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Global Shortages During Coronavirus Reveal Failings of Just in Time Manufacturing

In the story of how the modern world was constructed, Toyota stands out as the mastermind of a monumental advance in industrial efficiency. The Japanese automaker pioneered so-called Just In Time manufacturing, in which parts are delivered to factories right as they are required, minimizing the need to stockpile them.

Over the last half-century, this approach has captivated global business in industries far beyond autos. From fashion to food processing to pharmaceuticals, companies have embraced Just In Time to stay nimble, allowing them to adapt to changing market demands, while cutting costs.

But the tumultuous events of the past year have challenged the merits of paring inventories, while reinvigorating concerns that some industries have gone too far, leaving them vulnerable to disruption. As the pandemic has hampered factory operations and sown chaos in global shipping, many economies around the world have been bedeviled by shortages of a vast range of goods — from electronics to lumber to clothing.

In a time of extraordinary upheaval in the global economy, Just In Time is running late.

“It’s sort of like supply chain run amok,” said Willy C. Shih, an international trade expert at Harvard Business School. “In a race to get to the lowest cost, I have concentrated my risk. We are at the logical conclusion of all that.”

shortage of computer chips — vital car components produced mostly in Asia. Without enough chips on hand, auto factories from India to the United States to Brazil have been forced to halt assembly lines.

But the breadth and persistence of the shortages reveal the extent to which the Just In Time idea has come to dominate commercial life. This helps explain why Nike and other apparel brands struggle to stock retail outlets with their wares. It’s one of the reasons construction companies are having trouble purchasing paints and sealants. It was a principal contributor to the tragic shortages of personal protective equipment early in the pandemic, which left frontline medical workers without adequate gear.

a shortage of lumber that has stymied home building in the United States.

Suez Canal this year, closing the primary channel linking Europe and Asia.

“People adopted that kind of lean mentality, and then they applied it to supply chains with the assumption that they would have low-cost and reliable shipping,” said Mr. Shih, the Harvard Business School trade expert. “Then, you have some shocks to the system.”

presentation for the pharmaceutical industry. It promised savings of up to 50 percent on warehousing if clients embraced its “lean and mean” approach to supply chains.

Such claims have panned out. Still, one of the authors of that presentation, Knut Alicke, a McKinsey partner based in Germany, now says the corporate world exceeded prudence.

“We went way too far,” Mr. Alicke said in an interview. “The way that inventory is evaluated will change after the crisis.”

Many companies acted as if manufacturing and shipping were devoid of mishaps, Mr. Alicke added, while failing to account for trouble in their business plans.

“There’s no kind of disruption risk term in there,” he said.

Experts say that omission represents a logical response from management to the incentives at play. Investors reward companies that produce growth in their return on assets. Limiting goods in warehouses improves that ratio.

study. These savings helped finance another shareholder-enriching trend — the growth of share buybacks.

In the decade leading up to the pandemic, American companies spent more than $6 trillion to buy their own shares, roughly tripling their purchases, according to a study by the Bank for International Settlements. Companies in Japan, Britain, France, Canada and China increased their buybacks fourfold, though their purchases were a fraction of their American counterparts.

Repurchasing stock reduces the number of shares in circulation, lifting their value. But the benefits for investors and executives, whose pay packages include hefty allocations of stock, have come at the expense of whatever the company might have otherwise done with its money — investing to expand capacity, or stockpiling parts.

These costs became conspicuous during the first wave of the pandemic, when major economies including the United States discovered that they lacked capacity to quickly make ventilators.

“When you need a ventilator, you need a ventilator,” Mr. Sodhi said. “You can’t say, ‘Well, my stock price is high.’”

When the pandemic began, car manufacturers slashed orders for chips on the expectation that demand for cars would plunge. By the time they realized that demand was reviving, it was too late: Ramping up production of computer chips requires months.

stock analysts on April 28. The company said the shortages would probably derail half of its production through June.

The automaker least affected by the shortage is Toyota. From the inception of Just In Time, Toyota relied on suppliers clustered close to its base in Japan, making the company less susceptible to events far away.

In Conshohocken, Pa., Mr. Romano is literally waiting for his ship to come in.

He is vice president of sales at Van Horn, Metz & Company, which buys chemicals from suppliers around the world and sells them to factories that make paint, ink and other industrial products.

In normal times, the company is behind in filling perhaps 1 percent of its customers’ orders. On a recent morning, it could not complete a tenth of its orders because it was waiting for supplies to arrive.

The company could not secure enough of a specialized resin that it sells to manufacturers that make construction materials. The American supplier of the resin was itself lacking one element that it purchases from a petrochemical plant in China.

One of Mr. Romano’s regular customers, a paint manufacturer, was holding off on ordering chemicals because it could not locate enough of the metal cans it uses to ship its finished product.

“It all cascades,” Mr. Romano said. “It’s just a mess.”

No pandemic was required to reveal the risks of overreliance on Just In Time combined with global supply chains. Experts have warned about the consequences for decades.

In 1999, an earthquake shook Taiwan, shutting down computer chip manufacturing. The earthquake and tsunami that shattered Japan in 2011 shut down factories and impeded shipping, generating shortages of auto parts and computer chips. Floods in Thailand the same year decimated production of computer hard drives.

