Plus: Recalls Tarnish Toyota’s Reputation, U.S. GDP on the Rise and 10+2 Enforcement Takes Effect.

State of the Union Calls for Job-Creation Measures
The day before the U.S. Department of Labor reported that new jobless claims in the U.S. dipped after rising over two consecutive weeks, President Obama used his first State of the Union speech to focus on employment, particularly the loss of more than 7 million jobs since the start of the recession in December 2007.

“Jobs must be our No. 1 focus in 2010, and that is why I am calling for a new jobs bill tonight,” Obama said.

To hasten job creation, the president said he’s proposing a new small-business tax credit for firms that hire new workers or raise wages. He said it will go to more than 1 million businesses. “Obama wants to give companies a $5,000 tax credit for each net new worker they hire in 2010,” the Associated Press reported. A separate measure would offset the additional Social Security taxes that employers pay for boosting wages or hours of existing workers.

He called for an extension of tax incentives to accelerate equipment purchases and elimination of capital gains taxes on small business investments. Extending through 2010, the temporary tax incentive “would save companies that make purchases of equipment such as tractors, wind turbines, solar panels and computers a total of $38 billion over this year and next by allowing a 50 percent write-off of the cost in the first year,” Bloomberg News reported. According to Monica McGuire, senior policy director of taxation for the National Association of Manufacturers, “That’s a twofer for manufacturers. It helps the sellers of capital equipment and it helps the buyers of capital equipment. It’s more than a net-positive.”

Obama also said the government should use $30 billion of the money paid back by banks bailed out through the Troubled Asset Relief Program to assist community banks that give loans to small businesses. He also described high-speed rail and other infrastructure projects that he said will put Americans back to work. The president set a goal of doubling U.S. exports over the next five years, which would support 2 million jobs. He encouraged financial reform and emphasized American innovation and investment in education.

“And to encourage [...] businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America,” Obama said during his State of the Union speech.

NAM President John Engler said President Obama’s emphasis on jobs creation during last week’s speech must be followed by job-growth proposals in Congress, including tax reductions for businesses. (Source: Plant Engineering)

Delivering the Republican response, Virginia Gov. Robert McDonnell called on the president to scrap much of his agenda and instead opt for a more modest set of priorities that doesn’t expand the federal government. “Many Americans are concerned about this administration’s efforts to exert greater control over car companies, banks, energy and health care,” McDonnell said. “Top-down, one-size-fits-all decision making should not replace the personal choices of free people in a free market, nor undermine the proper role of state and local governments in our system of federalism.”

U.S. GDP Rises in Q4
Gross domestic product (GDP) for the U.S. grew at a robust pace in the fourth quarter of 2009, rising at the fastest rate since the Q3 2003 and boosting prospects of a stronger economic recovery despite a period of severe contraction earlier in the year.

According to a report from the U.S. Department of Commerce on Friday, fourth-quarter real GDP — purchases by U.S. residents of goods and services wherever produced — increased at an annual rate of 5.7 percent, more than double the 2.2 percent growth recorded in the third quarter.

The gains were driven largely by rising private inventory investment, exports and personal consumption expenditure, the Commerce Department said. Motor vehicle output alone accounted for a 0.61 percentage point gain in GDP, following a contribution of 1.45 percentage points in Q3 2009.

The latest GDP increase exceeded earlier projections of a 4.7 percent gain for the quarter, according to Forbes. Still, concerns remain as the majority of the growth depended on businesses letting their inventories shrink at a slower pace. Restocking inventories contributed to 3.4 percent of the Q4 boost, but the inventory cycle cannot outpace final demand indefinitely.

Toyota Recalls Hurt Production and Reputation
Toyota Motor Co., the world’s largest automaker, on Tuesday suspended production on eight of its most popular models due to widening recalls caused by a mechanical flaw in accelerators, the Washington Post reported. This latest problem is raising worries about the auto giant’s profitability and long-standing reputation for quality.

According to the Associated Press, Toyota began shipping replacement parts to repair the faulty accelerators last week, though it remains unclear when millions of drivers will have their vehicles returned. The latest recall includes approximately 2.3 million Toyota cars, and comes on the heels of a 4 million-car recall in September. Toyota also issued a separate recall of 1.1 million vehicles last week to address a potentially hazardous floor mat problem.

“They’ve been trying to be proactive, but that’s probably not what consumers will draw from this,” Jake Fisher, senior auto engineer for Consumer Reports, told Bloomberg News.

The recalls are already having a damaging effect on Toyota’s sales and public perception. The automaker’s stock price dropped 15 percent since January 21, while its market capitalization fell from about $143 billion in mid-September to $136 billion since the recalls began, Bloomberg reported. General Motors Co. is planning to offer sales incentives for the 2.3 million car owners in Toyota’s latest recall, and Ford Motor Co. plans to provide $1,000 rebates to encourage Toyota customers to switch to Ford brands.

Meanwhile, halted production at North American plants is likely to cost Toyota millions of dollars per day.

“Stopping production is never an easy decision, but we are 100 percent confident it was the right decision,” Jim Lentz, president and COO of Toyota Motor Sales U.S.A., said in an official statement from the firm. “We know what’s causing the sticking accelerator pedals, and we know what we have to do to fix it. We also know it is most important to fix this problem in the cars on the road.”

Traditionally, Toyota’s has been seen as among the most reliable and highly efficient companies in the world. The recent recalls may tarnish the company’s reputation more than initial sales losses indicate. According to the New York Times, some Japanese media are speculating that a tainted Toyota “could even destroy the world’s trust in Japanese manufacturing, which relies on its reputation for high quality.”

Enforcement Begins on 10+2
As of last Tuesday, the U.S. Department of Homeland Security’s Customs and Border Protection has officially begun enforcement of the interim final rule on the Importer Security Filing (ISF) and Additional Carrier Requirements, also known as the “10+2″ rule.

The new regulation requires that importers and carriers electronically submit 10 types of detailed information on cargo at least 24 hours before ocean freight is loaded onto a vessel bound for the U.S. Importers can now face fines of up to $5,000 for each violation of an ISF that is incomplete, inaccurately filed or late, and seizure of the goods if they are then unloaded.

The rules have been in place for a year, but will be policed starting Jan. 27, 2010.

For more information on 10+2, click HERE and HERE.