DealBook: What to Expect When Boeing’s C.E.O. Faces Congress Today
Dennis Muilenburg will appear before Congress for the first time since the crashes of two 737 Max jets mired the company in crisis.
October 29, 2019
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Dennis Muilenburg, Boeing's C.E.O. Pool photo by Joshua Lott
‘We know we made mistakes’
Boeing’s C.E.O., Dennis Muilenburg, will appear before Congress starting today, for the first time since the deadly crashes of two 737 Max jets mired the company in crisis.
“We know we made mistakes and got some things wrong,” Mr. Muilenburg plans to tell lawmakers. “We own that, and we are fixing them.” He will appear before the Senate commerce committee today, and then at a hearing of the House transportation committee on Wednesday.
• Who raised concerns about the jets? After revelations that the plane’s chief technical pilot was worried about the plane’s software, lawmakers may ask whether anyone else had worries and why they weren’t made known to regulators.
• How did the Max come to be? The jet was produced to help Boeing compete with Airbus, and developed in the face of huge time pressure. Expect lawmakers to zero in on what Boeing is doing to avoid letting production deadlines compromise passenger safety.
• Strengthening regulatory oversight. Jet safety certification has been gradually sliding into the hands of airplane makers, but many lawmakers feel that it’s time to reclaim some of that authority.
• When will the Max fly again? Its grounding is denting the U.S. economy, and a potential shutdown of its production could make matters worse. Lawmakers will want to know when the pain might realistically end.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced and Jamie Condliffe.
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Facebook's headquarters in Menlo Park, Calif. Josh Edelson/Agence France-Presse — Getty Images
Dissent within Facebook over political ads
Some of the social network’s employees have written a letter to Mark Zuckerberg and other company leaders denouncing the company’s practice of letting politicians post any claims they wanted — even false ones — in ads on the site, Mike Isaac of the NYT reports.
Last month, Facebook changed its rules so that politicians and their campaigns would have nearly free rein over content they post. That led Facebook this month to refuse to take down false claims about Joe Biden made by President Trump’s campaign.
“We strongly object to this policy as it stands,”the letter says. “It doesn’t protect voices, but instead allows politicians to weaponize our platform by targeting people who believe that content posted by political figures is trustworthy.” The letter also suggested ways to reduce harm from false claims in political ads.
Around 250 employees have signed the letter, a small fraction of the company’s 35,000-plus work force. But it’s a rare moment of internal strife for the company, underscoring the policy’s divisiveness.
“We remain committed to not censoring political speech,” Bertie Thomson, a Facebook spokeswoman, said in a statement.
Randall Stephenson, AT&T's chairman and C.E.O. Drew Angerer/Getty Images
AT&T settled with Elliott. What now?
The telecom and media giant has ended a potential battle with the activist hedge fund Elliott Management. But that hasn’t resolved bigger questions about its strategy, Ed Lee of the NYT reports.
Here’s how AT&T has agreed to appease Elliott:
• AT&T’s chairman and C.E.O., Randall Stephenson, will step down sometime after the end of 2020. When he does, the chairman and C.E.O. roles will be split.
• Two of its existing directors will leave within the next 18 months. AT&T will also name a new board member soon who has Elliott’s blessing.
• It promised to review its businesses and consider selling or spinning off some, with an eye toward repaying debt.
The settlement removes a big distraction for the company, given Elliott’s reputation as one of the most effective disrupters of corporate boardrooms.
AT&T’s bigger challenge:succeeding in the entertainment business, which it entered when it bought Time Warner for $80 billion. It plans to spend at least $1.8 billion on its forthcoming HBO Max streaming service, but analysts and investors think the bet won’t pay off.
And other parts of its empire are still in trouble. Its DirecTV unit, a target for Elliott, lost 1.1 million customers in the third quarter. Mr. Stephenson told analysts yesterday that the company would “approach it with a fresh set of eyes.”
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The F.C.C. doubles down on Huawei restraints
The Federal Communications Commission plans to vote next month on a measure that would prohibit U.S. companies that receive specific federal subsidies from buying equipment made by Huawei and ZTE, Reuters reports.
The policy would designate Huawei and ZTE as national security risks. It would prohibit companies that receive funding from the F.C.C.’s $8.5 billion Universal Service Fund, which is designed to expand telecom service in rural areas, from using that money to buy equipment or services from the companies. The commission will vote on the matter on Nov. 19.
Existing Huawei and ZTE hardware may also have to be replaced. In a WSJ op-ed, the F.C.C.’s chairman, Ajit Pai, called that equipment an “unacceptable risk.” The commission is investigating how expensive it would be to replace the hardware, and will consider another proposal that would enforce its removal.
The problem for rural communities is that Huawei equipment is often much cheaper than that of its rivals, so wireless expansion plans in such areas tend to rely on it. If Huawei equipment is banned, spotty data connections may persist for years.
