Audit shows problems at Samsung suppliers in China

SEOUL, South Korea — Samsung said Tuesday an external audit found labor violations at dozens of its suppliers in China including failure to provide safety gear and excessive working hours.

Samsung Electronics Co. released the findings covering 100 of the company's Chinese suppliers in its annual social responsibility report. It has at least 200 suppliers in China.

Samsung, the world's largest smartphone maker, faced allegations in 2012 of child labor and other violations in China. New York-based labor rights group, China Labor Watch, said working conditions at Samsung suppliers were "inhumane" and the company vowed to eliminate illegal overtime by the end of 2014.

The audit conducted last year found 59 Chinese suppliers did not provide sufficient protective goggles, masks and other safety equipment to workers while 48 let minors, which were classified as employees aged 16-18, handle chemicals. Most of the audited factories did not comply with legally permitted overtime hours.

Other violations included lack of evacuation drills or exclusion of night shift workers from the drills at 40 suppliers. Part-time workers were not compensated for overtime working hours at 39 suppliers.

The South Korean company said it had subsequently demanded suppliers comply with legal hours and reduce overtime. It said it asked suppliers to provide protective gear and conduct regular training. Suppliers that get low marks would face penalties.

Samsung conducted its own audit of Chinese suppliers in 2012 and said it found instances of Chinese workers working beyond legal hours.

It said no instance of child labor was found in the latest audit, which was carried out by a third party auditor certified by the Electronic Industry Citizenship Coalition, an electronics industry group.

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Birth control ruling sparks political clash

WASHINGTON — Republicans called it a win for religious freedom. The decision of the Supreme Court, they said, is further evidence the country's new health care law is deeply flawed.

The claims of victory arrived almost immediately after the high court ruled Monday that some companies need not provide contraception to women as required by President Barack Obama's signature domestic policy achievement. Yet there's a risk for the GOP in crowing too loudly.

Republicans for years have tried to make inroads with two groups that tend to favor Democrats: women and younger voters. And as popular as the court's decision will be with the Republican base, it's likely to be just as unpopular this year and into 2016 with those who depend on insurance to pay for birth control — a group that includes women and younger voters.

"The thought of your boss telling you what kind of birth control you can and can't get is offensive and it certainly is motivating to women to vote," said Cecile Richards, president of Planned Parenthood Action Fund, which plans to spend several million dollars this year to campaign for Senate candidates.

The Supreme Court ruled 5-4 that some companies can hold religious objections allowing them to opt out of health law's birth control coverage requirement. While the ruling does not address the heart of the Affordable Care Act, it's a setback for Democrats and amplifies a longstanding argument from conservatives that the law they call "Obamacare" intrudes on religious liberties as part of a larger government overreach.

"This is a clear and decisive defeat against Obamacare and a victory for the rights of all Americans," Republican National Committee Chairman Reince Priebus said in a fundraising appeal distributed less than three hours after the Supreme Court ruling.

But Republican leaders such as Priebus were careful to avoid mentioning the impact on women and their reproductive rights, underscoring the delicate balance the GOP must strike as it works to improve its image among women. The party is still recovering from a series of insensitive comments made by GOP candidates in the 2012 election, including Missouri U.S. Senate candidate Todd Akin, whose campaign crumbled after he said women's bodies were able to avoid pregnancy in cases of "legitimate rape."

"Republicans have to be careful about not appearing as though they're anti-contraception. This is a constitutional issue," said Katie Packer Gage, a GOP strategist whose firm advises Republicans on navigating women's issues. "We have to be very, very cautious as a party."

Polls suggest that most people — and a larger majority of women — think for-profit companies should be required to cover the cost of birth control. A Gallup survey conducted in May found that 90 percent of Americans, including 88 percent of Republicans, see the use of birth control as morally acceptable.

Democrats said the ruling would shine a spotlight on access to birth control and dovetail with a strategy by the party to mobilize female voters on issues such as raising the minimum wage and supporting pay equity for women.

