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Ford's Mulally Earns $18 Million

DEARBORN – Ford Motor Co. CEO Alan Mulally’s 2009 compensation package totaled nearly $18 million, including stock options and grants, the company reported.

Mulally’s compensation was $1 million more than he received in 2008, even though he got less cash because of a voluntary reduction that dropped his cash pay from $2 million to $1.4 million, reported The Detroit News.

Ford swung back to a profit of more than $2.7 billion last year after years of staggering losses. So, most of Mulally’s pay increase was a reflection of the increased value of the company’s stock, which traded at about $8.50 a share when he was hired in September of 2006 and closed at $13.99 a share Monday

“When CEOs take a lot of stock, you can’t complain because they’ve got to ride it up and ride it down just like the shareholders,” said turnaround expert Van Conway of Conway MacKenzie Inc. in Birmingham.

“At $14, it’s hard not to give the quarterback a little credit here. Ford avoided a bailout. They avoided bankruptcy. And shareholders would have lost everything if they had filed.”

By comparison, General Motors Co. Chairman and CEO Edward Whitacre Jr. this year will receive a compensation package worth $9 million.

The United Auto Workers also has been a big beneficiary of Ford’s rising share price.

Last February, the union received 362 million stock warrants with a $9.20 a share strike price that made them all but worthless — then — as part of a deal to take over responsibility for hourly retiree health care. At today’s prices, however, the UAW has netted more than $1.5 billion.

“Compensation typically goes up when companies are profitable,” Conway said.

One person who has yet to receive any increased rewards is Executive Chairman Bill Ford Jr., who has been working without compensation since 2005.

Ford spokesman Mark Truby said Bill Ford, the great-grandson of Henry Ford, will continue to forgo compensation “until the board determines we’ve achieved automotive profitability for a full year.”

When that happens, his total compensation for 2009, including stock options and grants, will be $16.8 million.

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Toyota to Replace Accelerator Pedals for Owners Who Are Unhappy With Repairs

DETROIT — After reports of sudden unintended acceleration in cars it has already fixed, Toyota has told dealers to provide replacement accelerator pedals to owners unhappy with repairs, a company document showed on Monday, The New York Times reported.

Under the policy, Toyota has told dealers to provide replacement pedals only if customers’ cars had already been repaired, and the owners had asked for them.

“Accelerator pedal replacement is based on specific customer request only,” said the memo, which was addressed to dealers, service managers and parts managers. “Dealers are not to solicit pedal replacement.”

The memo, originally dated February 2010, was reissued on Thursday with the part numbers for the replacement pedals and the procedure dealers should follow.

A spokesman for Toyota, Brian R. Lyons, said the company had agreed with the National Highway Traffic Safety Administration to provide the pedals as part of its recall. The safety agency has received more than 60 complaints of unintended acceleration from owners whose cars had been repaired.

Lyons said Toyota had already fixed 1.3 million vehicles, and that the number of complaints it had received after the repairs was “very low.” But he said, “There have been cases where the pedal feel was not satisfactory to the consumer or the dealer. In those cases, a new pedal has been put in.”

Toyota told dealers to begin installing a small metal bar in those vehicles that was intended to keep condensation from forming inside the pedal assembly, which the company said could cause the pedal to become stuck.

Toyota said the cars from owners who complained about the repair most likely had not been fixed properly, and said the remedy should address the problem when done correctly.

Lyons said the appearance between the repaired and replacement pedals is “almost identical. The change is so subtle.”

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For Now, Auto Industry Unsure What Health Care Bill Means

WASHINGTON – The auto industry, which was largely noncommittal during the yearlong debate about changes to the national health care system, remains uncertain about the effects of the new health care legislation on the industry, reported Automotive News.

General Motors Co., American Honda Motor Co. and the National Automobile Dealers Association are reviewing the new health care bill that passed the House last night to determine what it means to automakers, suppliers and dealers.

“Throughout ongoing policy talks, GM will continue to work constructively to ensure its long-standing priorities of improved health care quality and cost containment are included in the bill’s implementation,” GM spokesman Greg Martin said today.

Honda’s chief Washington lobbyist, Edward B. Cohen, said he is awaiting Senate action. “There are a couple of issues that we are not sure how they will look after the Senate acts on the House bill,” he said today.

Said Ed Tonkin, this year’s chairman of NADA: “Nobody knows exactly what’s in the bill that was voted on. I know it’s going to be expensive.”

NADA has been monitoring the legislation through coalitions in which it is involved, such as the U.S. Chamber of Commerce, Tonkin said.

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Toyota Residuals Increases Along with Rise in Industry

IRVINE, Calif. – According to Kelley Blue Book Values data to be published in the company’s May/June Residual Value Guide, the average year-over-year change in 36-month residual values of new Toyota models is forecasted to increase by 4.2 percentage points (based on the vehicles’ MSRP).

