fortune--2020-10-20--More CEOs must stand up to protect our democracy

Last week, a group of business leaders, mostly from technology companies and investment firms, issued an unprecedented statement supporting democratic elections amidst the current crisis. The need for such an extraordinary statement from an unexpected quarter reflects the atmosphere of doubt and fear that prevails as voting is underway. Efforts to delegitimize voting by mail, threats to intimidate voters at polling places, and other insidious forms of voter suppression have all challenged the integrity of the electoral process.
For these reasons, the signatories of the Leadership Now Project statement felt compelled to declare that “the health of America’s economy and markets rests on the founding principles of our democracy: elections where everyone’s vote is counted.” The three principles that they propose for the conduct of the elections are striking in their simplicity but shocking for their necessity: “ensuring that every vote will be counted”; urging the media to “take caution and avoid calling the election prematurely”; and calling on business leaders to “promote patience and civility.”
Their call is not too late. But it is too little in two critical respects.
First, the statement fails to address explicitly the corollary issue alongside the integrity of the election: the peaceful transfer of power if the outcome requires one. President Trump pointedly refused to commit to such a peaceful transfer in the Sept. 29 debate with Democratic presidential nominee Joe Biden, as did Vice President Pence in the Oct. 7 debate with vice presidential nominee Kamala Harris. Trump finally said when pressed at the NBC town hall last Thursday that he would accept a peaceful transfer of power, but he continued to claim widespread voter fraud and cast further doubt on the integrity of the election.
Trump certainly left the impression that he may contest the election, even if not close, and his signal to extremist followers in the first debate to “stand back and stand by” remains a threat. Equally threatening are his continued calls to “lock up” and prosecute his political opponents as recently as Saturday at a campaign rally in Muskegon, Mich.
Adding to the atmosphere of uncertainty last week, Supreme Court nominee Amy Coney Barrett declined to indicate her unequivocal support for a peaceful transfer if she were to sit on the court with that issue before it. The turmoil that would befall the country, let alone the economy and the financial markets, in such a situation would be a nightmare that should concentrate the minds of business leaders regardless of party or ideology.
Second, conspicuously absent among the signatories of last week’s election-integrity declaration are any current CEOs of Fortune 500 companies, or any senior executives or directors of any of the biggest companies in Corporate America or any of the biggest firms on Wall Street. Yet the stability and prosperity of every industry, every sector, every company of all sizes—but especially the largest—is on the line. Their leaders too must understand the “significant risks to business and markets in an already fragile economic environment” that the statement emphasizes.
The most prominent business leaders should lend their names and weight to this declaration—and better yet, extend its scope to address the imperative of the peaceful transfer of power, if the outcome produces a change in administration, as well as the integrity of the election itself. The Business Roundtable, the group of the largest companies and prominent CEOs in Corporate America, has been admirably addressing “corporate purpose” over the past year and made important commitments to address historic racial injustice this week. Its purpose must now extend to the defense of American democracy itself.
American business leaders should recognize that they have an existential stake in the rule of law and accountable governance, in our civil rights and liberties, and ultimately in the credibility and durability of our democratic institutions that protect us from autocracy. Any dispassionate risk assessment of the last several weeks of the campaign—whatever else corporate leaders think of the events of the last several years—would lead to the conclusion that those fundamentals cannot be taken for granted.
Business leaders normally and understandably want to “stay in their lane” during presidential elections, even as many contribute to and some even endorse a candidate. But the current abnormal situation has crossed into their lane. Speaking out to avoid a fatal crash for American democracy is their responsibility too: to their employees and retirees; business partners and local communities; shareholders and other stakeholders. Meeting this responsibility would be an act of no-nonsense nonpartisanship.
If that crash happens, there will be grave consequences not only for the U.S. but for democracies everywhere. There will also be equally severe risks for U.S. multinational corporations—and those who depend on them—as their leaders try to navigate an even more turbulent and dangerous world.
Bennett Freeman is a consultant for multinational corporations on international labor and human rights. He was formerly a senior vice president at Calvert Investments and was deputy assistant secretary of state for democracy, human rights, and labor in the Clinton administration.


fortune--2020-10-20--How Lowe’s plans to finally become a holiday season player

The polls are wrong .
The U.S. presidential race is a near dead heat , this A.I .
‘ sentiment @ @ @ @

While Lowe’s stores full of power tools, drywall panels, lacquer thinner, and other practical products have never been seen as a Christmas gift destination, the home improvement chain is hoping to change that this year by leveraging consumers’ fixation on their homes during the pandemic.
On Tuesday, the company announced its most aggressive sales campaign linked to the holidays yet. Lowe’s will hold an early deals event starting Thursday, featuring tools, generators, and the one item everyone wants under their tree on Christmas: a pressure washer. The company is making its assortment more fun by adding scooters, trampolines, exercise bikes, air hockey tables, and kitchen items like air fryers.
It’s clear Lowe’s wants to keep the momentum it has found since the pandemic broke out (U.S. sales in its most recent quarter rose 34%) as Americans have shifted spending from vacations they can’t take and clothes they don’t need to throwing cash at beautifying and improving the homes they are spending more time in during this COVID-19 outbreak.
“Whether repurposing a room into an office or tackling basic repairs, more time at home became more time for home,” Bill Boltz, Lowe’s executive vice president for merchandising, said in a statement.
More important, Lowe’s can’t sit idly by while competitors offer their own deals. In the appliance arena for instance, where Lowe’s leads, it has to compete with Best Buy’s earliest holiday deals yet this year.
But Lowe’s also has its eye on another rival: its most direct competitor, Home Depot. As detailed by Fortune earlier this year, Home Depot has gradually increased the assortment of merchandise that can be Christmas gifts, such as small tools, batteries as stocking stuffers, and even toys over the years to great effect. Last year, Home Depot created a Gift Center section at the front of its stores in a prime spot to showcase items with gift potential, along with Christmas staples like artificial trees.
It worked so well that executives said Black Friday in 2019 was a key source of its 5.3% jump in quarterly sales during that period. So it’s easy to see why Lowe’s would want in on it, too. Analysts believe the holidays will keep giving home improvement retailers a boost: This week, research firm Customer Growth Partners forecasted revenue in this area of retail would grow 8.9% in November and December, outpacing the rest of retail.
For Lowe’s and Home Depot, the fourth quarter is typically the slowest of the year. Their peak season has traditionally been spring as people ramp up home projects. But even as they have both thrived this year, Lowe’s and Home Depot dialed back their promotional events in the spring to avoid overcrowding at stores, likely leaving some money on the table. A holiday season boost would help them make some of that up.


