General Motors announces further crisis measures.
General Motors said on Thursday it would suspend production at its North American factories indefinitely, lay off 6,500 salaried employees and cut executive pay, signaling that the automaker believes that coronavirus will take a serious toll on its business.
“We are actively monitoring the situation and the possible impact of the crisis on consumer demand,” a G.M. spokesman, David Barnas, said. “When we can safely resume production, we will.”
G.M. and other automakers shut down their North American plants in the last few days in an effort to prevent the spread of the virus. Most had hoped to restart production next week, but have now scaled back those plans.
Ford Motor aims to restart production at several plants across the United States on April 14, and a plant in Mexico on April 6. Fiat Chrysler said its plants would stay closed until April 14, “dependent upon the various state stay-in-place orders and the readiness of each facility to return to production.” Toyota Motor said its North American plants would remain closed until at least April 17.
The United Automobile Workers union has been pushing G.M., Ford and Fiat Chrysler to keep their plants closed.
“The only guideline in a boardroom should be management asking themselves, ‘Would I send my family — my son or my daughter — into the plant and be 100 percent certain they are safe,’” Rory Gamble, the union’s president, said in a statement.
To cut costs, G.M. said it was suspending development work on some new models. Senior executives will take a pay cut of 5 percent or 10 percent, and defer 20 percent of their salaries to be paid at a later date. The 6,500 salaried put on furlough will receive 75 percent of their normal pay.
Ford has taken similar steps, deferring salaries of its top 300 executives.
Wall Street shakes off record unemployment claims.
Boeing is up nearly 90 percent this week. American Airlines has jumped almost 50 percent. Carnival Corporation has soared nearly that much as well.
Wall Street has been in rally mode, as investors bid up shares of companies that were set to receive support from Washington’s $2 trillion coronavirus aid bill.
With the package advancing through the Senate, the gains continued on Thursday. The S&P 500 climbed 6.2 percent, even after the government reported a staggering jump in unemployment claims by workers.
As it has been all week, investors’ focus was on companies likely to get help from the spending plan that passed the Senate on Wednesday night. The House of Representatives and President Trump are expected to approve it.
Boeing rose nearly 14 percent on Thursday because the package specifically sets aside $17 billion for “businesses critical to maintaining national security” — language that was seen as intended at least partly for the aircraft manufacturer and key Pentagon contractor.
Other companies that were hit hard in the early days of the coronavirus outbreak continued to soar. American and Delta Air Lines rose nearly 2 percent. Carnival was up about 14 percent.
The gains on Thursday also spread to Europe, with major benchmarks there reversing their losses to end the day sharply higher. The FTSE 100 in Britain climbed more than 2 percent.
The three-day rally has lifted the S&P 500 by more than 17 percent, its best such run since 1933, according to data from Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. Most of those gains came on Tuesday, when stocks rose 9.4 percent, amid growing hope that the large stimulus package would offer support to an economy crippled by the outbreak and efforts to curtail the spread of the virus.
But the economic crisis is perhaps the most daunting since World War II. On Thursday, a government report showed a record rise in weekly applications for unemployment benefits, which jumped to nearly 3.3 million from 282,000 in a week.
Until now, the record occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that point, the United States was more than a year into a recession, and the unemployment rate had passed 10 percent.
The numbers, released by the Labor Department on Thursday, are some of the first hard data on the economic toll of the coronavirus pandemic, which has shut down whole sectors of American life.
THE AID PLAN
Here’s what you need to know about Washington’s spending package.
Aid to state
Aid to state
Chief executives could still receive millions in compensation.
Lawmakers put some restrictions on the compensation of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms about bailouts of banks and other companies during the 2008 financial crisis. But the limits will not do away with multimillion-dollar paydays for corporate bosses.
Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million, or $3 million plus half of $17 million per year.
Companies receiving assistance will not be allowed to increase the compensation of executives who earned $425,000 to $3 million in 2019 until a year after government support ends.
Small businesses will get help paying workers, if they can wait.
The package includes more than $370 billion in much-needed help for small businesses. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration.
It could take at least two weeks after the bill is signed into law for the money to begin flowing.
Small businesses would not have to repay portions of loans that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department.
Banks aren’t the focus, but they still get help.
The role of banks in the rescue bill is to provide much-needed capital to businesses and taxpayers. “This is all about preserving the incentives for banks to lend,” said Mike Mayo, who researches large banks for Wells Fargo.
To ensure access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged banks to use the so-called discount window, its lending operation for big banks, and at least eight major financial institutions already have.
Banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses.
The bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.
