Member Briefing June 27, 2023
IBM Study: CEOs Embrace Generative AI as Productivity Jumps to the Top of their Agendas
A new global study by the IBM Institute for Business Value found that nearly half of CEOs surveyed identify productivity as their highest business priority—up from sixth place in 2022. They recognize technology modernization is key to achieving their productivity goals, ranking it as second highest priority. Yet, CEOs can face key barriers as they race to modernize and adopt new technologies like generative AI.
CEOs say productivity – and the technology that will help deliver it – is a pressing priority. For the fourth consecutive year, CEOs surveyed say technology factors remain the top external force impacting their organization over the next three years. About 43% of surveyed CEOs say they have reduced or redeployed their workforce due to generative AI, with an additional 28% indicating they plan to do so in the next 12 months. At the same time, 46% of CEOs surveyed have hired additional workers because of generative AI, with 26% saying they have plans for more hiring ahead. Yet, fewer than one in three CEOs (28%) surveyed have assessed the potential impact of generative AI on their workforces, and 36% say they plan to do so in the next 12 months.
War in Ukraine Headlines
U.S. Home Prices Posted First Annual Decline Since 2012 in April
Home prices posted their first year-over-year price decline in 11 years in April, as higher mortgage rates made home purchases more expensive for buyers. The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, fell 0.2% in April, compared with a 0.7% annual growth rate the prior month. The annual decline was the first for the index since April 2012.
Compared with the prior month, the index rose 0.5% in April on a seasonally adjusted basis, the third straight monthly increase. Mortgage rates rose rapidly in 2022, causing a major slowdown in home sales as buyers backed away from the market. House-buying affordability in April fell to its lowest level since November, according to the Federal Reserve Bank of Atlanta.
Frontline Workers Are Bargaining for Pandemic ‘Hero’ Pay
When West Coast dockworkers struck a six-year contract deal this month with a 32% pay increase, the tentative agreement came with an added benefit—$72 million for “hero bonuses” to be shared among workers for keeping cargo moving during the Covid-19 pandemic. Labor experts say it was the latest sign that workers from seaports and transit systems to food-processing plants and hospitals are looking for, and often getting, compensation for risking their lives over three years of turmoil and hardship on the economy’s front lines.
The payments have been called hazard pay, pandemic appreciation payments and, in the case of longshore workers at West Coast ports, hero bonuses, and in general have been added to contracts along with annual wage increases. The payments highlight a rift in the economy that emerged during the pandemic, as many white-collar workers were able to work remotely while blue-collar workers, from assembly line workers to truck drivers, remained on the front lines and risked their lives and their families’ health through waves of infections. While a swath of the population has moved on from the pandemic, the clamor for compensation shows the experience is still raw for many workers.
COVID Update - Vaccine Scheme for Poorest has $2.6 Billion Left to Spend as Pandemic Recedes
Several billions of dollars left in a scheme to deliver COVID-19 vaccines to the world’s poorest could be diverted to prepare for other pandemics or to support vaccine manufacturing in Africa, the scheme's partners said. The COVAX initiative, run by Gavi, the Vaccine Alliance, the World Health Organization (WHO), and the Coalition for Epidemic Preparedness Innovations (CEPI), has $2.6 billion left in its coffers as the emergency phase of the pandemic draws to a close, according to documents seen by Reuters and two sources close to the scheme.
The initiative is set to wind up at the end of this year, although some of its work will continue. With demand for COVID-19 vaccines dwindling, the partners are now working out how best to use the remaining cash – a significant sum in global health – alongside the donors who originally pledged it. “This money was designed as an instrument of contingency, so we could respond to the twists and turns of the pandemic,” said Marie-Ange Saraka-Yao, Gavi’s head of resource mobilization. “We don’t want the money to be idle.”
China Steps in to Stem Yuan Slide, Shore up Confidence
China's monetary authorities took forceful action against a sliding currency for the first time in nearly eight months on Tuesday, with the country's state banks acting to put a floor under the yuan even as officials pledged more stimulus for the flagging economy. The People's Bank of China (PBOC) set a stronger-than-expected trading band for the yuan and state banks sold dollars, market sources said, in the strongest sign yet the authorities are growing increasingly uncomfortable with the yuan's quickening slide.