fortune--2020-10-20--The Justice Department files a landmark suit against Google

This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox.
On Tuesday, the U.S. Justice Department dropped an antitrust case of significance not seen since its case against Microsoft over 20 years ago.
Alongside 11 states, the DOJ alleges that Alphabet’s Google used its dominance in online search to quash competition and spent billions to make itself the default engine on browsers.
“For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising—the cornerstones of its empire,” the lawsuit reads.
In response, Google called the lawsuit “deeply flawed.”
“People use Google because they choose to—not because they’re forced to or because they can’t find alternatives,” a spokesperson said via email, adding that a more comprehensive statement is forthcoming.
“We’re pleased the DOJ has taken this key step in holding Google accountable for the ways it has blocked competition, locked people into using its products, and achieved a market position so dominant they refuse to even talk about it out loud,” CEO and founder of Google competitor DuckDuckGo, Gabriel Weinberg, tweeted regarding the news.
The European Union has also fined Google billions in recent years for anti-competitive behavior, such as favoring its own shopping business over others on its platform. Alphabet still awaits approval from E.U. regulators over its $2.1 billion bid for Fitbit.
And beyond Alphabet, the DOJ case will be heavily watched as other tech giants—Facebook, Apple, and Amazon—also face the harsh limelight of antitrust scrutiny.
SPAC FATIGUE? A blank-check company formed by Cerberus Capital Management now says it expects to raise less than previously thought. Cerberus Telecom Acquisition, a SPAC focusing on its namesake, is now looking to raise $300 million instead of $400 million, per a filing with the Securities and Exchange Commission.
BLAST FROM THE NOT-SO-DISTANT PAST: Last year, a time that feels like eons ago, WeWork co-founder Adam Neumann was offered a much-maligned $185 million consulting deal as part of his exit package from the troubled company. That deal may no longer be in force, according to WeWork Executive Chairman and SoftBank executive Marcelo Claure during The Wall Street Journal’s Monday tech conference. Neumann only received a part of the $185 million, according to the Journal. But that means that he can now compete with WeWork if he so wishes. Neumann had previously sued SoftBank when it terminated a $3 billion tender offer in which he was set to sell many of his WeWork shares.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Handshake, a San Francisco-based recruiting platform focused on college students, raised $80 million in funding. GGV Capital led the round and was joined by investors including EQT Ventures, Kleiner Perkins, Lightspeed Venture Partners, Spark Capital and True Ventures, along with Chan Zuckerberg Initiative, Emerson Collective and Imaginable Futures.
- Dren Bio, a San Carlos, Calif.-based company developing technologies against disease-causing cells, raised $60 million in Series A funding. SR One and Taiho Ventures led the round and were joined by investors including 8VC, Mission BioCapital, BVF Partners, HBM Healthcare Investments, and Alexandria Venture Investments.
- LearnUpon, a Dublin-based online learning management platform, raised $56 million in funding from Summit Partners.
- Output, a Los Angeles-based maker of software for musicians, raised $45 million in Series A funding. Summit Partners led the round.
- BrightFarms, an Irvington, N.Y.-based indoor farming company, raised $100 million in debt and equity through Series E funding. Cox Enterprises led the round and is now the majority shareholder. Cox was joined by investors including Catalyst Investors.
- v2food, an Australian plant-based meat startup, raised AUS$77 million (US$55 million) of Series B funding. Investors included ABC World Asia, Altitude Partners, China Renaissance, Esenagro, Horizons Ventures, Main Sequence Ventures, Marinya Capital, Novel Investments, Sequoia Capital China, and Temasek.
- 4iQ, a Los Altos, Calif.-based cyber security company, raised $30 million in Series C funding. ForgePoint Capital and Benhamou Global Ventures led the round and were joined by investors including C5 Capital, Adara Ventures, and TheVentureCity.
- VENN, a Los Angeles-based streaming network for gaming and entertainment, raised $26 million in Series A funding. BITKRAFT and Nexstar Media Group (Nasdaq: NXST) led the round and were joined by investors including Eldridge, WISE Ventures, Alumni Ventures Group, and Josh Kroenke (Vice Chair of Kroenke Sports & Entertainment).
- ShopUp, a Bangladesh-based store digitization company, raised $22.5 million in Series A funding. Sequoia Capital India and Flourish Ventures coled the round. more here.
- Zest AI, a Los Angeles-based maker of software for credit underwriting, raised $15 million in funding from Insight Partners.
- eVisit, a Phoenix, Ariz.-based telehealth company focused on enabling virtual care for hospitals and health systems, raised $14 million in Series A funding. TVC Capital led the round and was joined by investors including Kickstart Seed Fund, University Growth Fund, and Jeremy Andrus.
- Knowledgehook, a London-based mathematics learning platform, raised £13.5 million ($17.5 million) in Series A funding. Investors included Mesoamerica’s Alexandria Corp., Nelson Education, Ideal Ventures, and Nicoya Ventures.
- Unit21, a San Francisco-based maker of API tools for risk and compliance teams, raised $13 million in funding. A.Capital Ventures led the round.
- ThinkIQ, an Aliso, Viejo, Calif.-based maker of supply chain software for manufacturing firms, raised $11.6 million in Series A funding. Ecosystem Integrity Fund led the round and was joined by investors including Hitachi Ventures and ArcTern Ventures.
- Fabric, a Bellevue, Wash.-based e-commerce firm, raised $9.5 million in seed funding, Redpoint Ventures led the round.
- Flick, a New York-based live group chat platform for sports influencers and their fans, raised $5 million in Series A funding. AlleyCorp led the round and was joined by investors including Bullpen Capital, Everblue Management, Amity Ventures, and Courtside VC.
- Jam, a Mountain View, Calif.-based company that turns websites into collaborative docs, raised $3.5 million in Seed funding. Union Square Ventures led the round and was joined by investors including Version One Ventures, BoxGroup and Village Global.
- Oula Health, a New York-based company pregnancy and birth care company, raised $3.2 million in seed funding. Collaborative Fund led the round and was joined by investors including Female Founders Fund, Rock Health, Metrodora Ventures, and Kate Ryder (CEO of Maven). Read more.
- Micronic Technologies, a Richmond, Va.-based maker of clean water technologies, raised $3 million in seed funding. The Center for Innovative Technology led the round and was joined by investors including The Pearl Fund and CAV Angels.
- Insha, a Berlin-based maker of a fintech account, raised €2.5 million in seed funding. Param led the round.
- Ways2H, a Long Beach, Calif.-based developer of solutions that converts waste into hydrogen fuel for mobility, microgrids and power generation, raised $2.5 million. Pacific6 Enterprises led the round.
PRIVATE EQUITY
- Mainsail Partners invested $41 million in PlanHub, a West Palm Beach, Fla.-based project bid marketplace for the commercial construction industry.
- Versapay, backed by Great Hill Partners, megred with Solupay, a Twinsburg, Oh.-based payment services provider. Financial terms weren't disclosed.
- Machine Solutions, backed by BW Forsyth Partners, acquired Beahm Designs, a Milpitas, Calif.-based maker of thermal processing machines to perform the principal composition of catheter manufacturing. Financial terms weren't disclosed.
- Pretium and Ares Management agreed to acquire Front Yard Residential (NYSE: RESI), a U.S. Virgin Islands-based provider of rental homes, for $2.4 billion in cash.
- Kainos Capital agreed to acquire Nutrisystem, a Philadelphia-based weight management brand, from Tivity Health (Nasdaq: TVTY) for $575 million.
- Caltius Structured Capital invested in Salas O’Brien, a Santa Ana, Calif.-based engineering, construction management, technology and commissioning firm. Financial terms weren't disclosed.
- Next Glass, backed by Providence Strategic Growth, acquired Oznr, a craft beverage marketplace. Financial terms weren't disclosed.
- Sageview Capital invested in XSELL Technologies, a Chicago-based provider of an augmented intelligence platform. Financial terms weren't disclosed.
- CapVest Partners agreed to acquire Datasite, a Minneapolis-based provider of software to the M&A industry. Financial terms weren't disclosed.
- Corrona, backed by Audax Private Equity, acquired HealthUnlocked, a London-based social patient health network. Financial terms weren't disclosed.
- GI Partners agreed to acquire Vast Broadband, a Sikeston, Mo.-based provider of gigabit-speed broadband, video and phone in South Dakota and Minnesota.
EXITS
- FactSet (NYSE:FDS) agreed to acquire Truvalue Labs, a San Francisco-based provider of environmental, social, and governance data. Truvalue was backed by Katalyst Ventures and The Entrepreneurs Fund. Financial terms weren't disclosed.
OTHER
- SK Hynix (KS: 000660) plans to acquire Intel's (Nasdaq: INTC) solid state drive business, NAND memory chip product and wafer business, and a production facility in Dalian, China for about $9 billion in cash.
- Danone is considering the sale of its Vega protein powder brand as well as a unit in Argentina. Read more.
- Sanofi is weighing the sale of some of its anti-inflammatory products, per Bloomberg citing sources. A deal could fetch around €200 million euros ($234 million). Read more.
IPO
- Southeastern Grocers, a Jacksonville, Fla.-based chain of supermarket chains including Winn-Dixie, filed for an $100 million IPO. It posted sales of $8.3 billion in the year ending Dec. 25, 2019 and a loss of $116.2 million. Read more.
- Foghorn Therapeutics, a Cambridge, Mass.-based company creating gene therapies for cancers and solid tumors, plans to raise $120 million in an offering of 7.5 million shares priced between $15 to $17. Flagship Pioneering and the Klarman Family Foundation back the company. Read more.
- Abcam, a U.K.-based maker of biological reagents, plans to raise $148 million in an offering of 8.9 million ADSs priced at about $16.52. T. Rowe Price Associates, Durable Capital Partners, and Aberdeen Asset Management back the firm. Read more.
- Compass Therapeutics, a Cambridge, Mass.-based biotech developing antibody therapies, filed to raise $50 million. OrbiMed Private Investments and F-Prime back the firm. Read more.
IPO
- Nextdoor, a San Francisco-based social network for sharing information and trading goods among neighbors, is weighing an IPO that would value it between $4 billion to $5 billion, per Bloomberg citing sources. Investors include Benchmark, Greylock Partners, Kleiner Perkins, Riverwood Capital, Axel Springer and Tiger Global Management. Read more.
- IN8bio, a New York-based maker of therapies for cancer and solid tumors, filed for an $86 million IPO. Bios Partners backs the firm. Read more.
- Opthea, an Australia-based maker of therapies for retinal diseases, raised $128.2 million in an offering of 9.5 million ADS (10% sold as warrants to acquire ADSs at the offering price) priced at about $13.50 apiece. Read more.
- Playtika Holding Corp, an Israel-based mobile gaming company backed by Chinese investors, filed confidentially for an IPO in the U.S. Read more.
SPAC
- Decarbonization Plus Acquisition, a blank check company formed by Riverstone Investment Group, raised $200 million. Read more.
- Helix Acquisition, a blank check company formed by Cormorant Asset Management seeking a healthcare target, raised $100 million. Read more.
- Horizon Acquisition II, a blank check company targeting the media and entertainment industry, raised $500 Million. Read more.
PEOPLE
- Good Growth Capital named Holly Krisztina as a venture partner on the West Coast.