In Colorado, for example, Democratic Sen. Mark Udall's first TV ad noted Republican Rep. Cory Gardner's past sponsorship of a bill to outlaw abortions in cases of rape and incest and support for an effort to grant an embryo the same legal rights as a person, which could have outlawed some types of birth control and all abortions. Gardner now says he opposes the "personhood" measure.

In Iowa, Democrats have signaled plans to highlight Republican Joni Ernst's support of a personhood amendment to the state's constitution. In Michigan, Democrats backing Senate candidate Gary Peters have sought to tarnish Republican Terri Lynn Land's record on reproductive rights, prompting her to air her own ad in April declaring, "As a woman, I might know a little bit more about women than Gary Peters."

It won't be clear until November whether women will respond to such appeals.

Fewer young women typically vote in midterm elections compared with presidential years. And they are particularly disengaged from this year's races: 63 percent of women under age 30 in an AP-GfK poll conducted before the ruling reported they "don't care very much" which party wins control of Congress. Just 21 percent said they were certain to vote in November.

Writing for the court's conservative majority, Justice Samuel Alito suggested the White House could resolve the issue by broadening a birth control compromise it created earlier for religion-oriented nonprofits. In those cases a third party — usually an insurer — can cover contraceptives at no charge to the affected employees, and the government absorbs the cost.

But White House spokesman Josh Earnest signaled the administration may not take that route. Instead, he challenged Congress to pass legislation to address the coverage gap for women. That could put some Republicans in a difficult spot politically, but not right away. For now, they're enjoying what many viewed as a win.

"When Obamacare and its impact on people is front and center in the political debate, it's just not good news for Democrats," Republican strategist Kevin Madden said.

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Peoples reported from Boston. Associated Press writer Ricardo Alonso-Zaldivar and AP Director of Polling Jennifer Agiesta contributed to this report.

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New recalls and questions about auto parts safety

DETROIT — The ignition switch recalls now engulfing General Motors and Chrysler are raising new questions about the safety of the parts across the American auto industry.

GM's safety crisis deepened dramatically Monday when the automaker added 8.2 million vehicles in North America to its ballooning list of cars recalled over faulty ignition switches. GM has now issued five recalls for 17.1 million cars with defective switches, spanning every model year since 1997.

On the same day, Chrysler recalled almost 700,000 vehicles in North America because its ignition switches — like GM's — can slip from the "run" to the "accessory" position while driving. The Chrysler action expands an earlier recall of 2010 Chrysler Town and Country and Dodge Grand Caravan minivans and Dodge Journey crossovers. Models from 2007 to 2009 are now included.

GM's debacle caused other manufacturers to investigate their own switches and other potential defects. A recent spate of air bag recalls is probably tied to those internal investigations, said Karl Brauer, a senior industry analyst with Kelley Blue Book.

The government is also reviewing the switches.

Brauer said he does not think the ignition switch recalls will expand across the industry. Manufacturers all have their own switch designs and use different suppliers.

But the possibility is there, and buyers should be aware of the potential for cars to slip into the wrong mode. If a car comes out of the "run" position, the power steering and brakes can stop working, which can cause drivers to lose control. The air bags also won't function. GM has urged drivers to remove excess items from their key chains that could weigh down the keys.

"I think the ignition switch thing is fairly specific to GM, but it will be interesting to see. Were other companies letting their standards fall?" Brauer said.

GM's latest recalls involve mainly older midsize cars and bring its total recalls in North America to 29 million this year, surpassing the 22 million recalled by all automakers last year.

The new GM recalls cover seven vehicles, including the Chevrolet Malibu from 1997 to 2005, the Pontiac Grand Prix from 2004 to 2008, and the 2003-2014 Cadillac CTS.

The company is aware of three deaths, eight injuries and seven crashes involving the vehicles, although it says there's no clear evidence that faulty switches caused the accidents. Air bags did not deploy in the three fatal accidents, which is a sign that the ignition was out of position. But air bags may not deploy for other reasons as well.

