Tesla, Defying Local Order, Plans to Restart Factory: Live Business Updates

Saudi Aramco reports shrinking profit as oil prices fall.

Saudi Aramco, the world’s largest oil company, reported Tuesday that its net income fell by 25 percent in the first quarter of 2020 compared with a year earlier. Still, Aramco said it earned $16.7 billion — an amount that may allow it to retain the title of world’s most profitable company.

Amin H. Nasser, the company’s president and chief executive, said in a statement that the coronavirus pandemic “impacted” the results, which he called “exceptionally strong” given the situation. The pandemic has sharply reduced the world’s demand for oil, lowering prices. The Saudi government, which owns about 98 percent of Aramco’s shares, contributed to the falls by starting a price war with Russia in March.

Aramco’s earnings are almost certain to fall further in the current quarter and later in the year. Aramco said that it received an average of $51.80 a barrel for its oil in the January-March period. Oil prices, which will largely determine Aramco’s earnings, have since fallen much lower.

Output, another key factor, is also likely to be lower. In an effort to bolster prices, the government said Monday that it had ordered Aramco to cut production to about 7.5 million barrels a day in June, about 25 percent below the average output for the first quarter.

The company said it would pay a dividend of $18.75 billion to shareholders for the quarter, in line with its commitment to pay out $75 billion for the year. Neil Beveridge, an analyst at Bernstein, a research firm, said in a note to clients that because the company was generating less cash than the dividend payment it would be “effectively borrowing to pay” shareholders.

Elon Musk, Tesla’s chief executive, said Monday that the electric-car company was resuming production at its assembly plant in Fremont, Calif., even though it had not yet been cleared to do so by the local health authorities.

“Tesla is restarting production today against Alameda County rules,” he announced on Twitter. “I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.”

The county’s health officer has said he hopes to work out an agreement with Tesla to open the plant on May 18. The plant is Tesla’s main source of revenue and has been closed since early April. County officials have not yet authorized the resumption of indoor manufacturing over fears that the coronavirus could spread among large groups working in proximity.

In email that was sent on Monday and was reviewed by The New York Times, the company’s head of human resources in North America, Valerie Workman, told employees they would be contacted within 24 hours about when to report for work.

The state has authorized a resumption of manufacturing, Gov. Gavin Newsom said Monday that “we recognize localism” and that “if a county doesn’t want to go as far,” local orders would prevail.

Mr. Newsom said he understood that Tesla and local officials “had some very constructive conversations,” adding, “I’m certainly encouraged by what I’m hearing.”

In her email, Ms. Workman said employees uncomfortable returning to work could stay home on unpaid leave. She also said that “choosing not to report to work may eliminate or reduce” eligibility for unemployment benefits.

Global stocks waver amid concerns over a recovery.

U.S. stock futures were flat and global markets were mixed on Tuesday, as reports from China, South Korea and the United States offered sobering reminders to investors of how long and difficult the coronavirus recovery is likely to be.

Futures markets were predicting that Wall Street would open unchanged. European markets were mildly higher after a broad drop in the Asia-Pacific region. U.S. Treasury prices rose, signaling more investor unease.

Investors had reasons for concern. Dr. Anthony S. Fauci, a central figure in the U.S. government’s coronavirus response, was expected to warn lawmakers on Tuesday that “needless suffering and death” would result if the country opened up too quickly. In China, the city of Wuhan, which seemed to have tamed its outbreak, has reported six new infections in recent days, while cases have also risen in the northern part of the country. That followed a disclosure over the weekend that South Korea, which has also seen success, had suffered a spate of new infections as well.

Oil prices rose on Tuesday, after Saudi Arabia said it had instructed Saudi Aramco, the world’s largest oil company, to deepen production cuts to help with the world’s glut of crude. Brent, the international benchmark, was up about 1 percent to over $30 a barrel. West Texas Intermediate, the U.S. standard, was up more than 3 percent to a little over $25 a barrel.

Three months after the Chinese authorities virtually shut down the country to stop the outbreak, its workers are back at their jobs. If factories and offices can successfully restart without major infections, China’s approach could serve as a model for President Trump and other leaders who want to get their economies back on track.

Major companies are asking workers to change their daily personal habits as well as their workplace conduct. BMW workers take their own temperature three times a day. Foxconn, the Taiwanese electronics giant that makes iPhones and other Western-branded gear in vast Chinese factories, has advised employees in a handout to avoid public transportation and walk, bike or drive instead. A ride-share driver wipes down his car daily and sends video proof to headquarters.

Many employers have embraced government-endorsed health code functions recently built into some of China’s most popular smartphone apps, like Alipay and WeChat. One of the first services built to gauge a person’s infection risk, the health code function tracks users’ travel to see whether they have been to areas with high infections, though the creators and the Chinese government have not disclosed full details about how it works. When prompted by health workers, police officers or security personnel, a person would display a code colored red, yellow or green.