fortune--2020-10-20--Russia’s ‘Sandworm’ hackers will slither into the sunset

This is the web version of Data Sheet, a daily newsletter on the business of tech. Sign up to get it delivered free to your inbox.
In the sci-fi universe of Dune, sandworms are colossal, apex-predatory monsters that burrow underground on the planet Arrakis. Real-life sandworms are slightly less terrifying, but equally good at evading capture.
No, these aren’t actual worms. “Sandworm” is the codename that cybersecurity researchers bestowed on a particularly brazen Russian military intelligence unit known for egregious digital aggression. (This story’s feature image is selected with apologies to Andy Greenberg, the hacking unit’s unofficial biographer.)
A codename is needed no longer. On Monday, the U.S. Justice Department indicted six people it alleges to be members of the marauding crew. You can read the full document—which John Hultquist, a threat-tracker in the Mandiant unit of the cybersecurity firm FireEye, calls “a laundry list of many of the most important cyberattack incidents we have ever witnessed”—here.
Sandworm is, indeed, behind a slew of big, bad hacks. You may remember 2017’s destructive NotPetya cyberattack, the repeated shutdowns of portions of the Ukrainian power grid, or the web server-crippling assault on the 2018 Winter Olympics in Pyeongchang. Or perhaps you’ll recall Sandworm interfered in the 2016 U.S. election and in the 2017 French elections.
It’s an open question as to what surprises Sandworm might have been—or, indeed, might still be—planning for the 2020 U.S. presidential election. If nothing else, British officials said Monday the hackers were plotting hijinks for the 2021 Tokyo Olympics.
But the U.S.’s indictment, well-meaning though it is, is unlikely to bring anyone to justice. Since these hackers operate in a jurisdiction outside of Uncle Sam’s reach—specifically, the tower at 22 Kirova Street in the Moscow suburb of Khimki—they will be able to continue their cyberwarmongering unimpeded.
Some people fear the official accusation could even inspire more flagrant bellicosity. “These indictments might prove to embolden them rather than curb their behavior,” warns Chester Wisniewski, principal research scientist at the British cybersecurity firm Sophos.
Other experts, like Sam Curry, chief security officer at the cybersecurity firm Cybereason, are more hopeful. “It’s hard to believe that this behavior will lead to meaningful changes in Russian foreign policy,” he says. “But the goal isn’t just bringing the perpetrators to justice. The goal is to lay the building blocks for future work and a more peaceful, democratic, collaborative physical and cyber world one day.”
It’s an admirable, if quixotic goal; in the meantime, the world ought to prepare for the worst. “We’re no safer than we were yesterday,” Wisniewski says. Were the Sandworm hackers “to be arrested, their replacements are already in training, and the relentless thirst of nation-states to compromise and interfere with their adversaries goes undeterred.”
A Dunish sandworm will survive even if cut apart. With this indictment, Russia’s Sandworm is barely knicked.
Robert Hackett
Twitter: @rhhackett
robert.hackett@fortune.com
THREATS
Down comes the hammer. The Justice Department has been busy. Federal prosecutors are unloading an antitrust lawsuit on Google this morning. (See Aaron's early tweet-reporting.) The government is accusing the search giant of abusing its market power to quash competition and harm consumers, charges that harken back to ones Microsoft faced in the '90s. Google, unsurprisingly, says the suit is "deeply flawed." Further investigations concerning Amazon, Apple, and Facebook are ongoing.
Sorry to pop your bubble. Political polarization in this country is getting worse. (Shocker!) One solution frequently proposed by pundits—exposing people to countervailing perspectives—doesn't appear to help the situation. Recent research suggests that injecting opposing viewpoints into people's social media-curated "filter bubbles" merely exacerbates divisions, warns Wall Street Journal columnist Christopher Mims.
Once you pop the fun don't stop. Speaking of bubbles, the Journal also observes the tech sector's influence over the stock market has reached a record high—beating the previous dot-com bubble peak. Conditions are ripe for initial public offerings, especially in the U.S. and China. Some companies are ready to take advantage: Billtrust, a U.S. payments processor, is planning to go public via a $1.3 billion SPAC merger. Alibaba's Ant Group is inching its way toward a supernova IPO, as Chinese regulators grant approvals. And ride-hailer Didi Chuxing is eyeing a 2021 IPO in Hong Kong that could value the company at more than $60 billion.
Founder-friendly with benefits. Investors love tech, but they love founder-led tech even more. Companies like Amazon and Netflix are outperforming peers steered by hired managers. Profits at the former-type firms grew 30% over the past five years compared to a meager 6.7% uptick at the latter over the same period, Reuters found. The founder set's share price also doubled this year, easily besting the S&P 500's 7.8% gain. IBM, whose revenues declined 2.6% to $17.6 billion in the most recent quarter, isn't helping the hired-hands' numbers.
Let's forget this ever happened. Chipmaker-on-the-outs Intel is selling its flash-memory manufacturing business to SK Hynix, a South Korean chipmaker, for $9 billion. Bob Swan, Intel's CEO, is tightening the focus of the organization by shedding the Nand data storage unit, saying "this transaction will allow us to further prioritize our investments in differentiated technology," such as A.I. and 5G. The deal follows Intel's sale of its smartphone modem business to Apple last year.
The ultimate guide to keeping it in your pants.
ACCESS GRANTED
Remember three years ago when iPhone-assembler Foxconn agreed to build a $10 billion manufacturing hub in the state of Wisconsin? The development has been an abject disaster, to say the least. In this cautionary tale of corporate political favor-seeking, the Verge details the complete deterioration of the ill-conceived project.
Foxconn would spend the next two years jumping from idea to idea—fish farms, exporting ice cream, storing boats—in an increasingly surreal search for some way to generate money from a doomed project. Frequent leadership changes, a reluctance to spend money, and a domineering corporate culture would create an atmosphere employees described as toxic. Many of the employees The Verge spoke with have since left the company, and all of them requested anonymity out of fear of retaliation.
FORTUNE RECON
This A.I. CEO says if governments don’t regulate technology, we will live in a ‘very scary place’ by McKenna Moore
Everything to know about the political food fight over Section 230 by Danielle Abril
This is the fastest 5G mobile network right now by Aaron Pressman
Are you entitled to time off work to vote? Depends where you live by Geoff Colvin
NASA plans first cellular network on the moon by Kati Pohjanpalo
Has CFIUS become a tool for crony capitalism? By Lucinda Shen
(Some of these stories require a subscription to access.Thank you for supporting our journalism.)
ONE MORE THING
Halloween is drawing near. If you're like me, you've been gearing up for the spooky season by streaming the occasional horror flick. (Most recently, I watched Steven Spielberg's Poltergeist and Tim Burton's Sleepy Hollow—both very fun.) What's the scariest movie of them all? The data demons at Broadband Choices, an Internet research firm, put 50 of the genre's finest films to the test by outfitting audiences with heart rate monitors and recording their response to viewings.
The reviews are in: 2012's Sinister is the ultimate blood-pumper. Which fright-romp is your favorite?


fortune--2020-10-20--Stimulus update: What to expect if the White House doesn’t meet Pelosi’s 48-hour deadline

Our mission to help you navigate the new normal is fueled by subscribers. To enjoy unlimited access to our journalism, subscribe today.
Is it now or never?
On Monday, Republican and Democratic leaders inched closer toward a compromise for another massive economic aid package. However, House Speaker Nancy Pelosi says the two sides only have until the end of Tuesday to reach a deal; otherwise they won’t be able to pass a stimulus package before the election.
If a deal doesn’t come Tuesday, it might not come until after until Jan. 20, if it comes at all: Divided governments rarely act between Election Day and Inauguration Day.
Though the battle on Capitol Hill over a new stimulus deal has been waged since May, some economists estimate things may start to look even worse for those who have been hit the hardest by the pandemic if help isn’t on the way soon.
“The economic recovery is already slowing,” Mark Zandi, chief economist at Moody’s Analytics, recently told Fortune. “Without additional support it threatens to stall out or even backslide.”
According to Brett Ryan, senior U.S. economist at Deutsche Bank, failing to pass another stimulus bill this year could have an adverse impact on incomes: “The most immediate effect is the extra income” from enhanced unemployment benefits, Ryan tells Fortune.
More than 25 million Americans are on some form of unemployment assistance. Without another stimulus deal, they’re unlikely to see any additional enhanced unemployment benefits. Before it expired at the end of July, out of work Americans were receiving the $600 weekly enhanced unemployment benefit. President Trump then signed a memorandum in August to provide a $300 enhanced weekly unemployment benefit; however, the $44 billion he set aside for it is running dry, and most states have ended the additional payment.
Failing to pass another bill with enhanced unemployment assistance “sets the economy back about a quarter,” Ryan predicts. “You’re going to have a drop-off in income of close to $1 trillion” in the third and fourth quarters of 2020, “and that’s pretty meaningful,” he says. Much of that will come from the lack of enhanced unemployment benefits—which alone could account for “about a $500 billion hit in the fourth quarter.”
Another problem with the timing of the yet-to-be stimulus bill is that failure to pass it may mean “income is going away in the heart of the holiday season,” Ryan notes. Retail sales might start looking less healthy despite strong numbers for September, as shopping for things like clothing could dwindle. That could translate to a decline in consumer spending in the coming months, Ryan suggests, and though he notes it’s unlikely, “if you get a weak holiday shopping season, and firms see less demand, they’re going to be less likely to hire or take risk. You don’t want to create that negative dynamic where firms see less demand than they expected and therefore they pull back on hiring, and it starts a downward spiral.”
There’s also a potential negative impact to small businesses, particularly those in the hospitality industry, should help not arrive soon.
Many small businesses have already exhausted their Paycheck Protection Program (PPP) loans, which were intended to help keep employees on the payroll while much of the country was on lockdown. As many businesses continue to struggle and the weather turns colder, economists foresee a rough few months if no further aid is passed.
Deutsche Bank’s Ryan argues that a failure to pass fresh PPP might lead to “more small-business bankruptcies as we get into the winter months, because we’re still dealing with the virus and social distancing and with these constraints on a lot of small businesses in terms of how they can operate,” Ryan notes. “Not having another round of PPP loans available yet is a potential timing issue, and it could slow the labor market recovery,” he suggests.
Certainly, not passing a stimulus deal before the election doesn’t mean one won’t be passed at all. But economists like Ryan don’t expect a deal until early next year, as late as February.


fortune--2020-10-20--Only a third of Americans plan to vote in person on Election Day

