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.
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 Leeand Heather Murphy.
British American Tobacco, the maker of brands including Lucky Strike, Dunhill, Rothmans and Benson & Hedges, has said it has a potential coronavirus vaccine in development using tobacco plants.
BAT has turned the vast resources usually focused on creating products that pose health risks to millions of smokers worldwide to battling the global pandemic.
“If testing goes well, BAT is hopeful that, with the right partners and support from government agencies, between 1m and 3m doses of the vaccine could be manufactured per week, beginning in June,” the company said.
The London-listed company used the announcement to trump the positive aspects of its tobacco empire, saying that “new, fast-growing tobacco plant technology” put it ahead of others trying to develop a vaccine.
“Tobacco plants offer the potential for faster and safer vaccine development compared with conventional methods,” the company said.
BAT said its US biotech subsidiary, Kentucky BioProcessing (KBP), has moved to pre-clinical testing and that it will work on the vaccine on a not-for-profit basis.
In 2014, the tobacco firm bought KBP, which has previously worked on a treatment for Ebola. BAT said its work was “potentially safer [than conventional vaccine technology], given that tobacco plants cannot host pathogens which cause human disease”.
BAT said it had engaged with the Food and Drug Administration in the US and the Department for Health and Social Care in the UK to “offer our support and access to our research with the aim of trying to expedite the development of a vaccine for Covid-19”.
Dr David O’Reilly, the director of scientific research at BAT, said: “Vaccine development is challenging and complex work but we believe we have made a significant breakthrough with our tobacco plant technology platform, and we stand ready to work with governments and all stakeholders to help win the war against Covid-19.
“KBP has been exploring alternative uses of the tobacco plant for some time. One such alternative use is the development of plant-based vaccines.”
BAT said it had cloned a portion of the genetic sequence of the coronavirus and developed a potential antigen. The antigen was then inserted into tobacco plants for reproduction and, once the plants were harvested, the antigen was purified. It is now undergoing pre-clinical testing.
Almost a fifth of small businesses are at risk of collapsing within the next month as they struggle to secure emergency cash meant to support them through the coronavirus lockdown, according to research by an accountancy network.
The chancellor, Rishi Sunak, has pledged unprecedented aid to companies to try to cushion the blow from much of the economy shutting down but businesses and politicians have raised concerns that there are gaps in the schemes.
Some 18% of small and medium-sized enterprises (SMEs) either probably or definitely will not be able to obtain additional cash from the government to survive for a four-week period, according to the Corporate Finance Network.
Its accountancy firm members estimated that almost a third of their 13,000 small-company clients from around the UK would be unable to acquire the cash needed to ride out an extended, three-month lockdown.
Rachel Reeves, the Labour MP who heads the business select committee, wrote to the chancellor on Tuesday outlining concerns with the schemes to support companies.
“The challenge now is getting the money out of the door to support businesses before it’s too late,” she told BBC radio on Wednesday. “There are many businesses who if they don’t quickly access this cash they are going to go under.
“That will have huge consequences for employment and also our ability to grow the economy when this pandemic has passed. If businesses collapse they won’t be able to ensure our economy can recover. They will be lost for ever.”
The banking industry body, UK Finance, has said it is running the schemes in line with the government’s design.
In her letter to Sunak, Reeves said the history of support to the banking sector meant they had to step up. The industry and regulators at the Bank of England have said that banks are well positioned to support the economy through the crisis. The banks on Tuesday night agreed to scrap dividend payouts to shareholders after Bank of England pressure.
“Banks were kept afloat by government and taxpayers during the financial crisis,” Reeves wrote. “I would urge them to play their part in helping small and medium-sized businesses through this crisis.”
One month ago, Chris Austin was running a little-known mom-and-pop business in Texas that fielded a few dozen orders a week for his helmet-style ventilation devices.
He had five employees and a handful of volunteers from the family’s church who would pitch in at the workshop behind their home in the small town of Waxahachie.
Then the coronavirus epidemic hit.
Austin’s company, Sea-Long Medical Systems Inc., is getting thousands of orders every day, from America’s top hospitals to countries as far flung as the United Arab Emirates. Researchers say the device, which costs less than $200, could help hospitals free up ventilators for only the most critically ill coronavirus patients.
“‘Overwhelmed’ doesn’t scratch the surface,” Austin told NBC News.
The demand for the Sea-Long helmet underscores the dire shortage of ventilators in the U.S. and around the globe fueled by a surge in hospital patients suffering from COVID-19.
In the last few weeks, hospitals have been flooded with patients experiencing respiratory problems so severe they need the help of a machine to help them breathe.
Governors have made impassioned pleas for more equipment. Companies like General Motors and Ford have redesigned their assembly lines to produce the lifesaving devices. And hospital executives are scrambling to snap up any equipment that might help ease the escalating crisis playing out inside their facilities.
The Sea-Long device doesn’t look the part of a lifesaving medical device. It resembles a crude spacesuit helmet, with a transparent hood sealed at the neck and two tubes extending from its base. The helmet was originally designed to supply oxygen to patients receiving treatment in hyperbaric chambers.
