jeff Bezos, who owns The Washington Post, added new products and business units at a breakneck speed and expected public partners to keep pace.

In Seattle that meant rehabbing an area of more than 350 acres at a cost of hundreds of millions of dollars in ongoing transportation and infrastructure upgrades, expanding public transit, road networks, parks and utilities.

It also put new strains on housing. Seattle is one of the most expensive places in the United States to live, forcing lower-income residents to move to far-off suburbs and prompting the city and surrounding King County to declare a state of emergency in 2015 over homelessness.

Since then, the problem has worsened. Rents in King County have more than doubled in the past 20 years, and gone up 65 percent since 2009. Seattle spends more than $60 million annually to battle homelessness, up from $39 million four years ago.

“We started seeing apartment listings that would say ‘No deposit needed and priority for Amazon, Microsoft and Google employees,‘ “ said Rachael Myers, executive director of the Washington Low Income Housing Alliance, a Seattle-based advocacy group. She said the area was “in the midst of the greatest affordable housing and homelessness crisis that our state has ever seen.“

How much of Seattle’s evolution is attributable to Amazon is a matter of debate. In the past decade, millennial workers have poured into other big cities - Washington, San Francisco, Boston - exacerbating housing costs and homelessness there.

But few buildups are so linked to the prospects of one company. Amazon has contributed $30 billion to the local economy, and as much as $55 billion more in spinoff benefits. Unemployment in the Seattle area is 3.7 percent, below the national rate of 4.4 percent.

Much of that progress is the result of Amazon’s decision to locate its first headquarters downtown a decade ago. John Schoettler, who oversees real estate for the online giant, thought it simplest and least expensive to plan a suburban headquarters campus east of Lake Washington, in Bellevue, Wash., near where Microsoft was located.

Bezos had a different idea. He wanted to stay in Seattle.

“Jeff said the type of employees we want to hire and retain will want to live in an urban environment. They are going to want to work, live and play in the urban core,“ Schoettler said.

The decision helped usher in a new era, one in which top employers abandon suburban office parks for lively, urban neighborhoods integrated into the cities around them. Only seven Fortune 500 companies had research or engineering hubs in Seattle in 2010; now 31 do.

“Their growth has just been so positive to lots of other companies, big and small and medium and in between,“ said Jon Scholes, president and chief executive of the Downtown Seattle Association, where Schoettler is a board member.

It’s a boom that has shown little sign of slowing. Seattle added 57 additional people a day for a year through the summer of 2016, according to census data. How best to accommodate that growth provokes regular debate in Seattle, and could well shape whatever city Amazon comes to next.

Such details spark little discussion as mayors and governors from coast to coast have embarked upon a sweepstakes fit for a reality show, touting their cities in online videos and dangling taxpayer-funded subsidies of as much as $7 billion even if their jurisdictions don’t have the workforce or transportation network Amazon said it requires.

The company has set October 19 as the deadline to receive proposals.

Tucson officials, with an airport one-tenth as busy as Seattle’s, mailed the company a 21-foot cactus to get its attention. Stonecrest, Ga., with a total population barely larger than Amazon’s Seattle workforce, offered to de-annex 345 acres of its land and rename it the “City of Amazon.“ Kansas City Mayor Sly James purchased 1,000 items on Amazon.com and rated them all five stars.

New York Mayor Bill de Blasio even announced plans to light up several landmarks and venues in orange to show support for his city’s bid.

“So will the all mayors go to compete on the Ellen DeGeneres show, Kelly Ripa or Anderson Cooper?“ said Greg LeRoy, president of the policy group Good Jobs First, which regularly warns that public incentives rarely pay off. “That’s the spectrum of the debate right now.“

Seattle won its own economic beauty contest in 1962, when it hosted the World’s Fair. To serve the crowds, the city built acres of parking and low-slung motels in an area known as South Lake Union.

The bet paid few dividends. Three decades later, the area was probably best known for a printing plant, struggling motels and a Hooters restaurant. Only 677 people lived there in 1990.

Then Paul Allen, co-founder of Microsoft, launched a real estate firm called Vulcan and bought 60 acres in the area. Vulcan executive Ada Healey recalls the early skeptics. During a 2002 pitch meeting, she said that a representative from a prospective company turned to her and said: “Why would I want to move to South Lake Union? It is a wasteland.“

Bezos, though, saw promise in the urban locale. He had started Amazon in his garage in nearby Bellevue, then opened an early office in a former military hospital now called Pacific Tower. Before long, he was searching for more space to accommodate his fast-growing company.

