Fitch cuts Italy’s gov’t debt grade, auto plants reopening
The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Wednesday related to the global economy, the work place and the spread of the virus.
Central Governments & Banks: Countries are slowly trying to reopen their economies in phases, as infections wane in some locations and calls for getting back to business grow. Meanwhile, signs of the economic damage from the virus are widespread.
– The U.S. economy shrank at a 4.8% annual rate last quarter. With much of the economy paralyzed, the Congressional Budget Office has estimated that economic activity will plunge this quarter at a 40% annual rate. The sudden downturn will likely ending the longest expansion on record.
– Ratings agency Fitch cut Italy’s government debt grade, the first downgrade to a major economy to reflect the surge in public debt that is expected to hit countries dealing with the vast costs of the coronavirus lockdown. Fitch expects the outbreak to shrink the Italian economy by 8% this year and that there’s a risk of a deeper downturn.
– The United Nations’ main labor body is again raising its prediction of job losses due to the pandemic. It is estimating the equivalent of 305 million full-time jobs could be lost in the second quarter, up from a prior estimate for the equivalent of 195 million full-time job losses. The estimate is based on an average 48-hour workweek.
– Indian businesses are urging Prime Minister Narendra Modi’s government to loosen a five-week-old lockdown. The economy could lose 30-40 million jobs by year-end, says Kiran Mazumdar Shaw, executive chairperson of biopharmaceutical company Biocon.
– Officials in Thailand’s capital city are preparing to ease restrictions that were imposed to fight the spread of COVID-19. Bangkok’s plans call for the reopening of restaurants, markets, exercise venues, parks, hairdressers and barbers, clinics and nursing homes, animal hospitals and pet salons, golf courses and driving ranges.
Airlines: The aviation industry continues to struggle to stay afloat, with travel demand all but gone and thousands of jets grounded worldwide.
– Boeing said it is cutting 10% of its work force and reducing the production rate of commercial jets. The aircraft manufacturer announced the moves as it reported that it swung to a loss during the first quarter. Rival Airbus reported a big loss in the first quarter, put thousands of workers on furlough and sought billions in loans to survive.
– Finnair is launching a 500 million euros ($542 million) rights offering to strengthen its balance sheet after reporting a steeper first quarter loss. The airline, majority owned by the Finnish government, said its cash position remained strong, but it expects to lose about 2 million euros a day throughout the second quarter.
– Scandinavian Airlines is looking to reduce its workforce by up to 5,000 full-time positions – or half its workforce – mainly in its home region of Scandinavia.
Lodging: Weak travel demand is also clobbering the lodging industry, with many hotels working on safely reopening but also in desperate need of cash.
– Hyatt is working with the Global Biorisk Advisory Council – a team of disease response experts – on a cleaning and disinfection program that will be introduced at its 900 hotels worldwide next month. The company is appointing hygiene managers at all of its properties. Hilton, Marriott and Airbnb also announced enhanced cleaning policies this week in an effort to reassure travelers.
Automobiles: Automobile makers are beginning to see a return of employees to some of their factories but cash concerns remain.
Toyota said Wednesday it will postpone the restart of its North American factories by a week until May 11 “based on an extensive review with our supplier and logistics network.”
Volkswagen’s Chattanooga, Tennessee, assembly factory was to resume production on May 3, but the company announced Wednesday that restarting would be delayed indefinitely. VW says it will weigh the readiness of parts-making companies and market demand before it decides on a date.
Toyota has large assembly operations in Kentucky, Texas, Indiana and Mississippi as well as engine and transmission factories in other states.
– With demand for rides plummeting, Lyft is laying off 982 people, or 17% of its workforce, the company said in a regulatory filing Wednesday. The San Francisco-based ride-hailing company expects to incur $28 million to $36 million in charges related to employee severance and benefit costs. Lyft will also furlough 288 employees and reduced salaries by 10% to 30%
– French auto workers are returning to factory floors at Renault and Toyota.
Renault restarted assembly lines Tuesday for its Zoe electric cars at a plant in Flins, though only a quarter of staff is allowed in so far. The company has resumed some activity at plants in China, Spain, Portugal, Russia and Romania, but work remains halted in India, Latin America and most facilities in France.
Toyota workers came back this week to a plant in Onnaing that used to churn out more than 1,000 Yaris cars a day.
Quarantine 15: Companies are continuing to find ways to keep consumers buying amid lockdowns, which is leading to a surge in online sales and some rethinking their business plans.
– The virus outbreak is accelerating WW International’s plans to move more of its business online. The New York-based weight management company, formerly known as Weight Watchers, will consolidate the number of its branded studios, which now total 800 in the U.S. Overall, it has in-person workshops in 3,300 U.S. locations, which serve about a quarter of its members. Those locations were closed last month as WW moved the sessions online.
Cable Discounts: New York’s attorney general is asking cable companies to give customers discounts or some other financial relief because their sports channels are devoid of live sports. Costs for sports networks like ESPN, FS1 and regional channels like the Yankees’ YES Network make up about $20 of customers’ monthly cable bills. Sports leagues have postponed or canceled games and events because of the coronavirus pandemic, and it’s not clear when they can return.
Markets: This is the busiest week of the earnings season, with companies facing a lot of uncertainty as they deal with the pandemic.
– Stocks charged higher around the world Wednesday following an encouraging report on a possible treatment for COVID-19.