Member Briefing December 20, 2023
CEO Survey: Where is the World Going in 2024 and Beyond?
Disruption breeds opportunity – this is a resounding theme from Teneo’s annual CEO and Investor Outlook Survey. The survey captures the views of more than 260 global CEOs and institutional investors representing approximately $3.4 trillion USD of combined company and portfolio value. Whether addressing higher interest rates, war in the Middle East and Ukraine or volatility in the debt and equity markets, operating through disruption has become the new normal for global CEOs and business leaders. Here are some highlights.
- 68% of both CEOs and investors expect a sizable M&A uptick in 2024 despite tougher regulatory oversight and higher cost of capital.
- 53% of CEOs expect worsening economic conditions in the first half of 2024; however, 94% of investors expect the macroeconomic environment to improve.
- 80% of CEOs report ongoing adjustments to prepare for the potential of deglobalization, with a particular focus on supply chain resiliency
- AI tops the list of technology investment priorities for both CEOs and investors, with nearly 80% actively investing in AI (a 20-point jump from last year).
- 8% of CEOs are ramping down their ESG programs. However, 72% of CEOs are making some change in how they operate – with many exercising increased caution on external communication of ESG initiatives.
- Every U.S.-based CEO surveyed is making some type of change to their business strategy in anticipation of the outcome of the 2024 presidential election.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- U.S. Officials Press Israel to Reduce Intensity of Fighting in Gaza Within Weeks - WSJ
- Israeli Army Says It Took Control of Jabalya Camp in Northern Gaza as Khan Yunis Invasion Deepens - Haaretz
- Poll Finds Wide Disapproval of Biden on Gaza, and Little Room to Shift Gears - NYT
- Negotiations Underway at UN Ahead of Vote on Resolution Calling for Halt in Hostilities in Gaza - CNN
- What We Know About How 3 Israeli Hostages Were Killed By the IDF - CNN
- A $2M Missile vs. a $2,000 Drone: Pentagon Worried Over Cost of Houthi Attacks - Politico
- Pentagon Announces New International Maritime Protection Force for the Red Sea - NPR
- U.S. Warships Head to Red Sea, but Shipping Firms Are Still on Edge - WSJ
- Meta Oversight Board Says Israel-Hamas Videos should not have been removed – Reuters
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- US Says it Will Run Out of Funds for Ukraine this Month - Politico
- Ukraine's Army Chief Says Situation at Front Line is Not a Stalemate – Reuters
- GOP Says No Christmas Deal for Ukraine, Border – The Hill
- Putin Says Russia is Ready to Talk on Ukraine - Reuters
- ‘Where Is Navalny?’ A Search Is On for the Missing Russian Dissident - NYT
- Russia Summons Finland Ambassador Over US Border Accord - BBC
- Putin Could Attack Baltics and Moldova Next, says Belgian Army Chief – Politico
- Chinese Traders and Moroccan Ports: How Russia Flouts Global Tech Bans - NYT
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Housing Starts Surged in November
Total housing starts bested consensus estimates and surged 14.8% to a 1.56 million-unit pace. November's gain was broad based, with single-family and multifamily starts rising sharply during the month. A modest rise in single-family permits and steep decline in multifamily permits takes some shine off the massive gain in starts. Unseasonably warm weather in November, which likely allowed more projects to get underway, may explain the divergence in starts and permits. That noted, the NAHB Housing Market Index improved for the first time in four months during December, with notable increases in the future sales and buyer traffic components.
Single-family starts soared 18% to a 1.143 million-unit pace during November, the strongest pace since April 2022. Single family starts have now risen for three straight months, bringing the seasonally adjusted annual rate of activity up 42.2% over the past year. The trend improvement in new starts appears owed to builders' ability to boost sales with mortgage rate buy-downs and price discounts.
IndustryWeek's 2023 Salary Survey: Labor Concerns Loom Large
Hiring in manufacturing is troubled, but paying top dollar for talent works. In the 2023 IndustryWeek Salary Survey, companies that pay better salaries also had less trouble hiring. Despite the clear correlation between pay and effective hiring, manufacturers remain concerned about a number of other key issues in addition to labor availability, especially interest rates and the risk of a recession in North America. In a question on what their biggest economic concerns for 2024 are labor availability topped the list.