With just over two weeks to go until Election Day, voter enthusiasm is the highest it’s been in the past three presidential elections—but the majority of Americans won’t turn up to the polls on Nov. 3.
With the coronavirus pandemic still raging across parts of the country, just one-third of Americans (33%) plan to vote in person on Election Day, according to national survey by the Public Religion Research Institute (PRRI) released on Monday. Another 17% said they plan to vote in person, but before Nov. 3, while another third of Americans (32%) said they plan on casting their ballots by mail.
Of the 2,538 respondents, the remaining 18% said they were still unsure how they planned to vote. 76% of Americans said they are absolutely certain they will vote in the 2020 election, which is higher than both the 2016 election (66%) and 2012 election (71%). Including this year’s election, PRRI has tracked the past three presidential election cycles.
Analysis of early voting appears to correspond with that enthusiasm—with record turnout recorded ahead of Nov. 3. As of Saturday, 26 million people have voted so far, according to the U.S. Elections Project, a database tracking early turnout shepherded by University of Florida political scientist Michael McDonald. That’s more than six times the number of votes had been cast by the same point in 2016.
According to data firm TargetSmart, Democrats make up the majority of early turnout with 53% of votes, while the Republican figure currently sits at 36%. President Trump has been vocal about his supporters turning up to polls on Election Day, even if they send in absentee ballot by mail. Voting twice in the same election is illegal.
“Let them send it in, and let them go vote, and if their system’s as good as they say it is, then obviously they won’t be able to vote,” the President said at a rally in North Carolina last month. “If it isn’t tabulated, they’ll be able to vote.”


fortune--2020-10-20--Jane Fraser’s two-pronged approach to becoming Citi’s next CEO

This is the web version of The Broadsheet, a daily newsletter for and about the world’s most powerful women. Sign up to get it delivered free to your inbox.
Good morning, Broadsheet readers! Chelsea Clinton’s venture capital fund ramps up, Denmark’s prime minister responds to a mayor’s sexual harassment scandal, and we learn more about Jane Fraser’s path to Citi’s CEO suite. Have a thoughtful Tuesday.
– How to break a glass ceiling. By now, we know what Jane Fraser accomplished when Citi appointed her incoming CEO last month: she broke Wall Street’s stubborn glass ceiling. But how, exactly, did she achieve what for so long seemed unachievable?
My new feature for Fortune aims to satisfy that question by closely examining Fraser’s career. The answer I arrived at is two-fold.
On one hand, she closely followed a ‘blueprint’ for banking executives, working her way through key business units at Citi, leaving each better than she found it. For instance, her promotion to CEO of Citi’s Latin American division in 2015 was a clean-up job, since it followed two scandals at Citi’s retail arm in Mexico.
On the other hand, Fraser flouted many of the old ‘rules’ of getting to the top, refusing to sacrifice her personal life at the altar of her career and talking openly about moments of self-doubt. Her willingness to address the human side of the job sets her apart not just from her Wall Street peers, but from other women who have achieved “firsts” in their industries, some of whom fear that by being open about such things they’ll be pigeonholed by the label, female CEO. Fraser sees it as an advantage: “I can be more vulnerable in certain areas; talking more about the human dimensions of this than some of my male colleagues are comfortable [with]. I don’t feel that’s in any way soft or weaker; I actually think it’s much more powerful.”
Getting the CEO job was only the first step, of course; actually doing it comes next. And it won’t be an easy task, since Citi is dogged by lagging profitability and longstanding problems with its risk controls.
To take on those challenges, Fraser told me she’s drawing on some of the turn-around experience that got her here. “I think it’s going back and saying, ‘What are some of the root causes and then how do you turn that into an opportunity to really leapfrog and take the bank to a different level?’ ” she says. “And then how do you galvanize the organization to work toward that? I did that with the private bank, did that with mortgages, did that in Mexico. And I’m excited to do it here too.”
You can read the full story here.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was curated by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Metrodora + Oula. Three months ago, we learned that Chelsea Clinton was considering launching a venture capital firm. Now that fund has ramped up, with three public investments so far. We have the exclusive on Metrodora Ventures' latest bet: the maternity care startup Oula Health. Fortune
- Mette responds to the mayor. The mayor of Copenhagen, Frank Jensen, resigned after admitting to sexual harassment. Danish Prime Minister Mette Frederiksen called his departure "the right decision" and added, "It is obvious that we in the Social Democratic Party have problems, and that needs to change now." Reuters
- Debate watch. The planned third presidential debate approaches on Thursday—after the thwarted second that turned into dueling town halls—and President Trump has started attacking the debate's moderator, NBC News White House correspondent Kristen Welker. Trump tweeted that Welker is "terrible & unfair" but he'll "still play the game." Welker hasn't responded to his comments. USA Today
MOVERS AND SHAKERS: After leaving her role as VP of originals at Netflix, Channing Dungey will become the new chair of Warner Bros. television studio. The National Geographic Society hired Kara Ramirez Mullins, former VP for advancement at University of Virginia's Darden School of Business, as chief advancement officer.
IN CASE YOU MISSED IT
- Retail woes. John Lewis chairwoman Sharon White laid out a plan to revive the U.K. mega-retailer's fortunes. White will focus on digital business, a plan the company unveiled after closing stores and canceling bonuses at the employee-owned partnership. Bloomberg
- The show must go on. Last week's Tony nominations saw some notable Broadway productions earn nods—even though fewer than usual are eligible because of the coronavirus shutdowns of live theater. Jagged Little Pill, the show inspired by the Alanis Morisette album, led with 15 nominations. CNN
- Election results. In Bolivia, Luis Arce, an ally of ousted leader Evo Morales, is on track to win the country's election. He will succeed Jeanine Áñez, the right-win leader who took power after Morales's departure last year. She said, "I congratulate the winners and I ask them to govern with Bolivia and democracy in mind." NPR
ON MY RADAR
Appeals court rules Ghislaine Maxwell's 2016 deposition transcript will be unsealed CNN
O Magazine changed the publishing industry Zora
When women and politics took over baseball Wall Street Journal
PARTING WORDS
"Is it now that we have permission to speak? Well, I have always spoken."
-Supermodel Naomi Campbell on growing societal understanding of racial injustice


fortune--2020-10-20--Justice Department to file landmark antitrust case against Google

The Justice Department is expected to file a lawsuit Tuesday alleging that Google has been abusing its online dominance in online search to stifle competition and harm consumers, a person familiar with the matter told The Associated Press.
The litigation marks the government’s most significant act to protect competition since its groundbreaking case against Microsoft more than 20 years ago. The suit could be an opening salvo ahead of other major government antitrust actions, given ongoing investigations of major tech companies including Apple, Amazon and Facebook at both the Justice Department and the Federal Trade Commission.
Lawmakers and consumer advocates have long accused Google, whose corporate parent Alphabet Inc. has a market value just over $1 trillion, of abusing its dominance in online search and advertising to stifle competition and boost its profits. Critics contend that multibillion-dollar fines and mandated changes in Google’s practices imposed by European regulators in recent years weren’t severe enough and that structural changes are needed for Google to change its conduct.
The case is expected to be filed in federal court in Washington, D.C., and will allege it has been abusing its online dominance in online search to stifle competition and harm consumers, the person familiar with the matter told the AP. It will also allege that Google uses billions collected from advertisers to pay phone manufacturers to ensure Google is the default search engine on browsers, the person said. The person could not discuss the matter publicly before a formal announcement expected later Tuesday morning and spoke to AP on the condition of anonymity.
The Trump administration has long had Google in its sights. A top economic adviser to President Donald Trump said two years ago that the White House was considering whether Google searches should be subject to government regulation. Trump himself has often criticized Google, recycling unfounded claims by conservatives that the search giant is biased against conservatives and suppresses their viewpoints, interferes with U.S. elections and prefers working with the Chinese military over the Pentagon.
Google controls about 90% of global web searches. The company has been bracing for the government’s action and is expected to fiercely oppose any attempt to force it to spin off its services into separate businesses.
The company, based in Mountain View, California, has long denied the claims of unfair competition. Google argues that although its businesses are large, they are useful and beneficial to consumers. It maintains that its services face ample competition and have unleashed innovations that help people manage their lives.
Most of its services are offered for free in exchange for personal information that helps Google sell its ads. Google insists that it holds no special power forcing people to use its free services or preventing them from going elsewhere.


fortune--2020-10-20--Can an A.I. algorithm help end unfair lending? This company says yes