Each disaster prompted talk that companies needed to bolster their inventories and diversify their suppliers.

Each time, multinational companies carried on.

The same consultants who promoted the virtues of lean inventories now evangelize about supply chain resilience — the buzzword of the moment.

Simply expanding warehouses may not provide the fix, said Richard Lebovitz, president of LeanDNA, a supply chain consultant based in Austin, Texas. Product lines are increasingly customized.

“The ability to predict what inventory you should keep is harder and harder,” he said.

Ultimately, business is likely to further its embrace of lean for the simple reason that it has yielded profits.

“The real question is, ‘Are we going to stop chasing low cost as the sole criteria for business judgment?’” said Mr. Shih, from Harvard Business School. “I’m skeptical of that. Consumers won’t pay for resilience when they are not in crisis.”

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Going to the Moon via the Cloud

Before the widespread availability of this kind of computing, organizations built expensive prototypes to test their designs. “We actually went and built a full-scale prototype, and ran it to the end of life before we deployed it in the field,” said Brandon Haugh, a core-design engineer, referring to a nuclear reactor he worked on with the U.S. Navy. “That was a 20-year, multibillion dollar test.”

Today, Mr. Haugh is the director of modeling and simulation at the California-based nuclear engineering start-up Kairos Power, where he hones the design for affordable and safe reactors that Kairos hopes will help speed the world’s transition to clean energy.

Nuclear energy has long been regarded as one of the best options for zero-carbon electricity production — except for its prohibitive cost. But Kairos Power’s advanced reactors are being designed to produce power at costs that are competitive with natural gas.

“The democratization of high-performance computing has now come all the way down to the start-up, enabling companies like ours to rapidly iterate and move from concept to field deployment in record time,” Mr. Haugh said.

But high-performance computing in the cloud also has created new challenges.

In the last few years, there has been a proliferation of custom computer chips purposely built for specific types of mathematical problems. Similarly, there are now different types of memory and networking configurations within high-performance computing. And the different cloud providers have different specializations; one may be better at computational fluid dynamics while another is better at structural analysis.

The challenge, then, is picking the right configuration and getting the capacity when you need it — because demand has risen sharply. And while scientists and engineers are experts in their domains, they aren’t necessarily in server configurations, processors and the like.

This has given rise to a new kind of specialization — experts in high-performance cloud computing — and new cross-cloud platforms that act as one-stop shops where companies can pick the right combination of software and hardware. Rescale, which works closely with all the major cloud providers, is the dominant company in this field. It matches computing problems for businesses, like Firefly and Kairos, with the right cloud provider to deliver computing that scientists and engineers can use to solve problems faster or at lowest possible cost.

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Biden and Republicans Spar Over Unemployment as Job Gains Disappoint

WASHINGTON — The disappointing jobs report released Friday by the Labor Department is posing the greatest test yet of President Biden’s strategy to revive the economy, with business groups and Republicans warning that the president’s policies are causing a labor shortage and that his broader agenda risks stoking runaway inflation.

But the Biden administration showed no signs on Friday of changing course, with the president defending the more generous jobless benefits included in the $1.9 trillion bill he signed into law in March and saying the $4 trillion in spending he proposed for infrastructure, child care, education and other measures would help create more and better-paying jobs after the pandemic.

Speaking at the White House, Mr. Biden urged “perspective” on the report, which showed only 266,000 new jobs added in April. He said it would take time for his aid bill to fully reinvigorate the economy and hailed the more than 1.5 million jobs added since he took office. And he rejected what he called “loose talk that Americans just don’t want to work.”

“The data shows that more workers are looking for jobs,” he said, “and many can’t find them.”

Republicans cast the report as a sign of failure for Mr. Biden’s policies, even though job creation has accelerated since Mr. Biden replaced President Donald J. Trump in the White House. They called on his administration to end the $300 weekly unemployment supplement, while several Republican governors — including those in Arkansas, Montana and South Carolina — moved to end the benefit for unemployed people in their states, citing worker shortages.

relief money to subsidize tax cuts, which could further slow the rollout.

Mr. Biden said at the White House that the administration would begin releasing the first batch of money to state and local governments this month. He said the money would not restore all of the lost jobs in one month, “but you’re going to start seeing those jobs in state and local workers coming back.”

The administration also took steps on Friday to get money out the door more quickly, saying the Treasury Department would release $21.6 billion of rental assistance that was included in the pandemic relief legislation to provide additional support to millions of people who could be facing eviction in the coming months.

Officials said they expected increased vaccination rates to ease some lingering fears about returning to jobs in the pandemic. The number of Americans 18 to 64 who are fully vaccinated grew by 22 million from mid-April, when the survey for the jobs report was conducted, to Friday. That was an acceleration from the previous month. Some White House officials said the administration’s push to further increase the ranks of the vaccinated could be the most important policy variable for the economy this summer.

Treasury Secretary Janet L. Yellen, speaking at the White House, said that a lack of child care related to irregular school schedules was making it a challenge to get the labor market back to full strength. She also said that health concerns about the pandemic were holding back some workers who might return to the market.