The last time jobless claims set a record, the economic shock wasn’t sudden.
The nearly 3.3 million new jobless claims filed last week dwarfed any previous weekly figure. Until now, the record occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that point, the United States was more than a year into a recession, and the unemployment rate had passed 10 percent.
In that case, the recession was caused not by a health crisis, but by a decision by political leaders and the Federal Reserve that raging inflation had to be shoved down, despite the cost to workers. The central bank sharply reduced the money supply while benchmark interest rates neared an astounding 20 percent.
Industries that relied heavily on borrowing like construction and manufacturing were hit hard. The jobless rate in construction reached 22 percent; among autoworkers, it was 24 percent.
Today, the circumstances are markedly different. Despite uneven rewards, the economy had achieved the longest expansion in history. The jobless rate had been below 4 percent for more than a year. A preoccupation of the Fed was raising the persistently low inflation rate toward 2 percent. Interest rates are near zero.
Efforts to slow the spread of the coronavirus meant the service industry bore the initial brunt of layoffs — workers at restaurants, bars, hotels, nail salons, gyms and more.
Hollywood lobbies hard for help from Washington.
With theater chains shuttered across the country and the box office declared dead, the National Association of Theatre Owners knew the only way for their businesses to survive was to become the recipients of a federal relief package.
So the trade association engineered an aggressive lobbying campaign that employed two law firms and a public relations agency. The group also coordinated an aggressive letter-writing campaign and call operation that had theater owners of all sizes reaching out to members of Congress.
But perhaps the pièce de résistance was the opinion article that the filmmaker Christopher Nolan wrote for The Washington Post reminding Congress that the movie business was not just about Hollywood and celebrities. Calling the moviegoing experience “a vital part of social life, Nolan wrote, “The movie business is about everybody: the people working the concession stands, running the equipment, taking tickets, booking movies, selling advertising and cleaning bathrooms in local theaters.”
“We plastered that all over Congress,” said the theater group’s chief executive, John Fithian. “A lot of these members are fans of movies and movie theaters. Hearing from the directors was a moving thing for us to use.”
THE AID PLAN
An F.A.Q. on the stimulus bill and your pocketbook.
How much money will individuals get — and how will it be distributed? How are unemployment benefits changing? Are gig workers included?
The Senate unanimously passed a $2 trillion economic stimulus plan on Wednesday that will offer assistance to tens of millions of American households affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes the self-employed, loans for small businesses and nonprofit organizations, temporary changes to withdrawal rules from retirement accounts, and more.
The House of Representatives was expected to quickly take up the bill and pass it, sending it to President Trump for his signature.
Catch up: Here’s what else is happening today.
The surge in interest in video games by people sheltered at home has led to a shortage of Nintendo Switch consoles at retailers like Best Buy and Target. Nintendo of America acknowledged the lack of availability and provided some hope to gamers, saying in a statement, “Nintendo Switch hardware is selling out at various retail locations in the U.S., but more systems are on the way. We apologize for any inconvenience.”
Some banks are adding job security to the list of things their employees are getting in exchange for working through the coronavirus crisis. James Gorman, the chief executive of Morgan Stanley, told employees in a memo that the bank would not resort to layoffs in 2020, according to a copy seen by The New York Times. Citigroup is taking a similar, though smaller step. A spokeswoman said that the bank had suspended any planned layoffs — for now.
Hilton Worldwide Holdings said on Thursday that it was furloughing or reducing the hours for much of its corporate staff for 90 days starting on April 4. Furloughed employees will maintain health benefits. Staff that isn’t furloughed will have their pay reduced by 20 percent for the duration of the crisis. The company will suspend dividends and share buybacks. Hilton’s chief executive officer, Christopher Nassetta, will forgo his salary for the rest of the year.
AT&T announced it would pay a 20 percent bonus to all union employees, including those in the field or working from home. The company didn’t divulge how many workers that would cover, but it had bargaining agreements with about 100,000 employees as of March.
Cargo volumes at the Port of Los Angeles, one of the largest in the United States, are about 80 percent below normal, Gene Seroka, its executive director, said. The effects of the coronavirus pandemic coupled with what an “ill-advised” trade war with China will suppress cargo traffic throughout the year, he added.
Reporting was contributed by Marc Tracy, Neal Boudette, David Gelles, Niraj Chokshi, Vindu Goel, Kate Kelly, Peter Eavis, Neil Irwin, Tara Siegel Bernard, Ron Lieber, Clifford Krauss, Ivan Penn, Matt Phillips, Peter S. Goodman, Patricia Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy.