DealBook: Boeing May Suspend 737 Max Production

December 16, 2019

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737 Max production at Boeing's Renton, Wash., factory. Jason Redmond/Agence France-Presse — Getty Images

Boeing 737 Max cutbacks could come today

As uncertainty grows over returning the troubled 737 Max to service, Boeing is considering either suspending or cutting back production of the plane, the WSJ reports, citing unnamed sources.

“Boeing management increasingly sees pausing production as the most viable among difficult options,” the WSJ writes. The plane maker’s board began a meeting yesterday in Chicago and could make a decision as early as today.

A halt in production would increase Boeing’s costs and could also lead to job cuts and furloughs across the aerospace industry and a disruption to airlines.

Boeing warned in October that a production cut or freeze could be necessary if regulatory approval of its fixes to the jet’s flight-control software is pushed into 2020.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin and Stephen Grocer in New York, and Gregory Schmidt and Sharon O’Neal in London.

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Marcelo Claure, the executive chairman of WeWork. Brendan Mcdermid/Reuters

WeWork’s rocky transition begins to smooth out

Since WeWork’s planned I.P.O. collapsed, Marcelo Claure, the company’s new executive chairman, has been working hard with the company’s two C.E.O.s on a plan to turn the company around, report Andrew and Peter Eavis of the NYT.

“It was a company on the verge of weeks, months if not weeks, of running out of cash,” Mr. Claure, a top lieutenant of SoftBank’s Masayoshi Son, said in his first interview since SoftBank effectively took control of WeWork.

After the bailout from SoftBank, the company plans to sell customers more services and renegotiate leases with landlords.

And it plans to buy shares from Adam Neumann, the founder and former C.E.O., as part of a tender offer, a $1 billion payout that has stirred up anger as thousands of WeWork employees are laid off.

WeWork will continue to grow, Mr. Claure said, because of the openings already in the pipeline. Profits and cash flows may remain negative for some time.

More: WeWork’s trajectory as America’s most valuable start-up was made possible by the executives and financiers from Wall Street and Silicon Valley who enabled Adam Neumann.

Mark Lennihan/Associated Press

Cloud developers say Amazon uses unfair tactics

Cloud computing may appear obscure and geeky, but it underlies much of the internet. It has grown into one of the technology industry’s largest segments, offering computing power and software to companies.

Its biggest provider? Amazon, via its arm known as Amazon Web Services.

Not since the mid-1990s, when Microsoft dominated the personal computer industry with Windows, has a technology platform instilled such fear in competitors, writes the NYT’s Daisuke Wakabayashi.

One example: the evolution of Elastic, a software start-up in Amsterdam that created a free software tool to allow people to search and analyze data. Amazon’s cloud computing arm announced in 2015 that it would copy Elastic’s free software tool and sell it as a paid service.

Elastic has fired back, suing Amazon for violating its trademark because Amazon had called its product by the exact same name: Elasticsearch. Amazon “misleads consumers,” the start-up said in its complaint. The case is pending.

Smaller developers say they often have no choice but to work with the giant, Mr. Wakabayashi writes.

Some of the companies have a phrase for what Amazon is doing: strip-mining software. By lifting other people’s innovations, trying to poach their engineers and profiting from what they made, Amazon is choking off the growth of would-be competitors, the companies said.

“Silly and off-base” was Amazon’s response to the accusations. It said it had contributed significantly to the software industry and that it acted in the best interest of customers.

Gains from China trade deal may come at a cost

Trump administration officials took a victory lap yesterday, predicting big wins for the economy from a new trade deal with China. But the losses caused by a trade war that lasted 19 months might not be easy to win back, report the NYT’s Ana Swanson and Keith Bradsher.

The deal avoided another punishing round of tariffs on $160 billion in Chinese goods that was scheduled to take effect yesterday, easing tensions between the world’s two largest economies.

Chinese purchases of American products will rise by more than $100 billion a year under the deal, Robert Lighthizer, President Trump’s top trade negotiator, said in a televised interview.

But the economic benefits are minimized by Mr. Trump’s tariffs and his unpredictable approach to trade, which have added new costs for businesses.

• “It’s a pretty small deal, coming at a pretty high cost,” a trade policy expert said.

And the retreat from the tariff threat may be seen as a victory for China’s hard-liners, resulting in a longer trade war and stiff resistance from Beijing.

More: Mr. Trump’s bid to reshape U.S. trade policy is coming into focus. And in a sign of growing optimism, investors are pulling back from safe havens like gold.

Fashion Nova’s affordable clothes come at workers’ expense, U.S. says

It offer fast fashion at affordable prices in the U.S., and enjoys a vast network of social media influencers. But the online retailer Fashion Nova also has some issues with the Department of Labor, writes the NYT’s Natalie Kitroeff.

In order to feed influencers’ and shoppers’ appetite for a constant stream of new looks, the company uses labor that can turn around garments in two weeks, often provided by manufacturers in Los Angeles.

That work force is being paid illegally low wages, federal regulators have found.

Los Angeles is filled with factories that pay workers — many of them undocumented — off the books and as little as possible, Ms. Kitroeff reports.

Fashion Nova’s labels were the ones found the most frequently this year by federal investigators looking into garment factories that pay egregiously low wages, according to an unnamed source familiar with the investigations.

“Any suggestion that Fashion Nova is responsible for underpaying anyone working on our brand is categorically false,” the company said in a statement.