“I don’t think that the addition to unemployment compensation is really the factor that’s making the difference,” Ms. Yellen said.

She said that she believed the labor market was healthier than the figures released on Friday suggested, but she allowed that the economic recovery would take time.

“We’ve had a very unusual hit to our economy,” Ms. Yellen said, “and the road back is going to be somewhat bumpy.”

Ms. Boushey and Mr. Bernstein said that it appeared the economy was working through a variety of rapid changes related to the pandemic, including supply chain disruptions that have hurt automobile manufacturing by reducing the availability of semiconductor chips and businesses beginning to rehire after a year of depressed activity because of the virus.

“It’s our view that these misalignments and bottlenecks are transitory,” Mr. Bernstein said, “and they’re what you expect from an economy going from shutdown to reopening.”

Other key economic officials treated the report as a sign that the labor recovery ahead is likely to prove wildly unpredictable. Robert S. Kaplan, the president at the Federal Reserve Bank of Dallas, said in an interview that his economics team had warned him that the April report might show a significant slowdown as shortages of materials — including lumber and computer chips — and labor bit into employment growth.

He said he was hoping to see those supply bottlenecks cleared up, but he was watching carefully in case they did not resolve quickly.

“It shows me that getting the unemployment rate down and moving forward to improved employment to population is going to have fits and starts,” Mr. Kaplan said. He noted that sectors that were struggling to acquire materials, like manufacturing, shed jobs, and he said leisure and hospitality companies would have added more positions if not for challenges in finding labor.

“It’s just one jobs report,” cautioned Tom Barkin, the president of the Federal Reserve Bank of Richmond, in Virginia. But he said labor supply issues could be at play: Some people may have retired, others may have health concerns, and unemployment insurance could be encouraging low-paid workers to stay at home or allowing them to come back on their own terms.

“I get the feeling that people are being choosy,” Mr. Barkin said. “The first question I have in my mind is — is it temporary or is it more structural?”

He said that the supply constraints playing out were likely to fade over time, and that while businesses complain about rising input costs and might have to raise entry-level wages somewhat, he struggled to see that leading to much higher inflation — the kind that would worry the Fed.

The Fed is trying to achieve maximum employment and stable inflation around 2 percent on average. It has pledged to keep its cheap-money policies, which make borrowing inexpensive, in place until it sees realized progress toward those goals.

Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, said the payrolls disappointment vindicated the Fed’s slow-moving stance.

“I feel very good about our policy approach, which is outcome-based,” Mr. Kashkari said, speaking on a Bloomberg television interview shortly after the report came out. “Let’s actually allow the labor market to recover, let’s not just forecast that it’s going to recover.”

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Despite Chip Shortage, Chip Innovation Is Booming

“It’s a bloody miracle,” said Jim Keller, a veteran chip designer whose résumé includes stints at Apple, Tesla and Intel and who now works at the A.I. chip start-up Tenstorrent. “Ten years ago you couldn’t do a hardware start-up.”

The trends are not necessarily good news for chip customers, at least for the short term. Scarce supplies of many chips have manufacturers scrambling to increase production, and are adding to worries in Washington about reliance on foreign suppliers. Extra demand could extend the shortages, which are already expected to last into 2022.

High demand was evident in earnings for chip companies last quarter, which ended in March. Revenue grew 27 percent, for example, at NXP Semiconductors, a big maker of auto, communications and industrial chips, even though it temporarily closed two Texas factories because of a cold snap.

The industry has historically been notorious for booms and busts, usually driven by purchasing swings for particular products like PCs and smartphones. Global chip revenue slumped 12 percent in 2019 before bouncing back with 10 percent growth last year, according to estimates from Gartner, a research firm.

But there is widening optimism that the cycles should moderate because chips are now used in so many things. Philip Gallagher, chief executive of the big electronics distributor Avnet, cited examples like sensors to track dairy cows, the flow of beer taps and utility pipes, and the temperature of produce. And the number of chips in mainstay products like cars and smartphones keeps rising, he and other executives say.

“This is a lasting growth cycle, not a short spike,” said Kurt Sievers, NXP’s chief executive.

A longtime industry watcher, Handel Jones, who heads the consultancy International Business Strategies, sees total chip revenues rising steadily to $1.2 trillion by 2030 from roughly $500 billion this year.

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Auto sales helped get the American economy off to a good start in 2021.

In the first months of 2021, what was good for the auto industry was decidedly good for the American economy.

Spending on motor vehicles and parts rose almost 13 percent in the first quarter, making a big contribution to the increase in gross domestic product, the Commerce Department reported Thursday. Strong sales of new and used vehicles were propelled by consumers who had delayed purchases earlier in the pandemic and by others who — because of the virus — wanted to rely less on public transit or shared transportation services like Uber.

Two rounds of stimulus payments since late December were a big factor. Low interest rates, readily available credit, rising home values and stock prices, and strong trade-in values for used models also eased the path for consumers.

In fact, demand in the first quarter was robust enough that the auto industry was able to post healthy results despite a shortage of computer chips that forced temporary shutdowns of many auto plants.

Ford Motor reported it made a $3.3 billion profit in the quarter, its highest total since 2011. While it produced 200,000 fewer vehicles in the quarter than it had planned, the average selling price of Ford models rose to $47,858, 8 percent higher than in the first quarter a year ago, Edmunds reported.