Richard Drew/Associated Press
The S&P 500 hits a record
It closed yesterday at 3039.42, beating a high set in July and capping a three-week run fueled by investor hopes that the economy will keep going strong. But Wall Street remains wary, Matt Phillips of the NYT reports.
Two things drove the S&P’s rise yesterday:
• President Trump’s comments that “Phase One” trade talks with China were ahead of schedule
• Expectations that the Fed will cut interest rates for a third time this year at its meeting tomorrow
But there’s still plenty to worry about. Mr. Trump’s trade wars could yet take a turn for the worse. Earnings expectations for Corporate America are slipping. C-suites are feeling more cautious, potentially dampening hiring and investment. And the Fed probably won’t keep cutting interest rates for much longer.
And the high doesn’t tell the full story. The S&P 500 isn’t significantly above the peak it set in late April, meaning that the last six months have been “a sideways struggle rather than a triumphant romp,” Mr. Phillips adds.
The opening day of the Future Investment Initiative in Riyadh, Saudi Arabia. Hamad I Mohammed/Reuters
‘Davos in the Desert’ kicks off
Saudi Arabia’s Future Investment Initiative, a conference meant to highlight the kingdom’s work with the biggest companies in the world, opened this morning. Big banks are back in force — but many others aren’t.
Among the 6,000 attendees expected to attend:
• Wall Street executives like Mike Corbat of Citi, John Waldron of Goldman Sachs and Noel Quinn of HSBC.
• Top Trump administration officials, including Jared Kushner, President Trump’s son-in-law (who will be interviewed onstage by Steve Schwarzman of Blackstone), Treasury Secretary Steven Mnuchin and the departing Energy secretary, Rick Perry.
• Masa Son of SoftBank, who is courting the Saudis to invest in his second Vision Fund.
But top figures in tech and entertainment are absent, including Dara Khosrowshahi of Uber, in which Saudi Arabia is a big shareholder. Many of those executives are wary of being seen as closely tied to the kingdom after the killing of the dissident columnist Jamal Khashoggi by Saudi agents last year.
And a bigger issue hangs over the conference: Saudi Arabia’s ambitious plan to overhaul its economy has stalled, despite efforts to work with outside partners. As the FT notes, foreign direct investment in the country remains low, and its economy continues to smart from low oil prices.
Revolving door
Sotheby’s named Charles Stewart, a co-president and C.F.O. of Altice USA, as its new C.E.O., replacing Tad Smith just two weeks before auction season begins.
• ByteDance, the Chinese owner of the social network TikTok, is reportedly considering going public on the Hong Kong stock exchange as soon as the first quarter of next year. The company denied the report. (FT, Reuters)
• Chinese investors are still investing in American tech start-ups and venture capital funds, partly because of an absence of clarity over proposed U.S. restrictions on such deals. (WSJ)
• Marathon Petroleum reportedly plans to spin off its gas stations business and shake up its executive team to settle an activist campaign by Elliott Management and others. (WSJ)
• Alphabet, the parent company of Google, has reportedly offered to buy the wearables maker Fitbit. (Reuters)
• Shares in Virgin Galactic soared in their debut on the New York Stock Exchange yesterday — and then erased nearly all of their gains. (Reuters)
Trump impeachment inquiry
• A White House national security official plans to tell House investigators that he heard President Trump’s conversation with Ukraine’s leader — and was so alarmed that he reported it to his superior. (NYT)
• House Democrats plan to vote this week to begin nationally televised hearings in their impeachment inquiry. (NYT)
Politics and policy
• Voters’ deeply partisan views about the economy may mean that the issue doesn’t matter much in next year’s elections, according to a new survey. (NYT)
• Jeff Sessions, President Trump’s first attorney general, may challenge Senator Doug Jones for his old Senate seat. (NYT)
• Attorney General Bill Barr rejected criticism that his inquiry into the Russia investigation is serving Mr. Trump’s personal interests. (NYT)
• Florida’s Republican Party has postponed its biggest annual fund-raiser because of insufficient interest among donors. (Politico)
Brexit
• Prime Minister Boris Johnson of Britain lost a bid to schedule a general election meant to put the fate of Brexit in voters’ hands. But he may succeed in a second attempt today. (NYT)
• The British government plans to destroy thousands of 50-pence coins minted to commemorate an Oct. 31 Brexit — which won’t happen thanks to an extension from the E.U. (Bloomberg)
• G.M., Fiat Chrysler and Toyota have sided with the Trump administration in its clash with California over car emissions standards. (NYT)
• JPMorgan Chase is reportedly weighing shifting thousands of jobs out of the New York area to cut costs. (Bloomberg)
• “Manufacturing isn’t the bellwether it used to be.” (WSJ)
• Elon Musk will have to go to trial after a federal judge declined to throw out a defamation lawsuit filed by a man whom the billionaire accused of being a pedophile. (Bloomberg)
Thanks for reading! We’ll see you tomorrow.
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