When Citigroup CEO Jane Fraser announced in September that her sweeping corporate overhaul would result in an undisclosed number of layoffs, a jolt of fear ran through many of the bank’s 240,000 souls.
“We’ll be saying goodbye to some very talented and hard-working colleagues,” she warned in a memo.
Employees’ concerns are justified. Managers and consultants working on Fraser’s reorganization — known internally by its code name, “Project Bora Bora” — have discussed job cuts of at least 10% in several major businesses, according to people with knowledge of the process. The talks are early and numbers may shift in coming weeks.
Fraser is under mounting pressure to fix Citigroup, a global bank so difficult to manage that its challenges consumed three predecessors dating back to 2007. Already a laggard in every metric that matters to investors, the bank has fallen further behind rivals since Fraser took over in early 2021. It trades at a price-to-tangible book value ratio of 0.49, less than half the average of U.S. peers and one-third the valuation of top performers including JPMorgan Chase.
“The only thing she can do at this point is a really substantial headcount reduction,” James Shanahan, an Edward Jones analyst, said in an interview. “She needs to do something big, and I think there’s a good chance it’ll be bigger and more painful for Citi employees than they expect.”
Citigroup’s stock has been mired in a slump under CEO Jane Fraser.
If Fraser decides to part with 10% or more of her workforce, it would be one of Wall Street’s deepest rounds of dismissals in years.
Burdened by regulatory demands that hastened the retirement of her predecessor Mike Corbat, Citigroup’s expenses and headcount have ballooned under Fraser. While competitors have been cutting jobs this year, Citigroup’s staff levels remained at 240,000. That leaves Citigroup with the biggest workforce of any American bank except the larger and far more profitable JPMorgan.
An update on Fraser’s plan and its financial impact will come in January along with fourth-quarter earnings.
The stakes are high for America’s third-largest bank by assets. That’s because, after decades of stock underperformance, missed targets and shifting goal posts, Fraser is taking steps analysts have long called for. Failure could mean renewed calls to unlock value by taking even more drastic actions like dismantling the company.
Fraser has vowed to boost Citigroup’s returns to at least 11% in the next few years, a critical goal that would help the bank’s stock recover. To get close, Citigroup needs to increase revenue, use its balance sheet more efficiently and cut costs. But revenue growth may be hard to achieve as the U.S. economy slows, leaving expense cuts the biggest lever to pull, according to analysts.
“Not one investor I’ve spoken to thinks they’ll get to that return target in ’25 or ’26,” analyst Mike Mayo of Wells Fargo said in an interview. “If they can’t generate returns above their cost of capital, which is typically around 10%, they have no right to stay in business.”
Fraser put Titi Cole, Citigroup’s head of legacy franchises, in charge of the reorganization, according to sources. Cole joined Citigroup in 2020 and is a veteran of Wells Fargo and Bank of America, institutions that have wrestled with expenses and headcount in the past.
Boston Consulting Group has a key role as well. The consultants have been involved in mapping out the bank’s organization charts, tracking key performance metrics and making recommendations.
Although the project’s code name evokes the turquoise waters of Tahiti, employees have been anything but calm since Fraser’s September announcement.
“Morale is super, super low,” said one banker who left Citigroup recently and has been contacted by former colleagues. “They’re saying, ‘I don’t know if I’m getting hit, or if my manager is getting hit.’ People are bracing for the worst.”
American residents eligible to travel to French Polynesia are charged less for on-island Covid tests if they are vaccinated ($50 versus $120).
Dana Neibert | The Image Bank | Getty Images
The ultimate number of layoffs will be determined in coming weeks as the massive project moves from management layers to rank-and-file workers. But some things are already clear, according to the people, who declined to be identified speaking about the confidential project.
Executives will see cuts beyond 10% because of Fraser’s push to eliminate regional managers, co-heads and others with overlapping responsibilities, they said.
For instance, chiefs of staff and chief administrative officers across Citigroup will be pruned this month, said one of the people with knowledge of the situation.
Operations staff who supported businesses that have been divested or reorganized are also at higher risk of layoffs, said the people.
Even if Fraser announces a large reduction in workers, investors will probably need to see expenses drift lower before being convinced, said Pierre Buhler, a banking consultant with SSA & Co. That’s because of the industry’s track record of announcing expense plans only to see costs creep up.
Still, it’s up to Fraser and her deputies to sign off on the overall plan, and they may opt to de-emphasize expense savings. The project is primarily about removing unnecessary layers to help Citigroup serve clients better, according to a current executive.
Publicly, the bank has only said that costs would start to ease in the second half of 2024.
Citigroup declined to comment beyond this statement:
“As we’ve said previously, we are committed to delivering the full potential of the bank and meeting our commitments to our stakeholders,” a spokeswoman said. “We’ve acknowledged the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but they’re the right steps to align our structure to our strategy and deliver the plan we shared at our 2022 Investor Day.”
United Auto Workers (UAW) members strike at a General Motors assembly plant that builds the U.S. automaker’s full-size sport utility vehicles, in another expansion of the strike in Arlington, Texas, October 24, 2023.
James Breeden | Reuters
DETROIT – General Motors plans to invest roughly $13 billion in U.S. facilities by April 2028, the United Auto Workers union said as part of its recent tentative agreement with the automaker.
GM has already announced some of the planned investments such as $4 billion at Orion Assembly in suburban Detroit and $2 billion in Spring Hill, Tennessee, for new electric vehicles. Others, such as $1.25 billion for a future electric vehicle plant at Lansing Grand River, are new.
Many of the new investments include hundreds of millions of dollars for assembly plants to support or add additional volume as well as engine and components plants.
Details of the tentative agreement were released Saturday after local UAW leaders with GM approved the pact, which must still be ratified by a simple majority of the union’s 46,000 members with the automaker. GM was the last Detroit automaker to reach a tentative agreement following Ford Motor and Chrysler-parent Stellantis.
GM’s U.S. investments through the terms of the 4 ½-tear tentative compared to $8.1 billion announced by the union at Ford and $18.9 billion at Stellantis, including $6.2 billion in previously announced parts plants in Kokomo, Indiana.
GM declined to comment on the released details, referring back to a statement by CEO Mary Barra when the tentative deal was initially announced: “GM is pleased to have reached a tentative agreement with the UAW that reflects the contributions of the team while enabling us to continue to invest in our future and provide good jobs in the U.S.,” she said. “We are looking forward to having everyone back to work across all of our operations, delivering great products for our customers, and winning as one team.”
The tentative labor agreement was announced Monday after roughly six weeks of targeted strikes by the union against GM, Stellantis and Ford, also known as the “Big Three” automakers. The work stoppages began on Sept. 15 after the sides failed to reach deals covering 146,000 UAW members with the automakers by a strike deadline.
“There’s a reason why the Big Three and their allies feel like they just got taken to the cleaners. This contract has wage increases and economic gains like nothing we’ve ever seen before, said UAW Vice President Mike Booth during an online broadcast Saturday. “The gains in this contract are worth more than four times the last contract.”