The combination of strong consumer demand and tight inventories — partly a result of the chip shortage — has produced something of a dream scenario for auto retailers. At AutoNation, the country’s largest chain of dealerships, many vehicles are being sold near or at sticker price even before they arrive from the factory.

“I’ve never seen so much preselling of shipments,” said Mike Jackson, the chief executive. “These vehicles are coming in and going right out.”

In the first quarter, AutoNation’s revenue jumped 27 percent, to $5.9 billion, and the company reported $239 million in profit. That was a turnaround from a loss a year ago, when the pandemic crimped sales and forced AutoNation to close stores.

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U.S. Economy Rebounds as Pain Caused by Pandemic Eases: Live Updates

the first-quarter growth rate was 6.4 percent.

2019 Q4 LEVEL

$20 trillion

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Gross domestic product,

adjusted for inflation and

seasonality, at annual rates

2019 Q4 LEVEL

$20 trillion

+1.6%

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PRIOR

QUARTER

Gross domestic product, adjusted for inflation

and seasonality, at annual rates

“This was a great way to start the year,” said Gregory Daco, chief U.S. economist at Oxford Economics. “We had the perfect mix of improving health conditions, strong fiscal stimulus and warmer weather.”

“Consumers are now back in the driver’s seat when it comes to economic activity, and that’s the way we like it,” he added. “A consumer that is feeling confident about the outlook will generally spend more freely.”

Looking ahead, economists said they expected to see even better numbers this quarter.

“It’s good news, but the better news is coming,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “There’s nothing in this report that makes me think the economy won’t grow at a gangbusters pace in the second and third quarter.”

The expansion last quarter was spurred by stimulus checks, he said, which quickly translated into purchases of durable goods like cars and household appliances.

“This demonstrates the value of government intervention when the economy is on its knees from Covid,” he added. “But in the coming quarters, the economy will be much less dependent on stimulus as individuals use the savings they’ve accumulated during the pandemic.”

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Cumulative percent change in G.D.P.

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before

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Overall economic activity should return to prepandemic levels in the current quarter, Mr. Anderson said, while cautioning that it will take until late 2022 for employment to regain the ground it lost as a result of the pandemic.

Still, the labor market does seem to be catching up. Last month, employers added 916,000 jobs and the unemployment rate fell to 6 percent, while initial claims for unemployment benefits have dropped sharply in recent weeks.

Tom Gimbel, chief executive of LaSalle Network, a recruiting and staffing firm in Chicago, said: “It’s the best job market I’ve seen in 25 years. We have 50 percent more openings now than we did pre-Covid.”

Hiring is stronger for junior to midlevel positions, he said, with strong demand for professionals in accounting, financing, marketing and sales, among other areas. “Companies are building up their back-office support and supply chains,” he said. “I think we’re good for at least 18 months to two years.”

Spending on goods like automobiles led the way in the first quarter, but demand for services like dining out should revive in the second quarter, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “I think we will see a surge in services spending,” she said.

As more Americans become vaccinated, many economists expect a decline in new unemployment claims.
Credit…James Estrin/The New York Times

Initial jobless claims fell last week to yet another pandemic low in the latest sign that the economic recovery is strengthening.

About 575,000 people filed first-time claims for state unemployment benefits last week, the Labor Department said Thursday, a decrease of 9,000 from the previous week’s revised figure. It was the third straight week that jobless claims had dropped.

In addition, 122,000 new claims were filed for Pandemic Unemployment Assistance, a federal program that covers freelancers, part-timers and others who do not routinely qualify for state benefits. That was a decline of 12,000 from the previous week.

Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 553,000.

“Today’s report, and the other data that we got today, signals an improving labor market and an improving economy,” said Daniel Zhao, senior economist with the career site Glassdoor. “It is encouraging that claims are continuing to fall.”

Although weekly jobless claims remain above levels reached before the pandemic, vaccinations and warmer weather are offering new hope. Most economists expect the slow downward trend in claims to continue in the coming months as the economy reopens more fully.

But challenges lie ahead. The long-term unemployed — a group that historically has had a more difficult time rejoining the work force — now make up more than 40 percent of the total number of unemployed. Of the 22 million jobs that disappeared early in the pandemic, more than eight million remain lost.

“The labor market is definitely moving in the right direction,” said AnnElizabeth Konkel, an economist at the online job site Indeed. She noted that job postings as of last Friday were up 22.4 percent from February 2020.

Still, she cautioned that industries like tourism and hospitality would probably remain depressed until the pandemic was firmly under control. She also stressed that child care obligations might be preventing people ready to return to work from seeking jobs.

“We still are in a pandemic — the vaccinations are ramping up but there is that public health factor still,” Ms. Konkel said. “We’re not quite there yet.”

The NBC sitcom “The Office” became a big streaming hit for Netflix and is now back in the Comcast fold, available on its streaming service Peacock.
Credit…Chris Haston/NBC

If you want a clear picture of the state of the media industry in upheaval, Comcast offers a good snapshot.