The 2023 IndustryWeek Salary Survey surveyed about 200 manufacturing administrators, engineering managers, health and safety professionals, and more who currently live and work at manufacturing companies in the United States. Respondents working in corporate and administrative roles made the most money, with an average wage of $158,000. Engineering and technology employees followed close behind with $150,000. The average wages for those in marketing and in operations roles were similar at $130,000 and $129,000, respectively, with supply chain and logistics employees the least well-paid of responsibility groups: The average wage for those mainly concerned with supply chain operations was $108,000.
COVID 19 News – A New Normal? 6 Stories About the Evolving U.S. COVID Response in 2023
In spring 2023, COVID hospitalizations and deaths hit their lowest levels since the start of the pandemic. Masks came off and schools and some workplaces were back in person. The nation emerged from the three-year COVID nightmare – and entered a tentative, new normal. And with the official end of the federal public health emergency in May, the U.S. health care system reverted to the way it usually works: People's health insurance, or lack of it, once again dictates their access to COVID-related tests, vaccines and soon – in 2024 – to treatments.
While business-as-usual resumed for many, the country was permanently changed in blatant and subtle ways that are still shaking out. Here are stories on the COVID beat from NPR's health reporters that show some of the lessons learned – and not learned — as the pandemic evolved in 2023.
Biden Has Big Plans for Semiconductors. But There's a Big Hole: Not Enough Workers
The goal of the CHIPS and Science Act is to dramatically boost U.S. production of semiconductor chips — the tiny electronic devices found in everything from cars to cell phones to military weapons. The vast majority of chips currently are made in Asia. The law gives the Biden administration $52.7 billion to pour into semiconductor plants. This month, it rolled out its first investment: $35 million for defense contractor BAE Systems Inc. to expand a semiconductor plant in Nashua, N.H.
To meet the expected demand, the White House says the United States needs 90,000 to 100,000 more semiconductor technicians — and needs to triple the number of engineering grads — by 2030. The engineering shortage could be as high as 300,000 by the end of the decade, according to a report from consulting firm McKinsey & Co. "That's the thing that keeps me awake at night," said Alex Oscilowski, with Tokyo Electron, a company that makes equipment used in semiconductor plants. Finding talent is the biggest challenge his industry faces, he said. "And that challenge is only going to increase as the industry grows because we're growing at a rate faster than our universities are able to produce skilled talent for us," he said.
A Free-World Champion to Rival China: Nippon Chief’s Ambitions for U.S. Steel Deal
Nippon Steel President Eiji Hashimoto, 68, learned something about international diplomacy at Harvard’s Kennedy School decades ago. By adding U.S. Steel to his empire, he says he wants to create a free-world champion in an industry dominated by China. With the $14.1 billion acquisition, Nippon Steel will be at the top of global producers, “excluding China, in the free-competition world,” Hashimoto said in an online briefing Tuesday.
If completed, the deal would make Nippon Steel the world’s second-biggest steelmaker by capacity, with plants spanning from Osceola, Ark., to Osaka, Japan. Only state-owned China Baowu Steel is bigger. “Through this network, we will lead the world and restore the growth potential of Japan,” Hashimoto said. The chief, who has spent many of his nearly 45 years at Nippon Steel building the company’s business overseas, said he wasn’t fazed by the criticism coming from the U.S. “I plan to calmly read and respond to the situation,” Hashimoto said. Any challenges, he said, “we will absolutely overcome.”
NY’s Population Loss Slowed a Bit in ’23, But Still Biggest in U.S.
New York’s population decreased by 101,984 residents—the largest loss of any state—during the 12-month period that ended last July 1, according to just-released Census Bureau estimates. The Empire State’s population as of mid-2023 was pegged at 19,571,216, a cumulative decline of 631,104 from the Census Bureau’s updated April 2020 base count. The 12-month trend for the period ending last July 1 was driven by a net outflow of 216,778 New Yorkers to the rest of the country — meaning 216,778 more people moved out of the Empire State than moved in from other states during the previous 12 months.
