The rapid spread of the coronavirus since it was first reported in China has dealt an unprecedented shock to the global economy.
Here’s a look at developments Tuesday as central banks, businesses and workers attempt to navigate a global outbreak that has brought economic activity to a standstill.
WAR CHEST: With the duration of the global outbreak unknown, the largest corporations in the world are canceling dividends, slashing costs, some through job cuts, and withdrawing financial outlooks.
Chevron slashed its 2020 capital spending plan by 20 percent Tuesday, or about $4 billion. Chevron said Tuesday that it’s goal is to lower run-rate operating costs by more than $1 billion by the end of the year. Investors count on steady dividends from big energy producers, and Chief Financial Officer Pierre Breber said protecting payouts to shareholders is a priority.
Nordstrom suspended its quarterly dividend and said in a regulatory filing that stock buybacks are suspended. Those buybacks can drive share prices higher, but it also means companies don’t have cash on hand, which is crucial right now. To that end, the luxury retailer is drawing down $800 million from a revolving credit line. It doubled down on cost-cutting initiatives. Its initial savings plan of up to $250 million this year has been expanded to more than $500 million.
Michaels Stores is borrowing $600 million to boost its cash position and preserve financial flexibility amid the virus outbreak.
REPURPOSING: Ford has partnered with 3M and GE Healthcare to create more medical equipment and supplies for health care workers, first responders and patients fighting coronavirus. Ford is working with 3M to make powered air-purifying respirators. It is teaming with GE Healthcare to expand production of a simplified version of GE Healthcare’s existing ventilator design to support patients with respiratory failure or difficulty breathing. In an interview with The Associated Press, Executive Chairman Bill Ford likened the effort to the World War II Arsenal of Democracy when the company shifted a factory to build thousands of bombers. His company has drawn credit lines to prepare for a downturn, but still is dedicating resources to fight the virus although it might not generate any revenue, he said. “Frankly we haven’t spent any time talking about that because the country needs us,” he said. “It’s the right thing to do. We’ll sort all that out later as we go through this.”
Ford will also assemble more than 100,000 plastic face shields per week at one of its manufacturing sites and will also use its in-house 3D printing capability to make components for use in personal protective equipment. The company already is producing masks and will test them at Detroit-area hospitals. It may build the simplified ventilators at a Ford factory but nothing is solid yet. The companies also said they didn’t have a time frame for when the ventilators might be produced. Ford also is looking at repurposing vehicle parts for use in respirators for health care workers and first responders such as the small fans used to cool seats in the F-150 pickup truck.
DARK SKIES: The outbreak and global recession will do more financial damage to airlines than previously estimated, according to an industry trade group. The International Air Transport Association said Tuesday that it now estimates that passenger revenue worldwide could fall as much as $252 billion, or 44%, compared with last year. That’s based on strict travel restrictions lasting up to three months, followed by a slow economic recovery. Less than three weeks ago, the group estimated the virus could reduce airline revenue by up to $113 billion compared with 2019, before a new round of travel restrictions that have stopped most international air travel.
FACTORY SHUTDOWNS: Ford indefinitely suspended planned re-openings of its North American factories, even as the Trump administration pushes for a broad normalization of business activity. Last week Ford, General Motors and Fiat Chrysler, under pressure from the United Auto Workers union, agreed to stop production until the end of March due to the threat of the coronavirus. That, Ford said Tuesday, is no longer the plan. The automaker is assessing options and working with U.S. and Canadian union leaders.
GM said Tuesday it’s monitoring the situation. A message was left seeking comment from Fiat Chrysler.
Bombardier is suspending all non-essential work at most of its aircraft and rail operations Tuesday. The suspension includes Bombardier’s aircraft and rail production activities in the Canadian provinces of Quebec and Ontario. Employees impacted by the temporary shutdowns will be placed on furlough.
TO YOUR HEALTH: The spread of the coronavirus has changed life as the world knew it, and that includes how we imbibe.
Money once spent on booze in pubs, restaurants and bars, is going to six-packs or cases of wine and beer consumed at home, according to a regulatory filing Tuesday by Constellation Brands. Cities from San Francisco to New York have shut down the places where people gathered, at best allowing pick-up or delivery. Orders for alcohol meant to be consumed outside of bars or restaurants spiked by 3 percent over the past four weeks at Constellation Brands, the maker of, among other things, Corona beer. Constellation, which also makes Funky Buddha beer, and wines like Clos du Bois and Robert Mondavi, as well Casa Noble Tequila, and High West Whiskey, is shifting operations to accommodate home drinking.