Schoettler initially secured about 1.7 million square feet in 10 buildings. It was enough, he thought, to contain the company through 2016, when it was projected to have 9,300 employees.

Instead, Amazon grew five times as fast. It now has more than 40,000 employees in 33 Seattle buildings totaling 8.1 million square feet. It occupies 19 percent of the high-end office space in the city, according to an analysis by the Seattle Times, as many square feet as the city’s next 40 biggest employers combined.

Next year Amazon will complete its most prominent addition: three glass biospheres featuring about 40,000 plants, “a unique environment for employees to come and collaborate and innovate,“ Schoettler said.

Seattle officials raced to keep up, approving $480.5 million in improvements for South Lake Union. Amazon and Vulcan, in need of approval to take over city alleys for its development, chipped in some funding.

A $190.5 million road realignment program included $31.4 million from property owners led by Vulcan. A new, 1.3-mile streetcar line cost $56.4 million and benefited from $5.5 million from Amazon, including the donation of a fourth car. Now the city has embarked on a $201.5 million electrical substation, work that includes burying electrical wires.

During weekdays, South Lake Union teems with young workers sporting Amazon name tags, eating bananas that the company offers free to passersby. Many can be seen walking their dogs, as 4,000 employee-owned pups are registered with headquarters access, helping Seattle earn notoriety recently for having more dogs than children.

The campus has produced spillover benefits for the city. Amazon’s buildings are home to 34 restaurants, including a culinary job training program called FareStart. More than 20 percent of employees walk to work, and less than half drive.

The company’s longtime support for LGBT rights - including a $2.5 million donation that Bezos and his wife, MacKenzie, made to advance same-sex marriage - dovetail with the city’s progressive politics. In June, the company flew a rainbow flag above its headquarters for LGBT Pride Month. It has more than 40 “glamazon” chapters for LGBT affinity around the world.

“We could have gone to the suburbs and we could have built a campus, and we would have had an entry gate where everybody would come and go so you would be very inward- looking and very exclusive,“ Schoettler said. “As opposed to being in a very urban environment where you have to look outward, so you’re very inclusive and everyone is your neighbor - and everyone is welcome.“

Maybe no city could have built housing fast enough to keep prices from spiraling during Amazon’s growth, but Seattle - despite nearly leading the nation in new apartment construction - hasn’t come close.

On the sidewalks, alongside rentable neon bikes, people subsist in tents and in sleeping bags, in places locals say they did not congregate 10 years ago - a warning sign for cities nationwide trying to capture a version of Seattle’s glory.

“We don’t have enough housing for low-income people especially, but we also just don’t have enough housing,“ said Myers, a longtime Seattle housing advocate. “And Amazon obviously impacts both of those things.“

Officials at Bellwether Housing, the city’s largest nonprofit manger of affordable housing, at 2,000 units, reports a vacancy rate of 1 percent. “It’s very rare that someone moves out because they have nowhere else to go,“ said chief executive Susan Boyd.

An analysis of evictions found they were driven not by social problems but by economics. Since Amazon’s boom began, the city approved a rule requiring landlords to accept the first viable renter who applies - rather than cherry-pick a tech worker. The government also adopted an inclusionary zoning policy requiring developers to set aside some new units at below-market rates or pay into a fund to develop other affordable units.

Myers suggests other jurisdictions pay heed: “If you’re going to get an Amazon that’s going to create a ton of high-paying jobs and a ton of pressure on the housing market, what are the things you can do before rents really skyrocket?“

Ask 10 experts where the company will put its next headquarters and you may get 10 different answers. The company prides itself on zigging when others zag, making it more difficult to read the tea leaves. Still, many in Seattle think the company has a good idea of its options. “I suspect they have a shortlist,“ said Healey, the Vulcan executive.

Landing the second headquarters would be a legacy-defining achievement for nearly any governor or mayor, but lessons from Seattle’s Amazon experience have bidders scrambling to show how they can meet Amazon’s insistence on speed, low costs, transportation and inclusion - particularly if they didn’t focus on them ahead of time.

East Coast cities such as Boston, New York and Washington may need to answer for their own runaway real estate and housing prices. Governors, including Chris Christie of New Jersey, Scott Walker of Wisconsin and Larry Hogan of Maryland, may have to explain why they canceled major transit projects. Charlotte and Indianapolis are bidding, but Amazon may want to know the effect of state laws there affecting the rights of gay or transgender employees.

Amy Liu of the Brookings Institution said the Amazon competition will hopefully serve as a chance for elected leaders to take the temperature of how prepared their neighborhoods and infrastructure are to drive growth, whether from Amazon or elsewhere.