While net domestic migration was down from New York’s near-record losses during the first two years following the spring 2020 COVID-19 outbreak, it remained well above the Empire State’s average annual migration outflow in any decade since the 1970s. New York’s out-migration loss was only partially offset by a net gain of 73,867 international migrants, ranking the state fourth in that category after Florida (178,432), California (150,982), and Texas (128,534), leaving the Empire State with a combined domestic-international migration loss of 142,911 residents in the latest period and 701,412 since the 2020 census.
Read more at the Empire Center
New York to Study State Reparations
New York on Tuesday created a commission to study potential reparations for state residents of African descent, making it the second state after California to do so. The commission, which will report its findings in 2025, will have a broad charge. It will examine New York’s legacy of slavery and discrimination and will make recommendations on both statutory changes and potential payments to combat generational wealth inequality.
The commission, which will wrap up its work by the summer of 2025, will only make recommendations. Anything it proposes will need to be passed as a bill by the Democratic-led Legislature and governor.
Volkswagen Chattanooga Refutes Claims Made by UAW in New Federal Complaint Against Company
On Monday United Auto Workers President Shawn Fain accompanied a delegation of Volkswagen workers and community and faith leaders to deliver a letter to Volkswagen management demanding the company end its union-busting and intimidation. The new letter, from Chattanoogans in Action for Love, Equality, and Benevolence (CALEB) – a community and faith coalition advocating for economic justice in Chattanooga – comes just one week after Volkswagen workers filed federal unfair labor practice charges against Volkswagen for illegally intimidating, interfering with, and spying on pro-union workers.
After the protest a spokesperson from Volkswagen released a statement saying: Volkswagen refutes any claims of union-busting, intimidation or illegal violations of worker rights at our Chattanooga plant. Labor representation is part of our company's culture; half of our global Supervisory Board members are labor representatives. We respect our workers' right to decide the question of union representation. And we remain committed to providing accurate information that helps inform them of their rights and choices.
VW Cost-Cutting Drive Includes Less Staff, Faster Development
Volkswagen (VOWG_p.DE) and worker representatives have agreed to measures for a cost-cutting drive that will yield 10 billion euros ($11 billion) in gains by 2026, up to 4 billion of which should kick in next year, the company said. The measures, which come after two months of talks amid intensifying competition in the electric age, include speeding up development and production times, reducing staff costs and implementing a more efficient procurement strategy.
In a memo to staff earlier this month, Volkswagen said it planned to slash administrative staff costs at its namesake brand by a fifth, save a billion euros by 2028 through reducing product development cycles to three years from 50 months, cut production times and scrap a planned new 800-million-euro R&D site in its home city of Wolfsburg.The carmaker also planned to save 320 million euros a year through better purchasing performance in its procurement, generate over 250 million euros a year through optimising its after-sales business, and save over 200 million euros a year by improving production times. A further 400 million euros annually would be saved by reducing the number of test vehicles used in technical development by up to 50%, with more testing done via digital processes, it said.
Survey: Business Travel Emissions Drop as Many Firms Fly Less, But That May Change
Almost half of 217 global firms cut their business travel carbon emissions by at least 50% between 2019 and 2022, analysis published on Monday found, as corporate air travel returned at a much slower pace since the pandemic than leisure flights.Despite a global rebound, business travel has been slow to return to 2019 levels, with many corporate clients turning to video conferencing or rail trips rather than flying.
Major companies such as tech firm SAP (SAPG.DE), accounting firm PwC and Lloyd's Banking Group (LLOY.L) all reduced their corporate air travel emissions by more than 75% compared with 2019, the Travel Smart Emissions Tracker analysis concluded. But whether business travel carbon emissions will stay lower is unclear. A joint survey by American Express Global Business Travel (Amex GBT) and the Harvard Business Review released in September said 84% of businesses believe in-person trips still bring "tangible business value".
Archer Eyes Autonomy For Air Taxis
Archer Aviation sees autonomy as a key technology to achieving mass scale adoption of eVTOL aircraft. The company plans to eventually develop a generation of autonomous eVTOL aircraft, with the goal of using the technology developed by its former rival Wisk Aero. As the industry matures and potentially hundreds of thousands of novel vehicles enter airspace, autonomy could be the key to unlocking scale in the advanced air mobility (AAM) industry.
