Member Briefing March 27, 2024
Baltimore Bridge Collapse – Important East Coast Port Faces Major Disruption
A significant section of the Francis Scott Key Bridge in Baltimore collapsed early Tuesday morning, after a container ship collided with it. The incident has serious implications for one of the busiest ports on the U.S. East Coast. The bridge plays a vital role in commercial shipping access to the Port of Baltimore, a major hub for autos, light trucks and various bulk goods. The Port of Baltimore is shut down indefinitely during the rescue and salvage operations, which could take days or weeks. Baltimore handled 52.3 million tons of foreign cargo last year worth about $80.8 billion, ranking ninth in the US for both metrics and records for the port. Another record was 1.1 million 20ft equivalent unit containers that arrived or left the port last year. Here are some more key port stats:
- The port handles imports and exports for major automakers including Nissan, Toyota, eneral Motors, Volvo, Jaguar Land Rover, and Volkswagen, including luxury models for Audi, Lamborghini, and Bentley. The port handled 847,158 cars and light trucks, the most in the US for the 13th year in a row.
- Cruises carrying more than 444,000 passengers departed from the port, which is a major destination for Norwegian, Carnival, and Royal Caribbean cruises.
- The port was the second busiest for coal exports last year, exporting 22 million tonnes of coal and small amounts of other metals and minerals.
- Other top export commodities by weight in 2022 were liquefied natural gas, wastepaper, ferrous scrap, and automobiles/light trucks.
- It is also the largest American port by volume for handling farm and construction machinery, as well as agricultural products.
- Imports of agricultural products totalled 3 million tonnes last year, including 1.2 million of sugar and salt, as well as gypsum, fertilisers and forest products.
- More than 40 ships remained inside Baltimore port, including small cargo ships, tug boats and pleasure craft. About 40 ships are on course for the Port of Baltimore, and others already diverted from there to other ports in the hours since the bridge collapse.
Durable Goods Orders Rise for First Time in Three Months
Orders for long-lasting U.S. manufactured goods increased more than expected in February, while business spending on equipment showed tentative signs of recovery. The rebound in orders reported by the Commerce Department on Tuesday, which was driven by increases in transportation equipment, primary metals and machinery, suggested manufacturing could be regaining its footing after struggling in the aftermath of the Federal Reserve's hefty interest rate hikes. Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, rose 1.4% last month. Data for January was revised lower to show orders falling 6.9% instead of 6.2% as previously reported.
- Civilian aircraft orders increased 24.6% last month after plummeting 63.5% in January.
- Overall transportation orders climbed 3.3% in February after dropping 18.3% in January.
- Orders for motor vehicles and parts accelerated 1.8%.
- Machinery orders increased 1.9%.
- Orders for computers and electronic products fell 1.4%, while those for electrical equipment, appliances and components decreased 1.5%.
- Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.7% in February after falling 0.4% in the prior month.
