TIME Autos

Death Toll Linked to GM Ignition Switch Defect Rises to 29

GM Hearing
Family members of people killed due to a faulty ignition switch watch a House hearing on April 1, 2014. Tom Williams—CQ-Roll Call / Getty Images

Two new death claims approved by compensation program

The number of deaths linked to a faulty ignition switch in General Motors vehicles rose to 29 on Monday, according to a new report, after two new death claims were approved by the program that will compensate victims and their families.

The fund has received more than 1,500 claims since its establishment on Aug. 1, including 184 submissions for death claims, Reuters reports. All 29 deaths, and another 27 injuries, have been determined to be eligible for compensation so far, finds the report released by the office of Kenneth Feinberg, who is heading the compensation effort.

GM launched the fund amid withering criticism for its failure to address the defect after several employees within the company noted the problem at least 11 years before any action was taken to resolve it.

[Reuters]

MONEY Tech

Why Apple is Not a Tech Company

hand pulling iPhone box off shelf
Maxim Shemetov—Reuters

Peter Thiel argues that buying Apple means betting against innovation.

As the founder of PayPal, and the one of the first external investors in Facebook, it’s hard to argue that Peter Thiel doesn’t understand innovation or technology companies. But in his new book, Zero to One, Thiel takes somewhat of a radical approach to these concepts, drawing a line in the sand that may irk many traditional tech firms, as well as their investors.

Despite being both the largest and most well-known firm in The Valley, Thiel’s personal opinion is that Apple APPLE INC. AAPL 0.5621% isn’t much of an innovator these days: Just a few years ago, Apple’s stock was a bet on new technology — today, it’s a bet against it (at least according to Thiel).

In a recent phone interview, Thiel told me why he doesn’t consider firms like Apple, and most of the members of the Nasdaq 100, to be technology companies, and what that might mean for their investors.

An odd transformation

Thiel has somewhat of a problem with the concept of a “tech firm” — or at least, what people generally define one to be. In Thiel’s mind, true technology companies are firms leveraged to innovation — to new business models designed to shake up the status quo. Plenty of firms begin their life as a tech company, but those that find success often become something quite different.

“A whole bunch of the Nasdaq 100 stocks are bets against innovation … it’s a long list. [There's] a very short list of companies where you’re actually betting on innovation … Most of [the members of the Nasdaq 100] just throw off huge cash flows, and the risk is actually that there’s some innovation ….These companies are always described as ‘tech stocks’ because they were tech stocks … at some point in the past, but [today] they’re bets against technology.”

Although most still consider Apple, Oracle, and Microsoft to be technology firms, few hold the same opinion of General Motors. Yet according to Thiel, it’s all relative — simply a matter of timing and perspective.

“GM was a tech stock in the 1920s — it was still sort of a tech stock in the 1950s. [But] by the 1980s, you invested in GM as a bet against German and Japanese innovation. You said, ‘I’m long GM because Germany and Japan are never going to build cars that are that good.’ At some point, a lot of these tech stocks become weirdly changed to being bets against technology … [Of course] the companies can never say that, because their internal narrative and their external story is [based] so much around how they were historically innovative.”

Know what you’re buying

Admittedly, General Motor’s transformation from technology firm to incumbent took decades, but Thiel believes the shift is often far more straight-forward: Simply look for the founder to depart. With Apple, the change occurred just over three years ago, with the passing of Steve Jobs that thrust Tim Cook into the spotlight.

Thiel is a fan of Cook’s management skills (“I think Tim Cook has done a very good job in an impossible position to try to fill Steve Jobs’ shoes,” he told me) but believes the Apple story is fundamentally different with him at the helm: Once, people bought stock in Apple because it was creating revolutionary new products — today, it’s all about the cash flow.

“No one is investing in Apple because they think it will create new products. People are investing in Apple because it’s generating massive cash flows, and the bet is that the cash flows will go on [for] somewhat longer than people think … that the rest of the world will not innovate; will not succeed in closing the gap.”

While plenty of investors may disagree with Thiel (the new Apple Watch, for one, gives investors something to look forward to) it’s indisputable that Apple is generating billions of dollars of cash, largely on the back of one product: the iPhone. Apple generated $10.3 billion in cash flow alone last quarter — enough to acquire many members of the S&P 500 outright. The iPhone brings in more than half of Apple’s revenue, and likely the bulk of its profits.