Felix Rohatyn in 1976. Associated Press

Felix Rohatyn, financier and New York’s municipal ‘surgeon,’ dies at 91

Felix G. Rohatyn was sometimes known as a “fixer,” but he liked to call himself a surgeon.

“I’m supposed to operate, fix it up and leave as little blood on the floor as possible,” he told The A.P. in 1978.

Mr. Rohatyn, a child refugee who rose to become a Lazard financier and left his mark on companies including Lockheed Martin and Warner Bros., was known for engineering the rescue of New York City from financial collapse in the 1970s. He died Saturday at age 91.

Deal-making, Mr. Rohatyn once said, was like a puzzle that required “not simply diligence and strategy but at times an iron will,” the NYT writes in his obituary.

While on Wall Street, he brokered the acquisition of Avis, the rental car company, helped Steve Ross gain control of the Warner Bros. film studio and engineered the merger of the Loews Corporation with the Lorillard tobacco fortune.

Mr. Rohatyn gained a say, often the final one, over taxes and spending in the nation’s largest city as chairman of the state-appointed Municipal Assistance Corporation, or M.A.C., from 1975 to 1993.

He brokered plans that helped stave off municipal bankruptcy and helped create a state oversight panel. Municipal unions agreed to tens of thousands of layoffs that amounted to 20 percent of the city’s work force.

Investors who bought the city corporation’s bonds made healthy returns, and, starting in 1983, the M.A.C. generated surpluses, which Mr. Rohatyn used to guide policy from behind the scenes.

Revolving door

Steve Burke, the chief executive of NBCUniversal, plans to step down next year.

The speed read

Deals

• FreeNow, the ride-hailing venture owned by Daimler and BMW, expects to double its revenue this year and next, a fresh challenge to Uber in Europe and Latin America. (Bloomberg)

• BlackRock, the world’s largest asset manager, is increasing its stake in the Hut Group, an online health and beauty retailer, as part of a capital round of more than 1 billion euros, or about $1.1 billion. (Sky News)

• At the center of a court battle over T-Mobile’s merger with Sprint is a debate over whether Americans will pay more for cellphone service. (WSJ)

• International Flavors & Fragrances reached a $26.2 billion agreement for DuPont’s nutrition division, as the food-flavoring industry rushes to consolidate. (Bloomberg)

• The Dutch activist fund Follow This has targeted Exxon Mobil and Chevron. (Bloomberg)

• A buyout consortium led by the Hudson’s Bay executive chairman, Richard Baker, did not secure enough shareholder support for a $1.4 billion deal to take the department store operator private. (Reuters)

• Many of the China bets placed by SoftBank or its mammoth Vision Fund have run into trouble. (Reuters)

Politics and policy

• California is spending $187 million to try to ensure an accurate 2020 census count of its population, while the Texas Legislature decided not to devote any money to the job. Why? The key seems to be which party controls state government. (NYT)

• Less than a year before the 2020 election, false political information is moving furiously online. Few politicians or their staffs, though, are prepared to combat incorrect stories about them. (NYT)

• Nothing the Democratic National Committee chairman, Tom Perez, does is just right, it seems. (NYT)

• U.N. climate talks ended yesterday with big polluting countries blocking an agreement to enhance climate targets and deferring until next year a set of rules on international carbon trading. (NYT)

• The E.U.’s competition chief, Margrethe Vestager, is examining ways of curbing unfair business practices by foreign state-owned enterprises. (FT)

Trump impeachment inquiry

• Senator Chuck Schumer wants testimony from Mick Mulvaney, John Bolton and other White House officials and to subpoena documents the White House has withheld. (NYT)

Tech

• The Army agreed to a $111 million contract with Palantir Technologies, the data analytics company backed by Peter Thiel. (Bloomberg)

• China has threatened retaliation if Germany bans Huawei from supplying 5G wireless equipment. (Bloomberg)

• An oral history of the 2010s: The decade tech lost its way. (NYT)

• Despite big deals, tech giants can’t touch Twitch in the video game streaming space. (NYT)

• Apple faces a showdown with activist shareholders after criticism that it gave in to Beijing when it removed a controversial mapping app during the Hong Kong protests. (FT)

• With a $12 billion pile of debt, Netflix is finding ways to work with brands, even as it resists commercials. (NYT)

• Hackers have breached Ring home security cameras in four states. (NYT)

• A potential change in deposit classifications could have big implications for the future of bank-tech partnerships. (WSJ)

Best of the rest

• China’s state-run CCTV pulled a live broadcast of Arsenal’s soccer match against Manchester City after one of Arsenal’s star players criticized the treatment of Uighurs in China. (Bloomberg)

• Mercedes delays its U.S. electric debut after Jaguar and Audi S.U.V.s flop. (Bloomberg)

• JPMorgan Chase’s C.E.O. tells employees: We need to do more to tackle racism. (NYT)

• Tariffs weren’t enough to compensate for old, accident-prone plants. Now U.S. Steel is taking financial risks to catch up with competitors. (WSJ)

• The U.S. has enjoyed its longest economic expansion on record without setting off inflation as interest rates remain historically low. (WSJ)

• Who would have predicted a decade ago that U.S. stocks would do better than ever before? But that’s exactly what happened. (Bloomberg)

• How billionaires would pay the wealth tax: Sell everything. (WSJ Opinion)

• The wealthy have always influenced the art scene. But in recent years, they’ve dominated it. (NYT Opinion)

Thanks for reading! We’ll see you tomorrow.

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