A GM spokesman could not say Monday if more recalls are imminent. But this may be the end of the recalls associated with a 60-day review of all of the company's ignition switches. At the company's annual meeting earlier in June, CEO Mary Barra said she hoped most recalls related to that review would be completed by the end of the month.

Brauer said the number of recalls — while huge — may be a good thing for the company in the long run.

"I think there's a new standard for what GM considers a potential safety defect, and Mary Barra has no tolerance or patience for potential safety defects that are unresolved," he said.

In a statement Monday, Barra said the company "will act appropriately and without hesitation" if any new issues come to light.

Lance Cooper, a Marietta, Georgia, attorney who is suing GM, said he expects even more recalls. A company funded investigation of the ignition switch problems by former U.S. Attorney Anton Valukas found that GM had a dysfunctional corporate culture in which people failed to take responsibility to fix the problems, Cooper said.

"Cars got made that were defective. The buck kept getting passed, and this is what happened as a result," Cooper said.

The announcement of more recalls extends a crisis for GM that began in February with small-car ignition switch problems. GM recalled 2.6 million older small cars worldwide because of the switches.

The problem has drawn the attention of the National Highway Traffic Safety Administration, the government's road safety agency. On June 18, the agency opened two investigations into ignition switches in Chrysler minivans and SUVs, and acknowledged that it's looking at the whole industry.

The agency is looking into how long air bags remain active after the switches are moved out of the run position. In many cases, the answer is less than a second.

GM's recalls on Monday bring this year's total so far to more than 40 million for the U.S. industry, far surpassing the old full-year record of 30.8 million from 2004.

The latest recalls came the same day the company's compensation consultant, Kenneth Feinberg, announced plans to pay victims of crashes caused by the defective small-car switches. Attorneys and lawmakers say about 100 people have died and hundreds were injured in crashes, although Feinberg said he didn't have a total.

Feinberg said the company has placed no limit on how much he can spend in total to compensate victims. But victims of the new set of recalls announced Monday can't file claims to the fund, which deals only with the small cars.

In the original recall, the ignition switches did not meet GM's specifications but were used anyway, and they slipped too easily out of the "run" position.

The vehicles recalled Monday have switches that do conform to GM's specifications. In these cases, the keys can move the ignition out of position because of jarring, bumps from the driver's knee or the weight of a heavy key chain, GM says. The cars recalled Monday will get replacement keys. The small cars recalled in February are getting new ignitions.

The Detroit company said it plans to take a $1.2 billion charge in the second quarter for recall-related expenses. Added to a $1.3 billion charge in the first quarter, that brings total recall expenses for the year to $2.5 billion.

GM also announced four other recalls Monday covering more than 200,000 additional vehicles. Most are to fix an electrical short in the driver's door that could disable the power locks and windows and even cause overheating.

GM has announced 54 separate recalls this year. The company's stock fell 32 cents, or just under 1 percent, to close Monday at $36.30.

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Asian stock markets inch higher

SEOUL, South Korea — Global stock markets mostly inched higher Monday as investors prepared for a busy week of economic news that will give new clues about the strength of the global recovery.

European markets were steady in early trading. Britain's FTSE and France's CAC 40 were nearly flat at 6,761.24 and 4,438.43 respectively while Germany's DAX added 0.3 percent to 9,845.17.

Wall Street was set for a tepid session. Dow Jones futures were down 0.1 percent and S&P 500 futures were little changed.

Trading this week is likely to turn on data from China and the U.S. and a European Central Bank meeting. Last week, Asian stock markets were buffeted by weak U.S. consumer spending and sluggish growth in Chinese industrial profits.

A preliminary reading of China's manufacturing for June, due Tuesday, will be scrutinized for evidence the slowdown in the world's No. 2 economy has stabilized.

Monthly U.S. employment figures are due Thursday. On the same day, the European Central Bank holds its monthly rate-setting meeting, where it is widely expected to stick with its easing stance.