The company, which includes NBC, Universal Pictures, several theme parks, and the Peacock streaming service, beat Wall Street’s expectations in its first-quarter earnings report on Thursday as it continued to shift its emphasis from cable to digital.

To start, take these figures from its results:

Despite the regular pace of cord cutting, Comcast’s cable television business pulled in over $5.62 billion in revenue for the first quarter. That was flat compared with last year, but it’s still the company’s biggest business, accounting for a fifth of all revenue.

Peacock, on the other hand, is the fastest growing, but it loses the most money. Last year, it approached $700 million in pretax losses. This year, the streaming platform is expected to lose $1.3 billion as Comcast spends big to load it up with original shows and sports programming with the aim of attracting more viewers.

That’s the operating thesis behind every major media company today: replace the eroding base of profit-rich cable customers with loss-making streaming viewers in the hope that over time the digital audience will become more valuable. The Walt Disney Company, ViacomCBS, Discovery Inc. and AT&T’s WarnerMedia are all trying to make the transformation without entirely losing their shirts.

Peacock’s 42 million sign-ups should also come with an asterisk. The service is free and easy to join, but that doesn’t mean everyone is watching. (The figure includes paid versions of Peacock, which feature more content and fewer commercials.) A February report from the tech news site The Information revealed that a little more than 11 million households were watching the service.

Even so, the aim of Peacock is to replace the lost advertising from Comcast’s cable and broadcast channels as people continue to cut the cord. Peacock, which is available nearly everywhere, can also act as a hedge against other cable operators such as Charter or Cox when Comcast’s media division, NBCUniversal, negotiates carriage fees.

Peacock offers some of the most popular streaming shows, including “The Office,” a top hit on Netflix before it lost the rights to the series in 2021 when the license expired and the show reverted back to its owner, Comcast.

In a few years, Peacock will have the rights to stream National Football League games on Sunday alongside NBC as part of a new agreement. That could ruffle feathers with some of NBC’s affiliate stations if viewers drop TV and opt for Peacock to watch football. The streamer will also have some games exclusively. In March, the service added WWE.

Comcast sells something that has proved more durable than sports and entertainment: broadband, the piping that carries all streaming platforms. The company saw a surge in subscribers during the pandemic. In the first quarter, sales increased 12 percent to $5.6 billion. It’s likely to overtake cable television as the company’s biggest business.

At NBCUniversal, sales sharply dropped as movie theaters remained mostly shut and fewer people were visiting theme parks under the pandemic. Revenue fell 9 percent to $7 billion and pretax profit decreased 12 percent to $1.5 billion. Advertising at its television networks, which include NBC, MSNBC and Syfy, fell 3.4 percent to $2.1 billion.

Overall, the company beat expectations, reporting adjusted profit of 76 cents a share on $27.2 billion in revenue, and its stock was climbing on Thursday morning. Investors were looking for 59 cents in per-share profit and $26.6 billion in sales.

Microsoft will decrease the share of money it charges independent developers that publish computer games on its online store, starting in August, the company said on Thursday.

Developers will keep 88 percent of the revenue from their games, up from 70 percent. That could make Microsoft’s store more attractive to independent studios than competitors like Valve’s gaming store, called Steam, which typically starts by taking a 30 percent cut. Epic Games’ store takes 12 percent.

“We want to make sure that we’re competitive in the market,” said Sarah Bond, a Microsoft vice president who leads the gaming ecosystem organization. “Our objective is to have a leading revenue share and really a leading platform.”

The share of revenue that developers get to keep has come under greater scrutiny across the tech industry. Google and Apple have faced antitrust questions for the 30 percent fees they charge developers whose programs appear in their app stores.

Last year, Epic sued Apple and Google separately, claiming they violated antitrust laws by forcing developers to use their payment systems. Epic had tried to bypass the fees by letting customers pay for items in its Fortnite video game directly through Epic. That caused Apple and Google to boot Fortnite from their app stores.

Apple and Google have since reduced fees for some developers. Epic’s lawsuit against Apple is set to head to trial on Monday in U.S. District Court in Oakland, Calif.

A Shell recharging station for electric vehicles in the Netherlands. Despite investments in renewable energy, Shell’s profit last quarter was largely the result of rising oil and gas prices.
Credit…Koen Van Weel/EPA, via Shutterstock

Strong profit increases from two of Europe’s largest energy companies, Royal Dutch Shell and Total, demonstrated that what really matters for the financial performance of these companies remains the price of oil and natural gas.

Their recent investments in clean energy, described by company officials as essential for the future, remain marginal.

Total said that adjusted net income rose by 69 percent compared with the period a year earlier, when the effects of the pandemic were beginning to kick in, to $3 billion, while Shell said that what it calls adjusted earnings rose by 13 percent to $3.2 billion.

The main factor in the improved performance by both companies was a roughly 20 percent rise in oil prices along with an increase in natural gas prices, leading to higher revenues. During a news conference to discuss the results, Jessica Uhl, Shell’s chief financial officer, said that a $10 jump in oil prices would translate into a $6.4 billion increase in cash for the company’s coffers on an annual basis.

Shell, which cut its dividend last year for the first time since World War II, confirmed that it would increase the payout for the quarter by 4 percent, to about 17 cents a share.

