fortune--2020-05-13--Restaurant owners want and need more guidance on how to reopen from government officials

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When it comes to reopening the economy, the first question to be addressed for many restaurant managers and owners is when. The second question, how, is proving even trickier to answer.
So far, there is no clear way on how to do this, either within the U.S. or other countries phasing out strict lockdown measures. South Korea recently had to re-shut down nightclubs, while bars in Hong Kong have been shut down, reopened, re-shut down, and are now reopen again—for the time being.
“I think it’s important to recognize that there will not be an overnight ‘back to normal’ for the industry, and when restaurants do reopen, their business models will look different,” says Resy CEO Ben Leventhal. “We are looking at a many months-long next phase in which restaurants are tasked with figuring out how to extend their brand, offerings, and hospitality beyond the dining room.”
With the summer months on the horizon, outdoor seating is being batted around as the secret ingredient to reopening as it has the potential to offer better social distancing between tables and less risk of spreading COVID-19 outdoors. But this strategy depends on so many variables, and it’s not a foolproof solution by any means. Not to mention, it won’t be a sustainable measure if a second wave of the novel coronavirus hits amid cooler temperatures during the fall and winter months of 2020.
Gitano Garden of Love, a 24,000-square foot, tropical-theme outdoor bar area in New York City, is leaning on its spacious, open air floor plan to safely draw customers if and when it can reopen this summer. But that hasn’t stopped James Gardner, founder and owner of Grupo Gitano—which oversees six restaurants and bars in New York, Miami, and Tulum, Mexico—from considering takeout and delivery services, among other branded products, to generate revenue in the meantime.
“Given our size and and being outdoors, we are grateful that we do not do not face the significant challenges of smaller indoor restaurants,” Gardner says. Currently, there are no plans to change the overall design and form of the restaurant, as Gardner says the establishment can implement social distancing easily by removing and spreading out tables, as well as activating unused areas.
“We do think this pandemic will take a lot of the intimacy out of the dining experience for some time most likely, not only the intimacy that is built between the guest and server but between our guests overall,” he says. “We have always thought about our spaces as a place for people to see, be seen, and to connect.”
An aerial view of Gitano Garden of Love NYC in Manhattan. Courtesy of Grupo Gitano
Despite recommendations against reopening too soon from the Centers of Disease Control (CDC), time is already running out to figure out the answers for some regions. Since May 1, restaurant dine-in restrictions have been lifted for nearly 192,000 restaurant units—about 29% of all units—based on an analysis using The NPD Group’s ReCount restaurant census.
“Many restaurant operators have weighed the value of limited operations versus the cost of opening, health risks, or other factors, and chose to remain closed or continue with a takeout-only model,” says David Portalatin, NPD food industry advisor and author of Eating Patterns in America. “The most recent week’s performance suggests we’ve achieved about 30% of the potential volume in states where restrictions were lifted. Looking ahead to next week, another 46,000 restaurants could come back online.”
Earlier this month, the U.S. Food and Drug Administration (FDA) prepared a checklist for retail food establishments that might have temporarily closed over the last two months. It should be stressed that these are guidelines, as the FDA openly acknowledges that it is “not a comprehensive list,” and most of the best practices are presented in the form of a question.
Highway Restaurant & Bar in East Hampton, N.Y. pivoted to a takeout model as soon as dining rooms were shutdown in mid-March with what general manager Kevin Lind describes as a comprehensive process that should transition through reopening.
“We added several options right away that we thought would accommodate changing needs, like extending hours of operation, taking advanced orders, adding some delivery areas, and offering large-format meals that can last at home and even make-at-home kits,” Lind explains. “We think these have staying power and give people safe options even after reopening. All of this was done with a focus on safety first.”
Highway Restaurant & Bar in the Hamptons, where many affluent New Yorkers fled to their second homes over the last several weeks, has already begun scenario planning with reduced capacity and social distancing considerations. Courtesy of Highway Restaurant and Bar
The new code of conduct
Even when there is broader acceptance for restaurants to reopen for dine-in services, there will be capacity restrictions, and rules will need to be established and made clear for patrons and employees alike.
“It’s very hard to know how things will continue to change,” Lind acknowledges. That said, the East Hampton eatery plans on being open for dine-in service this summer. Within the restaurant, the team has started to work on a floor plan that will provide the proper spacing between tables, while also, hopefully, maintaining the restaurant’s lively ambiance. “It’s an uphill battle to preserve the essence and energy of a restaurant which once served as a neighborhood space full of laughter and community.”
Cava’s Frederick, Md. location offers Pickup by Car service, a popular contactless pickup option; the Frederick location is one of the chain’s top performing restaurants over the past few weeks. Courtesy of Cava
Cava, a fast casual Mediterranean cuisine chain based in Washington D.C. with dozens of locations around the country, is holding back on opening dining rooms in states already reopening.
“The restaurant experience will most certainly evolve to accommodate a shift in consumer behavior and mindset,” says Cava’s CEO Brett Schulman.
Cava will be encouraging customers to wear facial coverings to protect themselves and its team members. To urge social distancing, there will be “hard-to-miss” floor markers for line queuing, and certain tables will be clearly marked as not open for use. The company also discontinued the use of cash for payment and, while Schulman stresses that Cava very much cares about its impact on the environment, all multi-use utensils, bowls and trays have been removed from dining rooms. Pre-packaged cutlery will be used until further notice.
The company already has off-premises kitchens for every restaurant, separate from its in-store serving lines. With off-premises becoming a larger part of the sales mix, Schulman says more interior production space will be dedicated to digital order pickup, curbside, and delivery.
“Ultimately, for us to execute this successfully and consistently, training will play a key role, and we’ve really dialed up in this area of operations,” Schulman says, adding Cava is deploying a “COVID compliance scorecard” for each restaurant and area leader, which will hold teams and leaders accountable to adhering to all safety and operational protocols in reopening its dining rooms.