Like the UAW’s tentative agreement with Stellantis and Ford, the deal includes 25% pay increases, bonuses and other enhanced benefits for autoworkers, such as profit-sharing payments and a $5,000 ratification bonus.
The 25% raises include an 11% increase upon ratification, followed by a 3% bump-up in the next three years and then a 5% increase in September 2027.
At GM, the union also made major gains in cutting down different tiers, or levels, of workers to be paid the same or similar to their traditional colleagues at assembly plants. UAW President Shawn Fain said some workers will receive an immediate raise of 89% if ratified by members.
“One of our central goals in this round of negotiations was the elimination of tiers,” Fain said during the broadcast. “While we didn’t win everything, we made enormous strides at GM. We did more to eliminate wage tiers than any of the Big Three.”
New workers added to the agreement include employees at GM’s Ultium Cells joint venture for battery cells, Fain reconfirmed Saturday. The battery workers will receive a raise of between $6 and $8 an hour, he said.
Fain on Saturday reiterated the union’s plans to use the record contracts with GM, Ford and Stellantis as leverage to unionize other automakers.
“We aren’t bashful or quiet about what our plans are: Our goal is to spend the next few years organizing auto workers across this country,” Fain said. “The Big Three aren’t the only auto companies making record profits. Auto workers at Toyota, Honda, Volkswagen, Hyundai and Tesla, they deserve record contracts. too.”
Toyota Motor earlier this week announced plans to hike wages at its U.S. factories. The new rates would see hourly manufacturing employees at top rates in Kentucky receive roughly 9% pay increases to $34.80 an hour – still below the more than $40 an hour top rate under the UAW’s tentative agreements with the Detroit automakers.
UAW members at Ford have already started voting on that tentative agreement. Most notably, 82% of workers at Ford’s Michigan Assembly Plant voted in support of the pact this week. The suburban Detroit plant was among the first to strike alongside other assembly plants with GM and Stellantis.
UAW members with Stellantis and GM are expected to vote on the deals over the next couple of weeks.
AMC clarified Friday that the Nov. 5 date was the cutoff for the first run of tickets available for the film when presales began.
The extra time in theaters can only benefit the film and the box office. Already Swift’s Eras Tour has shattered records and helped the theater industry weather a light release calendar.
Heading into the weekend, The Eras Tour film has collected $150 million in domestic receipts and more than $200 million globally. That global haul represents more than 18% of the $1.092 billion total global box office earned since the film was released Oct. 13, according to data from Comscore.
“It’s been a remarkable, one-of-a-kind, record-breaking and influential run for The Eras Tour, not to mention a huge win for Taylor Swift and theater owners,” said Shawn Robbins, chief analyst at BoxOffice.com.
Expectations are that Swift will add another $10 million domestically this weekend and the film could be No. 1 at the box office once again.
So far, The Eras Tour film is the highest-grossing domestic and global concert film release of all time but lags just behind the “Michael Jackson’s This Is It” concert documentary’s global haul of $262.5 million.
Box office records (Taylor’s version)
Highest opening weekend for a concert film: Taylor Swift: The Eras Tour — $92.8 million
Widest domestic release for a concert film: Taylor Swift: The Eras Tour — 3,855 locations
Highest-grossing concert film domestically: Taylor Swift: The Eras Tour — $150 million, and counting
Highest-grossing concert film worldwide: Taylor Swift: The Eras Tour — $203.8 million, and counting
Highest-grossing concert film documentary worldwide: “Michael Jackson’s This Is It” — $262.5 million
Source: Comscore
Swift’s concert film release came at an opportune time. Labor strikes in Hollywood led several films to depart the theatrical calendar, including the much-anticipated “Dune: Part Two” from Warner Bros. Discovery and Legendary Entertainment.
“One movie can make all the difference,” said Paul Dergarabedian, senior media analyst at Comscore. “This incredible box office performance is made all the more impressive given the film’s truncated release pattern that had it essentially playing on big screens four days a week.”
Swift’s unique release, coupled with her decision to distribute the film through theater chain AMC instead of a traditional Hollywood studio, has also led to increased speculation about where the concert film will land on streaming.
Taylor Swift’s previous movies
Taylor Swift: Journey to Fearless (2010): aired on The Hub, which has since been rebranded as Discovery Family, and then made available on DVD
Taylor Swift: Speak Now World Tour Live (2011): made available on DVD
The 1989 World Tour Live (2015): released through Apple Music
Taylor Swift: Reputation Stadium Tour (2018): streaming on Netflix
Taylor Swift: City of Lover Concert (2020): ABC TV Special
Miss Americana (2020):streaming on Netflix
Folklore: The Long Pond Studio Sessions (2020): streaming on Disney+
Currently, it appears that Swift is waiting for the SAG-AFTRA strike to wrap up before negotiating with streamers for the rights to her concert film. The film is much coveted in the industry and a big bidding battle is expected.
Swift has previously worked with Apple Music, Netflix and Disney to release filmed versions of her concerts and documentary projects.
Correction: An earlier version of this story incorrectly said it would be the Eras Tour movie’s last weekend at the box office. The headline and story have been corrected.
United Auto Workers President Shawn Fain gestures in solidarity with striking workers during a rally at UAW Local 551 on Saturday, Oct. 7, 2023, in Chicago.
John J. Kim | Tribune News Service | Getty Images
DETROIT – United Auto Workers President Shawn Fain wants to expand the union’s battle from the Detroit automakers to Tesla, Toyota Motor and other non-unionized automakers operating in the U.S.
The outspoken leader plans to use record contracts recently won after contentious negotiations and U.S. labor strikes with General Motors, Ford Motor and Chrysler-parent Stellantis to assist in the union’s embattled organizing efforts elsewhere.
“We’ve created the threat of a good example, and now we’re going to build on it,” Fain said Thursday night when discussing Stellantis’ tentative agreement. “We just went on strike like we’ve never been on strike before and won a historic contract as a result. Now we’re going to organize like we’ve never organized before.”
Doing so would greatly assist the union’s bargaining efforts and membership, which has been nearly halved from roughly 700,000 members in 2001 to 383,000 at the beginning of this year. UAW membership peaked at 1.5 million in 1979.
The UAW has previously failed to organize foreign-based automakers in the U.S. Most recently, plants with Volkswagen and Nissan Motor fell short of the support needed to unionize. The UAW has previously discussed organizing Tesla’s Fremont plant in California with little to no traction in those efforts.
It remains to be seen whether the recent efforts are gaining traction at any other automakers, but Fain has vowed to move beyond the “Big Three” — Ford, GM and Stellantis — and expand to the “Big Five or Big Six” by the time its 4½-year contracts with the Detroit automakers expire in April 2028.
The deals include 25% wage increases that would boost top pay to more than $40 an hour, reinstatement of cost-of-living adjustments, enhanced profit-sharing payments and other significant pay, healthcare and workplace benefits. The contracts must still be ratified.
The union has already received significant interest from non-union automakers in light of the tentative agreements, Fain said. And last month, he rejected comments from Ford Chair Bill Ford arguing the company and union should be working together to battle non-American automakers.