In Asia, most markets closed higher. Japan's benchmark Nikkei 225 gained 0.4 percent to 15,162.10, reversing morning losses. Japan's economy ministry said the country's industrial output recovered slightly in May from a fall in the previous month.

South Korea's Kospi was up 0.7 percent to 2,002.21 and China's Shanghai Composite Index advanced 0.6 percent to 2,048.33.

Stocks in Taiwan, Thailand and Indonesia also rose. But Australia's S&P/ASX 200 fell 0.9 percent to 5,395.70, one day ahead of the central bank's rate-setting meeting.

Hong Kong's Hang Seng shed 0.1 percent to 23,190.72.

In energy trading, benchmark U.S. crude for August delivery was down 42 cents to $105.32 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 10 cents on Friday.

In currencies, the dollar slipped to 101.38 yen from 101.41 yen late Friday. The euro rose to $1.3660 from $1.3648, reversing an earlier drop.

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Philips to separate its LED parts arm

AMSTERDAM — Royal Philips NV said Monday it plans to spin off its fast-growing LED parts business into a separate company, to win new customers and to capitalize as manufacturers integrate LED lights into an ever-widening array of products.

Philips, the world's largest lighting producer, says the separation will be complete by early 2015 but it is not clear yet whether the division will seek a separate listing, or if it will remain within Philips for a time before it is sold. Philips executive Pierre-Yves Lesaicherre, who currently heads the parts division, will remain as CEO of the new company.

LED sales are surging, as they can be programmed to emit light of different colors and need less energy than traditional lights. Manufacturers such as Philips, General Electric and Cree of the United States, as well as Germany's Osram, which was spun off from Siemens last year, all saw their LED sales rise at well above double digit rates in 2013, even as the price per bulb fell.

Philips' LED parts business, which is a major supplier to carmakers, had sales of 1.4 billion euros ($1.91 billion) in 2013.

Philips is prepared to become a minority shareholder in the parts business and will remain a big customer as it continues to sell its own branded lights and services, said Philips Chief Executive Frans van Houten.

Van Houten said the spin-off was not due to concerns LEDs themselves are becoming a commodity, despite recent price declines.

"I can assure you it is a very sound business with great margins and good profitability," he said. "At this stage, given the strong intellectual property and differentiation" of Philips' LEDs, "we think we can compete very well with Asian competitors."

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Japan's mixed data for May show economy slowing

TOKYO — Mixed economic data for May suggests Japan's economy is continuing to slow after a sales tax increase at the beginning of the second quarter.

Government figures released Monday and last Friday showed that housing starts and household spending fell in May while industrial output grew less than expected.

Japan's economy was the one of the best performing in the industrial world in the first three months of the year, growing 6.7 percent from the year before. But the April 1 increase in Japan's sales tax to 8 percent from 5 percent is expected to cause a contraction in the economy for the April-June quarter because demand has fallen off following a rush of purchasing to beat the tax hike.

Factory output in the world's third-largest economy climbed 0.8 percent in May from a year earlier, and was up 0.5 percent from the month before, the economy ministry reported. That was lower than most forecasts, but an improvement from a 2.8 percent drop in April.

Higher output of machinery, cars and electronic devices accounted for most of the increase, the ministry said. Since manufacturers are reporting rising inventories, they are forecasting a decline in output in June before a further recovery in July and beyond, the report said.

Housing starts fell 15 percent in May from the year before, the government reported. Construction starts have slowed since hitting a peak in October last year.

Much of the growth in demand before the sales tax was raised was attributed to construction of new homes. Now, many lots that were cleared of older structures last year remain idle due to the fall-off in construction. The tax increase is part of measures aimed at containing Japan's vast public debt.

Household spending fell 8 percent in May, the sharpest drop in three years, following a surge in spending early in the year.

Assuming output falls as expected in June, Japan's manufacturing will likely contract 3.1 percent in the April-June quarter, Marcel Thieliant, an economist with Capita Economics, said in a commentary Monday.

"The rise in industrial production in May suggests that the sector is recovering from the weakness caused by the consumption tax hike," he said.

