Seven To Ten

Toyota Motor Corp. will start producing the hybrid Prius in the U.S for the first time to meet customer demands for smaller, more fuel-efficient vehicles.

Customers can expect the first hybrid Prius to roll out in 2010, following a hybrid version of the Camry sedan. This is the first time the Prius, which has been on sale for more than a decade, will be built outside of Asia.

The Toyota Tundra pickup and Toyota Sequoia sport utility vehicle are suspended from production because of declining demand. Toyota’s U.S. sales fell 21% in June compared with the year before, an even steeper decline than the industrywide slump of 18%.

Toyota’s moves follow production cuts at General Motors Corp. and other automakers. GM said last month it is cutting shifts, reducing assembly line speeds and temporarily idling seven factories because of declining consumer demand for truck-based vehicles.

Chrysler LLC also announced plans to close a minivan factory and cut a shift at a full-size pickup factory, while Ford has said it is cutting production for the rest of the year.

You’ll note that this year many companies are reporting the specific performance targets on which CEO pay is based - saying not just that pay is based partly on free cash flow, for example, but reporting the amount that must be achieved.

Companies are doing that because the SEC is making them. But by wangling pay formulas in a dozen ways, they can still pay CEOs as crazily as they like. Look, for example, at one of America’s legendary pay abusers, Occidental Petroleum.

Its latest proxy is full of impressive-looking targets and formulas, but the bottom line is that the company has consistently paid CEO Ray Irani huge sums during his 17 years at the top, regardless of performance, which has mostly been terrible.

Even the way boards are elected appears immune to reform. Since the number of board candidates exactly equals the number of vacant seats, shareholders who don’t like a candidate can only “withhold” their vote, so even one vote is enough to get a candidate elected.

A popular reform proposal would require a majority of votes cast. The theory is that directors who could get voted off the board will more zealously serve shareholders - and that includes getting tough on CEO pay. But the worry is that they’ll adopt the go-along-to-get-along culture of many boardrooms.

It may seem obvious that CEO raises will have to slow down, if only because of simple arithmetic. Pay that gallops ahead far faster than the economy is one of those things that can’t go on forever. If it did, then someday the entire GDP would be used for paying CEOs, and that isn’t likely.

Meanwhile, let the reformers battle on. One of the most prominent, Nell Minow of the invaluable Corporate Library, which rates board effectiveness, says, “My colleagues and I have found that there is no more reliable indicator of investment, litigation, and liability risk than excessive CEO compensation.”

Boards that can’t manage to pay the CEO properly are damaging the company, punishing the shareholders they represent, and weakening America in a global economy. It’s in everybody’s interest to turn them around - or at least to keep trying.

Most Americans think times are tough because they are feeling the pinch from rising prices. A survey showed that 65% are “very concerned” about inflation, while 26% are “somewhat concerned.”

Unemployment is also a major concern. The Department of Labor reveals that America has has already lost 85,000 jobs so far this year, with February’s net job report showing the worst loss in nearly five years.

To balance the threat of recession against rising inflation, the Federal Reserve announced a 3/4 percentage point cut of its key interest rate. The purpose for the central bank rate cuts is to boost the economy and stave off a recession. But lower interest rates can also weaken the dollar, sending inflation higher.

The Fed acknowledged that “uncertainty about the inflation outlook has increased.” Inflation hurts consumers and many people will be cutting back on their spending habits. Are you feeling the pinch already?

Americans think the economy is now in a recession and the number who feel that way continues to grow. Of more than 1,000 adult Americans surveyed in March, 74% said they believe the nation is now in a recession. That figure rose from 66% in February and 61% in January.

Economists’ definition of a recession is two consecutive quarters of negative GDP growth, and though growth was sluggish in the last quarter - 0.6% - the U.S. economy has not yet shown one quarter of retraction.

Whatever the definitions, it is clear that average Americans feel the nation has fallen on hard times and making a living is tough. Coupled with escalating monthly bills, the outlook is very gloomy.