“Workers at Tesla, Toyota, Honda, and others are not the enemy — they’re the UAW members of the future,” Fain said.
Fain has taken particular aim at Toyota in recent days.
The automaker earlier this week confirmed plans to hike wages at its U.S. factories. The new rates would see hourly manufacturing employees at top rates in Kentucky receive roughly 9% pay increases to $34.80 an hour.
Fain on Thursday called that pay raise “the UAW bump,” joking that UAW stands for “U Are Welcome” to join the union’s movement.
UAW President Shawn Fain marches with UAW members through downtown Detroit after a rally in support of United Auto Workers members as they strike the Big Three auto makers on September 15, 2023 in Detroit, Michigan.
Bill Pugliano | Getty Images
“Toyota isn’t giving out raises out of the goodness of their heart,” Fain said. “They could have just as easily raised wages a month ago or a year ago. They did it now because the company knows we’re coming for ’em.”
Toyota, which has 49,000 hourly and salaried U.S. workers, said the “decision to unionize is ultimately made by our team members.”
“By engaging in honest, two-way communication about what’s happening in the company, we aim to foster positive morale which ultimately leads to increased productivity,” the company said Friday in an emailed statement. “Working together has provided a history of stable employment and income for our team members.”
The UAW has so far not been able to establish enough support to force an organizing vote at Tesla’s facilities, including its Fremont, California, plant where the union previously represented workers when it was a GM-Toyota joint venture.
Fain on Thursday told Bloomberg News he believes organizing Tesla and taking on CEO Elon Musk is “doable.”
“We can beat anybody,” Fain told Bloomberg. “It’s gonna come down to the people that work for him deciding if they want their fair share… or if they want him to fly himself to outer space at their expense.”
Still, Musk has historically clashed with union proponents.
As some workers sought to form a union at the company’s Fremont factory in in 2017 and 2018, Tesla was paying a consultancy named MWW PR to monitor employees in a Facebook group and on social media more broadly, as CNBC previously reported.
Elon Musk, CEO of Tesla and owner of X, arrives for the Inaugural AI Insight Forum in Russell Building on Capitol Hill, on Wednesday, September 13, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Tesla also terminated the employment of a union activist named Richard Ortiz in 2017. And in 2018, Musk said in a tweet, “Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing?”
The tweet violated federal labor laws, the National Labor Relations Board later found.
An administrative court ordered Tesla to reinstate Ortiz and to have Musk delete his tweet, which it concluded had threatened workers’ compensation. Tesla appealed the ruling, and Musk’s offending post remains on the social media platform which Musk now owns, has rebranded as X and runs as CTO and executive chairman.
In February, a different group of organizers filed a complaint with the NLRB claiming that Tesla had fired more than 30 employees at its Buffalo facility in retaliation for a union push there by Tesla Workers United. Tesla called the workers’ allegations false, saying 4% of its Autopilot data labeling team in Buffalo had been terminated due to performance issues.
The Equal Employment Opportunity Commission, the federal agency responsible for enforcing civil rights laws against workplace discrimination, sued Tesla in September, alleging widespread racist harassment of Black workers, and retaliation against those who spoke out.
And in late October, just over 100 of Tesla’s service employees in Sweden, members of the industrial labor group IF Metall, walked off the job for a short strike. Hundreds of mechanics and technicians at non-Tesla shops also agreed not to repair any of the EV makers’ cars in solidarity. However, Tesla has so far refused to negotiate with IF Metall.
Tesla did not immediately respond to a request for comment.
Jim Caviezel stars in Angel Studio’s “Sound of Freedom.”
Angel Studios
Amazon Prime Video has secured the rights to one of the hottest box office releases of 2023 — Angel Studios’ “Sound of Freedom.”
The Jim Caviezel-led thriller snared more than $180 million at the domestic box office during its run, outpacing big studio films such as “The Flash,” on a budget of just $14.5 million. It also made nearly $250 million worldwide.
The film will stream on Prime Video in the U.S. starting Dec. 26. Neither company commented on the financial details of the streaming deal.
“Sound of Freedom,” which tells the story of a real-life government agent who quit his job to rescue a young girl from sex traffickers in Colombia, captured audience attention, luring back moviegoers week after week after its $14.2 million opening over the July 4 holiday weekend.
Part of “Sound of Freedom’s” box-office success was due to a campaign from filmmakers to urge moviegoers to buy tickets that can be claimed online for future screenings by those who may not be able to afford them. Angel Studios calls the model “pay it forward” and sold nearly 30 million of these tickets during the film’s release, according to the studio’s website.
And that’s not the only unique thing the studio did for the film. Angel Studios actually used its crowdfunding model to raise $5 million in order to distribute the film after 20th Century Fox, which previously held the rights to it, was bought by the Walt Disney Co. and shelved its release. “Sound of Freedom” wrapped filming in 2018.
The anti-sex trafficking thriller has struck a chord with older audiences, many of whom have not been back to theaters since before the Covid pandemic. It has also become popular in conservative political circles. Former President Donald Trump hosted a private screening of the film at his Bedminster, New Jersey, golf club over the summer.
Angel Studios, which has become known for its faith-based content, has a wide variety of projects on the docket going forward. The studio is set to release a sci-fi thriller called “The Shift” in December and biographical drama “Cabrini” in March.
Amazon is unveiling its first buy now, pay later checkout option for the millions of small business owners who use its online store, CNBC learned exclusively.
The tech giant confirmed Thursday that its partnership with Affirm is expanding to include Amazon Business, the e-commerce platform that caters to companies.
Affirm shares jumped 19% on the news.
The service, with loans ranging from $100 to $20,000, will be available to all eligible customers by Black Friday, or Nov. 24. It is specifically for sole proprietors, or small businesses owned by a single person, the most common form of business ownership in the U.S.
It’s the latest sign of the widening adoption of a fintech feature that exploded in popularity early in the pandemic, along with the valuations of leading players Affirm and Klarna. When boom turned to bust in 2021, and valuations in the industry dropped steeply, skeptics pointed to rising interest rates and borrower defaults as hurdles for growth and profitability.
But for users, the option is touted as being more transparent than credit cards because customers know how much interest they will owe up front. That’s made its appeal durable for households and businesses coming under increasing strain as excess cash from pandemic stimulus programs has dwindled.
“We constantly hear from small businesses that say they need payment solutions to manage their cash flow,” Todd Heimes, director of Amazon Business Worldwide, said in an interview. “We offer the ability to use credit cards and to pay by invoice; this is another option available to small business customers to pay over time.”
Amazon Business was launched in 2015 after the company realized businesses were using its popular retail website for office supplies and bulk purchases. The division reached $35 billion in sales this year and has more than 6 million customers globally.
Amazon customer with access to a buy now, pay later option at checkout from Affirm.
Courtesy: Amazon Inc.
If approved, users can pay for Amazon purchases in equal installments over three to 48 months. They are charged an annualized interest rate between 10% and 36%, based on the perceived risk of the transaction, according to Affirm Chief Revenue Officer Wayne Pommen. There are no late or hidden fees, the companies said.