Both companies have tethered their futures to generating and distributing renewable sources of energy. Shell in February said its oil production had peaked in 2019, and it has been investing in various clean energy ventures, including a network of 60,000 charging stations for electric vehicles. And Total has, among other things, invested in options to build offshore wind farms off Britain.

In its earnings statement, Total took the lead among the oil majors in providing details on its investments in renewable energy like wind and solar. The company said these businesses brought in $148 million for the quarter, measured as earnings before interest, taxes, depreciation and amortization. This figure was about 2 percent of the overall total for the company of $7.3 billion, according to analysts at Bernstein, a research firm.

Although Airbus reported a quarterly profit after a full-year loss for 2020,  “the market remains uncertain,”  said Guillaume Faury, the company’s chief executive.
Credit…Chema Moya/EPA, via Shutterstock

Airbus announced Thursday that it had returned to a profit in the first quarter following a 1.1 billion euro loss last year because of the coronavirus pandemic, but its top executive warned that the economic toll would continue.

“The first quarter shows that the crisis is not yet over for our industry, and that the market remains uncertain,” Guillaume Faury, chief executive of the world’s largest airplane maker, said in a statement.

Airbus booked a net profit of 362 million euros ($440 million) between January and March, compared with a loss of 481 million euros a year earlier, as cost-cutting measures — which included more than 11,000 layoffs announced last year for its global operations — bolstered the bottom line. Revenue fell 2 percent to 10.5 billion euros.

Airbus delivered 125 commercial aircraft to airlines in the three-month period, up from 122 a year earlier. Over all, Airbus delivered 566 aircraft to airlines in 2020, 40 percent less than expected before the pandemic.

Airbus has previously warned that the industry might not recover from the disruption caused by the pandemic until as late as 2025, as new virus variants delay a resumption of worldwide air travel.

Given the uncertain outlook, Airbus won’t ramp up aircraft deliveries this year. The company said it expected to deliver 566 aircraft on back order from airline companies, the same number as last year.

It maintained its forecast for an underlying operating profit of two billion euros for the year.

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Stocks on Wall Street jumped on Thursday, rising with European stock indexes, amid indications that the economy is moving toward a recovery to prepandemic levels.

The Commerce Department reported Thursday that the U.S. economy expanded 1.6 percent in the first three months of 2021, compared with 1.1 percent in the final quarter last year, or 6.4 percent on an annualized basis.

A day earlier, the Federal Reserve said that the outlook was improving and that it would continue to provide substantial monetary support, easing investors’ concerns that it would soon start easing the stimulus efforts it launched a year ago when the Covid-19 crisis forced a near shutdown of many parts of the economy.

“While the level of new cases remains concerning,” Jerome H. Powell, the Federal Reserve chair, said, “continued vaccinations should allow for a return to more normal economic conditions later this year.” The central bank kept interest rates near zero and said it would continue buying bonds at a steady clip.

The S&P 500 rose 0.7 percent. Market sentiment continued to rise after President Biden detailed more of his spending plans — which total $4 trillion — to fund expanded access to education and reduce the cost of child care, among other things.

Oil prices rose. Futures of West Texas Intermediate, the U.S. benchmark, climbed more than 2 percent to above $5 a barrel.

The Stoxx Europe 600 rose 0.3 percent as a measure of economic confidence for the eurozone surged higher.

Amazon announced raises for half a million employees in its warehouses, delivery network and other fulfillment teams.
Credit…Chang W. Lee/The New York Times

Amazon will increase pay between 50 cents and $3 an hour for half a million workers in its warehouses, delivery network and other fulfillment teams, the company said on Wednesday.

The action follows scrutiny of Amazon from lawmakers and an unsuccessful unionization push that ended this month at its large warehouse in Alabama. In 2018, Amazon raised its minimum pay to $15 an hour. In recent months, it has publicly campaigned to raise the federal minimum to $15, too.

Amazon has been on a hiring spree during the pandemic. As more customers ordered items online, the company added 400,000 employees in the United States last year. Its total work force stands at almost 1.3 million people.

Amazon typically revaluates wages each fall, before the holiday shopping season. But this year, it moved those changes earlier, said Darcie Henry, an Amazon vice president of people experience and technology. The new wages will roll out from mid-May through early June. Ms. Henry said the company was hiring for “tens of thousands” of open positions.

Jeff Bezos, Amazon’s founder and chief executive, recently told shareholders in his annual letter that he recognized the company needed “a better vision for how we create value for employees — a vision for their success.” He said that Amazon had always striven to be “Earth’s Most Customer-Centric Company,” and that now he wanted it to be “Earth’s Best Employer and Earth’s Safest Place to Work” as well.

Amazon is scheduled to report quarterly earnings on Thursday.

Gary Gensler’s tenure leading the Securities and Exchange Commission is off to a rocky start: Alex Oh, who he named just days ago to run the regulator’s enforcement division, has resigned following a federal court ruling in a case involving one of her corporate clients, ExxonMobil.

In her resignation letter on Wednesday, Ms. Oh said the matter would be “an unwelcome distraction to the important work” of the enforcement division.

