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Betting on Small Companies Yielded Big Returns

Small-cap value stocks rank among the market’s riskiest fare.

But higher risk can bring bigger rewards, and in the first quarter, it did for three of the better-performing mutual funds. Each returned more than 20 percent by betting on small-cap value.

Value investors are betting on stocks that they think are trading below their fundamental worth. Often, companies end up classified this way because they operate in out-of-favor industries or have had setbacks.

Here are some of the choices that enabled three funds to prosper.

The Kinetics Small-Cap Opportunities Fund toted up a first quarter return that would have been whopping for an entire year — 60.5 percent. In contrast, the S&P 500 index gave a total return of 6.2 percent for the quarter.

Peter Doyle, one of the fund’s co-managers, said his fund achieved its result thanks to an unusual holding: the Texas Pacific Land Corporation.

Permian Basin, one of the United States’ leading oil-and-gas-producing locales. The company earns royalties from others’ drilling on its land, and its stock shot up in the first quarter, returning nearly 120 percent.

Until this year, some mutual funds wouldn’t hold Texas Pacific because it was a publicly traded trust, not a corporation. It converted its legal structure in January, though Kinetics has owned it since about 2013.

Texas Pacific recently accounted for 43.9 percent of the fund’s assets. It was one of 36 holdings.

Kinetics’s enormous bet is “an outgrowth of our long time horizon and low turnover strategy,” Mr. Doyle said. “Maybe five of our names will be great investments. If you don’t turn over frequently, those five will become a bigger and bigger percentage of the portfolio.”

Mr. Doyle said patience is essential to how he and his co-managers run their fund. He said they view it as an advantage in a business characterized by shorter-term thinking.

Fund managers’ bonuses are often based on annual returns, so they focus on those, he said. “If you can get away from that, you can buy great companies at a discount.”

Hartford Small Cap Value Fund, sleuths for values, too. But unlike Mr. Doyle, he shies from the energy sector.

He said that’s an outgrowth of his approach, which focuses on companies’ ability to produce free cash flow — that is, cash left over after a company funds its operations and maintains its assets. (Small-cap energy businesses can be speculative and require substantial investment before producing free cash.)

To spot cash spigots, Mr. Kammann ranks the 900 stocks in his investment universe and digs deeper into the better-ranking ones to understand why they’re cheap.

Poly, formerly known as Plantronics, a maker of headsets and other communications equipment.

The company had seen a planned merger collapse and a competitor, Jabro, swipe market share. The stock sank in the early days of the pandemic.

Mr. Kammann sensed a buying opportunity. “We thought the stay-at-home environment would be positive for headsets and that, post-Covid, there was going to continue to be some form of hybrid work. So we redoubled the position.”

The Hartford fund, whose A shares have a net expense ratio of 1.3 percent, returned 23.8 percent in the first quarter.

American Century Small-Cap Value Fund.

It’s one of several measures he considers as he’s screening companies. Others include balance-sheet strength and quality of management.

“We generate a score for each company, and that lets us compare it to other companies in its sector and across the portfolio,” he said. “We want to use data to remove some of the inherent biases we all have.”

Like Mr. Kammann’s approach, Mr. John’s has led him away from such traditional value-centric industries as energy and utilities.

Instead, he has lately found promise in Compass Diversified, which he calls a mini-conglomerate.

Compass, a publicly traded partnership, owns such diverse companies as the Sterno Group, producer of the canned fuel, and 5.11, a maker of clothing and gear for law enforcement and for the outdoors.

Compass’s managers are “incredible allocators of capital,” Mr. John said. “They invest in these businesses and help them grow, and if there’s an opportunity to sell them, they’ll do that.”

In 2019, for example, Compass sold off Clean Earth, an environmental remediation company, and Manitoba Harvest, a producer of hemp foods .

Penske Automotive, calling it “one of our core holdings for quite some time.”

Penske is known for its network of car dealerships, but its business is burlier than that, he said. Commercial trucks, via sales and leasing, have recently powered the company’s growth.

“Within the commercial truck space, 70 percent of gross profit comes from the servicing,” he said. “A sale is really just an entree to providing service over time.”

The company’s chairman, Roger S. Penske, makes shareholder interests a priority because he’s a substantial one himself, Mr. John said. “Penske owns 40-percent-plus of the company.”

The American Century Fund, whose investor shares have an expense ratio of 1.25 percent, returned 24.7 percent in the first quarter.


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Taiwan’s Drought Pits Chip Makers Against Farmers

HSINCHU, Taiwan — Chuang Cheng-deng’s modest rice farm is a stone’s throw from the nerve center of Taiwan’s computer chip industry, whose products power a huge share of the world’s iPhones and other gadgets.

This year, Mr. Chuang is paying the price for his high-tech neighbors’ economic importance. Gripped by drought and scrambling to save water for homes and factories, Taiwan has shut off irrigation across tens of thousands of acres of farmland.

The authorities are compensating growers for the lost income. But Mr. Chuang, 55, worries that the thwarted harvest will drive customers to seek out other suppliers, which could mean years of depressed earnings.

“The government is using money to seal farmers’ mouths shut,” he said, surveying his parched brown fields.

already strained by surging demand for electronics, the added uncertainty about Taiwan’s water supply is not likely to ease concerns about the tech world’s reliance on the island and on one chip maker in particular: Taiwan Semiconductor Manufacturing Company.

Intel and other big names. The company said last week that it would invest $100 billion over the next three years to increase capacity, which will likely further strengthen its commanding presence in the market.

TSMC says the drought has not affected its production so far. But with Taiwan’s rainfall becoming no more predictable even as its tech industry grows, the island is having to go to greater and greater lengths to keep the water flowing.

In recent months, the government has flown planes and burned chemicals to seed the clouds above reservoirs. It has built a seawater desalination plant in Hsinchu, home to TSMC’s headquarters, and a pipeline connecting the city with the rainier north. It has ordered industries to cut use. In some places it has reduced water pressure and begun shutting off supplies for two days each week. Some companies, including TSMC, have hauled in truckloads of water from other areas.

But the most sweeping measure has been the halt on irrigation, which affects 183,000 acres of farmland, around a fifth of Taiwan’s irrigated land.

project to increase irrigation efficiency.

That Taiwan, one of the developed world’s rainiest places, should lack for water is a paradox verging on tragedy.

2015, and before that in 2004.

“If in another two or three years, the same conditions reappear, then we can say, ‘Ah, Taiwan has definitely entered an era of major water shortages,’” said You Jiing-yun, a civil engineering professor at National Taiwan University. “Right now, it’s wait and see.”

according to the company, or more than 10 percent of the supply from two local reservoirs, Baoshan and Baoshan Second Reservoir. TSMC recycled more than 86 percent of the water from its manufacturing processes that year, it said, and conserved 3.6 million tons more than it did the year before by increasing recycling and adopting other new measures. But that amount is still small next to the 63 million tons it consumed in 2019 across its Taiwan facilities.

government figures show. Most Western Europeans use less than that, though Americans use more, according to World Bank data.

Mr. Wang of the Water Resources Agency said: “Adjusting water prices has a big effect on society’s more vulnerable groups, so when making adjustments, we are extremely cautious.” Taiwan’s premier said last month that the government would look into imposing extra fees on 1,800 water-intensive factories.

Lee Hong-yuan, a hydraulic engineering professor who previously served as Taiwan’s interior minister, also blames a bureaucratic morass that makes it hard to build new wastewater recycling plants and to modernize the pipeline network.

“Other small countries are all extremely flexible,” Mr. Lee said, but “we have a big country’s operating logic.” He believes this is because Taiwan’s government was set up decades ago, after the Chinese civil war, with the goal of ruling the whole of China. It has since shed that ambition, but not the bureaucracy.

Taiwan’s southwest is both an agricultural heartland and a rising center of industry. TSMC’s most advanced chip facilities are in the southern city of Tainan.

The nearby Tsengwen Reservoir has shrunk to a marshy stream in some parts. Along a scenic strip known as Lovers’ Park, the floor of the reservoir has become a vast moonscape. The water volume is around 11.6 percent of capacity, according to government data.

In farming towns near Tainan, many growers said they were content to be living on the government’s dime, at least for now. They clear the weeds from their fallowed fields. They drink tea with friends and go on long bike rides.

But they are also reckoning with their futures. The Taiwanese public appears to have decided that rice farming is less important, both for the island and the world, than semiconductors. The heavens — or larger economic forces, at least — seem to be telling the farmers it is time to find other work.

“Fertilizer is getting more expensive. Pesticide is getting more expensive,” said Hsieh Tsai-shan, 74, a rice grower. “Being a farmer is truly the worst.”

Serene farmland surrounds the village of Jingliao, which became a popular tourist spot after appearing in a documentary about farmers’ changing lives.

There is only one cow left in town. It spends its days pulling visitors, not plowing fields.

“Around here, 70 counts as young,” said Yang Kuei-chuan, 69, a rice farmer.

Both of Mr. Yang’s sons work for industrial companies.

“If Taiwan didn’t have any industry and relied on agriculture, we all might have starved to death by now,” Mr. Yang said.

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‘The U.S. Economy Will Likely Boom,’ Jamie Dimon Predicts: Live Updates

was published early Wednesday. The letter, which is widely read on Wall Street, is not just an overview of the bank’s business but also covers Mr. Dimon’s thoughts on everything from leadership lessons to public policy prescriptions.

“The U.S. economy will likely boom.” A combination of excess savings, deficit spending, vaccinations and “euphoria around the end of the pandemic,” Mr. Dimon wrote, may create a boom that “could easily run into 2023.” That could justify high stock valuations, but not the price of U.S. debt, given the “huge supply” soon to hit the market. There is a chance that a rise in inflation would be “more than temporary,” he wrote, forcing the Federal Reserve to raise interest rates aggressively. “Rapidly raising rates to offset an overheating economy is a typical cause of a recession,” he wrote, but he hopes for “the Goldilocks scenario” of fast growth, gently increasing inflation and a measured rise in interest rates.

“Banks are playing an increasingly smaller role in the financial system.” Mr. Dimon cited competition from an already large shadow banking system and fintech companies, as well as “Amazon, Apple, Facebook, Google and now Walmart.” He argued those nonbank competitors should be more strictly regulated; their growth has “partially been made possible” by avoiding banking rules, he wrote. And when it comes to tougher regulation of big banks, he wrote, “the cost to the economy of having fail-safe banks may not be worth it.”

“China’s leaders believe that America is in decline.” The United States has faced tough times before, but today, “the Chinese see an America that is losing ground in technology, infrastructure and education — a nation torn and crippled by politics, as well as racial and income inequality — and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals,” he wrote. “Unfortunately, recently, there is a lot of truth to this.”

“The solution is not as simple as walking away from fossil fuels.” Addressing climate change doesn’t mean “abandoning” companies that produce and use fossil fuels, Mr. Dimon wrote, but working with them to reduce their environmental impact. He sees “huge opportunity in sustainable and low-carbon technologies and businesses” and plans to evaluate clients’ progress according to reductions in carbon intensity — emissions per unit of output — which adjusts for factors like size.

Other notable news (and views) from the letter:

This was Mr. Dimon’s longest letter yet, at 35,000 words over 66 pages. The steadily expanding letters — aside from a shorter edition last year, weeks after Mr. Dimon had emergency heart surgery — could be seen as a reflection of the range of issues top executives are now expected, or compelled, to address.

Target said its commitment added to its other moves to improve racial equity in the past year,.
Credit…Kendrick Brinson for The New York Times

Target will spend more than $2 billion with Black-owned businesses by 2025, it announced on Wednesday, joining a growing list of retailers that have promised to increase their economic support of such companies in a bid to advance racial equity in the United States.

Target, which is based in Minneapolis, will add more products from companies owned by Black entrepreneurs, spend more with Black-owned marketing agencies and construction companies and introduce new resources to help Black-owned vendors navigate the process of creating products for a mass retail chain, the company said in a statement.

After last year’s protests over police brutality, a wave of American retailers, from Sephora to Macy’s, have committed to spending more money with Black-owned businesses. Many of them have joined a movement known as the 15 Percent Pledge, which supports devoting enough shelf space to Black-owned businesses to align with the African-American percentage of the national population.

Target’s announcement appears to be separate from that pledge. It said its commitment added to other racial-equity and social-justice initiatives in the past year, including efforts to improve representation among its work force.

A Samsung store in Seoul. The company’s Galaxy S21 series of  phones have sold well in the United States since their introduction in January. 
Credit…Jung Yeon-Je/Agence France-Presse — Getty Images

Samsung’s sales grew by an estimated 17 percent in the first quarter from a year earlier, and operating profit increased by 44 percent, the company said on Wednesday. The South Korean electronics titan’s growth has been helped during the pandemic by strong demand for televisions, computer monitors and other lockdown staples.

The company released its latest flagship smartphones, the Galaxy S21 series, in January. In the United States, the devices handily outsold Samsung’s last line of premium phones in their first six weeks on the market, according to Counterpoint Research, which attributed the strong performance in part to Americans receiving stimulus payments.

Samsung’s handset business has also been buoyed of late by the U.S. campaign against Huawei, one of the company’s main rivals in smartphones. The Chinese tech giant’s device sales have plummeted because American sanctions prevent its phones from running popular Google apps and services, limiting their appeal to many buyers.

Another competitor, LG Electronics, said this week that it was getting out of the smartphone business to focus on other products.

Samsung’s first-quarter revenue was likely hurt by February’s winter storm in Texas, which caused the company to halt production for a while at its manufacturing facilities in Austin.

The company is expected to report detailed financial results later this month.

Jeff Bezos in 2019. He said in a statement on Tuesday that he applauded the Biden administration’s “focus on making bold investments in American infrastructure.”
Credit…Jared Soares for The New York Times

Jeff Bezos, Amazon’s founder and chief executive, said on Tuesday that he supported an increase in the corporate tax rate to fund investment in U.S. infrastructure.

President Biden is pushing a plan to spend $2 trillion on infrastructure improvements, in part by raising the corporate tax rate to 28 percent, from its current rate of 21 percent.

Mr. Bezos said in a statement on Amazon’s corporate website that he applauded the administration’s “focus on making bold investments in American infrastructure.”

“We recognize this investment will require concessions from all sides — both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate),” Mr. Bezos said.

For years, Amazon has been a model for corporate tax avoidance, fielding criticism of its tax strategies from Democrats and former President Donald J. Trump. In 2019, Amazon had an effective tax rate of 1.2 percent, which was offset by tax rebates in 2017 and 2018, according to the Institute on Taxation and Economic Policy, a left-leaning research group in Washington. In 2020, the company paid 9.4 percent in taxes on U.S. pretax profit of about $20 billion, the group said.

The company has said in the past that it “pays all the taxes we are required to pay in the U.S. and every country where we operate.”

Companies employ varied strategies to reduce their tax liabilities. In 2017, the same federal bill that lowered the tax rate to 21 percent expanded tax breaks, including allowing the immediate expensing of capital expenditures. The goal was to lift investment, but the change also caused the number of profitable companies that paid no taxes to nearly double in 2018 from prior years.

Brandon Brown and Jeremiah Collins, students at American Diesel Training.
Credit…Brian Kaiser for The New York Times

American Diesel Training, a school in Ohio that prepares people for careers as diesel mechanics, is part of a new model of work force training — one that bases pay for training programs partly on whether students get hired.

The students agree to an share about 5 percent to 9 percent of their income depending on their earnings. The monthly payments last four years. If you lose your job, the payment obligation stops.

Early results are promising, Steve Lohr reports for The New York Times, and experts say the approach makes far more economic sense than the traditional method, in which programs are paid based on how many people enroll. But there are only a relative handful of these pay-for-success programs. The challenge has been to align funding and incentives so that students, training programs and employers all benefit.

State and federal officials are now looking for new ways to improve work force development. President Biden’s $2 trillion infrastructure and jobs plan, announced last week, includes billions for work force development with an emphasis on “next-generation training programs” that embrace “evidence-based approaches.”

Social Finance, a nonprofit organization founded a decade ago to develop new ways to finance results-focused social programs, is seeking, designing and supporting new programs — for-profit or nonprofit — that follow the pay-for-success model.

“There is emerging evidence that these kinds of programs are a very effective and exciting part of work force development,” said Lawrence Katz, a labor economist at Harvard. “Social Finance is targeting and nurturing new programs, and it brings a financing mechanism that allows them to expand.”

A former Kmart in West Orange, N.J., is now a coronavirus vaccination center. The International Monetary Fund said successful vaccination programs have improved countries’ growth prospects.
Credit…James Estrin/The New York Times

Major U.S. and European stock indexes hovered near record highs on Wednesday after a stream of mostly upbeat economic data and the progress on vaccinations.

U.S. stock futures were little changed on Wednesday, but the S&P 500 was set to open within half a percentage point of its record. The Stoxx Europe 600 and DAX index in Germany both fell about 0.1 percent after climbing to new highs on Tuesday.

On Tuesday, the International Monetary Fund upgraded its forecast for global economic growth and said some of the world’s wealthiest countries would lead the recovery, particularly the United States, where the economy is now projected to grow by 6.4 percent this year.