“The financial industry is not great at providing credit to really small businesses,” Pommen said. “They can’t walk into a bank branch and get a loan until they reach a certain scale. So us being able to provide this for purchases” helps business grow and manage their cash flows, he said.
The move is a boost in a crucial relationship for Affirm, which has had to search for revenue growth after demand for expensive Peloton bikes collapsed. Affirm first began offering installment loans to Amazon’s retail customers in 2021, launched on Amazon in Canada in 2022 and was then added to Amazon Pay earlier this year.
Affirm, which uses its own models to underwrite loans for each transaction it facilitates, decided to target sole proprietors first because they make up most small businesses in the country, with 28 million registered in the U.S., according to Pommen.
“We’ll see how the product performs and if it makes sense to expand it to a wider universe of businesses,” he said. “Our assessment is that we can underwrite this very successfully and have the strong performance that we need.”
Rafael Henrique | SOPA Images | LightRocket | Getty Images
Disney said Wednesday that it had agreed to buy Comcast‘s one-third stake in streaming service Hulu, a long-expected outcome.
Disney said it expects to pay Comcast’s NBCUniversal about $8.61 billion by Dec. 1, reflecting the guaranteed minimum value of $27.5 billion for the streaming service the two sides agreed upon in 2019.
Disney could pay more based on Hulu’s equity value as of Sept. 30. The company said the appraisal process should wrap up some time next year.
Originally, Disney and Comcast had set a deadline to resolve Hulu’s ownership by January. In September, the rival media giants moved up that deadline, effectively acknowleding the outcome announced Wednesday.
Disney already sells Hulu as part of a streaming bundle with its Disney+ and ESPN+ products.
If anything was going to topple Taylor Swift at the box office, it had to be a killer animatronic bear, right?
“Five Nights at Freddy’s,” the new Universal-Blumhouse horror offering set in an abandoned Chuck E. Cheese-type kids’ pizza parlor, scored an estimated $78 million at domestic theaters over the weekend, a huge haul that surprised many in the industry. Swift’s Eras Tour concert film came second for the weekend, with an estimated $14.7 million, putting its domestic total at $149.3 million.
“Five Nights at Freddy’s” had a few things going for it. First, it was Halloween weekend, which is primetime for spooky movies. In fact, the flick made more in its first weekend than fellow Universal-Blumhouse horror collaboration “The Exorcist: Believer” has made in its entire domestic run so far — an estimated $59.4 million, according to Comscore.
“Five Nights at Freddy’s” is also based on a popular horror-survival video game series that gave it a built-in younger audience. That helped it overcome generally awful reviews that left the film with a 26% “rotten” rating on movie-review aggregator Rotten Tomatoes.
Data firm EntTelligence said the movie accounted for 65% of foot traffic to theaters over the weekend. Audiences liked it, as well, giving it a strong A-minus rating, according to CinemaScore.
The movie’s PG-13 rating no doubt helped parents decide to let their kids see it, vindicating director Emma Tammi’s decision to make it a “gateway” horror movie for youngsters. “Ultimately, the film embraced a PG-13 rating with the type of well-executed scares that left just enough to the imagination and were still befitting of the spirit of the games,” said Shawn Robbins, chief analyst at BoxOffice.com.
Freddy Fazbear and director Emma Tammi on the set of “Five Nights at Freddy’s.”
Patti Perret | Universal Pictures
“The success of ‘Five Nights’ was the culmination of many factors not the least of which was making the film accessible to younger fans via the less restrictive PG-13 rating,” said Paul Dergarabedian, senior media analyst at Comscore.
The “Five Nights” fanbase propelled it to the third-biggest domestic opening weekend for a horror movie, behind both chapters of Warner Bros.’ recent “It” movies. It also cleared the bar set by 2018’s “Halloween” as Blumhouse’s biggest opening, according to Universal.
Fans also gave it the second-biggest weekend ever for a video game adaptation, behind Universal and Nintendo’s “The Super Mario Bros. Movie,” which grossed more than $146 million in its first frame earlier this year.
“Given the high level of interest by teen audiences, these key moviegoers were clearly inspired to migrate from their gaming small screens to the big screen to enjoy a communal, in-theater experience that drove weekend grosses to much higher-than-expected levels for ‘Freddy’s,’” Dergarabedian said.
The movie scored success at theaters even as it premiered on Peacock, NBCUniversal’s streaming service, at the same time. Universal said the movie is on pace to have the biggest-ever opening on the streamer.
Disclosure: NBCUniversal is the parent company of Universal Pictures, Peacock and CNBC.
Lana Payne celebrates on stage as Unifor, Canada’s largest private sector union, announce Lana Payne as their new president to replace outgoing leader Jerry Dias in Toronto, Ontario, Canada August 10, 2022.
Cole Burston | Reuters
DETROIT – After reaching a tentative agreement Saturday with the United Auto Workers union, Chrysler-parent Stellantis is now facing a national labor strike in Canada.
Canadian union Unifor called a national strike of more than 8,200 autoworkers early Monday morning after the sides failed to reach a new agreement by 11:59 p.m. Sunday.
The Canadian work stoppage comes two days after the Stellantis reached a tentative deal for roughly 43,000 U.S. autoworkers with the UAW after roughly six weeks of targeted strikes that began Sept. 16.
The new strikes in the Canadian province of Ontario affect two large assembly plants that produce the Chrysler 300 sedan and Pacifica minivan and Dodge Challenger and Charger muscle cars.
The latter vehicles, produced at Stellantis’ Brampton Assembly, are specifically notable, as the company is producing the final traditional V-8 models of the Dodge muscle cars ahead of production stopping at year’s end.
The Canadian work stoppage comes nearly three weeks after Unifor launched a roughly 12-hour national strike against General Motors after the sides failed to reach a tentative agreement by a union-set deadline.
Unifor, which represents 18,000 Canadian workers at the Detroit automakers, took a more traditional approach to its negotiations than its U.S. counterpart. The Canadian union is negotiating with each automaker separately and using a deal first reached last month with Ford as a “pattern” for GM and Stellantis.
That traditional patterned-bargaining approach runs counter to the UAW’s new strategy of bargaining with all three automakers at once.
The UAW has been gradually increasing the strikes since the work stoppages began after the sides failed to reach tentative agreements by Sept 14. The targeted, or “stand-up,” strikes are taking place instead of national walkouts.
However, once the UAW reached a tentative agreement, which must still be ratified by members, Wednesday with Ford Motor, it has used that deal as a template for proposals with Stellantis and GM.
An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.
Amazon.com Inc | Reuters
The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.
For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.
“People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,’” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.”
How is this possible with interest rates on everything from credit cards to cars and homes soaring?
It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.
The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.
How homebuilders are solving for mortgages rates
No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.
Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.
“What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”
The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.
Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge.
At auto companies, price cuts are in, and more are coming
Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford.
“I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.”
Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union.
GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.
“While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said.
Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .
“When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”
Most banks say the consumer still has cash, but not Discover
To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending.
In most cases, financial services firms say consumers are doing well.
At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.
“Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”
Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.
“I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.
At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.
“Guess they’re not bothered by the resumption of student loan payments,” Stovall said.
The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.
Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”
At airlines, still no sign of a travel recession
It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.
“With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.
One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.
As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.
The goods recession is for real
Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.
This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.
“All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”
Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%.
Amazon’s $1.3 billion holiday hiring spree
Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers.
That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.
“Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.
All of this sets the stage for a high-stakes holiday season.
PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.
Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.
“Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.”
Coca-Cola Co. and Pepsi Co. soda machines stand in a shopping center parking lot in Jasper, Indiana.
Luke Sharrett | Bloomberg | Getty Images
Coca-Cola and PepsiCo‘s rivalry spans decades, but Coke usually comes out on top.
This quarter was no different.
The beverage leaders’ stocks have struggled this year, hurt by higher interest rates and investor concerns about the possible negative impact of weight loss drugs like Wegovy. (Coke’s $242 billion market cap beats Pepsi’s by roughly $20 billion.)
Even so, both companies topped Wall Street’s estimates for their third-quarter results and raised their full-year forecasts. Strong demand for Coke products drove the Atlanta-based company to raise its forecast, while Pepsi’s cost-management improvements have bolstered its full-year outlook for earnings.
But only Coke managed to report volume growth. The metric, which strips out the effects of pricing and currency, has become more critical to investors in recent quarters as food and beverage companies pause the price hikes that drove sales growth last year. Those same increases have also alienated some shoppers who are trying to save money on their grocery bills.
Coke’s overall volume rose 2% in the third quarter, while Pepsi reported flat beverage volume and a 1.5% decline in its food volume. In North America, the differences between the two businesses were even more stark. Coke reported flat volume, while Pepsi’s North American beverage unit saw volume fall 6%.
Coke also raised both its top- and bottom-line outlook for the full year, while rival Pepsi only upped its forecast for its full-year earnings, signaling the better outlook might not be due to higher demand for its products.
Here’s a rundown of the five key factors that helped Coke edge out Pepsi:
Coke started raising prices across its portfolio in the spring of 2021. PepsiCo followed its lead, starting its own price hikes that summer.
More than two years later, both companies reported that higher prices have boosted sales. Pepsi paused price hikes earlier this year but plans a “modest” increase next year. Coke took longer to pause its higher prices, but CEO James Quincey said in July the company is done raising them for now in the United States and Europe.
Because of the timing of their price increases, Coke’s North American drink prices were up only 5% this quarter, compared with Pepsi’s increase of 12%.
“The higher the price increase, you would expect a bigger drag on volume,” Edward Jones analyst Brittany Quatrochi said.
But Coke is also winning over shoppers with its drinks, while Pepsi is focused on revitalizing some of its non-soda brands like Gatorade.
“Coke has been taking share from Pepsi for many, many quarters,” RBC Capital Markets analyst Nik Modi said.
When its drinks business falters, Pepsi is usually saved by its Frito-Lay unit, which includes Cheetos, Doritos and other snacks. But snacking has slowed as shoppers trade down to cheaper options in the face of Frito-Lay’s double-digit price increases.
“The reason why snacks have done so well relative to other categories is because it was really a trade down option on a meal,” Modi said.
As the price for a bag of chips has climbed, some shoppers have reached for private-label brands — or just leftovers in the fridge.
Pepsi is also getting rid of its less-profitable promotions. The strategy helps its earnings, but resulted in a 2.5% hit to its North American drink volume, executives said on the company’s conference call.
Roughly half of Coke’s sales come from away-from-home occasions, like movie theater visits or dining out, executives said during the early days of the pandemic. In the third quarter, those away-from-home purchases grew faster than the company’s at-home business, Quincey said on Tuesday’s conference call.
“There’s still a rebound and strong growth in away-from-home channels, not just some of the restaurants, but the amusements, travel, leisure, hospitality, those things,” Quincey told analysts.
Coke could also be benefiting from consumers trading down outside of the grocery store.
“If you were going to a mid-tier restaurant, maybe now you’re going to quick-serve fast food, which is where Coke has a lot of its business,” Modi said.
McDonald’s, for example, has said in recent quarters that diners trading down to its restaurants has boosted its U.S. sales. McDonald’s has served Coke products since Ray Kroc opened his first franchised location, and is the beverage company’s largest restaurant customer.
Pepsi, on the other hand, lags behind Coke with its away-from-home business, although it does have some large restaurant companies, like Taco Bell owner Yum Brands, as customers. Pepsi has not disclosed the size of this business.
Coke also has a larger international presence than Pepsi. Roughly 40% of Pepsi’s sales come from outside of the U.S., while more than 60% of Coke’s revenue is derived from international markets, according to FactSet.
“There’s stronger growth in those international markets,” Edward Jones’ Quatrochi said.
International success can offset more sluggish domestic demand, like the 6% volume decline for Pepsi’s North American beverage.But that comes at a price.
Some international markets, like Argentina and Turkey, have been dealing with hyperinflation, leading Coke to raise prices even after pausing hikes in the U.S. and Europe. And the strong dollar means Coke anticipates that currency exchange rates will dent its sales and earnings more than previously expected this year.
The biggest difference between Coke and Pepsi isn’t found in their portfolios. It’s how they bottle their soda.
Coke works with independent bottlers who manufacture, package and ship their drinks to customers. Those bottlers know their markets well and can make their own informed decisions for their businesses.
In contrast, Pepsi owns more than three-quarters of its North American bottling operations. The strategy is meant to help the company exert more control and cut costs, but it also requires devoting resources and capital to bottling soda, a category that has faced waning demand for nearly two decades.
“Right now, I think the whole bottling owned versus not owned is showing up in the results,” Modi said.
American banks have been shuttering branches located within supermarket chains at a rate seven times faster than other locations amid the industry’s profit squeeze and customers’ migration to digital channels.
Banks closed 10.7% of their in-store branches in the year ended June 30, according to Federal Deposit Insurance Corp. data. The closure rate for other branches was 1.4% in that period.
Most branches within grocery stores are operated by regional banks, which have been under pressure since the March collapse of Silicon Valley Bank. PNC, Citizens Financial and U.S. Bank shut the most in-store locations during the 12-month period at chains including Safeway and Stop & Shop. Among retailers, Walmart houses the most bank branches with 1,179, according to an S&P Global report released this week.
While the financial industry has been closing branches for years, the pace accelerated sharply in 2021 after the pandemic turbocharged the adoption of mobile and online banking. That year, banks closed nearly 18% of their in-store branches and 3.1% of other locations, S&P Global said.
“In-store branches have fallen out of favor at many banks,” said Nathan Stovall, head of financial institutions research at S&P Global Market Intelligence. “We’ve seen banks look to shrink their branch networks, with a focus on cutting less-profitable branches that generate less customer traffic and fewer loans and high net worth accounts.”