Jenny Vipperman, the chief lending officer at VyStar Credit Union, among the largest U.S. credit unions, wanted to lend more money to minorities and other disadvantaged groups that historically have struggled to obtain credit. But finding a way to lend more inclusively without taking on potentially dangerous amounts of risk was difficult using standard credit scoring and the tried-and-true lending rules of thumb that VyStar had been relying on.
“We had been approaching lending as an art, not a science,” she says. “But it is 2020 now, and we have access to much better data. We should be able to leverage that data to make more scientific decisions.”
She heard about a Los Angeles–based startup called Zest AI that was using artificial intelligence to help banks and credit unions lend more inclusively and decided to give it a try. But she wasn’t expecting what happened after Zest trained its A.I. system on several years’ worth of VyStar’s lending records: The A.I. figured out how to increase VyStar’s approvals for credit cards by 22% while keeping VyStar’s risk constant.
“That is thousands of people who otherwise would not have had access to a credit card,” Vipperman says.
Results like this are helping Zest build a growing stable of customers among financial institutions both large and small. It says that on average it can increase loan approvals 20% with no additional risk and it can help banks reduce charge-offs—or debts that cannot be collected—by 50%.
Today the company announced that it has received $15 million in additional funding from Insight Partners, a New York venture capital firm. Zest’s valuation from the financing was not disclosed. The latest round brings the amount the company has raised since its founding in 2009 to more than $230 million. As part of the fundraising, Lonne Jaffe, an Insight managing director, will be joining Zest’s board.
Zest’s previous backers have included Baidu, the Chinese search giant, as well as venture capital firms including Lightspeed Venture Partners, Matrix Partners, and Upfront Ventures. It also received $150 million in “venture debt” from investment management firm Fortress.
Deven Parekh, Insight’s managing partner, said the venture firm, which invests only in fast-growing software businesses aimed at serving large organizations, was drawn to Zest’s ability to help banks improve financial equality through A.I. and the way it could help banks manage A.I. systems over time.
This “model management” function—which involves not just creating an A.I. model but also running it on an ongoing basis, monitoring it to make sure the data it is being fed is not deviating substantially from the data it was trained on, and periodically retraining it—has become increasingly important to companies as the number of A.I. systems they use has begun to proliferate.
Zest was founded as ZestCash by Douglas Merrill, a former chief information officer at Google. It began life as a financial technology company that would underwrite short-term loans directly to consumers. But over time the company switched to selling fairer credit modeling software to other financial institutions and rebranded itself as Zest Finance. In October last year, Merrill departed the company, and it rebranded once again, to Zest AI.
Mike de Vere, who became Zest’s chief executive in December, says that the company is now solely focused on selling software to banks and credit unions to help them create and manage A.I. lending models. The company makes money by charging lenders a subscription to use its software.
The company is one of several startups using A.I. to improve lending. Others include Underwrite.ai and Upstart as well as efforts being tried inside banks themselves. Zest has found traction with some big banks, including Turkey’s Akbank, as well as work for Discover and France’s BNP Paribas.
One problem with using A.I. software, particularly in a highly regulated area like lending, is that some powerful A.I. models are also opaque. It can be difficult even for the data scientists who helped create them to understand exactly how they have arrived at any particular decision.
De Vere says Zest’s A.I. systems are far more transparent. “We have broken the black box and fully explain the machine-learning model,” he says. He says that Zest has gone through regulatory audits of its systems, including an audit of the model it helped build for a large U.S. private bank by the U.S. Treasury Department’s Office of the Comptroller of the Currency, and has been able to satisfy regulators that the correct reasons are being given for any adverse action—such a credit denial.
Vipperman says this transparency was critical for VyStar being comfortable with handing lending decisions to Zest’s models. “We have the ability to review those factors it is weighting most heavily in its decisions and make sure it is not learning something that we don’t want it to be learning,” she says.
Zest’s fairness and de-biasing system is based on a type of machine-learning technique called a generative adversarial network, or GAN, which is the same technology that makes deepfakes—highly believable photos and videos created by A.I. software—possible. GANs work by yoking two different neural networks—a kind of machine-learning software loosely based on how the human brain works—together: One network generates a model, and the second network acts as a “critic” that pushes the first network to improve.
In Zest’s case, the first network creates a lending model without having access to data about the applicants’ race or any information, such as post code or a person’s name, that can often serve as proxy for race. The second network does have access to the applicant’s race and computes how far away from perfect fairness the first network’s lending model is. It then feeds that difference back to the first model, prodding it to adjust how it weighs various pieces of data in order to create a fairer model.
Sean Kamkar, Zest’s head of data science, says the company’s GAN-based system can almost always find a way to improve fairness while keeping risk levels constant by making small adjustments in how different pieces of data are weighed. And some of Zest’s customers are willing to go further, sacrificing tiny amounts of potential profit for huge gains in inclusivity and fairness. De Vere says one auto lender it worked with found that by giving up just $2 in profit, or 0.125% of a loan with an average profit of $1,600, it was able to increase the number of auto loans it was offering to Black customers by 4%.
De Vere says Zest’s technique for improving the fairness of a lending model is far superior to the existing industry standard in banking, which is a technique called “drop one.” In this method, a financial institution takes its lending model and then simply eliminates—or drops—one of the variables from consideration completely and sees how the model performs on both risk and fairness. It then repeats this in turn for each of the variables in the model. Kamkar compares this to “taking a hammer” to the model, and not surprisingly, most models perform much worse when one variable is eliminated.
The problem, De Vere says, is that banks will often cynically use “drop one” analysis as an excuse to avoid altering their lending practices to be more inclusive. Most regulators will allow the “drop one” analysis as evidence that the bank has a valid business rationale for sticking with the existing model. De Vere says he has been trying to persuade lawmakers and regulators to compel financial institutions to move beyond “drop one.”
This story has been corrected. A previous version erroneously stated that Zest had worked with Citigroup instead of Discover.


fortune--2020-10-20--How Adobe plans to fight the scourge of deepfakes

Adobe said it has found a way to help news outlets build trust by enabling their readers to check whether news photos are deepfakes, or images covertly manipulated by artificial intelligence.
The tool, revealed Tuesday, lets the public review a list of all the ways a photograph has been altered, essentially showing consumers an audit trail that will help vouch for an image’s validity.
For instance, people who doubt the authenticity of a photo published online by the New York Times of President Trump exiting Air Force One in Afghanistan would see an icon indicating that readers can learn specific information about the photo’s origins. By clicking on the icon, which will not have the Adobe branding, readers will see information such as who took the photo and where it was taken, along with a history of the photo’s edits.
If the photo is indeed a deepfake, users would be able to see how the photo was created, including the original photo that was used to generate the deepfake.
The tool is intended to combat the potential problems that deepfakes pose for society. If manipulated images become common, people “will not believe the lies nor the truth,” said Adobe general counsel Dana Rao.
“The media companies—they see this as an existential threat to their businesses,” he said.
Lawmakers and researchers are increasingly sounding the alarm about the potential for deepfakes to erode public trust in accurate information or to manipulate public opinion. Rapid advances in A.I. technology have made it possible to more easily create authentic-looking but fake photos, videos, and audio clips.
The deepfake-fighting tool, which still needs additional testing, was developed as part of Adobe’s Content Authenticity Initiative, a project that debuted last year with help from organizations like the New York Times, the BBC, Twitter, and Microsoft. The idea behind the group is that it will help better coordinate creating tools and best practices to counter deepfakes.
Rao said there is an “arms race” between good and bad actors that makes it difficult to create deepfake detection tools that work. As he put it, bad actors are consistently developing more sophisticated deepfakes that can elude the best detection software, and there is no sign the race is slowing down.
The new tool only works on photographs. Future products from the initiative may include tools for verifying deepfake audio and video clips.
People will be able to see the new tool in action once publishers start their early testing. It will ultimately be up to the publishers to determine how best to use the tool and present the information to readers, Rao said.


fortune--2020-10-20--Microsoft partners with SpaceX on new push beyond the stratosphere

Microsoft has partnered with SpaceX to help the space cargo company develop a satellite-based Internet service.
Microsoft revealed its alliance with the Elon Musk–founded SpaceX while also debuting its Azure Space business, a cloud-computing service for aerospace companies.
Under the alliance, Microsoft said that SpaceX’s Starlink Internet service would be connected to Microsoft’s Azure cloud-computing service, making it the backbone for SpaceX’s planned Internet service. The deal lets SpaceX avoid having to build its own data centers to supports its planned Internet service.
In September, SpaceX said Starlink would be capable of delivering Internet speeds of 100 megabits per second, or about as fast as some currently available Internet satellite services, but slower than wired Internet providers, which offer 128Mbs on average.
SpaceX has not said how much Starlink subscriptions will cost.
Microsoft also plans to help SpaceX develop a defense system for the federal government that is capable of detecting and tracking ballistic, cruise, and hypersonic missiles. SpaceX is developing the system though a contract with the U.S. Space Development Agency, which is helping the Pentagon use space technology for military purposes.
Microsoft’s partnership with SpaceX and the debut of its Azure Space business comes as Microsoft’s cloud-computing rival Amazon plans to debut its own satellite-based Internet service. Amazon has not revealed a date for when the service will be publicly available.
Both Microsoft and Amazon have started selling technology that lets companies more easily collect and analyze satellite data via so-called ground stations. Companies can do tasks like predicting the weather or optimizing crop yields by collecting and analyzing satellite data.
Other companies that are signed up for Microsoft’s nascent space business include KSAT, Viasat, and Kratos.


fortune--2020-10-20--What the Democrats could prioritize if they win the presidency and both chambers of Congress