The rollout of vaccines is a major reason for the rosier forecast in some countries, the I.M.F. said. President Biden said that he wanted states to make all adults eligible for vaccines by April 19, two weeks earlier than his previous deadline. In Britain, the Moderna vaccine was administered for the first time on Wednesday, making it the third vaccine available.

Still, the I.M.F. warned on Tuesday against an unequal recovery because of the uneven distribution of vaccines around the world with some lower-income countries not expected to be able to vaccinate their populations this year.

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Business Groups Push Back on Tax Increase in Biden Plan: Live Updates

15 years of higher taxes on corporations to pay for eight years of spending. The plans include raising the corporate tax rate to 28 percent from 21 percent. The corporate tax rate had been cut from 35 percent under former President Donald J. Trump.

The Business Roundtable said it supported infrastructure investment, calling it “essential to economic growth” and important “to ensure a rapid economic recovery” — but rejected corporate tax increases as a way to pay for it.

Policymakers should avoid creating new barriers to job creation and economic growth, particularly during the recovery,” the group’s chief executive, Joshua Bolten, said in a statement.

The U.S. Chamber of Commerce echoed that view. “We strongly oppose the general tax increases proposed by the administration, which will slow the economic recovery and make the U.S. less competitive globally — the exact opposite of the goals of the infrastructure plan,” the chamber’s chief policy officer, Neil Bradley, said in a statement.

Wall Street has been wary of possible tax increases since the presidential election and has hoped that gridlock in Washington would moderate Mr. Biden’s agenda. On Wednesday, a spokesman for JPMorgan Chase said the bank’s chief executive, Jamie Dimon, believed “that the corporate tax rate for companies in the U.S. has to be competitive globally, which it is now.”

But “he has no problem with high-income people like himself paying a higher tax rate,” said the spokesman, Joseph Evangelisti.

The Biden administration has indicated that tax increases for wealthy Americans will help fund the second phase of the infrastructure plan, which is expected to be announced next month and will focus on priorities like education, health care and paid leave. The increase in corporate taxes is an effort to “ensure that corporations pay their fair share,” White House officials said in a news release.

“With vaccinations becoming more widespread and confidence in travel rising, we’re ready to help customers reclaim their lives,” the chief executive of Delta Air Lines said.
Credit…Chang W. Lee/The New York Times

Delta Air Lines said Wednesday that it would sell middle seats on flights starting May 1, more than a year after it decided to leave them empty to promote distancing. Other airlines had blocked middle seats early in the pandemic, but Delta held out the longest by several months and is the last of the four big U.S. airlines to get rid of the policy.

The company’s chief executive, Ed Bastian, said that a survey of those who flew Delta in 2019 found that nearly 65 percent expected to have received at least one dose of a coronavirus vaccine by May 1, which gave the airline “the assurance to offer customers the ability to choose any seat on our aircraft.”

Delta started blocking middle seat bookings in April 2020 and said that it continued the policy to give passengers peace of mind.

“During the past year, we transformed our service to ensure their health, safety, convenience and comfort during their travels,” Mr. Bastian said in a statement. “Now, with vaccinations becoming more widespread and confidence in travel rising, we’re ready to help customers reclaim their lives.”

Air travel has started to recover meaningfully in recent weeks, with ticket sales rising and as well over one million people per day have been screened at airport checkpoints since mid-March, according to the Transportation Security Administration. More than 1.5 million people were screened on Sunday, the busiest day at airports since the pandemic began. Air travel is still down about 40 percent from 2019.

The Centers for Disease Control and Prevention continues to recommend against travel, even for those who have been vaccinated. This week, its director, Dr. Rochelle Walensky, warned of “impending doom” from a potential fourth wave of the pandemic if Americans move too quickly to disregard the advice of public health officials.

Delta also said on Wednesday that it would give customers more time to use expiring travel credits. All new tickets purchased in 2021 and credits set to expire this year will now expire at the end of 2022.

Starting April 14, the airline plans to bring back soft drinks, cocktails and snacks on flights within the United States and to nearby international destinations. In June, it plans to start offering hot food in premium classes on some coast-to-coast flights. Delta also announced changes that will make it easier for members of its loyalty program to earn points this year.

Deliveroo is now in 12 countries and has over 100,000 riders.
Credit…Toby Melville/Reuters

Deliveroo, the British food delivery service, dropped as much as 30 percent in its first minutes of trading on Wednesday, a gloomy public debut for the company that was promoted as a post-Brexit win for London’s financial markets.

The company had set its initial public offering price at 3.90 pounds a share, valuing Deliveroo at £7.6 billion or $10.4 billion. But it opened at £3.31, 15 percent lower, and kept falling. By the end of the day, shares had recovered only slightly, closing at about £2.87, 26 percent lower.

The offering has been troubled by major investors planning to sit out the I.P.O. amid concerns about shareholder voting rights and Deliveroo rider pay. Deliveroo, trading under the ticker “ROO,” sold just under 385 million shares, raising £1.5 billion.

The business model of Deliveroo and other gig economy companies is increasingly under threat in Europe as legal challenges mount. Two weeks ago, Uber reclassified more than 70,000 drivers in Britain as workers who will receive a minimum wage, vacation pay and access to a pension plan, after a Supreme Court ruling. Analysts said the move could set a precedent for other companies and increase costs.

Deliveroo, which is based in London and was founded in 2013, is now in 12 countries and has more than 100,000 riders, recognizable on the streets by their teal jackets and food bags. Last year, Amazon became its biggest shareholder.

Demand for Deliveroo’s services could soon diminish, as pandemic restrictions in its largest market, Britain, begin to ease. In a few weeks, restaurants will reopen for outdoor dining. Last year, Deliveroo said, it lost £226.4 million even as its revenue jumped more than 50 percent to nearly £1.2 billion.

Last week, a joint investigation by the Independent Workers’ Union of Great Britain and the Bureau of Investigative Journalism was published based on invoices of hundreds of Deliveroo riders. It found that a third of the riders made less than £8.72 an hour, the national minimum wage for people over 25.

Deliveroo dismissed the report, calling the union a “fringe organization” that didn’t represent a significant number of Deliveroo riders. The company said that riders were paid for each delivery and earn “£13 per hour on average at our busiest times.”

On Monday, shares traded hands in a period called conditional dealing open to investors allocated shares in the initial offering. The stock is expected to be fully listed on the London Stock Exchange next Wednesday and can be traded without restrictions from then.

Last week, Ed Bastian, the chief executive of Delta, said he thought Georgia’s voting law had been improved, but on Wednesday he sounded a very different note.
Credit…Etienne Laurent/EPA, via Shutterstock

The chief executive of Delta, Ed Bastian, sent a letter on Wednesday to employees expressing regret for the company’s muted opposition to a restrictive voting law passed last week by the Georgia legislature.

“I need to make it crystal clear that the final bill is unacceptable and does not match Delta’s values,” he wrote in an internal memo that was reviewed by The New York Times.

Mr. Bastian’s position is a stark reversal from last week. As Republican lawmakers in Georgia rushed to pass the new law, Delta, along with other big companies headquartered in Atlanta, came under pressure from activists to publicly and directly oppose the effort. Activists called for boycotts, and protested at the Delta terminal at the Atlanta airport.

Instead, Delta chose to offer general statements in support of voting rights, and work behind the scenes to try and remove some of the most onerous provisions as the new law came together. After the law was passed on Thursday, Mr. Bastian said he believed it had been improved and included several useful changes that make voting more secure.

But on Wednesday, after dozens of prominent Black executives called on corporate America to become more engaged in the issue, Mr. Bastian reversed course.

“After having time to now fully understand all that is in the bill, coupled with discussions with leaders and employees in the Black community, it’s evident that the bill includes provisions that will make it harder for many underrepresented voters, particularly Black voters, to exercise their constitutional right to elect their representatives,” he said. “That is wrong.”

Mr. Bastian went further, saying that the entire premise of the new law — and dozens of similar bills being advanced in other states around the country — was based on false pretenses.

“The entire rationale for this bill was based on a lie: that there was widespread voter fraud in Georgia in the 2020 elections,” Mr. Bastian said. “This is simply not true. Unfortunately, that excuse is being used in states across the nation that are attempting to pass similar legislation to restrict voting rights.”

Also on Wednesday, Larry Fink, the chief executive of BlackRock, issued a statement on LinkedIn saying the company was concerned about the wave of new restrictive voting laws. “BlackRock is concerned about efforts that could limit access to the ballot for anyone,” Mr. Fink said. “Voting should be easy and accessible for ALL eligible voters.”

Kenneth Chenault, left, a former chief executive of American Express, and Kenneth Frazier, the chief executive of Merck, organized a letter signed by 72 Black business leaders.
Credit…Left, Justin Sullivan/Getty Images; right, Spencer Platt/Getty Images

Seventy-two Black executives signed a letter calling on companies to fight a wave of voting-rights bills similar to the one that was passed in Georgia being advanced by Republicans in at least 43 states.

The effort was led by Kenneth Chenault, a former chief executive of American Express, and Kenneth Frazier, the chief executive of Merck, Andrew Ross Sorkin and David Gelles report for The New York Times.

The signers included Roger Ferguson Jr., the chief executive of TIAA; Mellody Hobson and John Rogers Jr., the co-chief executives of Ariel Investments; Robert F. Smith, the chief executive of Vista Equity Partners; and Raymond McGuire, a former Citigroup executive who is running for mayor of New York. The group of leaders, with support from the Black Economic Alliance, bought a full-page ad in the Wednesday print edition of The New York Times.

“The Georgia legislature was the first one,” Mr. Frazier said. “If corporate America doesn’t stand up, we’ll get these laws passed in many places in this country.”

Last year, the Human Rights Campaign began persuading companies to sign on to a pledge that states their “clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society.” Dozens of major companies, including AT&T, Facebook, Nike and Pfizer, signed on.

To Mr. Chenault, the contrast between the business community’s response to that issue and to voting restrictions that disproportionately harm Black voters was telling.

“You had 60 major companies — Amazon, Google, American Airlines — that signed on to the statement that states a very clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society,” he said. “So, you know, it is bizarre that we don’t have companies standing up to this.”

“This is not new,” Mr. Chenault added. “When it comes to race, there’s differential treatment. That’s the reality.”

A Huawei store in Beijing. The United States has placed strict controls on Huawei’s ability to buy and make computer chips.
Credit…Greg Baker/Agence France-Presse — Getty Images

The Chinese tech behemoth Huawei reported sharply slower growth in sales last year, which the company blamed on American sanctions that have both hobbled its ability to produce smartphones and left those handsets unable to run popular Google apps and services, limiting their appeal to many buyers.

Huawei said on Wednesday that global revenue was around $137 billion in 2020, 3.8 percent higher than the year before. The company’s sales growth in 2019 was 19.1 percent.

Over the past two years, Washington has placed strict controls on Huawei’s ability to buy and make computer chips and other essential components. United States officials have expressed concern that the Chinese government could use Huawei or its products for espionage and sabotage. The company has denied that it is a security threat.

In recent months, Huawei has continued to release new handset models. But sales have suffered, including in its home market. Worldwide, shipments of Huawei phones fell by 22 percent between 2019 and 2020, according to the research firm Canalys, making the company the world’s third largest smartphone vendor last year. In 2019, it was No. 2, behind Samsung.

Huawei remained top dog last year in telecom network equipment, according to the consultancy Dell’Oro Group, even as Britain and other governments blocked Huawei from building their nations’ 5G infrastructure.

Announcing the company’s financial results on Wednesday, Ken Hu, one of its deputy chairmen, said that despite the challenges, Huawei was not changing the broad direction of its business. Another Huawei executive recently revealed on social media that the company was offering an artificial intelligence product for pig farms, which some people took as a sign that Huawei was diversifying to survive.

Mr. Hu took note of the news reports about Huawei’s pig-farming product but said it was “not true” that the company was making any major shifts. “Huawei’s business direction is still focused on technology infrastructure,” he said.

Apple led the $50 million funding round in UnitedMasters, which allows musicians keep ownership of their master recordings.
Credit…Kathy Willens/Associated Press

Apple is investing in UnitedMasters, a music distribution company that lets musicians bypass traditional record labels.

Artists who distribute through UnitedMasters keep ownership of their master recordings and pay either a yearly fee or 10 percent of their royalties.

Apple led the $50 million funding round, announced on Wednesday, which values UnitedMasters at $350 million, the DealBook newsletter reports. Existing investors, including Alphabet and Andreessen Horowitz, also participated in the funding.

Musicians are increasingly taking ownership of their work. Taylor Swift, most famously, and Anita Baker, most recently, have publicized their fights with labels over their master recordings. Artists once needed the heft of major publishing labels — which typically demand ownership of master recordings — to build a fan base. But with social media, labels no longer play as significant a gatekeeping role. UnitedMasters has partnerships with the N.B.A., ESPN, TikTok and Twitch, deals that reflect the new ways that people discover music.

“Technology, no doubt, has transformed music for consumers,” said Steve Stoute, the former major label executive who founded UnitedMasters. “Now it’s time for technology to change the economics for the artists.” The deal with UnitedMasters is about “empowering creators,” Eddy Cue, Apple’s head of internet software and services, said.

As streaming services, including Apple’s, compete for subscribers, they are cutting more favorable deals with the artists who attract users to platforms. Spotify announced an initiative called “Loud and Clear” this week to detail how it pays musicians following public pressure.

An H&M store in Beijing. The retailer’s chief executive, Helena Helmersson, said H&M had a “long-term commitment” to China.
Credit…Kevin Frayer/Getty Images

More than a week after the Swedish retailer H&M came under fire in China for a months-old statement expressing concern over reports of Uyghur forced labor in the region of Xinjiang, a major source of cotton, the company published a statement saying it hoped to regain the trust of customers in China.

In recent days, H&M and other Western clothing brands including Nike and Burberry that expressed concerns over reports coming out of Xinjiang have faced an outcry on Chinese social media, including calls for a boycott endorsed by President Xi Jinping’s government. The brands’ local celebrity partners have terminated their contracts, Chinese landlords have shuttered stores and their products have been removed from major e-commerce platforms.

Caught between calls for patriotism among Chinese consumers and campaigns for conscientious sourcing of cotton in the West, some other companies, including Inditex, the owner of the fast-fashion giant Zara, quietly removed statements on forced labor from their websites.

On Wednesday, H&M, the world’s second-largest fashion retailer by sales after Inditex, published a response to the controversy as part of its first quarter 2021 earnings report.

Not that it said much. There were no explicit references to cotton, Xinjiang or forced labor. However, the statement said that H&M wanted to be “a responsible buyer, in China and elsewhere” and was “actively working on next steps with regards to material sourcing.”

“We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China,” it said.

During the earnings conference call, the chief executive, Helena Helmersson, noted the company’s “long-term commitment to the country” and how Chinese suppliers, which were “at the forefront of innovation and technology,” would continue to “play an important role in further developing the entire industry.”

“We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward, ” she said.

Executives on the call did not comment on the impact of the controversy on sales, except to state that around 20 stores in China were currently closed.

H&M’s earnings report, which covered a period before the recent outcry in China, reflected diminished profit for a retailer still dealing with pandemic lockdowns. Net sales in the three months through February fell 21 percent compared with the same quarter a year ago, with more than 1,800 stores temporarily closed.

Stocks on Wall Street rose as investors waited for President Biden to lay out plans for a $2 trillion package of infrastructure spending on Wednesday, which he is expected to propose funding with an increase in corporate taxes.

The S&P 500 index gained about 0.7 percent by midday, while the Nasdaq composite climbed about 1.9 percent. Bonds fell, with the yield on 10-year Treasury notes at 1.72 percent. On Tuesday, the 10-year yield climbed as high 1.77 percent, a level not seen since January 2020.

Prospects of a strong economic recovery in the United States, supported by large amounts of fiscal spending and the vaccine rollout, have pushed bond yields higher. Economic growth and higher inflation have made bonds less appealing as investors adjust their expectations for how much longer the Federal Reserve will need to keep its easy-money policies.

The Ever Given cargo ship was stuck in the Suez Canal nearly a week.
Credit…Agence France-Presse — Getty Images

The traffic jam at the Suez Canal will soon ease, but behemoth container ships like the one that blocked that crucial passageway for almost a week aren’t going anywhere.

Global supply chains were already under pressure when the Ever Given, a ship longer than the Empire State Building and capable of carrying 20,000 containers, wedged itself between the banks of the Suez Canal last week. It was freed on Monday, but left behind “disruptions and backlogs in global shipping that could take weeks, possibly months, to unravel,” according to A.P. Moller-Maersk, the world’s largest shipping company.

The crisis was short, but it was also years in the making, reports Niraj Chokshi for The New York Times.

For decades, shipping lines have been making bigger and bigger vessels, driven by an expanding global appetite for electronics, clothes, toys and other goods. The growth in ship size, which sped up in recent years, often made economic sense: Bigger vessels are generally cheaper to build and operate on a per-container basis. But the largest ships can come with their own set of problems, not only for the canals and ports that have to handle them, but for the companies that build them.

“They did what they thought was most efficient for themselves — make the ships big — and they didn’t pay much attention at all to the rest of the world,” said Marc Levinson, an economist and author of “Outside the Box,” a history of globalization. “But it turns out that these really big ships are not as efficient as the shipping lines had imagined.”

