Member Briefing October 26, 2023

Posted By: Harold King Daily Briefing,

UAW, Ford Expected to Announce New Tentative Labor Deal

The United Auto Workers union is expected to announce a new tentative labor contract with Ford Motor F 1.32%increase; green up pointing triangle on Wednesday night, after intense bargaining throughout the day, according to people with knowledge of the talks. The UAW, now in the sixth week of its strike at the three Detroit automakers, has called for work stoppages at three Ford factories and sent more than 16,000 U.S. factory workers at the Dearborn, Mich., car company to picket lines.

The two sides have moved closer on key bargaining issues in recent days, the people said. As part of the proposed contract, Ford has agreed to give factory workers a 25% wage increase over the life of the agreement, including a 11% bump in the first year, according to people familiar with the details. The wage increase would bump the top pay for assembly line workers from around $32 an hour to roughly $40 an hour. The membership must approve the tentative agreement with a majority vote for it to be officially adopted. The contract, which would span more than four years, covers about 57,000 union-represented workers at Ford.

Read more at The WSJ

Manufacturing, Services Output Jump in October 

U.S. business output ticked higher in October as the manufacturing sector pulled out of a five-month contraction on a pickup in new orders, and services activity accelerated modestly amid signs of easing inflationary pressures. S&P Global on Tuesday said its flash U.S. Composite Purchasing Managers Index tracking both the manufacturing and service sectors rose to 51.0 in October - one point above the 50 level that separates expansion and contraction - from a final September reading of 50.2. It was the highest level since July.

The survey's manufacturing PMI inched up to the break-even level of 50, its highest since April and snapping a shallow contraction in the sector that had begun in May. The median expectation among economists polled by Reuters had been for a reading of 49.5. New manufacturing orders rose for the first time in six months and were the highest since September 2022. On the much-larger services side of the economy, activity also defied forecasts for a modest slowdown as that sector's PMI came in at a three-month high of 50.9 this month versus 50.1 in September and against a median Reuters poll estimate of 49.8.

Read more at Reuters

War in Israel Headlines

War in Ukraine Headlines

U.S. Economy May Have Grown 5% in the Third Quarter

The advance estimate of Q3 Gross Domestic Product growth for the U.S. economy will be announced at 8.30am E.T. on October 26. Nowcasts from the Atlanta Federal Reserve’s GDPNow suggest that annualized real GDP growth could come it an over 5% and professional economists see growth topping 3% after a trend of upward revisions in recent weeks. If even 3% forecasts hold, that would still be an impressive rate of growth for the U.S. economy compared to recent quarters.

If estimates hold, then Q3 will mark a step-up in real annual GDP growth compared to growth of over 2% for the prior four quarters. Prior to that, the first half of 2022 did see GDP decline. If robust Q3 growth does hold, the Atlanta Fed’s Nowcast suggest that it will be underpinned by strong growth in consumer spending, rebounding from relatively soft Q2 growth. Significant contributions may also come from net exports, which can be volatile quarter to quarter, as well as reasonable growth in private inventories. Given that robust Q3 growth is broadly expected, Q3 GDP numbers are unlikely to alter the perspective of the Fed or markets significantly.

Read more at Forbes

New Home Sales Soar in September as Builders Use Incentives to Offset Higher Financing Cost

New home sales leaped 12.3% in September in an expectation-defying jump. The 759K-unit sales pace more than reversed August's 8.2% decline. The rebound placed new home sales solidly back onto an upward trajectory. September's sales pace was up over 30% year-over-year. It was also 40% higher than the low of 543K hit in July 2022. Builders are increasingly offering price cuts and other incentives to sell homes in the face of rising affordability concerns. The NAHB builder survey revealed that 62% of builders offered sales incentives in October, tied with the previous cycle high reached in December 2022.

New home prices have trended lower as a result. The median sales price dropped 3.3% in September and was down over 12% from the year prior. In contrast, low resale supply continues to lift prices for existing single-family homes, boosting the relative affordability of new construction. An increasing share of new home inventory is occupied by homes that have not started construction. This count rose to 105K in September, an all-time-high for data stretching back to 1999. Unstarted homes now account for 24.1% of new home inventory.