- Non-defense capital goods orders advanced 4.4%, while shipments in that category rose 2.7%
- Business spending on equipment contracted in the fourth quarter. It has declined in four of the last five quarters.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel's Political Crisis Over Ultra-Orthodox Conscription Grows - I24NEWS
- Dozens Killed in Israeli Strikes on North and South of Gaza - Reuters
- Israel-US Diplomatic Spat Complicates Gaza Situation – Voice of America
- Arab Nations Balk at Funding U.N. Aid Agency Vital to Palestinians - WSJ
- Netanyahu’s Decision to Cancel Rafah Meetings Causes New Rupture with Biden - CNN
- Trump Warns Israel That it’s ‘Losing a Lot of Support’ – Politico
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Russia Extends Detention of US Journalist Gershkovich – Voice of America
- Graphic: How Drone Combat in Ukraine is Changing Warfare – Reuters
- ‘Duty to warn’ Guided US Advance Warning of the Moscow Attack. Adversaries Don’t Always Listen - Yahoo
- Beatings and Calls for Execution Follow Russian Concert Attack - WSJ
- Russia Sees No Chance of Swiss Leading Ukraine Peace Process, Envoy Says – Reuters
- ‘Give Us the Damn Patriots’ — Ukraine Needs Air Defenses Now, Minister Says - Politico
- Ukraine is in a Race Against Time to Fortify its Front Line – The Economist
- 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
Other Headlines
- Ugandan Farmers Tap Palm Oil And Cutting-Edge Tech To Transform Lives - Forbes
- An International Security Force is the Only Real Chance to End the Chaos in Haiti - FT
- New Zealand Accuses China of Hacking Parliament, Condemns Activity - Reuters
- WHO: Investing in TB Prevention, Screening, Treatment Will Save Lives, Money – Voice of America
- Three Decades After Rwanda’s Genocide, the Past is Ever-Present – The Economist
- More Than 63,000 People Dead or Missing While Migrating Over Last Decade, IOM says – Reuters
- Thailand, Philippines Embrace Nuclear Power to Cut Emissions - Nikkei
- Japan Relaxes Military Export Curbs for Planned Jet Fighter - AP
- Venezuela Opposition Leader Machado Says Yoris Remains Coalition Candidate – Reuters
Policy and Politics
4 Big Unknowns After the Baltimore Bridge Collapse
President Joe Biden promised he would “move heaven and earth” to replace the bridge and that the federal government would pay for the work. But closing off the Port of Baltimore — a crucial stop wedged between other major ports — amid an urgent rescue mission and the complicated nature of the laws that govern maritime shipping will likely ripple for months. Here are some of the big questions about what happens next:
- How big is the ripple effect on shipping? John Nardi, the president of the Shipping Association of New York and New Jersey, said it’s too early to know all the implications, “but it will certainly result in a rerouting of freight until the channel is cleared for navigation.”
- What’s the scale of the federal response? According to a release from the Maritime and Port Authority of Singapore, the vessel “experienced momentary loss of propulsion” directly prior to the incident. As a result, the ship was unable to maintain its course and collided with the Francis Scott Key Bridge, the authority said.
- Will there be any real consequences? The Dali is in the same regulatory black hole as cruise ships. Even cruise lines that do most of their business in and out of U.S. ports, for the most part, can’t be touched by U.S. regulators because their ships are typically flagged in Caribbean countries. That has blunted U.S. regulators’ ability to police health and safety rules on cruise ships when norovirus and Covid have ravaged passengers on cruise ships.
- How partisan will this get? The White House said President Biden met with senior staff Tuesday morning for a briefing about the collapse and told them to make federal resources available. Biden was also quick to mention Transportation Secretary Pete Buttigieg, who cut short a trip out West to rush to the scene. Both men faced withering criticism for failing to quickly visit the site of a train derailment in Ohio in 2022.
China Files WTO Complaint Against U.S. Over Electric-Vehicle Subsidies
Beijing will use the WTO’s dispute-settlement mechanism to challenge electric-vehicle subsidies, China’s Ministry of Commerce said on its website Tuesday. The rules being challenged require vehicles to use parts from specific regions to qualify for subsidies while excluding products from China, among other countries, the statement said. Under the Inflation Reduction Act consumers in the U.S. won’t be able to claim a $7,500 clean-vehicle tax credit if they purchase cars containing battery components from a “foreign entity of concern” starting in 2024. The policy will extend to the minerals that go into battery components in 2025.
In its statement, China’s Commerce Ministry said the U.S. used the pretext of climate and environmental protection to implement measures that violate WTO rules and disrupt global supply chains. “China is firmly opposed to it,” the ministry said, adding that it respected the rights of WTO members to implement industrial subsidies within the limits of WTO rules.In December, The Wall Street Journal reported that the Biden administration is considering an increase in import taxes on Chinese EVs, which are currently at 27.5%.