“Archer’s strategy has always been to find the most efficient path to market and in doing that, we started by having a piloted vehicle,” Archer’s CEO Adam Goldstein recently told the company’s shareholders. “That’s where the existing rules are. We can enter into service in the very near future and we’re really excited about that.” The company continues to make strides in its autonomous technology, including working with Skyports to develop a blueprint for autonomous operations. To develop its sixth-generation autonomous aircraft, Wisk is tapping into Canadian engineers and opened an engineering hub in Montreal last year.
Read more at Vertical Magazine
Aviation Company to Build Hangars for 15 Jets at Hudson Valley Regional Airport
Dutchess County has signed a lease for the Sky Harbour aviation company to construct hangars to house up to 15 corporate jets at the county-owned Hudson Valley Regional Airport in Wappinger. The hangars – up to 90,000 square feet – will be built on seven acres of airport property, said County Assistant County Executive Director Ron Hicks.
“Our airport is very competitive. We generate most of our economic activity based on fuel sales and the jobs that are created from the operations,” he said. “And now with our training facility – the aviation science center – we are creating new pilots; we are creating aircraft mechanics. In fact, the students going through these programs are getting job offers before they even graduate.”
Long COVID, Chronic Conditions Double Absence Rate
The prevalence of long COVID has had a profound impact on disability claims, work absences, and healthcare expenses. According to a recent analysis of workforce absences in the Journal of Public Economics, around 500,000 individuals in the US were removed from the workforce due to COVID-related illnesses between March 2020 and June 2022. Long COVID has had a significant impact on disability claims, duration, and costs. According to IBI’s Benchmarking Portal data, long COVID had 4,442 STD claims in 2021. The industries that report the highest STD claims are manufacturing (13,671 claims) and services (11,860 claims), followed by the finance, insurance, & real estate sector with 5,534 claims.
Long COVID has a much higher number of calendar days lost per STD claim at 90 days, compared with COVID-19 claims (22 days). Notably, 16% of these STD claims transitioned into LTD claims, resulting in 5,427 cases of long COVID LTD claims. These LTD claims had significantly higher payments, averaging $9,307 per closed claim. Importantly, 35% of individuals with LTD claims successfully returned to work within two years.
Oil Rises as Red Sea Shipping Concerns Unnerve Traders
Oil prices rose more than a dollar a barrel on Tuesday, extending the previous session's gains after attacks by Yemen's Iran-aligned Houthi militants on ships in the Red Sea disrupted maritime trade and forced more companies to reroute vessels. Brent crude futures rose $1.22, or 1.6%, to $79.17 a barrel by 1:20 p.m. ET (1820 GMT). U.S. West Texas Intermediate crude futures for January delivery, which expire on Tuesday, rose $1.16, or 1.6%, to $73.63 a barrel while the more active February contract gained $1.10 to $73.92.
On Monday, oil prices rose nearly 2% after a Norwegian-owned vessel was attacked and BP said it had paused all transit through the Red Sea. A number of other shippers have since made similar announcements. About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal. Goldman Sachs analysts also said the disruption was unlikely to have a large effect on crude and liquefied natural gas (LNG) prices because opportunities to reroute vessels suggest production should not be directly affected.
Court Rejects Claims Linking Tylenol to Autism, ADHD
A federal judge dealt a likely fatal blow to hundreds of lawsuits against manufacturers of Tylenol and generic acetaminophen, ruling the plaintiffs don’t have admissible evidence to support claims that using the pain reliever during pregnancy raises a child’s risks of autism or attention-deficit hyperactivity disorder. In a ruling late Monday, U.S. District Judge Denise Cote in Manhattan said the more than 400 consolidated lawsuits were centered on scientific claims that were fundamentally unreliable.
The lawsuits, brought on behalf of families who have children with ADHD and autism, argued that drugmakers should have warned pregnant women that taking the pain reliever posed health risks for their children. Acetaminophen has long been deemed the safest option for pain relief during pregnancy. The drug’s label advises pregnant women to speak to their doctor before taking the pain reliever. The defendant drug manufacturers said autism and ADHD are genetic disorders and there was no conclusive evidence to support claims that in-utero exposure to acetaminophen raises risks.