Ms. Oh’s resignation letter followed a ruling on Monday from Judge Royce C. Lamberth of the Federal District Court for the District of Columbia over the conduct of Exxon’s lawyers during a civil case involving claims of human rights abuses in the Aceh province of Indonesia.

According to Judge Lamberth’s ruling, Exxon’s lawyers claimed without providing evidence that the plaintiffs’ attorneys were “agitated, disrespectful and unhinged” during a deposition. He ordered Exxon’s lawyers to show why penalties were not warranted for those comments.

The ruling did not single out any lawyers by name. Ms. Oh was one of the lead lawyers for Exxon.

The judge’s order also granted the plaintiffs’ motion that Exxon pay “reasonable expenses” associated with litigating their request for sanctions and with an accompanying motion to compel additional testimony from Exxon related to the deposition.

Ms. Oh’s resignation letter did not mention the Exxon case by name, but a person briefed on the matter confirmed that the ruling from Judge Lamberth had prompted her to step down.

Ms. Oh, a former federal prosecutor in Manhattan who worked for the elite firm Paul, Weiss for nearly two decades, was picked by Mr. Gensler to oversee the S.E.C.’s 1,000-attorney enforcement division on April 22. The same day, she filed a notice with the court in the Exxon case saying she had withdrawn from the matter because she had resigned from the firm to join the federal government.

The civil litigation involving Exxon is nearly two decades old and involves allegations by the plaintiffs that Exxon’s security personnel “inflicted grievous injuries” on them. The lawsuit was brought under the federal Alien Tort Claims Act, which enables residents of other countries to sue in the United States for damages arising from violations of U.S. treaties or “the law of nations.”

Mr. Gensler said in a news release that Melissa Hodgman, who had been the enforcement division’s acting chief since January, will return to that position. Ms. Hodgman has been an enforcement attorney with the agency since 2008. He thanked Ms. Oh for her “willingness to serve the country.”

Ms. Oh could not immediately be reached for comment.

Brad Karp, chairman of Paul, Weiss, said the firm would not comment on the matter because it involved ongoing litigation. “Alex is a person of the utmost integrity and a consummate professional with a strong ethical code,” he added.

Ms. Oh is a highly respected lawyer, but her selection had been criticized by the Revolving Door Project, a good-government group, because she had been in private practice for so many years and had defended some of the largest U.S. companies.

Increased supply-chain and freight costs for cereal makers could translate into higher retail prices for customers.
Credit…Sara Hylton for The New York Times

Before the pandemic, when suppliers raised the cost of diapers, cereal and other everyday goods, retailers often absorbed the increase because stiff competition forced them to keep prices stable.

Now, with Americans’ shopping habits having shifted rapidly — with people spending more on treadmills and office furniture and less at restaurants and movie theaters — retailers are also adjusting, Gillian Friedman reports for The New York Times.

The Consumer Price Index, the measure of the average change in the prices paid by U.S. shoppers for consumer goods, increased 0.6 percent in March, the largest rise since August 2012, according to the Bureau of Labor Statistics. Procter & Gamble is raising prices on items like Pampers and Tampax in September. General Mills, which makes cereal brands including Cheerios, is facing increased supply-chain and freight costs that could translate into higher retail prices for customers.

At the beginning of the pandemic, companies were focused on fulfilling demand for toilet paper, cleaning supplies, canned food and masks, said Greg Portell, a partner at Kearney, a consulting firm. The government was watching for price-gouging, and customers were wary of being taken advantage of.

Now that the economy is beginning to stabilize, companies are starting to rebalance pricing so that it better fits their profit expectations and takes into account inflation. “This isn’t an opportunistic profit-taking by companies,” Mr. Portell said. “This is a reset of the market.”

Gary Gensler, the chair of the Securities Exchange Commission, has some expertise with cryptocurrencies.
Credit…Kayana Szymczak for The New York Times

For many cryptocurrency supporters and investors, regulatory approval of a Bitcoin exchange-traded fund in the United States represents the holy grail. It would allow the crypto-curious to get exposure to Bitcoin without having to buy the tokens themselves, signifying that digital assets are really, truly mainstream.

But it’s not meant to be — yet. On Wednesday, the Securities and Exchange Commission delayed a decision on a Bitcoin E.T.F. proposal from the investment manager VanEck, saying it needs more time but offering no other explanation.

Delay is not denial, and it may be a good sign, Todd Cipperman, the founder of the compliance services firm CCS, told the DealBook newsletter. When considering the concept of a crypto E.T.F. in 2018, the S.E.C. raised questions about investor protection issues and put a “wet blanket on the whole idea,” he said.

Now, crypto is much bigger, and Gary Gensler, who taught courses about blockchain technology at M.I.T., is chair of the S.E.C. His expertise doesn’t guarantee success for crypto E.T.F.s, but it will be easier for an expert in the field to approve them, Mr. Cipperman suggested.

The S.E.C. gave itself until mid-June, with the option to take more time, but it must decide before year’s end. The regulator has rejected every proposal to date, starting with the first Bitcoin E.T.F. pitch in 2013, presented by the Winklevoss twins, which was eventually dismissed in 2017 (and again in 2018). There are several E.T.F. proposals on the table now, including one from the traditional finance giant Fidelity.