Banks began building branches inside supermarkets in the 1990s because the scaled-down locations were far cheaper to set up than regular locations. But the industry now views branches as a place to entice customers with wealth management accounts, credit cards and loans rather than just a place to withdraw money, and that favors full-sized branches.
The pace of closures has slowed since the 2021 peak, but are still at an elevated level compared to before the pandemic. For instance, in 2019, banks shut 4.2% of in-store locations and 1.7% of other locations.
The moves come as the industry is adjusting to higher funding costs as customers have moved balances into higher-yielding options like money market funds. U.S. banks registered a 15% decline in deposits from in-store branches, while deposits at other branches fell 4.7% in the year ended June 30, according to the FDIC.
Food is served at a Chipotle restaurant on in Chicago, Illinois.
Scott Olson | Getty Images
Chipotle Mexican Grill on Thursday reported quarterly earnings that beat expectations, helped by higher menu prices for its burritos and bowls.
Shares of the company rose more than 5% in extended trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:
Earnings per share: $11.36 adjusted vs. $10.55 expected
Revenue: $2.47 billion, in line with expectations
The burrito chain reported third-quarter net income of $313.2 million, or $11.32 per share, up from $257.1 million, or $9.20 per share, a year earlier. Excluding corporate restructuring costs, Chipotle earned $11.36 per share.
Beef and queso costs rose this quarter, largely offsetting last year’s menu price hikes. Earlier this month, Chipotle raised menu prices for the first time in more than a year, citing inflation.
The company had paused its aggressive price hikes earlier this year as consumers pulled back their restaurant spending. Still, CEO Brian Niccol has maintained that Chipotle has pricing power and more room to run.
Net sales climbed 11.3% to $2.47 billion. Same-store sales rose 5%, beating StreetAccount estimates of 4.6%. The company credited higher transactions and menu prices for the quarter’s same-store sales growth.
Chipotle opened 62 new restaurants during the quarter. All but eight of those locations featured a “Chipotlane,” a drive-thru lane reserved for picking up digital orders.
Looking to 2024, the company expects that it will open 285 to 315 new restaurants.
Chipotle also reiterated its forecast for 2023 same-store sales growth in the mid-to-high single digit range.
Shares of Hasbro and Mattel sank on Thursday, as both toymakers suggested sales will slow in the fourth quarter.
Hasbro’s stock dropped more than 10% on Thursday, and Mattel slid more than 7%.
The companies face challenges entering the critical fourth quarter, they said as they separately reported third-quarter earnings. Consumers are cutting back on spending while inflation pressures their budgets as the holiday season approaches. Toys and games, products both Hasbro and Mattel are known for, could be on the chopping block this season as consumers watch their spending.
Hasbro, which houses iconic brands like Play-Doh and Monopoly, cut its guidance for the full year. It projected a 13% to 15% revenue decline for a year, a worse decrease than its previous forecast of a 3% to 6% drop in revenue. A “softer toy outlook” drove the guidance, the company said in its earnings release Thursday.
“We have a cautious outlook on the holiday,” CEO Chris Cocks said during Hasbro’s earnings call Thursday. “We do not have a real solid view on where the market will go.”
Mattel’s implied fourth quarter guidance on toy sales offered Wednesday also spooked Wall Street, despite its strong third-quarter results.
The company’s third-quarter earnings beat “was largely offset by a weaker-than-expected implied guide” for the fourth quarter, which suggested lackluster performance for Mattel’s business outside of Barbie products, analysts at Citi Research said Thursday.
While Mattel beat Wall Street expectations on the top and bottom lines, Hasbro’s third-quarter report fell short of analyst estimates compiled by LSEG, formerly known as Refinitiv. The company’s adjusted earnings per share of $1.64 missed expectations of $1.70 a share, and revenue of $1.5 billion missed an estimate of $1.64 billion.
Hasbro’s revenue fell 10% for the quarter compared to the year-ago period, largely driven by decreases in its consumer and entertainment segments. Conversely, Mattel on Wednesday posted a revenue increase of 9%, largely driven by a boost in Barbie sales in conjunction with the blockbuster summer film.
Hasbro’s consumer segment sales, which includes popular toy brands like Nerf, My Little Pony and Transformers, fell 18%. The company said the decline was due to “exited licenses and softer category trends.”
Hasbro’s entertainment segment revenue also lagged. It fell a whopping 42% year over year, largely due to the writers’ and actors’ strikes, the company said. Hasbro said earlier this year that it will sell its film and TV business eOne, home of Peppa Pig, to Lionsgate for $500 million.
Representative Mike Johnson, a Republican from Louisiana, left, speaks with Representative Kat Cammack, a Republican from Florida, outside of a House Republican caucus meeting on Capitol Hill in Washington, DC, US, on Tuesday, Oct. 24, 2023.
Al Drago | Bloomberg | Getty Images
Republican Rep. Mike Johnson of Louisiana was elected speaker of the House of Representatives on Wednesday, ending a three-week leadership crisis that has paralyzed Congress.
Vice chairman of the House Republican conference, Johnson had maintained a low public profile until he was thrust into the spotlight this week after securing the party’s nomination for speaker.
Johnson was elected unanimously by the 220 Republicans who voted, despite being the fourth nominee tapped by the GOP conference in two weeks, as the deeply divided party repeatedly failed to put forward a candidate who had enough support.
Every Democrat who voted Wednesday cast their ballot for Minority Leader Rep. Hakeem Jeffries, D-N.Y.
Johnson managed to rally the GOP conference behind his bid after recalcitrant Republicans rejected the three previous nominees — House Majority Leader Steve Scalise of Louisiana, Rep. Jim Jordan of Ohio and Majority Whip Tom Emmer of Minnesota.
Johnson’s bid received a boost Wednesday from former President Donald Trump, who encouraged Republicans to vote for the Louisianan.
He also consolidated the backing of several moderate New York Republicans who had been reluctant to support some of the more hardline conservatives who sought the top job.
Johnson, who is serving his fourth term in Congress, will wield the gavel as America faces a looming government shutdown, Israel wages war on Hamas, and Ukraine struggles to beat back Russia’s invasion.
The House needs to pass spending legislation by Nov. 17 to keep the government running, and President Joe Biden has called on Congress to approve emergency security assistance for Israel and Ukraine.
Johnson voted against legislation in September that has kept the government running through November, and he has opposed assistance for Kyiv in the past. The Louisiana Republican said earlier this month that the House needs to take all necessary action to help Israel destroy Hamas.
Johnson is a social conservative who served on Trump’s legal team during the former president’s first impeachment. He previously did legal work for the Alliance Defense Freedom, an ultraconservative advocacy group that litigates to restrict abortion access and prohibit same-sex marriage.
Johnson also participated in Republican efforts to overturn Biden’s 2020 election victory.
He filed a legal brief in support of a lawsuit that sought to block the certification of Biden’s victories in Georgia, Pennsylvania, Michigan and Wisconsin. Johnson then supported objections in Congress to the certification Arizona’s and Pennsylvania’s 2020 presidential election results.