Everyone agrees on one thing: There is no going back to life before the pandemic.

“Life will not become like it was before,” said Johann Wieland, the chief executive officer of BMW’s joint venture in China, which employs 20,500 people. “This is what we have to learn.”

The Japanese automaker Toyota said on Tuesday that it expects a nearly 80 percent decline in operating profit next year as the coronavirus craters global demand for vehicles, potentially driving down the company’s sales by as much as 20 percent.

The pandemic has forced automakers to close factories and dealerships. Sales have plummeted in the face of skyrocketing unemployment in key markets like the United States, and many potential customers who are in the position to afford a new car are staying home.

In its annual earnings report presented on Tuesday, the company said it expected operating profit to drop 79.5 percent to 500 billion yen in the fiscal year ending March 2021. It declined to make projections for net profit and net profit per share because of the uncertainty created by the pandemic.

Toyota said it remained profitable in fiscal year 2020 despite the effects of the coronavirus, with operating profits dropping just 1 percent year-on-year to 2.4 trillion yen ($22.3 billion). The company said the pandemic caused its expected sales volume to drop by 127,000 vehicles, shaving 160 billion yen ($1.5 billion) off its profit.

The blacklisting of the processors follows a threat made last month by China’s ambassador to Australia, Cheng Jingye, who called the inquiry proposal a “dangerous” move that could lead to a Chinese boycott of beef, wine, universities and tourism.

In a joint statement, Australia’s trade and agriculture ministers said the beef suspensions appeared to be based on highly technical issues.

“We’ve been speaking with industry leaders, colleagues and departments overnight,” the ministers said, adding that they were working with Chinese officials to “find a solution that allows these businesses to resume their normal operations.”

If the ban continues, the economic cost could be severe. Beef sales to China were worth $1.85 billion in 2019, up from $883 million in 2018.

Trade experts said that while small disputes over certification and other issues are a common feature in bilateral relations, China may also be signaling its discontent after a period of growing frustration that started before the pandemic. Australia has accused China of dumping steel, banned the Chinese companies Huawei and ZTE from supplying its 5G network and passed laws against foreign interference in its politics.

The United States is on the brink of the worst economic collapse since the Hoover administration. Corporate profits have crumpled. More than a million Americans have contracted the coronavirus, and hundreds of people are dying each day.

After a few weeks of wild swings, the market is down roughly 9 percent this year and a little more than 13 percent from its peak. Even as 20.5 million people lost their jobs in April, the S&P 500 stock index logged its best month in 33 years. The index was basically unchanged on Monday.

For decades, the market has been growing increasingly detached from mainstream of American life. There are a few reasons:

  • The giant companies that make up the S&P 500 operate under very different circumstances than the nation’s small businesses, workers and cities and states. They are highly profitable, hold significant sums of cash and have regular access to public bond markets.

  • Stock ownership is heavily skewed to the richest segments of the population, who are least likely to feel the pain of an economic downturn.

  • The Federal Reserve’s actions have also bolstered investors’ confidence that the bottom won’t fall out of the market.

Americans have long relied on the stock market as a proxy for the U.S. economy. The current economic fallout, however, could snap any illusions that the logic of the market is derived, in any consistent way, from real-world events.

Ryanair, Europe’s largest low-cost carrier, said it would resume 40 percent of its flight network beginning July 1, and institute safety measures like requiring passengers to wear face masks and to request access to the bathroom to prevent lines in the aisles.

The airline’s new schedule will operate 1,000 flights per day, an increase from Ryanair’s current 30 daily flights across Ireland, Britain and Europe.

The carrier, based in Ireland, is also trying to convince passengers it will be safe to fly. In a video announcing its safety measures, the airline said planes would be disinfected daily and that passengers may undergo a temperature check when they arrive at the airport, with those failing the test denied entry to the plane.

Ryanair’s announcement comes after Britain said it was considering a mandatory 14-day quarantine for international passengers arriving by air.

Catch up: Here’s what else is happening.

  • Steak ‘n Shake permanently closed 57 restaurants in the first quarter because of the coronavirus pandemic, the company’s parent, Biglari Holdings, said in its quarterly earnings report. Biglari, whose properties include Western Sizzlin restaurants, Maxim magazine and First Guard Insurance, reported that revenue fell to $136 million in the first quarter, from $182 million the same quarter a year earlier.

  • Hyatt, a hotel chain, said it would lay off 1,300 workers and restructure roles because of “the historic drop in travel demand and the expected slow pace of recovery.”

Reporting was contributed by Ben Dooley, Geneva Abdul, Stanley Reed, Niraj Chokshi, Alexandra Stevenson, Cao Li, Damien Cave, Matt Phillips, Gregory Schmidt, Carlos Tejada, Daniel Victor, Katie Robertson and Kevin Granville.

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