Regardless of the bravado of President Trump, Republicans seem to think he’ll lose next month’s presidential election to Joe Biden. “Y’all have a good chance of winning the White House,” South Carolina Sen. Lindsey Graham said to Democratic Sen. Amy Klobuchar during Thursday’s Supreme Court confirmation hearing. National polls anticipate that outcome as well: Biden currently holds an 11 point lead over Trump.
Democrats are also expected to maintain control of the House of Representatives, if not extend their majority. That means the most contentious battles come Election Day may very well be fought in the Senate. Forecast models from FiveThirtyEight to The Economist predict Democrats will take back the Senate—a scenario that would, along with the Democrats winning the House and presidency, see the party fully control the federal government for the first time since 2010.
What would the Democrats aim to do with that power? Here’s what we anticipate an all-Democratic government would prioritize.
COVID-19 relief
The Democrats have made it known that another COVID-19 relief bill akin to the $2.2 trillion CARES Act passed in late March is a priority for the party. In May, House Democrats passed another $3 trillion stimulus package, the HEROES Act, designed to bolster state governments, extend unemployment insurance, and increase COVID-19 testing and contact tracing. Senate Republicans promptly shut it down, calling it unrealistic and a “partisan offering,” instead proposing a significantly cut-down version of the legislation—a $650 billion “skinny” bill.
The two parties have since been locked in a stalemate over a revised stimulus, with neither side apparently willing to budge. And though House Speaker Nancy Pelosi on Thursday penned a letter to her colleagues saying that “Democrats will stay at the table for as long as takes to reach agreement to honor our heroes,” it still looks unlikely the two sides will be able to compromise before the election.
In that case, a Democrat-majority Congress with Biden as President would almost certainly see the Democrats move quickly to pass another COVID-19 relief bill. Despite talks of an effective vaccine arriving sometime in late 2020 or early next year, the coronavirus pandemic—and the economic collapses it brought—will still be raging.
Alter—or end—the filibuster rule
Even if the Democrats take back the Senate, the rules the chamber must operate within could prevent the party from passing its major legislative goals. Under the current setup, the minority party in the Senate can still block most proposed legislation from being put to a vote unless three-fifths of the Senate, or 60 of 100 senators, vote to proceed.
In increasing times of partisanship, this tactic often leaves legislation dead in the water. It’s rare to get a supermajority of 60 senators to agree on changes, and much of the Democrats’ ambitions—Medicare for All, police reform, climate change policy—would likely stall in the Senate. Should the filibuster be ended so that a simple majority, 51 votes, would trigger the decision to vote?
It’s a question some in Washington are considering. But not all Democrats necessarily support the change: Senators like Joe Manchin of West Virginia and Dianne Feinstein of California said they had concerns over ending the filibuster rule. The purpose of the filibuster is to lead to more compromise and prevent the opposing party from easily implementing its legislation. “I know it can be frustrating, but I think legislation is better when it has some bipartisan support,” Sen. Angus King of Maine told the Wall Street Journal.
Other Democrats, though, have come around to the idea, even those who previously didn’t support it, such as Sen. Michael Bennet of Colorado. “If people continue for their own political reasons to make it impossible for the majority to exercise its will, filibuster reform may have to be on the table,” he told the Journal.
Discussions are ongoing, and it remains to be seen if Democrats would seek an all-or-nothing approach to the filibuster or simply tweak the rule, such as classifying certain types of legislation as immune to filibusters.
“Democracy reform”
While an all-out elimination of the filibuster may ultimately prove too bold for Democrats to pursue, there are other tactics they may take to expand their power in government. It’s a plan they label as “democracy reform,” highlighted in 2019’s For the People Act, or H.R. 1, passed in the House of Representatives.
Not yet passed in the Republican-controlled Senate, the bill would establish a national voter registration program, make Election Day a federal holiday, replace partisan gerrymandering with nonpartisan commissions to redraw electoral districts, require presidential and vice presidential candidates to disclose tax returns, and create a public financing system for federal campaigns, among other things. Democrats believe it would create a more equitable system of democracy—and they also think it would get them more votes.
With control of Congress and the presidency, Democrats could look to finally pass H.R. 1 in the Senate and have it signed into law by Biden. “Starting with H.R. 1 is a good idea,” Rep. Ro Khanna of California told The Atlantic. “The filibuster could come right next.”
If these fundamental shifts in governance and voting are able to pass, the Democrats would have a stronger platform to push through their more ambitious proposals. With the end of a filibuster and expanded voting rights completed, climate change, Medicare for All, police reform, and statehood for Washington, D.C., and Puerto Rico could eventually be on the table.


fortune--2020-10-20--Kohl’s bets on more activewear, fewer store brands to finally get back to growth

On the eve of the pandemic’s outbreak in mid-March, Kohl’s had a new turnaround plan it wanted to unveil to Wall Street that it hoped would finally shake years of stagnation.
But the COVID-19 outbreak, which forced Kohl’s to close its stores for weeks, thwarted those plans, instead putting the retailer in survival mode as sales fell 33% in the first half of the fiscal year.
Now that business has stabilized—though far from returning to pre-pandemic levels—Kohl’s is unveiling its plan, which shifts it away from fashion, where it has stumbled, and further into activewear. The plan also calls for Kohl’s to lean more heavily on national brands like Nike and TOMS, as well as newer partners like Lands’ End and Cole Haan, and shed many of its store brands.
“The Kohl’s store and brand is going to look and feel different,” Kohl’s CEO Michelle Gass tells Fortune. “Active and casual are going to be at the center of that.”
Apparel spending has been one of the biggest victims of the pandemic. Shielding Kohl’s from the worst of the clothing armageddon buffeting other department stores and specialty clothing chains is activewear from brands like Nike, Under Armour, and Adidas. Kohl’s wisely placed a big bet on sporty apparel after Gass joined Kohl’s in 2013. That category now generates 20% of Kohl’s sales and Gass thinks that can hit 30%.
While COVID-19 took a hammer to the business of many Kohl’s rivals— notably bankrupting mall-based J.C. Penney and decimating Macy’s—other competitors have fared much better, adding to the pressure on Kohl’s to finally get back to growth.
Having 95% of stores away from malls helped it avoid from much of the ravages felt by Penney and Macy’s. Yet as a strip-mall based chain, Kohl’s is going up against very strong competitors in Target, Ulta Beauty, Dick’s Sporting Goods and T.J. Maxx.
Gap Inc’s Old Navy chain, which competes directly with Kohl’s for the business of young American mothers, among other demographics, saw a sales decline much smaller than Kohl’s, while Target reported an increase in apparel and home goods sales.
And this has forced Kohl’s to rethink its merchandise strategy and what makes it appealing to shoppers. While Kohl’s isn’t alone in selling athleisure, it has carved out a niche by focusing on such items for the whole family and not just women. “We can own that space,” says Gass. Kohl’s is also testing out new ideas, like personal care products, at 50 stores. “It may or may not work—we’re really stretching the boundaries of where we can go and take this active and casual lifestyle,” Gass adds.
For years, Kohl’s bet heavily on store brands, which offer higher profit margins, more control, and ideally, something customers want—but can’t get elsewhere. Kohl’s problem is that too many of its store brands grew stale, particularly in apparel. That weakness stands in stark contrast to Target’s remarkable ability to quickly launch new brands that send consumers flocking.
Kohl’s has so far ditched eight of its exclusive brands, including JLO, Rock & Republic and Dana Buchman, with more exits to come, even as it has lined up more national brands, like Lands’ End and Cole Haan. The retailer now gets 37% of sales from its exclusive brands in apparel and other categories, down from more than half just a few years ago. “We will be more focused,” Gass said of the paring of brands.
Beauty call
Kohl’s has been trying for years to become a serious player in the beauty sector after having ceded it to Macy’s and J.C. Penney, which houses Sephora shops. In fact, building a sizable beauty was a linchpin of Kohl’s “Greatness Agenda” in 2014, with the company hoping beauty would grow from 2% of sales then to 5% in short order, helped by so-called “beauty concierges.” While Kohl’s has shown strength in fragrance, beauty has not yielded the upside the company planned on, as it has faced stiff competition from strip mall neighbors Target and Ulta Beauty, and to a lesser extent CVS and Walgreens.
Kohl’s is now planning beauty shops three times the size of its current ones, staffed with beauty advisors. The category is crucial to solving a riddle that has bedeviled Kohl’s for years: how to get more shoppers to come to store and indulge, rather than just popping into the store for a quick in-and-out trip.
A big part of its plan is to keep building its e-commerce business. Online shopping, which accounted for nearly a quarter of sales pre-pandemic, spiked to as much as 40% at the peak of the pandemic. Ultimately, it’s expected to settle in somewhere in the middle of those two percentages.
In-store, Kohl’s will reduce its assortment within some brands as much as 40%. It will shrink its offering of handbags, fine jewelry, and men’s suits—areas that have seen sales decline—making space to increase inventory of healthier categories.
“That gives us the flexibility to lean into growth categories, test, learn, iterate—kill what’s not working, scale what is,” says Gass. And hopefully finally yield that long elusive growth.


fortune--2020-10-20--World’s vaccine testing ground deems Chinese COVID candidate ‘the safest, most promising’