Despite the risks they pose, however, massive vessels still dominate global shipping. According to Alphaliner, a data firm, the global fleet of container ships includes 133 of the largest ship type — those that can carry 18,000 to 24,000 containers. Another 53 are on order.

A.P. Moller-Maersk said it was premature to blame Ever Given’s size for what happened in the Suez. Ultra-large ships “have existed for many years and have sailed through the Suez Canal without issues,” Palle Brodsgaard Laursen, the company’s chief technical officer, said in a statement on Tuesday.

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In today’s On Tech newsletter, Shira Ovide talks to New York Times reporter Karen Weise about the vote on whether to form a union at an Amazon warehouse in Bessemer, Ala., and how the outcome may reverberate beyond this one workplace.

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Delta reverses course, calling Georgia’s voting law ‘unacceptable.’

15 years of higher taxes on corporations to pay for eight years of spending. The plans include raising the corporate tax rate to 28 percent from 21 percent. The corporate tax rate had been cut from 35 percent under former President Donald J. Trump.

The Business Roundtable said it supported infrastructure investment, calling it “essential to economic growth” and important “to ensure a rapid economic recovery” — but rejected corporate tax increases as a way to pay for it.

“Business Roundtable strongly opposes corporate tax increases” to pay for infrastructure investment, the group’s chief executive, Joshua Bolten, said in a statement. Policymakers should avoid creating new barriers to job creation and economic growth, particularly during the recovery.”

The U.S. Chamber of Commerce echoed Business Roundtable’s view. “We strongly oppose the general tax increases proposed by the administration, which will slow the economic recovery and make the U.S. less competitive globally — the exact opposite of the goals of the infrastructure plan,” the chamber’s chief policy officer, Neil Bradley, said in a statement.

Automakers embraced Mr. Biden’s bet to increase the use of electric cars. The plan proposes spending $174 billion to encourage the manufacture and purchase of electric vehicles by granting tax credits and other incentives to companies that make electric vehicle batteries in the United States instead of China.

“Customers want connected and increasingly electric vehicles, and we need to work together to build the infrastructure to help this transformation,” Jim Farley, the chief executive of Ford Motor, said in a statement. “Ford supports the administration’s efforts to advance a broad infrastructure plan that prioritizes a more sustainable, connected and autonomous future — including an integrated charging network and supportive supply chain, built on a foundation of safe roads and bridges for our customers.”

“With vaccinations becoming more widespread and confidence in travel rising, we’re ready to help customers reclaim their lives,” the chief executive of Delta Air Lines said.
Credit…Chang W. Lee/The New York Times

Delta Air Lines said Wednesday that it would sell middle seats on flights starting May 1, more than a year after it decided to leave them empty to promote distancing. Other airlines had blocked middle seats early in the pandemic, but Delta held out the longest by several months and is the last of the four big U.S. airlines to get rid of the policy.

The company’s chief executive, Ed Bastian, said that a survey of those who flew Delta in 2019 found that nearly 65 percent expected to have received at least one dose of a coronavirus vaccine by May 1, which gave the airline “the assurance to offer customers the ability to choose any seat on our aircraft.”

Delta started blocking middle seat bookings in April 2020 and said that it continued the policy to give passengers peace of mind.

“During the past year, we transformed our service to ensure their health, safety, convenience and comfort during their travels,” Mr. Bastian said in a statement. “Now, with vaccinations becoming more widespread and confidence in travel rising, we’re ready to help customers reclaim their lives.”

Air travel has started to recover meaningfully in recent weeks, with ticket sales rising and as well over one million people per day have been screened at airport checkpoints since mid-March, according to the Transportation Security Administration. More than 1.5 million people were screened on Sunday, the busiest day at airports since the pandemic began. Air travel is still down about 40 percent from 2019.

The Centers for Disease Control and Prevention continues to recommend against travel, even for those who have been vaccinated. This week, its director, Dr. Rochelle Walensky, warned of “impending doom” from a potential fourth wave of the pandemic if Americans move too quickly to disregard the advice of public health officials.

Delta also said on Wednesday that it would give customers more time to use expiring travel credits. All new tickets purchased in 2021 and credits set to expire this year will now expire at the end of 2022.

Starting April 14, the airline plans to bring back soft drinks, cocktails and snacks on flights within the United States and to nearby international destinations. In June, it plans to start offering hot food in premium classes on some coast-to-coast flights. Delta also announced changes that will make it easier for members of its loyalty program to earn points this year.

Deliveroo is now in 12 countries and has over 100,000 riders.
Credit…Toby Melville/Reuters

Deliveroo, the British food delivery service, dropped as much as 30 percent in its first minutes of trading on Wednesday, a gloomy public debut for the company that was promoted as a post-Brexit win for London’s financial markets.

The company had set its initial public offering price at 3.90 pounds a share, valuing Deliveroo at £7.6 billion or $10.4 billion. But it opened at £3.31, 15 percent lower, and kept falling. By the end of the day, shares had recovered only slightly, closing at about £2.87, 26 percent lower.

The offering has been troubled by major investors planning to sit out the I.P.O. amid concerns about shareholder voting rights and Deliveroo rider pay. Deliveroo, trading under the ticker “ROO,” sold just under 385 million shares, raising £1.5 billion.

The business model of Deliveroo and other gig economy companies is increasingly under threat in Europe as legal challenges mount. Two weeks ago, Uber reclassified more than 70,000 drivers in Britain as workers who will receive a minimum wage, vacation pay and access to a pension plan, after a Supreme Court ruling. Analysts said the move could set a precedent for other companies and increase costs.

Deliveroo, which is based in London and was founded in 2013, is now in 12 countries and has more than 100,000 riders, recognizable on the streets by their teal jackets and food bags. Last year, Amazon became its biggest shareholder.

Demand for Deliveroo’s services could soon diminish, as pandemic restrictions in its largest market, Britain, begin to ease. In a few weeks, restaurants will reopen for outdoor dining. Last year, Deliveroo said, it lost £226.4 million even as its revenue jumped more than 50 percent to nearly £1.2 billion.

Last week, a joint investigation by the Independent Workers’ Union of Great Britain and the Bureau of Investigative Journalism was published based on invoices of hundreds of Deliveroo riders. It found that a third of the riders made less than £8.72 an hour, the national minimum wage for people over 25.

Deliveroo dismissed the report, calling the union a “fringe organization” that didn’t represent a significant number of Deliveroo riders. The company said that riders were paid for each delivery and earn “£13 per hour on average at our busiest times.”

On Monday, shares traded hands in a period called conditional dealing open to investors allocated shares in the initial offering. The stock is expected to be fully listed on the London Stock Exchange next Wednesday and can be traded without restrictions from then.

Last week, Ed Bastian, the chief executive of Delta, said he thought Georgia’s voting law had been improved, but on Wednesday he sounded a very different note.
Credit…Etienne Laurent/EPA, via Shutterstock

The chief executive of Delta, Ed Bastian, sent a letter on Wednesday to employees expressing regret for the company’s muted opposition to a restrictive voting law passed last week by the Georgia legislature.

“I need to make it crystal clear that the final bill is unacceptable and does not match Delta’s values,” he wrote in an internal memo that was reviewed by The New York Times.

Mr. Bastian’s position is a stark reversal from last week. As Republican lawmakers in Georgia rushed to pass the new law, Delta, along with other big companies headquartered in Atlanta, came under pressure from activists to publicly and directly oppose the effort. Activists called for boycotts, and protested at the Delta terminal at the Atlanta airport.

Instead, Delta chose to offer general statements in support of voting rights, and work behind the scenes to try and remove some of the most onerous provisions as the new law came together. After the law was passed on Thursday, Mr. Bastian said he believed it had been improved and included several useful changes that make voting more secure.

But on Wednesday, after dozens of prominent Black executives called on corporate America to become more engaged in the issue, Mr. Bastian reversed course.

“After having time to now fully understand all that is in the bill, coupled with discussions with leaders and employees in the Black community, it’s evident that the bill includes provisions that will make it harder for many underrepresented voters, particularly Black voters, to exercise their constitutional right to elect their representatives,” he said. “That is wrong.”

Mr. Bastian went further, saying that the entire premise of the new law — and dozens of similar bills being advanced in other states around the country — was based on false pretenses.

“The entire rationale for this bill was based on a lie: that there was widespread voter fraud in Georgia in the 2020 elections,” Mr. Bastian said. “This is simply not true. Unfortunately, that excuse is being used in states across the nation that are attempting to pass similar legislation to restrict voting rights.”

Also on Wednesday, Larry Fink, the chief executive of BlackRock, issued a statement on LinkedIn saying the company was concerned about the wave of new restrictive voting laws. “BlackRock is concerned about efforts that could limit access to the ballot for anyone,” Mr. Fink said. “Voting should be easy and accessible for ALL eligible voters.”

Kenneth Chenault, left, a former chief executive of American Express, and Kenneth Frazier, the chief executive of Merck, organized a letter signed by 72 Black business leaders.
Credit…Left, Justin Sullivan/Getty Images; right, Spencer Platt/Getty Images

Seventy-two Black executives signed a letter calling on companies to fight a wave of voting-rights bills similar to the one that was passed in Georgia being advanced by Republicans in at least 43 states.

The effort was led by Kenneth Chenault, a former chief executive of American Express, and Kenneth Frazier, the chief executive of Merck, Andrew Ross Sorkin and David Gelles report for The New York Times.

The signers included Roger Ferguson Jr., the chief executive of TIAA; Mellody Hobson and John Rogers Jr., the co-chief executives of Ariel Investments; Robert F. Smith, the chief executive of Vista Equity Partners; and Raymond McGuire, a former Citigroup executive who is running for mayor of New York. The group of leaders, with support from the Black Economic Alliance, bought a full-page ad in the Wednesday print edition of The New York Times.

“The Georgia legislature was the first one,” Mr. Frazier said. “If corporate America doesn’t stand up, we’ll get these laws passed in many places in this country.”

Last year, the Human Rights Campaign began persuading companies to sign on to a pledge that states their “clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society.” Dozens of major companies, including AT&T, Facebook, Nike and Pfizer, signed on.

To Mr. Chenault, the contrast between the business community’s response to that issue and to voting restrictions that disproportionately harm Black voters was telling.

“You had 60 major companies — Amazon, Google, American Airlines — that signed on to the statement that states a very clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society,” he said. “So, you know, it is bizarre that we don’t have companies standing up to this.”

“This is not new,” Mr. Chenault added. “When it comes to race, there’s differential treatment. That’s the reality.”

A Huawei store in Beijing. The United States has placed strict controls on Huawei’s ability to buy and make computer chips.
Credit…Greg Baker/Agence France-Presse — Getty Images

The Chinese tech behemoth Huawei reported sharply slower growth in sales last year, which the company blamed on American sanctions that have both hobbled its ability to produce smartphones and left those handsets unable to run popular Google apps and services, limiting their appeal to many buyers.

Huawei said on Wednesday that global revenue was around $137 billion in 2020, 3.8 percent higher than the year before. The company’s sales growth in 2019 was 19.1 percent.

Over the past two years, Washington has placed strict controls on Huawei’s ability to buy and make computer chips and other essential components. United States officials have expressed concern that the Chinese government could use Huawei or its products for espionage and sabotage. The company has denied that it is a security threat.

In recent months, Huawei has continued to release new handset models. But sales have suffered, including in its home market. Worldwide, shipments of Huawei phones fell by 22 percent between 2019 and 2020, according to the research firm Canalys, making the company the world’s third largest smartphone vendor last year. In 2019, it was No. 2, behind Samsung.

Huawei remained top dog last year in telecom network equipment, according to the consultancy Dell’Oro Group, even as Britain and other governments blocked Huawei from building their nations’ 5G infrastructure.

Announcing the company’s financial results on Wednesday, Ken Hu, one of its deputy chairmen, said that despite the challenges, Huawei was not changing the broad direction of its business. Another Huawei executive recently revealed on social media that the company was offering an artificial intelligence product for pig farms, which some people took as a sign that Huawei was diversifying to survive.

Mr. Hu took note of the news reports about Huawei’s pig-farming product but said it was “not true” that the company was making any major shifts. “Huawei’s business direction is still focused on technology infrastructure,” he said.

Apple led the $50 million funding round in UnitedMasters, which allows musicians keep ownership of their master recordings.
Credit…Kathy Willens/Associated Press

Apple is investing in UnitedMasters, a music distribution company that lets musicians bypass traditional record labels.

Artists who distribute through UnitedMasters keep ownership of their master recordings and pay either a yearly fee or 10 percent of their royalties.

Apple led the $50 million funding round, announced on Wednesday, which values UnitedMasters at $350 million, the DealBook newsletter reports. Existing investors, including Alphabet and Andreessen Horowitz, also participated in the funding.

Musicians are increasingly taking ownership of their work. Taylor Swift, most famously, and Anita Baker, most recently, have publicized their fights with labels over their master recordings. Artists once needed the heft of major publishing labels — which typically demand ownership of master recordings — to build a fan base. But with social media, labels no longer play as significant a gatekeeping role. UnitedMasters has partnerships with the N.B.A., ESPN, TikTok and Twitch, deals that reflect the new ways that people discover music.

“Technology, no doubt, has transformed music for consumers,” said Steve Stoute, the former major label executive who founded UnitedMasters. “Now it’s time for technology to change the economics for the artists.” The deal with UnitedMasters is about “empowering creators,” Eddy Cue, Apple’s head of internet software and services, said.

As streaming services, including Apple’s, compete for subscribers, they are cutting more favorable deals with the artists who attract users to platforms. Spotify announced an initiative called “Loud and Clear” this week to detail how it pays musicians following public pressure.

An H&M store in Beijing. The retailer’s chief executive, Helena Helmersson, said H&M had a “long-term commitment” to China.
Credit…Kevin Frayer/Getty Images

More than a week after the Swedish retailer H&M came under fire in China for a months-old statement expressing concern over reports of Uyghur forced labor in the region of Xinjiang, a major source of cotton, the company published a statement saying it hoped to regain the trust of customers in China.

In recent days, H&M and other Western clothing brands including Nike and Burberry that expressed concerns over reports coming out of Xinjiang have faced an outcry on Chinese social media, including calls for a boycott endorsed by President Xi Jinping’s government. The brands’ local celebrity partners have terminated their contracts, Chinese landlords have shuttered stores and their products have been removed from major e-commerce platforms.

Caught between calls for patriotism among Chinese consumers and campaigns for conscientious sourcing of cotton in the West, some other companies, including Inditex, the owner of the fast-fashion giant Zara, quietly removed statements on forced labor from their websites.

On Wednesday, H&M, the world’s second-largest fashion retailer by sales after Inditex, published a response to the controversy as part of its first quarter 2021 earnings report.

Not that it said much. There were no explicit references to cotton, Xinjiang or forced labor. However, the statement said that H&M wanted to be “a responsible buyer, in China and elsewhere” and was “actively working on next steps with regards to material sourcing.”

“We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China,” it said.

During the earnings conference call, the chief executive, Helena Helmersson, noted the company’s “long-term commitment to the country” and how Chinese suppliers, which were “at the forefront of innovation and technology,” would continue to “play an important role in further developing the entire industry.”

“We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward, ” she said.

Executives on the call did not comment on the impact of the controversy on sales, except to state that around 20 stores in China were currently closed.

H&M’s earnings report, which covered a period before the recent outcry in China, reflected diminished profit for a retailer still dealing with pandemic lockdowns. Net sales in the three months through February fell 21 percent compared with the same quarter a year ago, with more than 1,800 stores temporarily closed.

Stocks on Wall Street rose as investors waited for President Biden to lay out plans for a $2 trillion package of infrastructure spending on Wednesday, which he is expected to propose funding with an increase in corporate taxes.

The S&P 500 index gained about 0.7 percent by midday, while the Nasdaq composite climbed about 1.9 percent. Bonds fell, with the yield on 10-year Treasury notes at 1.72 percent. On Tuesday, the 10-year yield climbed as high 1.77 percent, a level not seen since January 2020.

Prospects of a strong economic recovery in the United States, supported by large amounts of fiscal spending and the vaccine rollout, have pushed bond yields higher. Economic growth and higher inflation have made bonds less appealing as investors adjust their expectations for how much longer the Federal Reserve will need to keep its easy-money policies.

The Ever Given cargo ship was stuck in the Suez Canal nearly a week.
Credit…Agence France-Presse — Getty Images

The traffic jam at the Suez Canal will soon ease, but behemoth container ships like the one that blocked that crucial passageway for almost a week aren’t going anywhere.

Global supply chains were already under pressure when the Ever Given, a ship longer than the Empire State Building and capable of carrying 20,000 containers, wedged itself between the banks of the Suez Canal last week. It was freed on Monday, but left behind “disruptions and backlogs in global shipping that could take weeks, possibly months, to unravel,” according to A.P. Moller-Maersk, the world’s largest shipping company.

The crisis was short, but it was also years in the making, reports Niraj Chokshi for The New York Times.

For decades, shipping lines have been making bigger and bigger vessels, driven by an expanding global appetite for electronics, clothes, toys and other goods. The growth in ship size, which sped up in recent years, often made economic sense: Bigger vessels are generally cheaper to build and operate on a per-container basis. But the largest ships can come with their own set of problems, not only for the canals and ports that have to handle them, but for the companies that build them.