The push back comes as investors sour on China, with data showing China's vaunted rebound faltering. Still, the stuttering recovery has stoked expectations of stimulus to help offset growth worries, something even mainland authorities have been more vocal about. Addressing a World Economic Forum summit in Tianjin, Premier Li Qiang said China will take steps to boost demand and invigorate markets, although he didn't provide details.
Republican Lawmakers Urge U.S. to Scrap China Science Deal
Republican lawmakers on Tuesday urged the U.S. State Department not to renew a decades-old U.S-China agreement on scientific cooperation, arguing that Beijing would seek to use it to help its military. The deal, signed when Beijing and Washington established diplomatic ties in 1979 and renewed about every five years since, has resulted in cooperation in areas from atmospheric and agricultural science to basic research in physics and chemistry.
But concerns about China's growing military prowess and theft of U.S. scientific and commercial achievements have prompted questions about whether the Science and Technology Agreement (STA) set to expire on Aug. 27 should continue. In a letter sent to Secretary of State Antony Blinken, the chair of the U.S. House of Representative's select committee on China Mike Gallagher and nine other Republican representatives said the deal should be scrapped.
EV Transition Has Automotive OEMs and Their Suppliers Struggling to Communicate
Electric vehicles are a tiny but accelerating force in the U.S. passenger car market, and automotive suppliers are feeling the burn. The growing pains that come with the transition to an electric vehicle future are especially tough on suppliers, who put forth much of the investment in new technology and whose strategies must account for automakers’ last-minute design changes, fluctuating production schedules and automaker shifts in priorities.
This year’s Supplier Working Relations Index (WRI)—an annual survey that measures how satisfied Tier 1 suppliers are with working with their OEM customers—reflects the uncertainties suppliers face around large investments they must make in new technology while still focusing on components for gas-powered vehicles. OEMs with the highest ratings in the survey tend to have better sourcing, production processes and results. This year, Toyota had the highest score for its supplier relations of the six automakers surveyed, with Honda close behind.
Lordstown Motors Files for Bankruptcy and Sues Foxconn
Lordstown Motors, the electric-truck startup once cheered by investors during the SPAC boom and lauded by former President Donald Trump as a savior for a closed General Motors factory in Ohio, has filed for bankruptcy, the company said early Tuesday. Lordstown’s filing came after talks with its investment partner, Taiwan-based contract-manufacturing company Foxconn Technology, for it to purchase $170 million in shares of the electric-truck maker fell through, Lordstown said.
Lordstown sold its northeast Ohio factory, a former GM plant, to Foxconn in November 2021, after the startup ran into production issues. As part of the deal, Foxconn and Lordstown agreed to cooperate on a series of new vehicles, which were to be produced at the plant. Early Tuesday, Lordstown said it was filing for chapter 11 bankruptcy protection and would seek a buyer. At the same time, Lordstown sued Foxconn for fraud and breach of contract, alleging that the contract manufacturer’s actions “had the intended effect of destroying the business of an American start-up,” Lordstown said.
Senate Panel Advances FY2024 NDAA With Pay Raise, Cyber Force Items
The Senate Armed Services Committee on June 23 advanced its version of the National Defense Authorization Act (NDAA) for fiscal year (FY) 2024 by a vote of 24-1.The committee’s approval came just one day after the House Armed Services Committee advanced its version of the FY 2024 NDAA, initiating the first step in a months-long process to authorize funding and set policies for the Department of Defense (DoD).
The bill must now be debated and voted on by the full U.S. Senate. Once the Senate and House pass their own versions of the FY 2024 NDAA, the two bills must then be reconciled into a single bill through at bicameral conference committee. Then the House and Senate will vote on the unified legislation before it goes to President Biden for his signature. The committee and its subcommittees considered a total of 445 amendments during their markup processes, and adopted 286 amendments. The full text of the approved Senate bill has not been released yet, but the committee did offer up an executive summary detailing several cybersecurity and technology related provisions.
Kendall: More Rapid Acquisition is Within Reach, if Congress Acts
In his first op-ed since becoming secretary of the Air Force, Frank Kendall calls on Congress to support a DoD measure to speed new tech programs. Perhaps the biggest challenge facing the Pentagon — larger than any one geopolitical foe — is its struggle to move quickly enough to keep up with technological development and the breakneck evolution of the modern battlespace.
And while the Defense Department has rolled out several initiatives to make up ground, in his first op-ed since assuming the title of secretary of the Air Force, Frank Kendall argues below that there’s a way to go faster, with Congress’s help.
Feds Approve NYC Congestion Pricing Plan
New York has received a critical federal approval for its first-in-the-nation plan to charge big tolls to drive into the most visited parts of Manhattan, part of an effort to reduce traffic, improve air quality and raise funds for the city’s public transit system. The program could begin as soon as the spring of 2024, bringing New York City into line with places like London, Singapore, and Stockholm that have implemented similar tolling programs for highly congested business districts.
Under one of several tolling scenarios under consideration, drivers could be charged as much as $23 a day to enter Manhattan south of 60th Street, with the exact amount still to be decided by the Metropolitan Transportation Authority, which is overseeing the long-stalled plan. “With the green light from the federal government, we look forward to moving ahead with the implementation of this program,” Hochul, a Democrat, said in a statement.
What Has Paris Air Show Told Us About The Future Of Aviation?
Sustainability has been one of the key themes of this year’s Paris Air Show. From modern airplane designs and the use of sustainable aviation fuel (SAF) to future hybrid-electric and all-electric air vehicles, the 54th edition of the event certainly defined the way into the future. While the aviation industry is still recovering from the pandemic downturn, future demand for air travel looks bright. Sustainable and efficient solutions must be identified and implemented to minimize carbon emissions related to aviation.
During one of the largest aviation forums, manufacturers, suppliers, and stakeholders came together to promote sustainability in aviation. This was evident from the number of new hybrids and all-electric aircraft that were either ordered or intended by customers. This is in addition to the order of over a thousand fuel-efficient commercial aircraft, primarily from Airbus and Boeing.
America Aims for Nuclear-Power Renaissance
Nuclear is a carbon-free alternative to other sources of steady baseload power, such as coal and natural gas. Nuclear reactors are much smaller than wind or solar farms, which sprawl across landscapes and attract legal challenges from groups with different visions of how the land should be used. The need to decarbonise electric grids to limit greenhouse-gas emissions has spurred liberals, historically wary of nuclear power’s toxic-waste problem, to rethink their stance. In America, 46% of Democrats favour using nuclear energy for electricity, the highest proportion in a decade. Republicans have long approved of the technology.
But the biggest reason the nuclear sector is popping champagne is the billions of dollars the Biden administration is pumping into nuclear development via the Inflation Reduction Act (ira), which made nuclear power eligible for the same tax credits as renewables like wind and solar; and the Infrastructure Investment and Jobs Act of 2021, which created a $6bn fund to help keep existing plants running. The Biden administration is even offering developers a bonus tax break if they build reactors in fossil-fuel areas, such as a coal-mining town, to funnel workers into green jobs, a core tenet of Joe Biden’s industrial policy.
C-Suite: Energy Gets More Strategic
A survey of 138 aggregators, brokers and consultants (ABCs) offers some insights on the position of energy and related topics within the C-suite of North American corporates.The Business Energy Census, a collaborative effort between Energy Research Consulting Group (MA) and ENGIE Resources, shows energy is taking its strategic place among corporate executives. The majority of corporate end-users view energy as more strategic, according to the ABCs who advise them.
There are some regional differences. Texas led the way among markets served by ENGIE Resources, while NYISO and NEPOOL trailed. Leading the strategic charge were “other” markets such as CAISO.
Ford Plans to Lay Off at Least 1,000 Contract, Salaried Workers
Ford Motor plans to lay off at least 1,000 salaried employees and contract workers in North America, people familiar with the matter said, the automaker’s latest effort to defray the heavy cost of investing in electric cars. The automaker has made several rounds of global layoffs over the past year, including a 3,000-person reduction in the U.S. last summer and a slightly larger layoff in Europe initiated earlier this year.
Ford has about 28,000 salaried employees in North America. The U.S. automaker’s plan for another round of layoffs was first reported last week by The Wall Street Journal. This latest reduction of Ford’s white-collar workforce includes employees in its electric-vehicle and software side of the business, the company spokesman confirmed. The salaried job cuts at Ford come weeks ahead of the scheduled start of negotiations with the United Auto Workers union over a new four-year labor contract for its hourly factory workers. The automaker, along with rivals Stellantis and GM, face an especially tough round of talks with a higher-than-usual risk of a strike, analysts say, citing a hard-line stance taken by the UAW’s new leadership team.