Prime Minister Shinzo Abe has championed an economic strategy aimed at breaking Japan free of years of deflation. The theory is that companies and households will spend more now if they expect things to cost more in the future due to inflation.

Last week, Abe released the latest iteration of reforms he is proposing to help sustain growth and boost competitiveness, vowing to trim the country's massive public debt and spur companies to spend more and diversify their employment practices.

But for most families struggling to get by on incomes that have been falling since 1997, wages must rise to increase or keep purchasing power constant. Despite some of the biggest wage increases in years for employees of some of the biggest companies, such as Toyota Motor Corp., income of salaried households dropped a real 4.6 percent from the year before in May, to an average 421,117 yen (about $4,160), the eighth straight monthly decline.

So far, wage increases have been mainly in limited categories of workers, most of whom are contract or freelance employees in areas such as trucking and construction.

While there are shortages of labor in some key industries, the recovery so far is not helping push base wages higher for workers as a whole. Similar to the "jobless recovery" in the U.S., Japan's rebound so far has mostly boosted the hiring of temporary or contract workers, as rising prices and tax hikes eat into consumer purchasing power.

The consumer price index climbed 3.4 percent in May from a year earlier, the fastest increase since the oil shock in 1982, as 10 percent higher rates for electricity and a hike in the sales tax pushed costs sharply higher.

The central bank estimates that about 2 percent of the increase can be attributed to the increase in the tax rate to 8 percent from 5 percent.

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You can follow Elaine Kurtenbach on Twitter at: http://www.twitter.com/ekurtenbach

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With boom, worry over fate of older Boston properties

Corporate tenants, their employees and tourists are all fueling Boston's building boom, but developers and urban planners also will need to consider what will happen to all of the older buildings that are left behind.

"You can in fact build a new building for less than acquisition cost," said Ray Ritchey, executive vice president of Boston Properties. "Tenants are going to new buildings to rebrand themselves. ... When you see the Innovation District and buildings going up, it really needs to be tempered with what happens to the buildings that are left behind."

At an Urban Land Institute forum yesterday, James Clayton, vice president of research at Cornerstone Real Estate Advisors, said money is flowing to both existing properties and new development, noting that his company has been associated with properties as varied as the Copley Square Hotel and Fan Pier.

"We have investors who want well-leased core property because they're after income," Clayton said, "whereas others are after total return, and they're willing to take more risk."

Ted Tye, managing partner at National Development, noted that about 5,300 apartments also are going up in Boston over the next several years, and tenants are looking for amenities.

"We're thinking about bikes, rental cars, dogs," Tye said. "The answer really is in variety."

The challenge, however, is to provide all of that at an affordable price, he said.

"We can have all the job growth in the world," Tye said, "but we need to have affordability, otherwise we're going to lose people to other cities."

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Walsh seeks more Hub Wi-Fi

Mayor Martin J. Walsh is pitching a plan to expand the city's high-speed Internet network to connect all Boston Public School buildings and increase the number of public Wi-Fi hotspots in the Hub.

Walsh wants to spend $10.75 million over five years to expand the city's fiber-optic cable network to hook up 100 additional schools to high-speed Internet. The proposal is included in Walsh's capital budget, which is before the City Council.

"The mayor is committed to investing in improving the Internet connections for our schools and the students we serve," said Kate Norton, a spokeswoman for Walsh.

The fiber-optic network now connects about 200 city buildings, including police and fire stations and 26 schools. There are 128 schools in the city.

The move to bolster the Internet capability comes after the schools spent 
$3 million on 10,000 Google Chromebooks, ultra-light laptops based on Google's Chrome browser. The laptops work without Internet access, but are designed to be used while connected.

City Councillor Michelle Wu said increasing Internet access for students is crucial. "It's important that Boston is providing the infrastructure for our kids, our students and our families," Wu said.

The expanded fiber-optic network also will be used to support public Wi-Fi. In May, Walsh announced Wicked Free Wi-Fi, Boston's new public wireless program that will focus on the city's Main Streets Districts. Most existing hotspots are built on top of access points in the current fiber-optic network.