“They did what they thought was most efficient for themselves — make the ships big — and they didn’t pay much attention at all to the rest of the world,” said Marc Levinson, an economist and author of “Outside the Box,” a history of globalization. “But it turns out that these really big ships are not as efficient as the shipping lines had imagined.”

Despite the risks they pose, however, massive vessels still dominate global shipping. According to Alphaliner, a data firm, the global fleet of container ships includes 133 of the largest ship type — those that can carry 18,000 to 24,000 containers. Another 53 are on order.

A.P. Moller-Maersk said it was premature to blame Ever Given’s size for what happened in the Suez. Ultra-large ships “have existed for many years and have sailed through the Suez Canal without issues,” Palle Brodsgaard Laursen, the company’s chief technical officer, said in a statement on Tuesday.

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CreditCredit…By Erik Carter

In today’s On Tech newsletter, Shira Ovide talks to New York Times reporter Karen Weise about the vote on whether to form a union at an Amazon warehouse in Bessemer, Ala., and how the outcome may reverberate beyond this one workplace.

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Clearing the Suez Canal Took Days. Figuring Out the Costs May Take Years.

TOKYO — It took six days to prise free a giant container ship that ran aground and clogged the Suez Canal, one of the world’s most crucial shipping arteries. It could take years to sort out who will pay for the mess.

Cargo companies, insurers, government authorities and a phalanx of lawyers, all with different agendas and potential assessments, will not only need to determine the total damage, but also what went wrong. When they eventually finish digging through the morass, the insurers of the ship’s Japanese owner are likely to bear the brunt of the financial pain.

The costs could add up quickly.

There are the repairs for any physical damage to the Ever Given, the quarter-mile-long ship that got stuck in the Suez. There is the bill for the tugboats and front-end loaders that dug the beached vessel out from the mud. The authority that operates the Suez Canal has already said the crisis has cost the Egyptian government up to $90 million in lost toll revenue as hundreds of ships waited to pass through the blocked waterway or took other routes.

And the stalled ship held up as much as $10 billion of cargo a day from moving through the canal, including cars, oil, livestock, laptops, sneakers, electronics and toilet paper. Companies delivering goods may have to pay customers for missed deadlines. If any agricultural goods went bad, producers may look to recoup lost revenue.

Richard Oloruntoba, an associate professor of supply chain management at the Curtin Business School in Perth, Australia.

Jeff N.K. Lee, a lawyer in Taipei who specializes in commercial and transportation law.

“While the ship is just parked there, the cargo isn’t actually being damaged,” Mr. Lee said. “The only damage is that it’s delayed.”

“Say I have a batch of cloth, and on top of the time it took to come to Taiwan, it got stuck for six or seven days,” he said. “It just sat there. Will it go bad? It won’t.”

There is a caveat. The ship’s owner could have to pay for cargo delays, if its crew is found to be at fault for the accident.

Some so-called third-party claims related to delayed cargo may be covered by yet another insurer for the ship, the UK P&I Club. The same goes for any claims by the Suez Canal Authority, which operates the waterway and might file over any loss of revenue.

Nick Shaw, chief executive of the International Group of Protection and Indemnity Clubs, the umbrella group that includes the UK P&I Club, said the insurer would “make decisions together with the shipowner as to which ones had validity and which ones are illegitimate.”

Adding to the complexity of the Suez accident are the layers upon layers of insurance. Reinsurers, companies that covers the risk of other insurance companies, come into play for claims above $100 million. Between insurance and reinsurance, the ship’s owner has coverage for those third-party claims up to $3.1 billion, although few experts believe the damages will run that high.

The sheer size of the Ever Given makes the situation all the more labyrinthine. Aside from time of war, the Suez Canal has never been blocked quite so spectacularly or for as long a time as it was with the Ever Given, and this is the biggest ship to run aground.

The ship is as long the Empire State Building is tall, with the capacity to carry 20,000 containers stacked 12 to 14 high. The Ever Given is one of a fleet of 13 in a series designed by Imabari, part of a push to lower the costs per container and make the ships more competitive in an increasingly fierce market dominated by Chinese and South Korean shipbuilders.

“The bigger the ships get, the risk is whenever you have an incident like this is that you are putting more of your eggs into one basket,” said Simon Heaney, senior manager of container research at Drewry UK, a shipping consultancy. “So the claims will magnify.”

Raymond Zhong and Amy Chang Chien contributed reporting from Taipei, Taiwan. Vivian Yee contributed from Cairo and Makiko Inoue, Hisako Ueno, Hikari Hida from Tokyo.

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A-Rod Explains Why Sports and SPACs Mix

Professional athletes can sell almost anything, from soda to sneakers to car insurance. But lately they’ve used their star power to sell SPACs, the blank-check acquisition vehicles that have raised more than $90 billion this year. Amid frenzied competition for merger deals, about a fifth of SPACs launched since last year have brought athletes on board in hopes of standing out when pitching to start-ups they hope to take public, Matthew Goldstein and DealBook’s Lauren Hirsch report.

Alex Rodriguez is one of the highest-profile athletes in the SPAC business, and he stands out because unlike many of his peers merely adding their names to someone else’s SPAC, he founded his own. Slam Corp, established by the former baseball slugger and the hedge fund manager Himanshu Gulati, has met with more than 70 potential targets since it raised $500 million in a February I.P.O. Mr. Rodriguez could sit on the board of whatever company it acquires. He and his business partner spoke with Lauren about their plans — below are exclusive excerpts from their conversation.

On running a public company …

Mr. Rodriguez formed the investment firm A-Rod Corp in 1996, but a listed company brings a new set of responsibilities. Is he ready?

“I think you do it collectively, you do it with the team,” said Mr. Rodriguez, pointing to his frequent communication with Mr. Gulati. And when it comes to understanding the fiduciary duties involved, he said that his long career at the Yankees brought him experience at “the ultimate public company,” where the shareholders, so to speak, were the outspoken fans of the storied franchise.

$1.7 billion bid for the Mets lost out to Steve Cohen’s $2.4 billion offer. “The silver lining for me is the trust that people put on us, and that doesn’t go to waste just because you didn’t win,” Mr. Rodriguez said, referring to himself and the pop star Jennifer Lopez, who joined him on the bid. “I think that’s something that brings tremendous credibility.”

On the S.E.C.’s warning about SPACs pitched by celebrities …

The U.S. securities regulator recently told investors not to buy shares of a SPAC simply because boldface names are attached to it. Many SPACs bring celebrities on as directors or advisers, Mr. Gulati said, and “they’re just there to kind of help them raise capital.” At Slam Corp, he said, “Alex is the C.E.O. — what he’s done at A-Rod Corp should not be understated.”

“I just want to stand up for the athlete community, because there’s so many smart young men and women. I would be lucky to have them as partners,” Mr. Rodriguez said. “We have a reach, and it’s not just domestic, it’s global,” he said, in reference to himself and Ms. Lopez.

WeWork is going public via a SPAC. The office sharing company agreed to a deal with the blank-check company BowX Acquisition that values WeWork at $9 billion. That’s less than a quarter of its valuation in 2019. The venture firm behind the SPAC counts Shaquille O’Neal as an adviser.

struggling to free the container ship that has been wedged in the vital waterway since Tuesday, creating a huge, costly traffic jam that exposes the world economy’s reliance on just-in-time supply chains.

Lawmakers get few direct answers when grilling tech C.E.O.s. At the five-hour hearing on disinformation, Twitter’s Jack Dorsey acknowledged that his platform bore some responsibility for the Jan. 6 Capitol riot, while Facebook’s Mark Zuckerberg and Google’s Sundar Pichai disagreed on whether regulatory changes were needed. Lawmakers were unimpressed: “There’s a lot of smugness among you,” said one.

Chinese consumers boycott several foreign brands. H&M, Nike, Adidas and others face retaliation from shoppers — egged on by the Communist Party — after they joined calls to avoid using cotton produced in the Xinjiang region, where Beijing has waged a repression campaign against ethnic minorities. Shares in Chinese apparel brands with ties to Xinjiang have rallied.

Banks can resume buybacks and raise dividends this summer. After the Fed’s next round of stress tests ends in June, most institutions will be allowed to resume share repurchases and increase dividends that were frozen during the pandemic, assuming they have sufficient capital.

Over its nearly 20-year history, Vizio has become one of the biggest names in flat-screen TVs. But as it began life as a publicly listed company yesterday, its founder and C.E.O., William Wang, was eager to convince investors that its biggest business is in streaming on its smart TVs.

Lockdowns were good for Vizio. With people stuck at home and movie theaters closed, TVs have been in high demand: The company shipped 7.1 million units last year, up 20 percent from 2019. More important from Vizio’s perspective, it saw a 60 percent increase in accounts for SmartCast, its platform for connecting to streaming services like Apple+ and Netflix. “I think the biggest impact of the pandemic is forcing people to look at home entertainment again,” Mr. Wang told DealBook.

paid $2.2 million to settle charges that it collected and sold users’ data without their knowledge or consent. It doesn’t offer every streaming service — it’s missing HBO Max, for example — and faces competition from Roku, Apple TV and other smart TV makers.

The time was right for an I.P.O. Vizio tried to go public in 2015, but called it off after agreeing to sell itself to a Chinese rival (only for that deal to fall apart). Now that it makes money from both TV sales and streaming, Mr. Wang said, Vizio is more attractive to public-market investors. That said, the I.P.O. priced at the low end of its expected range, and fell 9 percent in the first day of trading. The C.E.O. put a positive spin on it: “We’re probably the leader in the space in consumer electronics. I believe sooner or later people will appreciate that.”


Some of the academic research that caught our eye this week, summarized in one sentence:


The Lost Art of Connecting: The Gather, Ask, Do Method for Building Meaningful Business Relationships,” which was published by McGraw-Hill Education this week.

Ms. McPherson spoke to DealBook about making connections during a pandemic that has physically estranged so many. The interview has been edited and condensed for clarity.

DealBook: Has your view of technology changed?

Ms. McPherson: The past year helped us all understand how much we miss human connection when we don’t have it. Some days I‘ve showed up at a team meeting and a part of me just felt like crying. So I’ve learned to expose more of that vulnerability and how to be more empathetic and compassionate online, which freed up my team, too. Now, I think we can be better stewards of technology and make those deep connections if we’re intentional about it.

NYT)

  • Britain’s competition watchdog is worried about the “supply of GIFs” after Facebook’s acquisition of the animated-image site Giphy. (Reuters)

  • Are the bond vigilantes back? (NYT)

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    In Suez Canal, Stuck Ship Is a Warning About Excessive Globalization

    LONDON — The world got another warning this week about the perils of its heavy reliance on global supply chains. As a single ship ran aground in the Suez Canal, shutting down traffic in both directions, international commerce confronted a monumental traffic jam with potentially grave consequences.

    The troubled craft is not just any vessel. The Ever Given is one of the world’s largest container ships, with space for 20,000 metal boxes carrying goods across the sea. And the Suez Canal is not just any waterway. It is a vital channel linking the factories of Asia to the affluent customers of Europe, as well as a major conduit for oil.

    The fact that one mishap could sow fresh chaos from Los Angeles to Rotterdam to Shanghai underscored the extent to which modern commerce has come to revolve around truly global supply chains.

    In recent decades, management experts and consulting firms have championed so-called just-in-time manufacturing to limit costs and boost profits. Rather than waste money stockpiling extra goods in warehouses, companies can depend on the magic of the internet and the global shipping industry to summon what they need as they need it.

    letter to all employees last March. “Masks remain in short supply globally.”

    energy prices rose on Wednesday, though they pulled back on Thursday. Some are carrying electronics, and clothing, and exercise equipment.

    None of them are getting where they are supposed to until the waylaid ship is freed. Each day the stalemate continues holds up goods worth $9.6 billion, according to a Bloomberg analysis.

    shipping industry, which has been overwhelmed by the pandemic and its reordering of world trade.

    As Americans have contended with lockdowns, they have ordered vast quantities of factory goods from Asia: exercise bikes to compensate for the closure of gyms; printers and computer monitors to turn bedrooms into offices; baking equipment and toys to entertain children cooped up at home.

    The surge of orders has exhausted the supply of containers at ports in China. The cost of shipping a container from Asia to North America has more than doubled since November. And at ports from Los Angeles to Seattle, the unloading of those containers has been slowed as dockworkers and truck drivers have been struck by Covid-19 or forced to stay home to attend to children who are out of school.

    Delays in unloading spell delays in loading the next shipment. Agricultural exporters in the American Midwest have struggled to secure containers to send soybeans and grains to food processors and animal feed suppliers in Southeast Asia.

    This situation has held for four months, while showing few signs of easing. Retailers in North America have been frantically restocking depleted inventories, putting a strain on shipping companies in what is normally the slack season on trans-Pacific routes.

    The blockage of the Suez Canal effectively sidelines more containers. The question is how long this lasts.

    Two weeks could strand as much as one-fourth of the supply of containers that would normally be in European ports, estimated Christian Roeloffs, chief executive officer of xChange, a shipping consultant in Hamburg, Germany.

    “Considering the current container shortage, it just increases the turnaround time for the ships,” Mr. Roeloffs said.

    Three-fourths of all container ships traveling from Asia to Europe arrived late in February, according to Sea-Intelligence, a research company in Copenhagen. Even a few days of disruption in the Suez could exacerbate that situation.

    If the Suez remains clogged for more than a few days, the stakes would rise drastically. Ships now stuck in the canal will find it difficult to turn around and pursue other routes given the narrowness of the channel.

    Those now en route to the Suez may opt to head south and navigate around Africa, adding weeks to their journeys and burning additional fuel — a cost ultimately borne by consumers.

    Whenever ships again move through the canal, they are likely to arrive at busy ports all at once, forcing many to wait before they can unload — an additional delay.

    “This could make a really bad crisis even worse,” said Alan Murphy, the founder of Sea-Intelligence.

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    Intel plans to spend $20 billion on two new chip factories in Arizona.

    Intel’s new chief executive is doubling down on chip manufacturing in the United States and Europe, a surprise bet that could please government officials worried about component shortages and dependence on factories in Asia.

    Patrick Gelsinger, who took the top job in February, said on Tuesday that he planned to spend $20 billion on two new factories near existing facilities in Arizona. He also vowed that Intel would become a major manufacturer of chips for other companies, in addition to producing the processors that it has long designed and sold.

    Intel had stumbled in developing new production processes that improve chip performance by packing more tiny transistors on each piece of silicon. The lead in that costly miniaturization race had shifted to Taiwan Semiconductor Manufacturing Company, or TSMC, and Samsung Electronics, whose so-called foundry services make chips for companies that include Apple, Amazon, Nvidia and Advanced Micro Devices.

    Some investors and analysts had pushed for Intel to spin off or discontinue manufacturing in favor of external foundries, an approach taken by most other chip companies to increase profits.

    a pandemic-fueled shortage of semiconductors for cars, appliances and other products has underscored the vital role of chip factories in supporting many sectors of the economy. And before the recent concerns, worries about the Asian foundries’ proximity to China had already prompted Congress and several branches of the Trump and Biden administrations to back plans to encourage more domestic chip manufacturing, though funding had not yet been appropriated.

    Officials in Europe have also floated proposals for new factories to reduce reliance on foreign-made chips.

    The Intel strategy recognizes “that the world no longer wants to be dependent on the ring of fire that is right there next to China,” said G. Dan Hutcheson, an industry analyst at VLSI Research. “It’s very forward-looking.”

    TSMC previously announced plans for a new factory in Arizona, a project that it valued at $12 billion and that is expected to receive federal subsidies. Samsung is seeking government incentives for a $17 billion expansion of its facilities in Austin, Texas.

    Mr. Gelsinger, who first joined Intel at 18, left in 2009 after 30 years. He served eight years as chief executive of the software maker VMware before Intel’s board persuaded him to replace Robert Swan, who was ousted in January.

    Intel said its new global foundry service would operate from the United States and Europe, with further factory additions expected to be announced in the next year. It already runs plants in Ireland and Israel.

    “The industry needs more geographically balanced manufacturing capacity,” Mr. Gelsinger said.

    While it is committing $20 billion up front, Intel hopes to negotiate with the Biden administration and other governments to get incentives for its manufacturing expansion, said Donald Parker, an Intel vice president.

    Though it makes most products in house, Intel has long used external foundries for some less advanced chips. Mr. Gelsinger said the company would expand that strategy to include some flagship microprocessors, the calculating engines used in most computers. That will include some chips for PCs and data centers in 2023, he said, and give Intel more flexibility in meeting customer needs.

    But manufacturing will remain the core of Intel’s strategy, Mr. Gelsinger said, despite its recent technical problems.

    He said significant improvements were being made in its next production process, which was delayed last summer. Intel also will engage with IBM in a new partnership to develop new chip-making technology, he added.

    Mr. Gelsinger’s plans are bound to meet skepticism. Besides recent problems with manufacturing technology, Intel has tried in the past to operate as a foundry for other companies with little success.

    But Intel has modified those plans in several ways. For one thing, it will for the first time be willing to license its technical crown jewels — the so-called x86 designs used in most of the world’s computers — so customers can incorporate that computing capability in chips they design for Intel to make, the company said.

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