Companies Agree To Pay Millions To Resolve Paycheck Protection Program Lawsuits
The Federal Trade Commission (FTC) has reached settlements with two companies accused of making fake promises to small businesses seeking to participate in the Paycheck Protection Program (PPP). The companies, Biz2Credit, Inc. and Womply, without admitting wrongdoing, will pay millions to the FTC for their conduct. According to the FTC, these are the largest damages ever secured by the agency under Section 19 of the FTC Act.
Biz2Credit, Inc., and its subsidiary, Itria Ventures, agreed to pay $33 million in damages to settle charges the company of falsely advertised that PPP loan applications would be processed in an average of 10-14 business days when, in reality, the average processing took well over a month. Oto Analytics, Inc., which also does business as Womply, and its CEO, Toby Scammell, agreed to pay $26 million to settle similar FTC charges. The FTC's complaint alleges that Womply and Scammell advertised that small businesses—particularly one-person businesses like gig workers—could successfully get PPP funding. According to the complaint, that more than 60% of Womply applications never resulted in funding.
Health and Wellness
How To Address Overlooked Mental Health In The Workplace
Wellness has entered the workplace. The pandemic was a catalyst for reconsidering how organizations fare in terms of supporting their employees’ mental health. At the same time, the dialogue surrounding wellbeing at work often focuses on what individuals can do to make sure they’re in a good headspace. Exercise every morning. Do your morning pages. Eat a balanced diet. Clock eight hours of shut-eye. The onus falls on employees to prevent their own burnout. It’s like throwing someone in a whirlpool and telling them to start swimming.
But what if leaders prioritized making sure that the waters were calm? After all, they’re in the best position to optimize workplace culture so that employees can thrive, in terms of wellness and performance. The pandemic may be receding into the past, but employees are still languishing. In 2024, a Business Group on Health survey of 152 large employers in the United States found that 77% indicated an increase in mental health issues among their workforce during 2023, compared to 44% in 2023. The culprit isn’t just long hours either. As it turns out, there are various hidden issues that may be impacting your employees’ mental health.
Election 2024
- Election 2024 Poll: Biden Gains On Trump in Six Swing States – Bloomberg
- Biden, Harris Heading to N.C. as Campaign Puts Emphasis on South – Washington Post
- RFK Jr. Announces Tech Attorney Nicole Shanahan as VP Pick – The Hill
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Consumer Confidence Dips in March on More Pessimism About the Future of the Economy
Consumer confidence fell in March to a four-month low as persistent inflation and the 2024 presidential election made Americans more anxious, a new survey showed. The consumer confidence index slipped to 104.7 this month from a downwardly revised 104.8 (originally106.7) in February, the Conference Board said Tuesday. Confidence has improved considerably since late last year thanks to slowing inflation, but it’s still well below the pre-pandemic high.
“Consumers’ assessment of the present situation improved in March, but they also became more pessimistic about the future,” said Dana Peterson, chief economist at the board. A confidence gauge that looks ahead six months, however, declined to a five-month low of 73.8 from 76.3 n the prior month. Historically readings below 80 in the expectations index often signal a forthcoming recession. inflation is still running at excessively high levels and gas prices have risen to give Americans more to worry about. The pending presidential election has also made people anxious, polls show.
China Blocks Use of Intel and AMD Chips in Government Computers
China has introduced guidelines to phase out U.S. microprocessors from Intel and AMD (from government personal computers and servers, the Financial Times reported on Sunday. The procurement guidance also seeks to sideline Microsoft's Windows operating system and foreign-made database software in favour of domestic options, the report said. Government agencies above the township level have been told to include criteria requiring "safe and reliable" processors and operating systems when making purchases, the newspaper said.
Intel and AMD did not immediately respond to Reuters request for comment. The U.S. has been aiming to boost domestic semiconductor output and reduce reliance on China and Taiwan with the Biden administration's 2022 CHIPS and Science Act. It is designed to bolster U.S. semiconductors and contains financial aid for domestic production with subsidies for production of advanced chips.
Mortgage Rates Are Down, But That Doesn’t Make Buying Easier
More home sales certainly seems like good news for a housing market that’s been sluggish, to say the least. But that doesn’t necessarily mean that homes are any more affordable. There is some good news on housing affordability. Mortgage rates are down almost a full percentage point from October of last year. But…"You know, when you zoom out, affordability is still very, very low from a historical perspective," said Odeta Kushi, deputy chief economist at First American Financial Corp.
She looks at affordability as a factor of home prices, mortgage rates and household incomes. And even though incomes have been rising, "the rise in household income has not been enough to offset the impact from rising mortgage rates and higher house prices," Kushi said. If you take mortgage rates, housing prices and incomes into account, homes are 44% less affordable than they were two years ago — before the Federal Reserve started raising interest rates, she said. Even if people’s incomes rise further "…the problem is that home price appreciation is likely to continue, probably a little bit quicker than income growth," said Charlie Dougherty, senior economist at Wells Fargo.
Boeing’s Next CEO: Here’s Who Could Succeed David Calhoun
After months of damaging revelations about quality issues at Boeing, the company announced a shakeup Monday morning. Boeing CEO Dave Calhoun will step down at the end of 2024, while the head of Boeing’s commercial airplane division, Stan Deal, is out, replaced by Stephanie Pope, who was promoted just four months ago to the position of chief operating officer. The board is likely to look outside the company for Boeing’s next CEO, Loren Thompson, a longtime aerospace and defense consultant, told Forbes. “This will be a tough job to fill.”
Wall Street is hoping for someone with a strong operational background, someone who could give investors more confidence in Boeing's manufacturing operations. But there aren’t many leading executives with the right manufacturing pedigree, Cliff Collier, a principal at Charles Edwards Management Consulting, told Forbes. “You need someone who knows how to throw the B.S. flag on operations when they make excuses and who can push finance back in the corner when they want to worry more about the bottom line this quarter than performance. The problem is for 15 years or so, those are the guys who haven’t been promoted in aerospace.” Forbes has a list of potential candidates.
The New Boss of Boeing's Commercial Airplanes Division is a Third-Generation Employee
On Monday morning, embattled airline manufacturer Boeing announced that its CEO, Dave Calhoun, would be stepping down at the end of the year. In the same release, Boeing said the firm’s current board chairman, Larry Kellner, won’t seek reelection; commercial airplanes president and CEO Stan Deal, is retiring; and current COO and longtime Boeing exec Stephanie Pope will take his place, effective immediately. Leading Boeing’s commercial airlines division is no small task these days, but Pope, who has been with Boeing for three decades, may be the airliner’s best shot at steadying.
Pope joined Boeing in 1994 as a finance analyst, an area in which she served in a smattering of managerial and directorial roles over nearly two decades. As the firm’s COO, Pope has been responsible for a wide array of business functions, including supply chain, quality, manufacturing and engineering. “Next year will be a significant transitional year in our performance as we continue to restore our operational and financial strength; and Stephanie will help drive the stability and predictability necessary to ensure we deliver on our customer, employee, regulatory, investor and other stakeholder commitments,” Boeing’s outgoing CEO Calhoun wrote in the January 2024 press release announcing Pope’s promotion.
Korean Air Orders Airbus Wide-Bodies for $13.7B
Korean Air confirmed it plans to purchase 33 A350 wide-body aircraft from Airbus at a cost of $13.7 billion, in an ongoing effort at modernizing its carrier fleet. The order will include 27 A350-1000 jets, the largest variant of the series, and seven of the A350-900 model. The airline did not detail the delivery schedule for the new jets. A statement by the airline noted that the “eco-friendly A350” supports Korean Air’s sustainability efforts while preparing for its planned combination with Asiana Airlines.