Not a bad investment

But even if Apple’s best work is behind it, it doesn’t make it a bad investment. In fact, Thiel believes Apple could be an excellent stock — so long as the iPhone cash-cow continues to deliver.

“Apple [will keep] generating massive cash flows so long as nothing much changes — as long as it maintains a certain brand lead, a certain premium on the iPhone. [If so,] it will generate huge cash flows [for many years] … the risk is that other people will catch up.”

That risk could come from rival handsets. Competitors like Xiaomi and OnePlus have attracted a fair amount of attention recently for their quality handsets, which they sell at a fraction of what Apple charges for the iPhone. Or it could come from advanced wearables — watches and other gadgets designed to replace the traditional smartphone. It may come from a radical reinvention of the handset — something like Project Ara, that shakes the current smartphone business model to its core.

Of course, it may not come at all — or if it does come, not for many, many years. In which case, the cash flows should continue, and Apple should reward its shareholders.

“Maybe there’s not much innovation happening. Maybe people overestimate innovation … but I think it is very helpful to try to get the framing right and understand, ‘OK, I’m betting against technology here.'”

MONEY Ask the Expert

What To Do When Your Pension Is Frozen

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: My company froze our pensions last year. I am 53. Can I take the money out and invest it myself? – Tim Shields, New York

A: You’re in the same boat as many private sector workers today. Hundreds of companies have frozen their pensions in the past decade in order to shed the cost of providing guaranteed lifetime income to retirees. The trend accelerated after the recession—more than 40% of the Fortune 1000 companies now have frozen pensions, according to one study.

Your employer can’t take away the benefits you’ve earned. But if you’re currently covered by a pension, also known as a defined benefit plan, your pension benefit will no longer increase. This trend leaves older workers like you vulnerable, especially if you have long tenure, says Bonnie Kirchner, a certified financial planner and president of Sea Change Financial Education. That’s because pensions are back-loaded, reaching their peak value in your last years before retirement. You’re losing what would have been a large income stream in retirement, so you’ll need to figure out different saving and investing strategies.

Whether you can take the money out and invest it yourself depends on your plan’s rules, says Kirchner, who also wrote Who Can You Trust With Your Money? You should contact your human resources department to find out the specifics.

Chances are, your employer will want you to take that pension money as a lump sum, says Kirchner. Many pensions are underfunded, and companies must make up any underfunded liabilities with additional contributions to their plans. “Your corporation may be very happy to get rid of that liability from their balance sheet,” says Kirchner.

In fact, more companies are doing so. In a move known as “de-risking,” companies are offering settlement payouts to employees, thereby moving the pension obligation off their books. Three out of four employers with pension plans said they are—or are in the process of—unloading pensions obligations, according to a report by Towers Watson and Institutional Investors Forum.

To do so, your company may offer to pay you a lump sum in place of a monthly pension payment, or it may replace your pension by buying an equivalent annuity from an insurance company. Motorola recently did both, buying annuities from Prudential Insurance to cover its current pensions and offering lump sum buyouts to plan participants. General Motors and Verizon replaced their pension obligations with annuities in 2012.

For most people, taking an annuity that guarantees an income stream for life is a far better option than a lump sum payout. “It protects you against running out of money,” says Kirchner. An exception might be if you are in poor health and need to tap those assets sooner. (If you do take a lump sum, be sure to roll it over into an IRA—otherwise you could incur penalties and income taxes.)

Granted, investing a lump sum does offer the potential for higher returns, so it may be a better fit for those who want to manage their own money. Still, few investors are capable of outperforming the market, as studies have repeatedly shown. And today a guaranteed stream of income is something that is highly sought after by retirees, says Kirchner, so think twice about rejecting an annuity.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

MONEY Autos

Corvette Stingray: All American Muscle

TIME's Bill Saporito test drives the new Corvette Stingray and finds it's as fast and powerful as advertised.

The guy standing on the traffic island seeking donations didn’t want one from me. He just walked over to the car, gave the thumbs-up and then moved on to the unremarkable vehicle behind me.