Walsh has also repeatedly teased plans for a citywide fiber-optic network, saying "stay tuned."

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New owner at Fox 25 after station swap with Cox Media

Boston TV station Fox 25 has a new owner under a surprise TV station swap announced yesterday — and the first big move is general manager Gregg Kelley, who is heading to the West Coast to helm two TV stations.

Under the switch-up, Fox Television Stations is giving Fox 25 and a Memphis TV station to Cox Media Group while Cox gives Fox two San Francisco stations.

Fox 25 will remain a Fox affiliate. Kelley is moving to San Francisco to run KTVU-TV and KICU-TV, a Fox spokeswoman confirmed. Kelley will stay on in Boston until they ink the deal.

Al Tompkins of the Poynter Institute said Fox is moving up a market with the TV station trade, as San Francisco is the sixth-largest TV market in the country and Boston is seventh.

San Francisco is also home to the 49ers football team and Fox has the TV broadcasting rights to NFC games, Tompkins noted. (The Patriots are in the AFC).

"I suspect that's the biggest motivator behind this," Tompkins said of the TV market boost and football broadcasts.

As for any on-air changes at Fox 25 which might affect morning show personalities or longtime evening anchor Maria Stephanos, Tompkins said "anything could happen" but a new owner "doesn't usually walk in and clean house on the air."

"They don't want to disturb viewers," Tompkins said.

In a joint press release, Cox President Bill Hoffman said: "This is the first time we have had a media presence in Boston and Memphis, and CMG is excited about the prospects that WFXT-TV and 
WHBQ-TV bring to our business. These new stations fit nicely into CMG's broadcast portfolio, and we look forward to having a great news presence in these two markets and competing hard with the fine local broadcasters who already reside there."

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AG to probe CGI payments

The state will shell out an additional $35 million to developer CGI in a settlement over the disastrous Health Connector website, and Attorney General Martha Coakley has launched an investigation into the Virginia-based company, officials said yesterday.

"There were deficiencies and shortcomings on our part and CGI's part," said state Obamacare czar Maydad Cohen. "That has been well-documented by independent reports and by virtue of the fact we're in the position we're in today."

All totaled, CGI will have recouped $52 million of the original $69 million contract — a cost that skyrocketed to $89 million thanks to cost overruns. But the site was doomed from day one, baffling users with glitches that blocked people with hyphenated names and forced others to falsely identify themselves as prison inmates or mental patients to enroll.

"What a sad state of affairs that you spend that amount of money and there's no accountability at all," said Joshua Archambault of the Pioneer Institute. "If this were the private sector, there would be serious consequences for wasting this kind of money."

The agreement gives Coakley the power to try to recover up to $12 million from CGI under the False Claims Act.

"The failings of the CGI-developed website have been unacceptable, and we are conducting an investigation into their actions to seek to recover money back for taxpayers," said spokesman Brad Puffer.

But GOP gubernatorial candidate Charlie Baker shot back: "Investigations cannot undo the taxpayer dollars wasted and the disruption of families' access to health care."

Gov. Deval Patrick defended the settlement in a statement: "This is a pragmatic way to wind up a frustrating relationship. CGI has been a disappointing partner."

CGI had continued working on the day-to-day project as recently as this week, even though Patrick had announced in March that the two sides were "parting ways."

Part of yesterday's settlement included determining the ownership of intellectual property — items such as software and code — that wasn't clearly spelled out in the contract.

CGI workers will remain on the job for the next three months in the transition.

"This agreement recognizes the important contributions made by CGI throughout the project and during the past three months when hundreds of CGI professionals stayed on the job," said CGI spokeswoman Linda Odorisio.

While state officials had blamed CGI for the disaster, documents unearthed by the Herald showed that in-fighting among Patrick administration officials, frequently changing work orders, and the state's obsession with building the "Rolls-Royce" of insurance portals also contributed to the cyber-meltdown.

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