This is a developing story. Please check back for updates.
Striking United Auto Workers (UAW) members from the General Motors Lansing Delta Plant picket in Delta Township, Michigan September 29, 2023.
Rebecca Cook | Reuters
DETROIT – The United Auto Workers union believes there is “more to be won” in ongoing contract negotiations with the Detroit automakers following five weeks of labor strikes against the companies, UAW President Shawn Fain said Friday.
His comments come despite record contract offers from General Motors, Ford Motor and Stellantis that now include 23% hourly pay increases and other significantly enhanced benefits during the terms of the four and a half-year deal.
“There is more to be won,” Fain said during an online broadcast. “These are already record contracts, but they come at the end of decades of record decline. So it’s not enough to be the best ever, when auto workers have gone backwards over the last two decades. That’s a very low bar.”
Despite Fain’s comments, the union did not announce additional strikes Friday against any of the companies. He said the “bottom line is we’ve got cards left to play, and they’ve got money left to spend.”
Fain did not address a Friday report by Bloomberg that the union has asked for a 25% increase in general wages.
The union has not announced any additional strikes since initiating an unexpected walkout on Oct. 11 at Ford’s Kentucky Truck Plant that produces highly profitable pickup trucks and SUVs. That’s despite Ford having the best proposal regarding economics, as outlined Friday by Fain.
Fain spent quite a notable amount of time during the online broadcast discussing how the union plans to use these talks to assist in organizing non-union plans. He also heavily criticized the Monday comments of Ford Chair Bill Ford to bring an end to the negotiations.
“Bill Ford said it shouldn’t be Ford versus the UAW. He said it should be the UAW and Ford against foreign automakers,” Fain said. “I want to be crystal clear on one thing: The days of the UAW and Ford being a team to fight other companies are over … Non-union autoworkers are not the enemy. Those are our future union family.”
Ford said it remains “eager to conclude these negotiations with a contract” that benefits its workers, citing it’s “good that Mr. Fain acknowledged Ford’s contract offer ‘already’ is a record and remains the best one on the table.”
Stellantis said the sides “continue to be productive, building on the momentum from the past several weeks,” but declined to discuss specific details. GM declined to comment regarding Fain’s comments, citing details it released of its most recent offer earlier Friday.
The UAW hasn’t expanded strikes at GM since Sept. 29 or at Stellantis since Sept. 22, despite offers made this week not meeting details of Ford’s proposal from last week and Fain last week saying the union was initiating a “new phase” of strikes and contract negotiations.
“Right before a deal is when there’s the most aggressive push for that last mile. They just want to wait us out,” Fain said. “They want division. They want fear. They want uncertainty. And what we have is our solidarity.”
The strike at Ford’s Kentucky plant — responsible for $25 billion in revenue annually — marked a major escalation in the UAW’s targeted, or “stand-up,” strikes. It also represents a shift in strategy, as Fain had previously publicly announced the targets before the work stoppages occurred.
The UAW has been gradually increasing the strikes since the work stoppages began after the sides failed to reach tentative agreements by Sept 14.
About 34,000 U.S. automakers with the companies, or roughly 23% of UAW members covered by the expired contracts with the Detroit automakers, were on strike.
Here are details of current proposals by the companies to UAW:
Wages: All three automakers have offered a 23% pay increase over four and a half years.
Wage tiers: All three automakers have agreed to eliminate wage tiers at parts facilities where workers have historically been paid less than production-line workers.
Wage progression: Ford has offered a three-year progression to the top wage rate, a system that was in place from the mid-1990s until the aftermath of the 2008 economic crisis. GM has also offered a three-year progression, but only for current workers. GM wants a more gradual four-year progression for future hires. Stellantis has offered only a four-year progression.
Cost of living adjustments (COLA): Ford has offered to restore its COLA formula to the level last used in 2009, meeting the UAW’s demand. Fain said that GM is “approaching restoration but not fully there,” while Stellantis wants to delay cost-of-living adjustments by a year.
Job security: Ford and Stellantis have agreed to give the union the right to strike over plant closures, a key UAW demand. GM has so far rejected that demand.
Temporary workers: Ford has offered to convert current temp workers with 90 days of service to full-time employees, with a raise to $21 per hour for remaining and future temps. Whether those future temps will be converted to full-time employees automatically is still being negotiated, Fain said. GM has proposed to convert current and future temps with one year of service to full time employees, and has matched Ford with a $21 per hour wage for remaining and future temps. Stellantis agreed to convert “thousands” of current temps to full-time status, with a wage increase to $20 per hour for remaining and future temps. As with Ford, the automatic conversion of future temps is “still being negotiated,” Fain said.
Retirement plans: All three automakers have offered a $3 increase to pension benefits. Ford and Stellantis have offered to increase their 401(k) contributions to 9.5% plus $1 per hour. GM offered an increase to 8% plus $1.25 per hour.
Payments to retired workers: Ford offered annual lump sum payments of $250 to retired workers, with surviving spouses eligible to continue to receive the payments. GM offered a one-time lump sump payment of $1,000, with surviving spouses not eligible. Stellantis rejected all increases to retiree pay. Fain said all three offers were “deeply inadequate.”
Profit sharing: Ford offered to improve its existing profit-sharing formula by including profits from Ford Credit, its financing subsidiary, and to make temp workers eligible to receive profit-sharing payments. Stellantis and GM both want to maintain their current profit-sharing formulas, but GM has offered to make temp workers with 1,000 hours of service eligible to receive payments. Stellantis has not offered to make its temporary workers eligible to receive profit-sharing payments.
Work-life balance: All three automakers have offered to make Juneteenth an official paid holiday and have offered two weeks of paid parental leave.
The streaming giant said after the market closed Wednesday that it had added 8.76 million global subscribers during the third quarter, higher than 5.49 million Wall Street had expected, according to estimates from Street Account. It’s the biggest quarterly net add total for the company since it added 10.1 million subscribers in the second quarter of 2020 – when Covid restrictions kept people home.
Here are the results:
Earnings: $3.73 vs $3.49 per share expected, according to LSEG, formerly known as Refinitiv
Revenue: $8.54 billion vs $8.54 billion expected, according to LSEG
Total memberships expected: 247.15 million vs. 243.88 million expected, according to Street Account
Netflix said that its ad plan membership grew nearly 70% quarter over quarter, although it did not disclose what percentage of its base is subscribed to this tier.
Revenue in the third quarter rose to $8.54 billion from $7.93 billion a year earlier. Net income came in at $1.68 billion, or $3.73 per share, compared with $1.4 billion, or $3.10 per share.
The results were the latest confirmation that Netflix rules the streaming world, as its would-be rivals scratch and claw to become profitable.
The company’s dominance shows in its pricing power. Netflix said it is keeping its ad tier pricing at at $6.99 a month in the U.S. while its basic and premium services will see a price hike starting Wednesday. Netflix’s basic plan will now cost $11.99 (up from $9.99) and premium will be $22.99 a month (up from $19.99). Netflix’s standard plan will remain at $15.49 a month.
