Dupont’s Disappearing Act, New Air Bag Recall, Food Cart Black Market

By Peter Ward     June 17, 2016

DuPont’s Disappearing Act

Is a major chemical company about to make itself disappear, just as it faces a number of personal lawsuits over the alleged effects of its chemicals? An investigative article in The Intercept, published on Wednesday, looks into the lengths a company may go to avoid litigation costs.

Lawyers have accused DuPont, one of the world’s largest chemical companies, of maneuvering its liabilities and merging with a competitor to avoid the potential consequences of a massive class action lawsuit over the industrial chemical PFOA. The lead plaintiff in the case is David Freeman, an Ohio man who developed testicular cancer, allegedly due to drinking water contaminated with PFOA.

Last July DuPont spun off its performance chemicals division to form a new company, known as Chemours. Chemours took responsibility for a number of the company’s assets as well as a large portion of DuPont’s environmental liabilities, including the litigation over PFOA. In December, DuPont announced plans to merge what is left of the main company with fellow chemical titan Dow.

All this has left attorneys prosecuting the case asking the court to compel DuPont to demonstrate how it would pay any awards to Freeman and other plaintiffs. Lawyers have specifically asked “where the liabilities and obligations of DuPont will fall” if the merger takes place. DuPont lawyers have described the claims that the company is trying to dodge its obligations from the case, as “merely speculative.”

But prosecuting lawyers maintain that even if damages are awarded to plaintiffs, DuPont’s responsibilities will cease to exist if the company merges with Dow and effectively disappears. “I’m afraid DuPont will vanish,” said Rob Bilott, the attorney who oversees the class-action suit.

Largest Air Bag Recall Interactive

Faulty air bags don’t just make cars exceedingly dangerous, they can also have severely adverse effects on auto makers’ bottom lines. One airbag manufacturer, Takata, recently expanded the largest and most complex recall in U.S. history, with more than 60 million air bags deemed of insufficient quality to stay on the road.

Air bags in vehicles from BMW, Ford, Honda, Tesla, Toyota and 12 others, are included in the recall, which could affect more than 100 million vehicles around the world. Faulty Takata air bags have already killed 12 people and injured more than 100.

This week Bloomberg published an interactive article detailing the extent of the Takata air bag recall. The pyramid-shaped graphic has as its starting point a 2004 incident in which a Takata air bag exploded in a Toyota car, an event the air bag manufacturer called an anomaly. Four years on, Takata began recalling the air bags from 4,000 Honda cars. For the first five years, all of the recalls were for Honda and Acura cars, the graphic shows. In 2013, Takata reported a problem with side air bags that could rupture in hot conditions, and the recall expanded massively to include Nissan, GM, Toyota and Inifniti cars.

The number of cars affected by the recall grows as the timeline moves on. In 2016, Land Rover, Fiska, Tesla and Jaguar cars were included in the recall, but are yet to release the number of cars affected, which means the graphic will have to expand even further in the future.

New York’s Food Cart Black Market

When New Yorkers buy morning coffee and bagels from their favorite food cart, they probably don’t realize they’re supporting a black market worth an estimated $15-20 million a year.

That is the finding from an investigative long read published this week by Crain’s New York Business. Food carts have long been a popular option for immigrant entrepreneurs. But restrictions on the number of carts in New York City are forcing them into a black market just to get a cart out on the street.

In 1981, Ed Koch, then mayor of New York city, set a limit of 3,000 citywide permits for mobile food carts and trucks. This limitation pushed the value of cart permits higher and higher, as those with permits who had made their money kept renewing permits but leasing them out rather than using them. Initially individuals took advantage of this limitation and amassed huge numbers of food carts. But in 1995 the city’s mayor Rudy Giuliani passed a rule of one permit per person or company.

Now, the city charges $200 for a two-year permit, but licensed holders are renting them out for $20,000 or more. Regulations stipulating that only the permit holders can show up should the cart be fined have only served to drive up prices, as the risk for permit lenders has increased. Cottage industries, including brokers connecting those looking for carts with those renting permits, have also emerged.

The article illustrates the destructive nature of a system that has kept generations of immigrants from making any economic progress. “The black market preys upon working-class immigrants, discourages entrepreneurship and has done nothing to foster financial security. The vendors who started under Giuliani are now well into middle age, and most have little to show for their decades of hard work,” reporter Jeff Koyen writes.

Microsoft’s $26.2bn LinkedIn Deal

Microsoft announced a deal on Monday to buy the career-oriented social network LinkedIn for $26.2 billion in cash, its biggest ever purchase.

LinkedIn currently boasts 430 million members, meaning the deal values each one at more than $60. The acquisition works out at $196 per share for LinkedIn. When the markets opened on Monday, LinkedIn shares jumped 49% on the deal news, while Microsoft’s dropped 3%.

LinkedIn has struggled lately. In February, the company’s shares plunged 43% after a much weaker growth forecast than expected for 2016. That dip left LinkedIn shares at a three-year low of $101, wiping $11 billion off its value in a single day.

The deal has been seen as further proof of Microsoft’s shift away from the PC software that once made it the world’s most valuable company. “This deal is all about bringing together the professional cloud and professional network,” Microsoft CEO Satya Nadella told the New York Times in a telephone interview.

But some commentators have been left baffled by the acquisition, saying the two companies are too dissimilar, and citing Microsoft’s poor track record of big business buys.

The Week’s Top Headlines

Brexit poses global financial risk, Bank of England warns – BBC

Deadly shooting at Pulse nightclub was a financial windfall for gun makers – Suzanne McGee, The Guardian

The Federal Reserve Stays On Hold With Interest Rates As It Awaits A Brexit Strategy – Antoine Gara, Forbes

Nikkei sinks 3%, yen climbs after Bank of Japan stays pat – Dominque Fong, MarketWatch

China’s Didi Chuxing raises $7.3 billion in new funding – Reuters

Brexit Campaigns Suspended After Labour Lawmaker Jo Cox Shot – Robert Hutton, Matthew Campbell, Emma Charlton, Bloomberg News

VW CEO’s Strategy Overhaul Focuses on Electric Vehicles – William Boston, Wall Street Journal

Shanghai Disneyland Opens Amid Rain and Pageantry – Brooks Barnes, New York Times

U.S. Inflation Firms Amid Rising Gas Prices, Rents – Ben Leubsdorf, Wall Street Journal

China Dumping More Than Treasuries as U.S. Stocks Join Fire Sale – Andrea Wong, Oliver Renick, Bloomberg News

This entry was posted on Friday, June 17th, 2016 at 6:39 pm. It is filed under Week in Review. You can follow any responses to this entry through the RSS 2.0 feed.