Read more at Wells Fargo


COVID Update - ‘On track’: 3 Percent of Americans Have Gotten New Covid Shot, But CDC Director Remains Confident

The Biden administration’s campaign to convince Americans to get an annual Covid shot is off to a very slow start. Even so, the nation’s top disease-fighting official says the U.S. remains “on track” to hit last year’s uptake levels, which crested at just 17 percent of the U.S. population. So far, 12 million people, or about 3.6 percent of the population, have gotten the shot in the five weeks since it hit pharmacy shelves — though reporting lags mean it’s likely a bit higher, Centers for Disease Control and Prevention Director Mandy Cohen said.

More people, by far — 16 million — have gotten their annual flu vaccine, Cohen said, attributing the difference to long-held routines.

Read more Politico

NAM Study: Regulations Cost Manufacturers $29,100 Per Employee Per Year

Yesterday the NAM released the findings of a landmark study showing the real cost of regulatory overreach by the federal government. According to NAM President Jay Timmons the study shows that “the federal regulatory burden is now costing manufacturers $29,100 per employee per year, and that cost rises to $50,100 per employee for small manufacturers. The total cost of complying with federal regulations in 2022 is an estimated $3.079 trillion (in 2023 dollars), an amount equal to 12% of U.S. GDP and greater than the manufacturing sector’s entire economic output. These numbers mean that a small firm with 20 employees bears more than $1 million in annual compliance costs.”

Looking at inflation-adjusted numbers, the cost of complying with federal regulations has grown 26% for the manufacturing sector since 2012. According to Timmons “the regulatory burden is chilling investment, curtailing our ability to hire new workers and suppressing wage growth across the nation.  This regulatory burden threatens the competitiveness of manufacturing in America, chilling manufacturing investment, job creation and wage growth and blunts the positive impacts of tax reform, the Bipartisan Infrastructure Law and the CHIPS and Science Act.”

You can read more and view an executive summary of the study’s findings here

UAW Strike Update: UAW Now Wants at Least 25% Raises

The UAW now is seeking raises totaling at least 25 percent from the Detroit 3, a significant reduction from its original demand of 40 percent, as the two sides close in on resolving a major sticking point to reaching deals to end the union's 6-week-old strike, according to people familiar with the talks. The new figure would result in top hourly wages of about $41.20 in 2027. Ford Motor Co., General Motors and Stellantis each have proposed 23 percent raises, which would put top earners at about $40.39.

The difference between the union's demand and what the companies have offered is roughly $3,100 per worker over the entirety of the contract, although one source cautioned that the target could shift at any or all of the companies as talks continue. The UAW since early August has mostly held firm to its initial demand of 40 percent wage gains, although the union budged slightly last month, telling the companies it was open to raises of 36 percent. The 25 percent request still would fit UAW President Shawn Fain's stated goal of "substantial" double-digit wage increases and likely represent record raises for auto workers.

Read more at Automotive News

Meet Rep. Mike Johnson, the New Speaker of the House

Following three failed GOP speakership bids in the three weeks since Kevin McCarthy's ouster, the House elected Rep. Mike Johnson of Lousiana on Wednesday to be the next speaker of the House. He won with the unanimous support of House Republicans. Johnson, a relatively unknown 51-year-old congressman first elected in 2016, is a staunch social conservative and evangelical Christian who already served in party leadership as the vice chair of the House GOP conference.

The Louisiana Republican became the party's nominee after House Majority Whip Tom Emmer's candidacy was derailed by dozens of hardliners who made clear they were not ready to support his candidacy. Last week, Rep. Jim Jordan of Ohio was the party's nominee, losing support with each successive floor vote until he was voted down by the conference on Friday. Before that, House Majority Leader Steve Scalise was briefly the nominee. As the speaker, Johnson will be second in line to the presidency behind Vice President Kamala Harris. Here's what you need to know about him.

Read more at Business Insider

New York’s Elise Stefanik, The Most Senior Woman in House Republican Leadership is Avoiding the Chaos

Everyone in the House GOP’s leadership ranks — plus a host of other rank-and-file members — has taken a shot at replacing Kevin McCarthy, with one curious exception: Elise Stefanik. The highest-ranking Republican woman in the House, Stefanik has been conspicuously absent from the speakership discussion. While she has remained highly visible in running the conference meetings and offering enthusiastic endorsements of various failed nominees, the GOP conference chair has avoided throwing her own hat in the ring or even offering public comment about her intentions.

It’s a potentially savvy move, allowing her to steer clear of the career-killing chaos now engulfing the GOP. And yet it’s also likely that she would struggle to win the votes, underscoring how difficult it will be to rise in the party in its current form. The Upstate New York Republican declined to be interviewed this week about the speaker saga. Her senior advisor, Alex DeGrasse, said she is “laser-focused on unifying the House Republican Conference to elect the next speaker of the House.”

Read more at Politico New York

Chronic Conditions: The Top Reason for Rising Health Care Costs in the U.S.

Inflation. Delayed care. Chronic conditions. Pharmaceutical prices. These and other factors will continue to push upward the cost of providing health coverage to employees in 2024 by an estimated 7%. A new report from the International Foundation of Employee Benefit Plans confirms other estimates in that range. The foundation’s estimate is based on a survey of 171 employers that offer health coverage. The median cost increase has been creeping higher since the pandemic, from 4.4% in 2022 to the 7% predicted for next year.

In this survey, respondents were asked to cite the primary reasons that will contribute to the increase. The top four responses are: Utilization due to chronic health conditions (22%, up from last year) Catastrophic claims (19%, same as last year) Specialty/costly prescription drugs/cell and gene therapy (16%, up from last year) Medical provider costs (14%, up from last year) Respondents generally shrugged off the pandemic hangover caused by delayed care. Only 4% cited that as the primary reason for cost increases. Last year, 12% pointed to an increase in utilization due to delayed preventive/elective care as a major inflating factor.

Read more at Benefits Pro

Boeing Reports Q3 Loss, Cuts 737 Delivery Goal for Year

Boeing BA booked a third-quarter loss and lowered delivery goals this year for its 737 MAX jet, which accounts for the bulk of the plane maker’s output. Boeing lost $1.64 billion in the quarter ended Sept. 30, more than analysts expected, and it reported negative cash flow from its operations. But the company met expectations for sales, and executives kept their full-year and medium-term financial guidance unchanged.

MAX production has been running at about half the company’s target while Boeing and one of its largest suppliers race to fix misdrilled holes on the jet’s fuselage. The company said Wednesday that it will this year deliver between 375 and 400 of the 737 jets. It had previously set out to deliver 400 to 450 this year, and executives had said in September that they believed they could hit that target. Boeing said Wednesday that it still expected to deliver 70 to 80 787s.

Read more at the WSJ

Toyota Chairman Says People Are Finally Seeing the Reality About EVs

Toyota Motor Chairman Akio Toyoda, asked about electric-vehicle challenges including a recent lull in U.S. demand, said the industry was coming to recognize that there isn’t a single answer to reducing carbon emissions. “People are finally seeing reality,” Toyoda said Wednesday, speaking in his capacity as the head of the Japan Automobile Manufacturers Association.  Toyoda, who stepped down this year as Toyota chief executive after nearly 14 years on the job, has long said the auto industry should hedge its bets by continuing to invest in hybrid gasoline-electric cars and other options beyond just electric vehicles.

“There are many ways to climb the mountain that is achieving carbon neutrality,” Toyoda told a small group of reporters at the Japan Mobility Show, formerly the Tokyo Motor Show, which is opening this week for the first time in four years. Japanese automakers, most prominently Toyota, have been more vocal than their Western peers about the challenges EVs face in the near term, including high costs, resource crunches and limited charging infrastructure.

Read more at the WSJ

Apple Backs Right To Repair—Will Provide Parts To Consumers For Product Repairs

Though the legislation has only been passed in three states so far—California, Minnesota and New York—Apple will make repair tools and parts nationally at “reasonable prices,” according to Lael Brainard, the director of the National Economic Council. Apple, which has built a reputation for high product repair costs, will also pledge support to a federal right to repair bill.