Brazil is one of the world’s top COVID-19 vaccine testing grounds. Now officials there say that CoronaVac, the experimental COVID-19 vaccine from Chinese developer Sinovac, is the safest of the coronavirus immunizations evaluated in the country so far.
“The first results of the clinical study conducted in Brazil prove that among all the vaccines tested in the country, CoronaVac is the safest, the one with the best and most promising rates,” São Paulo Gov. João Doria told reporters in Brazil on Monday.
Doria’s comments are especially striking since Brazil has more extensive and varied exposure to COVID-19 vaccine candidates than other countries. Brazil is conducting Phase III trials for at least five of the 10 vaccine makers that have reached the final stage of testing. In addition to Sinovac, Brazil is the site of large, human trials of COVID-19 vaccines developed by American vaccine makers Johnson & Johnson and Pfizer, the U.K.’s AstraZeneca, and China’s Sinopharm. Brazil’s struggles to contain COVID-19—it has the third-highest number of cases globally—have made it fertile ground for vaccine makers that need high rates of infection to adequately test their candidates.
Brazilian authorities pegged Sinovac as the top contender after reviewing preliminary data from Sinovac’s ongoing clinical trials. Sinovac hasn’t released the data to the public, but Dimas Covas, director of the Butantan Institute, a vaccine research center, said that Sinovac’s CoronaVac candidate had proved safe among 9,000 volunteers.
No volunteers in Sinovac’s trials experienced severe adverse reactions to the vaccine; 20% reported mild pain from the injection site; and less than 15% said they had headaches, nausea, or tiredness after receiving the shot, Covas told reporters on Monday.
Covas and Doria did not provide specifics on how Sinovac’s candidate stacked up against rivals; their statements represent the first preliminary result from any Phase III trial of a COVID-19 vaccine.
The Brazilian authorities said the Sinovac data indicated that the vaccine provided protective antibodies among volunteers, but a final determination of CoronaVac’s effectiveness will come once the 13,000-volunteer trial is complete, which could occur as early as mid-November.
Brazilian President Jair Bolsonaro has, at times, promoted “miracle cures” and other dubious science related to COVID-19. But the Butantan Institute, which is affiliated with the São Paulo government, is known globally as a reputable biomedical research institution and is Latin America’s largest vaccine manufacturer.
Sinovac did not respond to Fortune’s request for comment.
Even before Monday’s announcement, Brazil had a lot riding on the success of Sinovac’s candidate.
In late September, Brazil’s São Paulo state agreed to purchase 46 million doses of CoronaVac for $90 million. Days later, Doria said that he had asked Brazil’s health regulator to register CoronaVac for potential distribution and announced that São Paulo would be “one of the first places in the world to vaccinate the public.”
Brazil’s vote of confidence in Sinovac’s vaccine comes as vaccine makers like Johnson & Johnson and AstraZeneca have paused trials amid safety concerns. Johnson & Johnson’s Phase III clinical trials in the U.S., Brazil, and Argentina remain temporarily suspended after the company reported an unexplained illness in a trial participant. AstraZeneca’s trials also remain paused in the U.S. after the vaccine maker discovered a similar unexplained illness in a U.K. volunteer in September, but the company has resumed testing in the U.K., Brazil, and South Africa.
Barring any holdups, Brazilian authorities said on Monday that they will aim to approve CoronaVac before the end of 2020 and begin distributing the vaccine to the public by the start of next year.
Other vaccine makers have put forth roughly similar timelines.
Pfizer said in a statement on Oct. 16 that it may be ready to begin rolling out its vaccine for emergency use in the U.S. by the third week of November. Moderna has provided a similar emergency use timeline in the U.S. but says its vaccine might not be ready for widespread distribution until the spring of 2021. China’s Sinopharm, meanwhile, has already distributed its vaccine to hundreds of thousands of people outside of clinical trials through an emergency use program and may reach market by December.


fortune--2020-10-21--Elijah Cummings has a message for voters ‘from beyond the grave’

Elijah Cummings was born to sharecroppers in the Jim Crow South. He spent his life fighting for civil rights and against segregation and went on to become one of the most influential members of Congress, chairing the House Committee on Oversight and Reform where he was a key figure in the impeachment inquiry against President Donald Trump.
His story, much like the history of the United States, is long and complicated, full of dark spots but ultimately bending toward justice. Cummings served for 23 years as a Democrat in Congress, representing his home state of Maryland and home city of Baltimore. He was known as a hard worker, willing to reach across the aisle when necessary and to bridge gaps between politics to create friendships. “Those who knew him understood that it was values and patriotism that mattered to him, not party or politics,” writes Speaker Nancy Pelosi in the introduction to his new book, We’re Better Than This, written in the final year of his life.
The book delves into his story and personal history, but it largely serves as a warning.
“This is a fight for the soul of our democracy,” he wrote of President Donald Trump and the current political situation. He used his last days to write a call to action, which he believed was vital to the future of the United States. His widow, Maya Rockeymoore Cummings, finished the book for the congressman, writing in its final chapter that “with every transgression, every disregard for the Constitution, every attempt to act above the law, every denial of truth, our democracy is endangered. That’s why in the months and years ahead we must continue to hear Elijah’s voice, ‘We’re better than this.’ We’re better than this.”
Rockeymoore Cummings ran as a candidate in the special election to fill her late husband’s seat, coming in second to Kweisi Mfume. She also served as chair of the Maryland Democratic Party.
Fortune spoke with Rockeymoore Cummings about her late husband, his legacy, and his final call to action.
The following conversation has been edited for clarity.
What are your thoughts on the passing of Ruth Bader Ginsburg and the new fight in the Senate to fill the vacant Supreme Court seat with Amy Coney Barrett?
We’re headed towards something big and scary, and it’s because this President and his attorney general have indicated that they will be able to fight the results of any election as much as they possibly can. That means that Justice Ginsburg’s death is especially significant; they want to stack the court before the election. Because of that, our democracy is in peril, just like Elijah always predicted, and it’s in peril before the election even happens. We’re at a very serious inflection point in the history of this country. People need to open their eyes and their ears to see and hear clearly what’s going on. Our democracy is in danger, and it’s being put in danger by the very man sitting in the Oval Office.
Let’s talk about this election and the role Congress and the oversight committee in particular may end up playing over these next few weeks.
The Republican Party has been unwilling to hold President Trump accountable. We saw that during the impeachment process, and we’ve seen it in many respects during investigations by both the Senate and the House. It’s important that they continue to investigate and sound the alarm to the American people about what’s happening to counter Donald Trump’s efforts to thwart their investigations. The Trump administration has failed to comply with democratic norms. They won’t respond to subpoenas. Some of their administration officials have refused to testify.
There does seem to be this growing distrust of both the government and our electoral system in general. How does Congress change that going into this presidential election?
Our institutions are only as good as the people who run them. And we have a country being run by a man who is intent on fostering and disseminating disinformation, who operates through chaos and confusion so that he can control the levers of power for his own benefit and for that of his party. He already acknowledged privately to Bob Woodward back in January that he knew that COVID-19 was airborne and that it was dangerous, and yet we’ve seen him and his administration actually rescind that knowledge. We see him trying to confuse people about how it’s transmitted, and we see him directly putting people in danger by holding rallies where they could possibly get COVID-19 and die. People are rightly confused because they’re used to trusting the message of the person sitting in the Oval Office.
Elijah’s message to the American people was that this man, Donald J. Trump, can never be trusted. He’s shown on a daily basis that he is willing to tell hundreds of lies. And the person sitting in the Oval Office today cannot be trusted with our children’s future, with our country’s future, or with our own future.
Chairman Cummings wrote about the importance of finding the humanity in voters and connecting with them—even if they weren’t going to vote for him. What do you think he would have said about this growing partisan divide in the country? How can we bridge these gaps?
What’s so sad about this current moment is that we also have stealth political actors, whether they be foreign governments or our own disinformation specialists from inside the country, who are trafficking conspiracy theories like QAnon. They are intent on capturing the minds of the American public who are vulnerable to conspiracy theories in a way that makes them resistant to facts.
But what’s challenged their ability to continue that effort is the coronavirus, which is resistant to human spin. So in spite of what they say about not wearing masks or whether it’s airborne or forcing kids to go to school or people to open their businesses, the coronavirus is going to do what it does. We’re going to see more unnecessary deaths, and the economy is going to continue to suffer because we have people and institutions that are intent on keeping the American people misinformed.
The President said things about your late husband that were cruel. Your husband was vocal about how much they hurt him. There’s some power in letting the President’s words have power instead of brushing them off…
Words make the world go round. What we say is the currency of what happens in life. With regards to Elijah, I think the hurt and the pain that came from President Trump’s attacks were rooted in being the child of the Jim Crow South. Places where African-Americans live, like Baltimore, have been continually defined as being less than and outside of the body politic. That hurts people because it results in people in power making decisions that intentionally deprive American citizens of the resources they need to thrive. Through his childhood, those kinds of attitudes and that kind of language resulted in separate and unequal schools. It resulted in segregated neighborhoods. It resulted in children like Elijah having rocks thrown at them when they tried to integrate.
It still results in tangible harm and is a real threat to people who are persecuted. And the President is engaged in persecution. He’s been persecuting the city of Baltimore. He’s been persecuting immigrants. He’s been persecuting people of color, and those words aren’t just harmless. They result in actions by people who follow what the President says and act accordingly.
This book came out weeks before the election. What lessons do you want people to take away from it?
I want this book to change the course of history. I want this book to deny President Trump the ability to game and to cheat the system and the electoral college in order to get reelected. I want this book to reach people in every state, red and blue, across the country.
I want Elijah’s words to rise above partisanship. This is his message to American people from beyond the grave: They absolutely must defeat Donald Trump. Our democracy depends on it.
He firmly believed that if Donald Trump managed to get reelected then we would no longer have a democracy. He wanted the American people to know that. He spent the last year of his life pouring his heart and soul into this book so they could hear it, and now it’s time to get that message out.
What do you imagine will happen if President Trump does win reelection?
I think that we’ve already seen a preview of what’s going to happen: He’s going to become increasingly autocratic. We have already entered the realm of becoming a pariah nation, and I think that will become a bigger issue under a second term. He’s indicated that he wants to be President for life, which is against the Constitution. We know that he has flouted the law; we can expect to see that continue.
It’s going to be a terrible scenario, and Americans are going to suffer deeply.
But Elijah’s message is that we’re better than that. We can be better as long as we do better. His life was a testament about how we can achieve great things as a nation when we unify, when we push forward, and when we breathe life into those four words: a more perfect union.


fortune--2020-10-21--Time to concede that the EU’s antitrust action was about Google, not America