The A350-1000 carries 350 to 410 passengers in a three-class arrangement. The A350-900 seats 300-350 passengers. Both models will be in service on Korean Air’s longest intercontinental routes, such as the twice-daily Seoul-New York route. In addition to the 33 A350s, Korean Air will add 50 Airbus A321neos, 10 Boeing 787-9s, 20 Boeing 787-10s, and 30 Boeing 737 MAX 8s as it proceeds with its fleet modernization and carbon reduction efforts.
Read more at American Machinist
IBM Continues Work to Establish Trusted Semiconductor Foundry Technology for U.S. Military Applications
Officials of the U.S. Defense Microelectronics Activity (DMEA) in McClellan Park, Calif., are asking IBM in Armonk, N.Y., to enable an evidence based trusted enclave in a commercial manufacturing environment supporting the Trusted Foundry Access III – Manufacturing Contract. This will enable a wide range of advanced semiconductor technologies and services to create a DMEA-accredited trusted supply chain with IBM, U.S. military officials say.
The DOD Trusted Foundry program provides the U.S. government with guaranteed access to leading-edge trusted microelectronics services for typically low-volume military and government manufacturing. Leading-edge foundry services including multi-project wafer runs, dedicated prototypes, and high- and low-volume production. This contract to IBM provides an additional layer of security to commercial IC manufacturing processes that gives government access to advanced technology manufacturing capabilities for trusted and classified programs. In addition, the contract provides expertise and consulting to help establish and certify new facilities and processes in advanced semiconductor technologies.
Read more at Military Aerospace Electronics
Manufacturers Innovate to Train, Cultivate Workforce
Facing a shortage of skilled workers, manufacturers like General Electric and Siemens are expanding their training programs to cultivate talent, including specialized roles in welding and machining. With innovative approaches such as on-site training schools and partnerships with educational institutions, these companies aim to fill critical positions and address persistent challenges in recruiting and retaining workers.
GE, for example, has expanded a welding training program it runs out of a Beavercreek, Ohio, factory that makes tubes and ducts for its aerospace engines. Welding and machining roles are extra difficult to fill because they require more specialized training, particularly when it comes to precision manufacturing work. Siemens AG, for example, has recruited a team of former high school principals and teachers to work alongside its manufacturing veterans running an on-site training program for its new $150 million electrical infrastructure plant in Fort Worth, Texas. Manufacturers have traditionally relied on a significant amount of on-the-job training for positions that don’t require specific certifications.
Double-Brokering Fraud Surges in Freight Sector
A Brazen Yogurt Heist Shows How Cyber Gangs Are Hijacking U.S. Goods Thieves intercepted a refrigerated container bound for Florida and demanded a $40,000 ransom—part of a surge in fraud that has frustrated freight haulers.
Scam artists are increasingly targeting freight brokers in a practice known as double-brokering where fraudulent carriers use stolen motor carrier numbers to snare loads, hire unsuspecting carriers to complete the delivery at a reduced rate, and pocket the difference. Oftentimes they steal the cargo along the way. Brokers, carriers, and law enforcement agencies can fight back by implementing stronger vetting and authentication processes and sharing information about these scams.
Hershey, Mondelez Bet Big on Easter as Cocoa Price Crisis Looms
Hershey, Mondelez, and other confection-makers are employing promotions and pitching more non-chocolate Easter treats like cookies 'n' cream bunnies at a time when soaring cocoa prices threaten their profits and shoppers balk at high prices. With shoppers' "impulse buys" of chocolate and candy at convenience stores and in grocery checkout lines down, according to industry data, special occasions like Easter and Halloween are increasingly important to the companies' sales.
Cocoa prices have tripled over the past 12 months thanks to bean disease in West Africa, which continues to worsen, meaning companies are not expected to get relief anytime soon. Sugar prices are also up some 7%. Chocolate makers set their plans for this Easter last year, and have said they will hike prices again to cover the cocoa crunch. The companies face additional pressure on their profit margins as their hedges protecting commodity costs expire later this year and next.