In California, the Right to Repair Act covers electronics and appliances made and sold after July 1, 2021, and requires manufacturers to make repair parts available seven years after the initial production of devices priced above $100. Right to repair proponents have said the legislation aims to make repairs more affordable and convenient for consumers with broken products, which at times have to be replaced entirely, turned back into original manufacturers for pricey repairs or given to repair shops that use third party parts. Right to repair provisions also stand to benefit farmers

Learn more at Forbes

Companies Plan Fewer Layoffs, Challenger Survey Finds

While 29% of the 200 human resource and business leaders surveyed said their companies are currently conducting or planning to conduct layoffs, that number is down from 45% this spring, according to an Oct. 17 report from Challenger, Gray & Christmas, Inc. Likewise, only 4% said they anticipate the need for future layoffs, down from 8%. “We know that many companies have conducted layoffs during the first three quarters of the year, since announcements are up 198% over the same period last year,” Andrew Challenger, workplace and labor expert and senior vice president of the firm, said in a statement. “It seems a lot of the cost-cutting companies planned was carried out prior to the fourth quarter,” he said.

Still, about 46% said they believe a recession is coming, and 24% are actively planning for one. But employers may be cutting costs in other ways. Most said they’re reducing business travel. Some said they’ve implemented a hiring freeze, and others are redeploying workers internally.

Read more at HR Dive

Battery Recycler Li-Cycle Pausing Work on Rochester NY Project

Li-Cycle Holdings Corp. executives announced Oct. 23 they are pausing construction work on the company’s much-anticipated Rochester Hub project in upstate New York. The leaders of the largest lithium-ion battery recycler in North America cited rising construction costs as the reason for the pause and added they have launched “a comprehensive review of the go-forward strategy for the project.” The project, which was expected to cost roughly $485 million to complete, was backed by the Department of Energy earlier this year with a $375 million loan under the Advanced Technology Vehicles Manufacturing program.

The Rochester Hub was first announced in 2020 as a complement to Li-Cycle’s existing battery-recycling “Spoke” facilities. Where spoke sites break down lithium-ion batteries in a safe manner, the hub is intended to process the materials from spoke to the point of having them be reused in battery production and other uses or sending them to other recyclers such as steel or plastic plants for further processing. Li-Cycle claims its zero-waste process recovers at least 95% of material, compared to the industry norm’s 50% recovery rate.

Read more at IndustryWeek

Striking St. Lawrence Seaway Workers, Management Called Back to Negotiation Table

The Canadian government has instructed workers and management in the St. Lawrence Seaway strike to sit down with a mediator this Friday and hash out their differences, as groups ranging from grain farmers to steelmakers feel the squeeze. The job action by 361 Unifor members at 13 of the 15 locks along the key trade corridor kicked off Sunday, shutting it down immediately. The union and management authority both said on Tuesday they would comply with the government notice for mediation.

In the meantime, producers continue to fret. Crosby Devitt, who heads Grain Farmers of Ontario, said the majority of crops yielded by the 28,000 producers he represents are exported, as farmers wrap up the soybean harvest and begin to reap corn. "It's like a chain reaction. As it stops at the port, there's terminals all along the Great Lakes and along the St. Lawrence River [...] They'll get full of grain, and then it backs up to the farm and potentially can be sitting in the field, subject to wildlife damage — or snow soon enough — moisture and rotting." Devitt said there is no export alternative to the seaway, which runs between Lake Erie and Montreal and carried $16.7 billion worth of cargo last year — nearly half of it grain and iron ore.

Read more at CBC

NAM: California Emissions Law Will Harm Manufacturing

Large companies that do business in California will soon be required to report their greenhouse gas emissions to state regulators thanks to a new state law. Signed by Gov. Gavin Newsom on Oct. 7, SB 253 requires the California Air Resources Board to form transparency rules for companies with yearly revenues exceeding a billion dollars by 2025. The first of its kind law in the U.S. will impact over 5,000 corporations both public and private.

Under the law, by 2026 major companies will need to report the amount of carbon produced by their operations and electricity. By 2027 they will need to disclose “Scope 3” emissions, or those attributable to their customers and suppliers. The effects of the law on manufacturing will be ruinous and widespread, according to Conference of State Manufacturers Associations Chair and Utah Manufacturers Association President and CEO Todd Bingham. The rule—which the NAM has been actively working against—not only requires numerous unfeasible moves, but also imposes significant financial burdens on manufacturers, the NAM has said.

Read more at USA Today