The 2015 Corvette Stingray ZF1 convertible I was driving is the type of car that can do that. You park it at Home Depot and guys start circling, taking pictures. Parking lot attendants, who see everything on wheels, nod in admiration. New cars that attract this kind of attention are relatively few: The awesome Audi R-8 comes to mind, as do the recently remade Camaro and the old Jaguar XK8. Even that funky little Fiat 500 was a head turner when it first landed.

For Chevrolet, the Corvette is an iconic automobile and you redesign it at your peril. Yet as Ford proved with its Mustang this year, and Chevy itself with Camaro, you can remake trophy cars without denting their heritage. This Vette is a perfect example of heritage brought smartly—and swiftly— forward.

The Stingray did show up with a surprise: an eight-speed automatic with paddle shifters. The automatic trans adds $1,725 to the base price of $58,000, and the other goodies on the car I drove—including a performance data and video recorder—pushed the price up to $71,255. Who would want to drive a Vette with an automatic? Turns out, lots of people, and fully 65% of new Vettes being sold are automatics, according to the company. And it’s not just Corvette owners. Manual transmissions simply can’t match the efficiency of a new generation of 8-, 9-, and 10- speed automatics now being introduced into high performance cars. (In fact, the new Porsche GT3 isn’t available with a manual transmission. It rides a dual-clutch automatic called a Doppelkupplungsgetriebe.) The manual transmission is going the way of the manual window. Do you miss cranking?

Although I absolutely doppelkupplungsgetriebed at the thought of a stickless Corvette, any disappointment disappeared when I stomped on the pedal at a highway on-ramp. Very instant gratification. Chevy has equipped this Vette with its LT1 6.2 liter V-8 engine, the latest version of a famous power plant known as the small block V-8. In GM lore, this engine actually saved the Corvette when it was introduced in 1955, because sales had been languishing with the underpowered 150-hp engine then in use. The small block V8 put the muscle in muscle cars. This updated one has variable valve timing that deactivates cylinders when you don’t need them—say cruising when the tachometer’s barely pushing 1,500 r.p.m.—which helps the car’s impressive 29-m.p.g. highway fuel rating.

But when you want’em, all eight cylinders snap to attention and report for duty, ready to throw out 455-to- 460 h.p. —the higher figure if you get the optional multimode exhaust option ($1,195) that is exquisitely tuned to zoom. This Vette will get you from here to there—0 to 60 mph—in a throaty 3.7 seconds. The eight-speed automatic is even a tick faster than the seven-speed manual, although the thrill of rocketing up the speedometer is very much the same. And if you insist on shifting the gears yourself, go right ahead and use the paddles. Automatic or no, this thing is still low, wide, and nasty. The two competition seats in the Z51 version come with adjustable side bolsters to lock yourself in on tight turns.

It’s not all about speed, I guess. The Stingray includes a 5-position Drive Mode selector (Sport, Track, Tour, Eco, Weather) that adjusts the performance to suit conditions or your whims. And on nice days, there’s that drop-top, which can be popped while moving at up to 30 m.p.h. if you’d like to really show off.

Chevy is also making the convertible available on a supercharged Z06 racing model rated at 650 h.p. that it will introduce next year. Which is going to provide a whole new definition of driving with the wind in your hair. You are probably going to need that automatic. Because you’ll be too busy hanging on to your hat to work a stick.

Correction: a previous version of this story stated the Corvette has a dual-clutch transmission.

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TIME Autos

Auto-Safety Head Admits Major Reform Is Needed

David Friedman, the acting head of the National Highway Traffic Safety Administration, as he testified on Capitol Hill in Washington, April 2014.
David Friedman, the acting head of the National Highway Traffic Safety Administration, as he testified on Capitol Hill in Washington, April 2014. Evan Vucci—AP

He says we need a "new normal" when it comes to assuring human safety in cars

A week after facing blistering criticism for his agency’s handling of the recent General Motors (GM) auto recall, the man charged with running the nation’s auto-safety administration acknowledged that his office needs to improve.

“Any life lost is one too many; anything that we can do to improve in a situation like this, we’ve got to do,” David Friedman, interim head of the National Highway Traffic Safety Administration (NHTSA), tells TIME in his first interview since the hearing. “We need a new normal when it comes to recalls.”

A more combative relationship that keeps “every car company on their toes” is at the heart of Friedman’s “new normal” and carried out through increased financial penalties on car companies and an expanded budget.