Canada is moving faster, approving all kinds of crypto E.T.F.s, after allowing its first Bitcoin E.T.F. in February. Hester Peirce, an S.E.C. commissioner and vocal crypto champion, told DealBook earlier this month that she has been “mystified” by her agency’s response to some prior applications, which met the standards in her view. With more players now engaging in the process, approval could be looming — eventually.

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Global chip shortage will slash Ford’s production by about half in the second quarter.

Ford Motor said on Wednesday that the global shortage of computer chips will take a greater toll on its business than previously expected and would likely cut its vehicle production in the second quarter by about half.

“The effects of the shortage have grown,” Ford’s chief financial officer, John Lawler, said during a conference call with reporters. “We now expect the semiconductor shortage to get worse and bottom out in the second quarter but continue to put pressure on our operating results in the second half of the year.”

Ford expects the shortage to lower its operating profit this year by $2.5 billion, to between $5.5 billion to $6.5 billion. It had previously said the impact of the shortage would be between $1 billion to $2.5 billion.

The shortage was exacerbated in March by a fire at a plant owned by a Japanese electronics supplier, Renesas.

the ability to command higher prices helped Ford’s bottom line, as did lower warranty costs and a $900 million gain related to its stake in Rivian, an electric vehicle start-up.

While it hopes to be able to make up some of the lost production later in the year, Ford will likely produce 1.1 million fewer vehicles in 2021 than it had planned to, Mr. Lawler said.

Ford has been trying to streamline its operations and raise its profits for several years with modest success until now. In 2020, it named Mr. Farley to the top job, charging him with accelerating the turnaround.

The automaker has developed vehicles that could revitalize profits. It redesigned its F-150 pickup truck, the top-selling vehicle in the United States. It has also gotten strong reviews for a new Bronco sport-utility vehicle and the Mustang Mach E, an electric S.U.V. styled to resemble the company’s famous sports car.

But the chip shortage has crimped its plans. In the first three months of the year, Ford has had to pause or slow production at a variety of plants, including some that make the F-150, which generates a large chunk of its profits.

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A Computer Chip Shortage Has Hobbled the Auto Industry

Around the world, auto assembly lines are going quiet, workers are idle and dealership parking lots are looking bare.

A shortage of semiconductors, the tiny but critical chips used to calibrate cars’ fuel injection, run infotainment systems or provide the brains for cruise control, has sent a shudder through the automaking world.

A General Motors plant in Kansas City closed in February for lack of chips, and still hasn’t reopened. Mercedes-Benz has begun to hoard its chips for expensive models and is temporarily shutting down factories that produce lower-priced C-Class sedans. Porsche warned dealers in the United States this month that customers might have to wait an extra 12 weeks to get their cars, because they lack a chip used to monitor tire pressure.

The French automaker Peugeot, part of the newly formed Stellantis automaking empire, has gone so far as to substitute old-fashioned analog speedometers for digital units in some models.

consumer electronics, which tend to be more lucrative customers.

German economic research institutes warned in a joint report this month.

The crisis has exposed not only how dependent the car industry is on a few suppliers, but also how vulnerable it is to disruptions. Supply chain managers shuddered last month when an early-morning fire knocked out production at a factory owned by Renesas Electronics in Hitachinaka, Japan, north of Tokyo. Renesas is a crucial supplier of chips used to monitor brake functioning, control power steering, trigger airbags and in many other tasks.

Storms in Texas earlier in the year temporarily forced the shutdown of three semiconductor factories. And Taiwan is in the midst of a severe drought, analysts at IHS Markit warned in a recent report. Chip manufacturing requires large amounts of very pure water.

Even without a pandemic and supply chain disruptions, the auto industry is in turmoil. In the United States, sales have been basically flat since the early 2000s. Profit margins are slim. Some big automakers may not survive the shift to electric cars.

“If I were a chip manufacturer I wouldn’t start investing in a new plant unless I got free money from the government,” said ManMohan S. Sodhi, who teaches supply chain management at the business school at City, University of London.

Ford Motor said Wednesday that it would keep several U.S. plants idle longer than expected because of the chip shortage.

The auto industry has been paralyzed by supply chain disruptions before. Mr. Källenius recalled an episode when a hurricane struck Puerto Rico and shut down production at a factory that, to his surprise and pretty much everyone else’s, was the only source of a coating essential to some kinds of auto electronics.

Automobiles have tens of thousands of parts and so many layers of suppliers and sub-suppliers and sub-sub-suppliers that even carmakers have trouble keeping track of every component’s provenance.

The economics of the industry are such that only suppliers with the highest volume survive. Smaller suppliers tend to die out because they can’t produce parts or materials as cheaply as the big players, leaving the industry dependent on one or two manufacturers of high-pressure fuel lines, for example, or a certain specialized plastic.

The current semiconductor shortage may not be the last. The auto industry’s need for semiconductors is expected to explode in coming years because of autonomous driving features and the increasing popularity of electric vehicles, which are more reliant on software than internal combustion engines.

Mr. Källenius said, though, that the most sophisticated chips were not the ones currently giving him headaches. “We are missing the most simple of chips, that maybe only cost cents or dollars,” he said. “That’s holding us up from building a product that costs $75,000.”

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