The price increases come as the company seeks to improve its profitability and grapple with higher production costs.
As part of its new deal with Hollywood’s writers, Netflix, alongside other members of the Alliance of Motion Picture and Television Producers, have agreed to higher wages and monetary benefits based on streaming popularity. The AMPTP has yet to finish negotiations with striking actors, but expectations are that costs for creating content will rise when a new contract is finalized.
“We spent hours and hours with SAG-AFTRA over the last few weeks and we were actually very optimistic that we were making progress,” said co-CEO Ted Sarandos during the company’s taped earnings comments Wednesday. “But then at the very end of our last session together the guild presented this new demand on top of everything of a per subscriber levy, unrelated to viewing or success, and this really broke our momentum unfortunately.”
Sarandos noted that Netflix and other members of the AMPTP remain committed to reaching an agreement with actors. It is unclear when negotiations will continue. Talks have been stalled for about a week.
Representatives from SAG-AFTRA did not immediately respond to CNBC’s request for comment.
The company forecast that revenue will jump 11% in the fourth quarter, reaching $8.69 billion, below Wall Street expectations of $8.77 billion. Netflix said it expects net subscriber adds will be similar to the third quarter.
Netflix stock performance this year
It warned that the strength of the U.S. dollar in recent months will result in a roughly $200 million drag on fourth-quarter revenue.
As for Netflix’s profitability, the streamer now expects its full-year 2023 operating margin will be around 20%, the high end of its previous forecast range of 18% to 20%. It also said full-year 2024 should see operating margins of 22% to 23%.
The company also addressed shareholder concern about its executive compensation model, telling investors that it would make “substantial changes” in 2024 to a more conventional model. Compensation will still be based on performance.
Sarandos and former co-CEO Reed Hastings each took home more than $50 million in 2022. Hastings took most of his earnings in stock options, while Sarandos elected to have a $20 million base salary and the rest in stock.
After Greg Peters was named co-CEO and Hastings stepped down, the company set a salary cap of $3 million for executives. However, they are still entitled to an annual target bonus and additional stock rewards.
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Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is a member of the AMPTP.
Google headquarters in Mountain View, California, on Jan. 30, 2023.
Marlena Sloss | Bloomberg | Getty Images
Google cut dozens of jobs in its news division this week, CNBC has learned, downsizing at a particularly sensitive time for online platforms and publishers.
An estimated 40 to 45 workers in Google News have lost their jobs, according to an Alphabet Workers Union spokesperson, who didn’t know the exact number.
A Google spokesperson confirmed the cuts but didn’t provide a number, and said there are still hundreds of people working on the news product.
“We’re deeply committed to a vibrant information ecosystem, and news is a part of that long-term investment,” the spokesperson said. “We’ve made some internal changes to streamline our organization. A small number of employees were impacted. We’re supporting everyone with a transition period, outplacement services and severance as they look for new opportunities at Google and beyond.”
Google News presents links to articles from thousands of publishers and magazines. It’s a popular tab for people who use Google search, allowing them to find top-ranked stories on a particular topic.
The layoffs come amid a war between Israel and Hamas that has claimed thousands of lives in both Israel and Gaza since Oct. 7, and 20 months after Russia invaded Ukraine. Both wars have spawned a surge in the spread of misinformation across the web, heightening the importance of Google and other sites that users count on to find up-to-date news.
Sen. Michael Bennet, D-Colo., on Tuesday asked for information on how Google; X, formerly known as Twitter; Meta; and TikTok were trying to stop the spread of false and misleading content about the Israel-Hamas conflict on their platforms.
European Union industry chief Thierry Breton demanded that companies, including Google, take stricter steps to battle disinformation as the conflict escalates. Breton specifically addressed letters to Google CEO Sundar Pichai and YouTube CEO Neal Mohan, reminding them of the content moderation requirements under the EU’s Digital Services Act.
Google’s spokesperson said, “These internal changes have no impact on our misinformation and information quality work in News.”
Some tech companies said they’ve staffed up on content moderators as they scramble to battle misinformation.
Meanwhile, Canada and other countries are eyeing laws that would force tech platforms to compensate publishers for their work.
The cuts in Google News follow widespread layoffs across many parts of the company this year. In January, Google announced it was cutting 12,000 jobs, affecting roughly 6% of the full-time workforce. Last month, the company eliminated hundreds of positions from its recruiting organization.
A staff engineer at Google News wrote a post on LinkedIn on Tuesday regarding the layoffs.
“These are some of the best and brightest people I’ve ever worked with,” the person wrote. “We’re definitely worse off without them.”
UAW Local 5960 member Kimberly Fuhr inspects a Chevrolet Bolt EV during vehicle production on May 6, 2021, at the General Motors Orion Assembly Plant in Orion Township, Michigan.
Steve Fecht for Chevrolet
DETROIT – General Motors said Tuesday it is delaying production of all-electric trucks at a Michigan plant by at least a year to “better manage capital investments” and implement improvements in an effort to make the new EVs more profitable.
GM now plans to begin construction of its next-generation EVs at Orion Assembly in suburban Detroit by late 2025, instead of next year. The factory currently produces Chevrolet Bolt EV models, which GM will cease producing at the end of this year.
The delay is the latest sign of potential trouble for the ambitious, multibillion-dollar plans of traditional automakers to move to electric vehicles. Adoption of EVs, which remain costly to produce and purchase, has been slower than many expected.
“General Motors today confirmed it will retime the conversion of its Orion Assembly plant to EV truck production to late 2025, to better manage capital investment while aligning with evolving EV demand. In addition, we have identified engineering improvements that we will implement to increase the profitability of our products,” the company said in a statement.
The change in plans is not connected to the company’s ongoing contract negotiations with the United Auto Workers union, according to a GM spokesman. However, the contentious talks do involve EVs, and current contract proposals by the company are expected to be more expensive than those in year’s past. The UAW, which represents workers at Orion Assembly, did not immediately respond for comment.
The production delay calls into question GM’s previously announced EV goals, including cumulative production of 400,000 EVs in North American from 2022 through mid-2024, which had already been pushed back. GM also has a goal to exclusively offer consumer EVs by 2035.
A GM spokesman late-Tuesday said there’s currently no change in plans to the company’s EV production targets.
New electric versions of the Chevrolet Silverado and GMC Sierra that were supposed to be produced at Orion Assembly will be assembled at GM’s Factory Zero in Detroit, the company said. Limited production of the Silverado EV is underway, while Sierra is scheduled to begin next year.
Alongside the Silverado EV, Factory Zero is currently building the GMC Hummer EV pickup and SUV and Cruise Origin shuttle.
In January 2022, GM announced it would invest $4 billion to convert Orion Assembly to produce electric trucks. The plant was expected to be its second U.S. assembly plant to exclusively produce EVs. GM said construction includes significant facility and capacity expansion at the site, including new body and paint shops and new general assembly and battery pack assembly areas.
Roughly 1,000 hourly workers at Orion Assembly will have the option to transfer to other Michigan facilities until the retooling at Orion Assembly is completed.