While Toyota’s increase is below the industry average increase of 6.2 percentage points, it still outperforms a number of other brand increases. Year-over-year changes in residual values in the May/June release are largely being driven by changes within the vehicle segments.

Kelley Blue Book lowered its outlook on current used Toyota vehicle values in early February, with affected models dropping anywhere from 1-3 percent depending on the model.

In early March, Toyota began offering various incentives to bring consumers back to the brand. Toyota’s recall, lingering in the press and the introduction of these incentives raised questions about Toyota’s residual values. According to Kelley Blue Book analysts, shifts in incentive spending often impact current used-car values much more than future values otherwise known as residual values.

At this time, Kelley Blue Book’s residual analysts do not believe that the company will make zero percent financing a permanent fixture and therefore values will not be impacted greatly three or four years from now.

“Incentives offering lower interest rates have less of an impact on future values than cash incentives,” said Eric Ibara, director of residual value consulting, Kelley Blue Book. “Attractive lease payments can increase market penetration for certain models and create a larger volume of lease returns for the banks in the end. What remains to be seen is the larger volume of leases Toyota’s incentives create, as the volume is what will have a detrimental impact on future residual values.”

Toyota’s recent attractive incentive offers appear to be driving a rebound in consideration according to Kelley Blue Book Market Intelligence data. Seven percent of car shoppers say they were not considering a Toyota prior to the incentive announcements, but now they are. In addition, the week-over-week percentages of consumers who say they would never consider a Toyota again, decreased (from 17 to 13 percent).

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PayTeck’s Secure System Blocks Damage from Inside Invasion

AUSTIN, Texas — When a disgruntled employee decided to get even with the auto dealership that fired him, he returned the favor by logging in to the dealership’s online vehicle immobilization system and sabotaging 100 vehicles by interrupting the starter function or, in some cases, by activating their horns.

News stories released on Wired and other media outlets called the former worker a “hacker”—but with the right information in his hands (login/password), the man was no Internet whiz cracking code. This was a case of insider invasion. He knew how to activate the WebTeck system connected to vehicles, which is generally only activated when the owners fail to pay.

The good news is that Pay Technologies LLC (PayTeck), creator of WebTeck and other car starter interrupt systems, responded immediately to the dealer’s service call, first changing all passwords and then providing a list of actions for the dealership to reverse all of the former employee’s vehicle shut-off and/or horn commands.

Because of the PayTeck software system, the necessary information was captured and provided to the Austin police department. The police examined those records and traced the unauthorized access back to Omar Ramos-Lopez, 20, who was charged with computer intrusion on March 16.

“Over the last 10 years, PayTeck has developed very secure, high-quality equipment and provides dealer support that goes above and beyond troubleshooting,” said James Krueger, president and CEO of the Cleveland, Ohio-based firm. “The situation was handled seamlessly, and because of the information we maintain, we can react in the rare case that an upset occurs.”

To date, Payteck has hundreds of thousands of these units in service and working 24/7. This Texas incident is the only time the system has been breached. And the reported “hacking” was actually abuse of login and password. This is called “inside invasion,” the most damaging type of system abuse and business abuse. That’s because the offender knows the company and systems, and he or she could operate years without notice and do lots of damage.

“Logins and passwords are the keys to door at the dealership, and when employees leave, you need to take the keys back or change them,” Krueger emphasized. ”When personnel changes occur, dealers are encouraged to immediately change logins and passwords.”

PayTeck changes usernames and passwords at any time. While it’s the dealer’s responsibility to manage the system, Krueger says PayTeck provides consultation and technological backup to help dealers make smart decisions before connecting cars to the system—and after cars are connected to make sure everything is running smoothly.

Ultimately, PayTeck and similar systems are an alternative to the repo man, but they serve an important function of allowing dealers to take a chance on car buyers with less-than-perfect credit. Rather than declining them the opportunity to drive a car, the dealer can install a system like PayTeck’s WebTeck Plus in the car, and gain some peace of mind knowing that the system can be implemented to shut off a car’s starter if payment is not received in a timely manner.

“It’s insurance for dealers’ accounts receivables and a tool that allows salespeople at dealerships to extend car ownership to these risky customers,” Krueger explained.

The secure technology works like this: Commands are issued through a website that are relayed through wireless pager or cellular networks to allow dealerships to disable a car’s ignition system or start its horn. The dealer decides which cars get controllers, at what point to activate the system, and who at the dealership gets a login and password to immobilize vehicles. Some dealers choose one point person to manage the system; others distribute login/passwords to hundreds of individual employees.

“What we hope dealers take away from this story is that it’s important to manage logins and passwords carefully, and to invest in a system that is secure and backed up by the type of technological support that will ensure that any breaches, should they occur, are managed efficiently and effectively,” Krueger said.

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