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning. David Meyer here in Berlin, filling in for Alan.
Europe provides an entertaining vantage point from which to view the U.S. Department of Justice’s (very) long-awaited antitrust broadside against Google.
It really wasn’t so long ago that the EU was being accused of bias against American companies by whacking Google with what turned out to be the first of three major fines (totaling more than $9 billion) over its antitrust abuses. At the time, in 2017, lobbyists at the U.S. Consumer Technology Association said the actions of EU competition chief Margrethe Vestager were “driven by politics and protectionist policies that harm open-competition practices, consumers, and unfairly target American companies.”
“She hates the United States perhaps worse than any person I’ve ever met,” complained President Trump of Vestager when the third fine rolled around a couple years later. “She’s suing all our companies. We should be suing Google and Facebook, and all that, which perhaps we will.”
And now Trump’s administration, backed by 11 Republican-led states, is indeed suing Google. It’s fair to say none of them hate the U.S. and its corporate titans, yet elements of their assault are really pretty similar to the EU’s complaints, particularly the accusation that Google entrenches its search monopoly by forcing manufacturers to use its own flavor of Android if they also want to use its Play app store and other key services. The DOJ even cites the crowding-out of Amazon’s failed Fire OS Android variant, just like Vestager did.
There are huge differences between the cases, of course—for one thing, U.S. antitrust suits have to demonstrate evidence of negative impacts on consumers, while in the EU it’s sufficient to say that a market-dominant player’s policies have the potential to cause consumer harm. But nonetheless, it should now be clear that attacks on Google are motivated by its size and behavior, rather than its country of origin.
For more Fortune comprehensive coverage of the DOJ suit, check out Aaron Pressman’s explanation of the key points, Danielle Abril’s rundown of Google’s defense, David Z. Morris’s piece on possible remedies for the alleged abuses, and Robert Hackett’s report on reaction from politicians and Google’s rivals.
Also, Fortune’s latest Most Powerful Women International list is out today (the U.S. list came out earlier this week.) Last year’s No. 1, Banco Santander executive chair Ana Botín, is down to No. 3, and GlaxoSmithKline CEO Emma Walmsley has retaken the top spot.
The U.K.’s GSK is of course one of the big hopes (in collaboration with French competitor Sanofi) in the race to produce a COVID-19 vaccine. It’s also worth noting that this year’s No. 2 place goes to Jessica Tan, co-CEO and executive director of China’s Ping An Group—an insurer whose telehealth and smart-city arms are both benefiting from the behavioral changes that result from the pandemic.
More news below.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Biden picks
Former eBay CEO (and current Quibi CEO) Meg Whitman is reportedly among the Republican figures that Joe Biden is considering for certain cabinet posts, should he win the election in a couple weeks' time, along with former Ohio Governor John Kasich, and former Arizona Senator Jeff Flake. Bringing a couple Republicans on board would be something of an olive branch, but the progressive wing of the Democratic Party may not be amused. Politico
Huawei effect
Who's benefiting from governments shunning Huawei in their telecoms networks? Ericsson, for one—the Swedish outfit (the global number three player, behind Huawei and Nokia) has reported a 38% jump in third-quarter adjusted profit, largely off the back of increasing market share in Europe and (obviously not a country that's banned Huawei!) China. CEO Borje Ekholm said the "footprint gains" offset the negative impact of the pandemic on operator capex. Bloomberg
Goldman settlement
Goldman Sachs will reportedly settle with the Justice Department, perhaps this week, over its role in the Malaysian 1MDB government fund scandal. According to reports, one of the bank's Asian subsidiaries will plead guilty to ignoring signs of the fund's looting in order to reap tasty fees, and Goldman will pay around $2.8 billion. Wall Street Journal
Netflix plunge
Netflix's share price fell more than 6.5% in late trading after the streamer missed Wall Street estimates with its latest results. Investors are worried about Netflix's ability to keep growing as pandemic lockdowns fade (though looking at the latest infection numbers, perhaps they're being a bit overoptimistic about that happening.) Fortune
AROUND THE WATER COOLER
Sinovac promise
Brazilian officials say CoronaVac, the experimental vaccine from China's Sinovac, is the safest thus far of all the candidate COVID-19 vaccines that have been tested in the country. Brazil is one of the world's preeminent testing grounds for a vaccine that could stem the pandemic, and other candidates being tested there include those from Johnson & Johnson and Pfizer, AstraZeneca, and Sinopharm. Fortune
NASA mission
NASA's OSIRIS-Rex spacecraft successfully made a brief touchdown on the asteroid Bennu. At the time of writing early Wednesday morning, it is not yet known whether the spacecraft successfully collected rocky pieces from Bennu's surface, which is what the $1 billion mission aims to achieve. CNBC
Brexit intervention
Europe's big auto firms have asked the EU to ease the requirements for their cars to reap the benefits of a potential EU-U.K. trade deal, because the bloc's current position is "not in the long-term interests of the EU automotive industry." Of course, it is increasingly unlikely that there will actually be a trade deal anyway, but the reported letter indicates how skittish European industry is getting about Brexit's fallout. Financial Times
Protecting democracy
Fortune 500 CEOs really ought to lend their names to the Leadership Now Project statement promoting election integrity, writes labor and human rights consultant Bennett Freeman in a piece for Fortune: "American business leaders should recognize that they have an existential stake in the rule of law and accountable governance, in our civil rights and liberties, and ultimately in the credibility and durability of our democratic institutions that protect us from autocracy." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-10-21--Hong Kong has COVID-19 under control—it hasn’t helped its flagship airline

Hong Kong’s flagship airline Cathay Pacific will slash 8,500 jobs and shutter one of its subsidiary airlines as part of a pandemic-induced restructuring, the airline announced on Wednesday.
The job cuts represent roughly 24% of Cathay’s 35,000-person headcount: 5,300 Hong Kong employees and 600 employees outside Hong Kong will be affected; the remaining 2,600 jobs are unfilled positions. The shuttered carrier, Cathay Dragon, was founded in 1985 and since 2006 operated as a wholly owned subsidiary of Cathay Pacific. Dragon flew regular routes between Hong Kong and cities in mainland China and destinations in Southeast Asia, Taiwan, and South Korea. Cathay said the restructuring measures will save around $65 million per month in 2021.
“The future remains highly uncertain, and it is clear that recovery is slow,” Cathay said in the Wednesday announcement, noting an International Air Transport Association (IATA) prediction that passenger travel won’t return to pre-pandemic levels until 2024.
Hong Kong, like mainland China, has COVID-19 mostly under control, keeping daily new cases to the low double digits in recent weeks. But unlike airlines operating in mainland China, Cathay cannot rely on domestic flights to boost revenue and make up for the losses incurred by the decimation of international air travel.
“There’s really only one airport, and all the routes connected to Hong Kong are considered international routes,” said Ivan Su, a Hong Kong–based equity analyst at Morningstar. “For that reason, Hong Kong and Cathay cannot benefit just from the fact that the case count here is low.”
Hong Kong International Airport recorded 97.9% fewer passengers and 68.5% fewer flights in September 2020 than it did in September 2019. In mainland China, international travel slumped by similar levels, Su said, but ample domestic routes have helped Chinese airlines weather the drop in long-haul demand.
Domestic passenger flights in China in August reached 80% of August 2019 volume, and the number of domestic flights during the eight-day “Golden Week” holiday in early October exceeded the total for the same period last year. Domestic Chinese airlines like Air China and China Southern also benefit from being state-owned, meaning they have financial backing from the government and don’t have to resort to restructuring measures like Cathay, Su said.
Hong Kong and Singapore—another regional hub with a struggling flagship carrier and no capacity for domestic flights—announced last week that they had reached an agreement to create a “travel bubble” that will allow people from each city to visit the other without needing to quarantine. Shares in both Cathay Pacific and Singapore Airlines surged after the announcement.
Travel bubbles will help, Su said, but only to a limited extent. Even if Hong Kong forms multiple bubbles with neighboring countries like Japan, Thailand, and others in the Asia-Pacific region, “I just cannot see how those travel bubbles will be able to bring airlines, especially Cathay, to a net profit territory or a break-even territory,” he said.
A large share of Cathay’s pre-pandemic passengers were travelers from mainland China who either flew direct to Hong Kong on Cathay or else flew Cathay through Hong Kong for connecting flights to destinations that mainland Chinese carriers didn’t serve, Su said. In that regard, Cathay’s rebound “to its previous self” depends a great deal on how soon mainland tourists can travel internationally without quarantine restrictions, he said.
Cathay shares climbed as much as 6% on Hong Kong’s stock exchange after the company announced the restructuring on Wednesday morning, signaling investors’ approval of the cost-cutting measures.
In the longer term, Cathay is banking its recovery prospects on a successful mid-2021 coronavirus vaccine rollout across the globe, it said in the Wednesday statement.
“Assuming the vaccines currently under development prove to be effective and are successfully rolled out on a global scale by summer 2021,” Cathay expects to be operating at “well below” 25% of its capacity in the first half of 2021 with a “gradual recovery” in the second half of the year, it said.
Cathay didn’t give capacity projections for a scenario in which an effective vaccine isn’t deployed by the middle of next year. “If the vaccine gets delayed, I think airlines like Cathay will have to reconsider their cash position. They might need to borrow money or issue equities or even tap into the government’s pockets for help,” Su said. He estimates that Cathay will still have “at least one or two years” before resorting to such measures.
The restructuring is the latest chapter in Cathay’s year of woe. The Hong Kong government spent nearly $4 billion to bail out Cathay in June in a package that included the government taking a stake in the company. It was the first time Hong Kong’s government made a direct investment in a private company.
Before the pandemic, Hong Kong’s anti-government protests in 2019 dented Cathay’s sales as mass airport sit-ins and employee strikes forced the airline to cancel 130 flights in one week in August 2019. The political unrest prompted several countries to issue travel warnings for their citizens visiting Hong Kong.
Cathay has tried to generate revenue in unorthodox ways this year, such as offering “flights to nowhere” on its low-cost carrier, Hong Kong Express, in which passengers board a plane that flies around Hong Kong airspace and lands back where it started. Cathay has designed special leave schemes for employees, and executives have taken pay cuts. Even so, the carrier continued to bleed around $193 million to $258 million per month.