“Dropping the ball will not be tolerated,” Friedman said.

In the months since GM announced its first recalls for ignition switch problems, critics have hounded the automaker for taking so long to address an issue that affected millions of cars and killed at least 21 people. More recently, criticism has turned to NHTSA. The agency, created in the 1970s to oversee a powerful industry, is charged with ensuring automakers meet safety standards on everything from brakes to windshields. But its actual authority remains hampered: it can levy a maximum fine of $35 million for a violation and has no power to bring criminal charges.

Friedman wants to change that, and advocates say he should step on it. “This is the best opportunity to reform NHTSA, really, since the original Safety Act was passed in 1966,” says Center for Auto Safety executive director Clarence Ditlow. “When a GM president has to apologize for their safety inaction, that shows you how bad the situation is.”

The reaction centers on faulty ignition switches in millions of GM vehicles that in some cases abruptly shut down the engine and kept airbags from deploying in the subsequent crash. The automaker had been aware of issues with the switch—though perhaps not the extent of the problem—for more than a decade prior to issuing recalls, investigations have shown. NHTSA also received strong evidence of the safety issue in 2007, when Wisconsin officials told the federal agency about what they suspected was a link between ignition switches and airbags. NHTSA officials “either overlooked or failed to understand” the implications of the Wisconsin report and didn’t follow up appropriately, according to a congressional report released last week.

Supporters of reform, both in Congress and among the ranks of safety advocates, say the needed changes are multifaceted: The agency requires expanded enforcement power, increased funding and greater transparency so that the public can hold it accountable.

The agency was granted just over $10 million to investigate defects in 2014, a paltry sum considering the 250 million vehicles on the road in the United States. Overall, the agency devotes about $130 million annually to vehicle safety research—a total that outrages auto-safety advocate Ralph Nader. “It’s about the cost of three months of guarding the US embassy in Baghdad,” Nader tells TIME.

“If Congress would give us another 20 people and $20 million, we could do a lot more for the American public to save lives,” Friedman says.

Increased authority also ranks high on the list of the changes safety advocates say NHTSA needs. Currently, the agency can fine automakers a maximum of $35 million for safety violations, a pittance for an industry that brings in billions each year. Friedman, along with President Obama and transportation secretary Anthony Foxx, wants to raise the cap to $300 million.

But changes to funding or regulatory authority would require Congress to act. A number of legislative proposals have been introduced, but it remains unclear whether this opportunity, as good as it may be, can overcome gridlock.

Friedman says his agency will do its best to improve, even if it doesn’t receive help from Capitol Hill. “If Congress fails to act, we’re a scrappy organization. We punch above our weight,” he says. “We’ll do everything with the resources we can.”

Nader, along with others, says he is skeptical, but ultimately, external pressures may make the question of whether NHTSA officials want to change irrelevant.

“I think the agency will change,” says Joan Claybrook, who ran the agency during Jimmy Carter’s presidency. “If it doesn’t they’re in trouble.”

TIME Autos

More Than 200,000 GM Cars Have Been Recalled for a Brake Defect

Los Angeles Auto Show Previews Latest Car Models
The Cadillac 2013 XTS is unveiled during the LA Auto Show on November 16, 2011 in Los Angeles. Kevork Djansezian—Getty Images

The problem has been reported in the 2013-2015 Cadillac XTS and the 2014-2015 Chevrolet Impala

The latest in a series of recalls from General Motors was announced over the weekend, with hundreds of thousands of cars being pulled off the roads due to defective parking brakes.

The National Highway Traffic Safety Administration (NHTSA) said that brake-indicator lights in at least two GM models failed to illuminate when the brake was not retracted completely, according to Reuters.

“Brake pads that remain partially engaged with the rotors may cause excessive brake heat that may result in a fire,” NHTSA said.

The problem has been reported in the 2013-2015 Cadillac XTS and the 2014-2015 Chevrolet Impala, and General Motors said 221,558 vehicles have been recalled so far.

“GM is not aware of any crashes, injuries or fatalities as a result of this condition,” the company said.

General Motors has already recalled more than 15 million cars this year, because of a problem with ignition switches that has resulted in at least 19 deaths.