But doctors in Italy, where a version of the helmet has long been used to treat people experiencing breathing problems, found it to be effective in helping some COVID-19 patients.
Dr. Bhakti Patel, who has been studying the devices for four years, said they hold promise as an early intervention that could spare respiratory patients the need to be put on the more traditional — and costly and invasive — ventilators.
“I would love for there to be a silver bullet for this pandemic,” said Patel, a pulmonologist at the University of Chicago. “My best hope is that the way it changes the game is that maybe it shaves off the number of patients who need a ventilator — even if it’s 1 out of 3 or 1 out of 5.”
“If that is the case,” Patel added, “that would be a game changer when we’re seeing this tidal wave of patients who need a ventilator.”
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Patel led a first-of-its-kind study in 2016 that tested the Sea-Long helmet against an oxygen mask for a group of 83 intensive care patients suffering from acute respiratory distress. The researchers found that the helmet led to superior outcomes: Patients using them required ventilation 18.2 percent of the time, compared to 61.5 percent for the masks, and had a better 90-day survival rate, according to the study, published in the Journal of the American Medical Association.
The trial was stopped early because the helmets proved more effective than the masks, resulting in a smaller sample size than originally intended. But Patel believes the device could lead to a sea change in intensive care units that have long relied on traditional ventilators. Those devices require doctors to fully sedate patients and insert a tube into their windpipes, a process that can cause pneumonia and other problems when used for extended periods of time.
“If we take away the ventilator — which comes with this package of sedating people, making them not move, making them sort of not have memory of what’s happening — perhaps we could spare some patients some long-term complications,” Patel said.
At $162 apiece, the Sea-Long helmet costs a tiny fraction of the five-figure ventilators.
The original devices were made to run through ventilators. But working with Patel and her mentor, Dr. John Kress, Sea-Long has modified the helmets so they can be hooked up to a hospital’s regular oxygen supply, keeping the ventilators free for those who need them most. They have also made another significant modification, adding a viral filter to prevent possible COVID-19 exposure to others.
This week, the team at the University of Chicago Medical Center used the helmet on one coronavirus patient and has gotten encouraging results, Kress said. The facility has received 20 of an expected 100 helmets and is planning to use them on additional patients, the doctors said.
Other companies make similar ventilator helmets, but Sea-Long’s is the only helmet available in the U.S. that meets requirements of the Food and Drug Administration and has been validated in a clinical study for acute respiratory syndrome. No studies have yet been done, however, examining the effectiveness of the devices in treating COVID-19 patients.
Austin’s team has been working around the clock for the past several weeks. The workforce has at least doubled to more than 10 people, Austin said, and volunteers have been showing up in droves.
“We have people showing up that we don’t even know that say: ‘We’re here to help. What can we do?'” Austin said. “They don’t ask for anything. They don’t expect anything. They just say, ‘Whatever you want me to do, we’ll do it.'”
“It just about brings tears to my eyes,” Austin added.
The attention has led to some other acts of extraordinary generosity.
Austin said he recently got a surprised call from Virgin Galactic CEO George Whitesides offering to help him produce more devices.
“Chris, I saw what you do, and we want to help,” Whitesides said, according to Austin. “Whatever it takes.”
Austin told him he needed more machines to manufacture the devices but didn’t have the cash to pay for them. Later that day, Austin got a call from his New Jersey-based supplier.
“Somebody just paid your bill,” Austin said he was told. “They’ll be shipping tomorrow.”
With the four additional machines, Sea-Long expects to produce thousands of helmets a week. The goal is to produce 50,000 per week.
“This is the classic sort of American story,” Patel said. “It’s the little engine that could.”
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James Vanderploeg, Virgin Galactic’s chief medical officer, said the company is working with Sea-Long “to help them expand their capacity, helping with recruiting additional people and getting equipment in place and helping with the logistics and so forth — anything we can do to help them expand their throughput.” Virgin Galactic is also modeling potential prototypes for its own design of helmets used for ventilation, Vanderploeg said.
Major U.S. medical centers are now stocking up on the helmets, including Massachusetts General Hospital and the Hospital of the University of Pennsylvania. Austin said he’s also received orders from Canada, Mexico and several countries in Europe, including hard-hit Italy.
A Mass General spokesperson said the hospital has ordered five Sea-Long helmets but has not yet received them.
A Penn Health spokesperson confirmed that the hospital has ordered the devices.
With so much of the world in need and so many orders coming in at once, Austin has faced a difficult question: Whom to prioritize?
“We really look at where is the need,” Austin said. “We know New York has a stronger need. We know Boston. We know Chicago. … But we also know that we have to get what we can to Italy.”
For now, the company is shipping only a limited number helmets per order, “because we still can’t afford the volume of a huge order,” he said.
Amid the worsening pandemic, Sea-Long isn’t planning to raise the price in part because it doesn’t want to limit who has access to the devices.
“This probably sounds sappy,” Austin said, “but we think of what if that was our son or daughter or grandfather sitting there in that bed gasping for air and we have to explain to him: ‘I’m sorry. We don’t have anything for you.'”