(AP) — The rapid spread of the coronavirus since it was reported in China in December has dealt an unprecedented shock to the global economy.
Here are business developments Monday as governments attempt to stabilize their economies, companies struggle to cope and millions of people face job losses and disruptions in supplies of goods and services.
Airlines can’t seem to cut capacity as fast as air travel is fading as businesses and vacationers pull back on plans. Industry analysts are slashing their expectations even faster, with cuts of 40% or more the norm.
Air Canada is laying off more than 5,000 flight attendants as the country’s largest airline cuts routes amid plunging demand. The layoffs will take effect by April and affect roughly 60% of flight attendants. Air Canada says it will suspend most of its international and U.S. flights by March 31.
GE aviation will cut about 10% of its U.S. workforce. David Joyce, vice chairman of GE and CEO of GE Aviation, will give up half of his salary starting April 1. The aviation arm of General Electric has announced a hiring freeze, cancellation of a salaried merit pay increase, a dramatic reduction of all nonessential spending, and a significant decrease in its contingent workforce.
Canadian airline and travel company Transat AT Inc. has temporarily laid off about 70% of its workforce in Canada — about 3,600 people.
The United Arab Emirates is suspending passenger transits through Dubai, the world’s busiest international airport, for two weeks. Suspending transit through Dubai, which connects Europe with Asia and Australia, will affect travelers around the world.
Low-cost airline Eastar Jet has become the first South Korean carrier to shut down all flights as demand plunges. The company said it will suspend its domestic flights from Tuesday to April 25.
General Motors is exploring the production of ventilators at a facility in Kokomo, Indiana. The automaker said Monday that it’s working around the clock with Ventec Life Systems of Washington state to build more of the critical medical devices.
GM spokesman Dan Flores said he can’t comment on how many more ventilators Ventec will make or how soon they will come. The GM statement did not say when the Kokomo facility might be in operation.
Supply chain experts say it will be difficult to repurpose an auto plant to build a smaller, unrelated product such as ventilators. They say such a change could take months, but GM may be doing it faster. In an email to GM senior management late Sunday, Shilpan Amin, the company’s vice president of purchasing, wrote that GM has commitments from Ventec’s parts companies to supply 93% of the ventilator’s parts to GM. The company is developing plans for the remaining 28 parts, he said in the email.
Yves Saint Laurent and Balenciaga are the latest luxury fashion labels ramping up the manufacturing of surgical masks. The Kering Group, which owns the labels, said French workshops that usually make clothes for Yves Saint Laurent and Balenciaga will switch over to manufacturing masks. Kering said it will also buy and import 3 million surgical masks from China for donation to the French health service. The world’s largest luxury group — Paris-based LVMH — has also said it has reached a deal with a Chinese industrial supplier to deliver 10 million masks to the French population.
Airbus is canceling a planned dividend payment and lining up $16 billion in new credit to give the European aircraft giant more cash to weather the crisis. The plane-maker shut several plants last week.
Apparel company VF Corp. said it will draw down $1 billion from its revolving credit facility.
Royal Dutch Shell will reduce its operating costs by $3 billion to $4 billion for the next 12 months to adapt to the virus outbreak crisis and plunging oil prices. The company is also reducing capital expenditure to a maximum of $20 billion, down from its previous expectation of $25 billion.
Millions of people are working at home. However, heavy industrial sectors have come to a standstill because the risk of infection, if operations continue, would be unavoidable.
A big auto industry trade group is telling Congress that 95% of U.S. auto assembly plants have been forced to close due to the coronavirus outbreak.
The Alliance for Automotive Innovation said in a letter obtained by The Associated Press that 42 of 44 U.S. auto assembly plants were closed as of Friday. The letter said 87% of the assembly plants in North America have been closed, including all seven in Canada and 60 of 69 in Mexico. It said analysts expect March sales to fall by up to 40% from 2019 figures. The association is asking Congress for loans and loan guarantees for affected companies. It also is asking that businesses with more than 500 workers that provide paid leave for employees get a tax deduction or credit. Most U.S. auto assembly workers are being paid through the closure, which in most cases is scheduled to last into late March and early April. The industry also wants Congress to delay 2020 quarterly federal tax payments, start a temporary payroll tax holiday, extend expensing for machinery, and delay the June 1 effective date of the USMCA trade pact, which replaces the North American Free Trade Agreement.
Forecasting as much as a 60% decline in reservations for April due to coronavirus travel restrictions, rental car giant Avis is cutting staff, reducing its fleet and pausing capital spending, among other actions. The company said it will also evaluate compensation expenses for senior employees, including executive leadership, as it looks to save $400 million on an annualized basis. The Parsippany, N.J.-based Avis Budget Group said it has accessed $1.1 billion in cash from equity in its vehicle fleet and has an estimated $750 million in revolving credit, giving it the liquidity to operate “through the end of 2020 and beyond.”
Winnebago Industries halted production to protect workers from coronavirus exposure and to adjust production as demand for the company’s products is sinking. Winnebago, which employs about 5,000 people, makes motor homes, travel trailers and boats under the Winnebago, Grand Design, Newmar and Chris-Craft brands. The Forest City, Iowa-based company has production facilities in Iowa, Indiana, Oregon, Minnesota and Florida. The company said Monday that production will cease until at least April 12. Benefits and base pay will continue for the first two weeks.
Ford Motor Co. has suspended vehicle and engine production at its International Markets Group manufacturing sites in India, Vietnam, South Africa and Thailand. The suspensions started Saturday and will continue for several weeks.
To conserve capital, Zillow Group postponed homebuying in the 24 markets where it participates in such activity. Zillow stopped open houses for homes in all markets last week.
U.S. home sales jumped by 6.5% in February to their highest level in 13 years. But that was for contracts that were signed in December and January, with closings in February. The first report of a coronavirus infection in the U.S. occurred on Jan. 21 and economists are expecting a vast slowdown in the next report, with sellers closing their homes to potential buyers.
The commercial real estate market is at risk of collapse, cautions the founder of Colony Capital, as mortgage loans experience growing pressure. Thomas Barrack said in a blog post that liquidity has dried up as businesses get hit with a cash flow deficit and a rapid decline in revenue.
“The market for commercial real estate mortgage loans in the United States stands on the brink of collapse,” Barrack wrote.
The federal regulator of giant mortgage-buyers Fannie Mae and Freddie Mac is aiming to provide relief from eviction for renters in multifamily buildings. The Federal Housing Finance Agency said Fannie and Freddie will offer owners of multifamily properties forbearance relief on their mortgages, on condition they suspend all evictions of renters who are unable to pay due to the impact of the virus. The two companies together guarantee about half of the U.S. home-loan market. Last week they temporarily suspended foreclosures and evictions of borrowers in single-family homes whose mortgages they guarantee.
B.J.’s Wholesale Club is the latest to offer a bump in hourly wages to workers restocking shelves while others stay home. Increased hourly pay would extend at least through April 12. Managers and key personnel will get a one-time bonus, ranging from $500 to $1,000. Walmart, Target and Amazon are among the other companies giving pay hikes. Walmart is also giving one-time bonuses to its hourly part-time and full-time workers.
The spread of the virus has created a massive disruption in the workplace, with many companies sending workers home. However, other companies, largely those considered essential during the outbreak, have gone on a hiring binge.
Dollar General will hire up to 50,000 workers by the end of April as people ordered to stay home clear the bargain chain’s shelves. Dollar General said Monday that most of the jobs will be temporary, but that some may be long term.
Papa John’s is hiring up to 20,000 people with demand for pizza deliveries elevated. The need for new workers is so great, the company said Monda,y that interviews can turn into punching the clock on the same day. Domino’s already announced additional hiring.
CVS Health said Monday that it is looking to fill 50,000 full-time, part-time and temporary roles across the country. Positions include store associates, prescription delivery drivers, distribution center employees and customer service. The company is also giving employee bonuses ranging from $150 to $500 to workers required to be at its facilities.
Instacart is looking to add 300,000 gig workers to its platform over the next three months, more than doubling the number of people it has picking and delivering groceries for customers. Online retailers have seen demand for orders surge as more people are stuck at home and shopping online. Instacart said it will focus on hiring more personal shoppers in 10 states where demand is the highest: California, Florida, Georgia, Illinois, New Jersey, New York, Ohio, Pennsylvania, Texas and Virginia.
H&M warned Monday that it may need to permanently lay off workers as it wrestles with the financial implications of the virus. The Swedish fast-fashion company said that 3,441 of its 5,062 stores globally are temporarily closed. The closures have had “‘significant negative impact on sales so far in March,” the company said.
Amazon is telling shoppers some items could take up to a month to deliver as it deals with a rush of online orders. The company said it is focusing on getting medical supplies, hand sanitizers, baby formula and other essential items to customers first. Some best-selling books, for example, will be delivered at the end of April, much longer than the two-day or less delivery times Amazon typically promises. It said it plans to hire 100,000 people in the U.S. to keep with an increase in orders as more people stay home and shop online.
The energy sector has lost almost half of its overall value in March. Economic forecasts indicate a vast reduction in the amount of energy that will be needed as national economies are broadsided.
Total said Monday that it is planning more than $3 billion in organic capital expenditure cuts and suspending its $2 billion buyback program. The company is also planning $800 million in savings this year, up from its previously announced $300 million in savings.
When the company announced its buyback program, oil was around $60 a barrel. Since the coronavirus outbreak and oil dispute between Saudi Arabia and Russia, oil has fallen as low as $24 a barrel.
GIG ECONOMY DISRUPTED
Uber CEO Dara Khosrowshahi is calling on the federal government to help independent workers such as the drivers and delivery workers on its platform, not just full-fledged employees. Khosrowshahi sent a letter to President Trump Monday. Uber has 1.3 million people working on its platform in the United States. Khosrowshahi said they are delivering food to people staying home and providing essential transportation services. The company has offered up to 14 days of financial assistance to drivers and delivery workers who were diagnosed with Covid-19 or placed in quarantine.