“These are things every city should be doing anyway,“ she said.

Business and Financial News

The Free Press WV

►  Sears sinks as key investor Berkowitz plans to leave board

Bruce Berkowitz, the largest outside shareholder at Sears Holdings Corp., is leaving the retailer’s board, a move that sent the stock tumbling on Monday.

Berkowitz, the chief investment officer and founder of Fairholme Capital Management, will step down October 31, about 20 months after he joined the board. Concern that one of Sears’s biggest backers is reducing his involvement sent the shares on their worst intraday slide since March.

Berkowitz first reported a stake in Sears in 2005 and held more than 27 million shares, or about a quarter of the total, as of October 12, according to data compiled by Bloomberg. Long a passive investor, Berkowitz signaled he’d get more involved in a December 2015 regulatory filing.

Sears has been kept afloat in recent years by Chief Executive Officer Edward Lampert, who has used his own money to prop up the company.

Berkowitz’s departure signals that “these guys could be on different sides of the fence,“ said Bloomberg Intelligence analyst Noel Hebert. The precipitous decline in retail real estate values may also have given Berkowitz pause, Hebert said.

Shares of Sears, based in Hoffman Estates, Illinois, plunged as much as 15 percent to $5.75 on Monday. The shares had dropped 27 percent this year through Friday’s close.

Berkowitz’s decision to leave the board wasn’t the result of any disagreement over the company’s operations, policies or practices, Sears said in an emailed statement.

“Mr. Lampert and Mr. Berkowitz have a longstanding partnership and continue to have great respect for each other,“ the company said.

Sears has lost almost $11 billion in the past six years, prompting the company to sell or spin off assets such as its Lands’ End clothing business. The retailer’s continued cash burn “does not build confidence or trust,“ Berkowitz said on a February 2016 investor call, noting nonetheless that Sears investors “own valuable assets at historic discounts.“

He said earlier this year that there is still value in the traditional retail industry. Commenting on Bloomberg Television after Amazon.com Inc. announced it would buy Whole Foods Market, Berkowitz said that deal “says to me there is a need for physical space in retailing.“ Additional mergers make sense because department stores, supermarkets and malls occupy prime real estate with infrastructure already in place, he said.

Asked if he thought Amazon should buy Sears, he said: “That would be an intelligent move,“ though he said he had no reason to believe that would happen.


►  Tesla has fired ‘hundreds of workers’

Tesla’s stock is slightly down Monday after news that it fired “hundreds of workers” in recent days as a result of annual performance reviews.

While the firings come as the company is experiencing significant production delays affecting the Model 3, Tesla said the dismissals - which involved hundreds of employees, according to some reports - were unrelated to those delays and would have no effect on the vehicle’s continued rollout.

In a statement emailed to The Washington Post, the company said a similar number of “employee departures” occurred last year. The company also noted that the firings involved mostly nonmanufacturing positions and that some employees were given bonuses and promotions after this year’s review.

“Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period,“ the statement said.

“As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures,“ the statement added. “Tesla is continuing to grow and hire new employees around the world.“

The company declined to confirm how many employees had been let go but said it plans to back-fill the vast majority of the openings.

The San Jose Mercury News, which first reported the firings, said the departures included “engineers, managers and factory workers.“ Employees told the paper that they received “little or no warnings” before the firings, which reportedly targeted 400 to 700 employees, leading to “lowered morale through many departments.“

Juan Maldonado, a production worker, told the paper that he was fired last week after close to four years at Tesla. The 48-year-old speculated that his dismissal was the result of being late to work on two occasions in recent months.

“I’m going to try to find a job,“ he said.

The firings come during an important period for the company that chief executive Elon Musk has characterized as “production hell.“ That production surrounds the Model 3, the company’s first mass-market vehicle, for which Musk has set an aggressive production schedule - one the company has not kept pace with.

Musk’s original goal was for Tesla to produce 1,500 Model 3s in the third quarter, a sizable jump en route to increasing production to 20,000 vehicles per month by the end of the year and 50,000 a month by the end of next year.

But the company said earlier this month that it had produced only 260 of the 1,500 intended sedans during that period, blaming production issues.

“Model 3 production was less than anticipated due to production bottlenecks,“ Tesla wrote in an October 02 investor letter. “Although the vast majority of manufacturing subsystems at both our California car plant and our Nevada Gigafactory are able to operate at a high rate, a handful have taken longer to activate than expected.“

The company noted that there are “no fundamental issues with the Model 3 production or supply chain” and said that company officials understand “what needs to be fixed.“

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