[Reuters]

TIME Automobiles

GM Lawyer Increases Death Toll From Recalled Cars

General Motors CEO Mary Barra Testifies Before Senate Committee About GM's Recalls
Attorney Kenneth Feinberg testifies during a hearing before the Consumer Protection, Product Safety, and Insurance Subcommittee of the Senate Commerce, Science and Transportation Committee July 17, 2014 on Capitol Hill in Washington, DC. The subcommittee held hearing on "Examining Accountability and Corporate Culture in Wake of the GM Recalls." Alex Wong—Getty Images

The figure has now been raised to 19 and is expected to go even higher

A lawyer for General Motors has raised the number of eligible compensation claims for deaths related to defective ignition switches in millions of recalled cars.

The death toll from the recalled cars is 19, not 13, as GM had originally indicated. That’s according to an assessment released Monday by GM lawyer Kenneth R. Feinberg, who manages a compensation program for accident victims and surviving families.

The Detroit-based automaker in February recalled more than 2 million of its cars after it acknowledged that switches in the vehicles were prone to shifting, cutting the engine’s power and deactivating airbags and other safety systems. The company had previously said it believed that the faulty switches had led to 13 deaths.

GM has given Feinberg “complete and sole discretion over all compensation awards,” and has waived its right to disagree with his numbers, the company has said. GM said on Monday that it accepts the new, higher assessment of the death toll, Bloomberg reports.

“Ken Feinberg and his team will independently determine the final number of eligible individuals,” a spokesman for GM told Bloomberg. “What is most important is that we are doing the right thing for those who lost loved ones and for those who suffered physical injury.”

GM has so far received 125 death claims, and it is not known how many of those claims might be found eligible in the coming weeks or months. The auto giant is expected to receive even more claims before its Dec. 31 deadline.

GM has also received 58 claims for serious injuries, including brain damage, pervasive burns, double amputation, paraplegia and quadriplegia. Four of those claims have been deemed eligible. Another 262 claims have been received for lesser injuries that required hospitalization or outpatient treatment, eight of which have been accepted.

GM has said its compensation program has no cap and that it will pay any sum that Feinberg “deems appropriate in each and every individual case.” In July, it said it had allocated between $400 million and $600 million for the fund, though it has not yet said how much each individual claim so far approved is worth.

TIME Autos

GM Will Make Cars With Motion Sensors to Keep Your Eyes on the Road

Detroit Exteriors And Landmarks
A general view of the Cadillac showroom in the General Motors Renaissance Center on August 14, 2014 in Detroit, Michigan. Paul Marotta—Getty Images

Eye and head tracking sensors will make it harder to text while driving

General Motors is reportedly installing sensors in its next generation of cars that will detect drivers’ eye and head motions and alert drivers to prolonged moments of distraction.

The Financial Times, citing unnamed sources, reports that GM’s safety parts supplier, Takata, has signed a deal with Seeing Machines to purchase upwards of 500,000 tracking devices that use cameras to detect subtle signs of distraction, such as the rotation of the head or frequency of blinks.

GM declined to comment on the deal, but people with knowledge of the plan confirmed to the Financial Times that the devices would be used to keep drivers’ attention on the road.

[FT]

MONEY Autos

WATCH: Americans Still Love Buying SUVs

GM lost billions of dollars due to recalled vehicles, but sales are actually up thanks largely to SUVs.

TIME auto industry

GM Recalls Another 7.6 Million Vehicles

Six recalls announced on Monday greatly expand total number of recalled vehicles to over 25 million

GM announced Monday that there will be six more safety recalls involving 7.6 million vehicles made from 1997 to 2014.

Among the recalled vehicles, GM said it is aware of seven crashes, eight injuries and three fatalities. “We undertook what I believe is the most comprehensive safety review in the history of our company because nothing is more important than the safety of our customers,” GM CEO Mary Barra said in a statement on the company’s website. “Our customers deserve more than we delivered in these vehicles.”

“We have worked aggressively to identify and address the major outstanding issues that could impact the safety of our customers,” Barra said. “If any other issues come to our attention, we will act appropriately and without hesitation.”

The latest recall brings the number of vehicles affected to over 25 million, USA Today reports. GM expects to set aside $1.2 billion in the second quarter for the cost of recall-related repairs, which includes $700 million already announced.

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