A mockup of what the “Open Date Alert” feature on Resy At Home. Courtesy of Resy
Resy’s leadership says government and public health officials needs to set the guidelines for how best to reopen and patronize restaurants. The CDC recommends restaurants should space tables at least six feet (1.8 meters) apart and try to use phone app technology to alert a patron when their table is ready. Resy’s new Mobile Waitlist feature, Leventhal notes, was designed to fit this recommendation.
“In talking with our restaurant partners it has become clear that revenue diversification is top of mind, since operating at a limited dine-in capacity will not yield them enough revenue,” Leventhal explains. “They are thinking about supplemental revenue streams, like meal kits, groceries, premium experiences, and more.”
While it’s a challenging proposition for restaurants all-around, Leventhal stresses it is important to equip operators with new services imagined for a pandemic environment. Resy At Home, launching at the end of May, will serve as the company’s new meal ordering and contactless pickup functionality. It will be embedded onto a given restaurant’s reservation page, so guests will see dine-in reservations slots (if those are being offered) on one tab, and pickup slots on another tab. And contrary to the fees charged by app-based delivery services like Grubhub and DoorDash, Resy says it will not charge any commissions on takeout orders booked through the Resy At Home.
Workplace safety
Just as critical to ensuring customers are safe upon reentry, the same precautions must be taken in consideration to dining room and kitchen staff. Many restaurants shut down entirely during shelter-in-place mandates without pivoting to takeout for this very reason: to protect employees from the spread.
“We expect that there will be capacity restrictions for the foreseeable future, and we are prepared for this,” says the owner of the Grupo Gitano hospitality business. Courtesy of Grupo Gitano
Without immediate testing available, temperature checks for customers and employees alike have been cited frequently by restaurant managers as critical to health management, along with face masks. Gitano’s Gardner says the objective will be to make these requirements as painless and non-intrusive to the guest experience as possible whilst also reassuring that everyone’s safety is being protected.
“Most importantly, we are thinking about how we can deliver the necessary changes both safely and in a fun, engaging, branded way that neutralizes the fear factor,” Gardner explains. “We are going to ‘own the look,’ redesigning uniforms where the front of house will include branded masks, sun visors, and other surprises.”
Cava says it will be providing employees experiencing flu-like symptoms with access to fast and free COVID-19 testing as well as emergency 14-day pay for any team member who tests positive for COVID-19. Employees will also be required to take temperature checks at the start of every shift (including testing a facial recognition thermal imaging device), and partitions will be constructed at strategic spots where guests and employees previously came into contact.
A customer steps out of a Starbucks coffee shop beside a sign notifying customers the store is open for grab and go in downtown Los Angeles, Calif. on March 16, 2020. Frederic J. Brown—AFP via Getty Images
Starbucks says it will be offering comprehensive care to its employees impacted by COVID-19, including catastrophe pay, mental health and sick pay benefits, childcare support, and more. Additionally, the company introduced Starbucks Service Pay, providing a premium of $3 per hour to retail partners for shifts worked as scheduled through the month of May.
“As we reopen stores, we are appropriately prioritizing health and safety concerns, working hard to exceed public health requirements and adjust to new customer expectations,” Starbucks CEO Kevin Johnson said in an interview with Fortune earlier this month. This includes directing customers where to stand and limiting the number of customers in a café; providing partners with protective equipment, including masks and gloves; maintaining elevated cleaning and sanitation procedures for the foreseeable future; and promoting low-contact channels for customers, including the drive-thru, entryway and curbside pickup, and delivery.
At the end of April, 50% of Starbucks locations were closed and available only for drive-thru and delivery. Drive-thrus remained open to serve customers, with additional delivery locations available via Uber Eats. Starting this month, more Starbucks cafés are slowly reopening across the U.S. and other countries. Customers will be able to order and pay ahead of time using the Starbucks app, and pick up their orders at the door or at the drive-thru window. At select locations where social distancing can be implemented, stores will offer “grab and go,” so customers can place orders in the café and then take them to-go.
“Our customers are looking for experiences that are safe, familiar, and convenient,” Johnson said. “They want to know that whatever they’re going to do is not going to contribute to the further spread of the virus or put them at risk of getting sick. Starbucks has become part of the daily routine of millions of people around the world, which we think they’ll be excited to get back to. The health, safety, and wellbeing of our partners and customers will continue to be our top priority.”
The final frontier
The region hardest hit nationwide by COVID-19, New York City’s restaurants and bars will likely be among the last businesses to open their doors back to the public. Restaurants like The Wooly, a popular New American restaurant and bar located in the Woolworth Building in lower Manhattan, have had to quickly implement protocols for employees working while looking ahead to the future when customers reenter the establishment.
The main dining room at The Wooly Public, a New American restaurant and cocktail bar in the landmark Woolworth Building. New York, N.Y. Courtesy of The Wooly Public
Co-owner Eric Adolfsen reiterates what many restauranteurs have said: They’re looking to the government to provide guidelines for protection and safety that will be the basis for its policies. Additionally, Adolfsen says he and his co-owner, David Tobias, will continue to explore ways to go above and beyond these policies and create a comfortable environment for employees and patrons alike.
“At the end of the day, a restaurant is supposed to provide people with an enjoyable experience and a break from the stressors of everyday life,” Tobias says. “In order to do this, our solutions should be novel and possibly even whimsical at times, not just means to an end. This is what people need at times like these.
Gardner concludes that what the “new normal” will look like is the biggest question on everyone’s minds, answering it will not be back to business as usual for quite some time. “We hope that this pandemic will also lead to a lot more kindness on all sides, that our guests will see how hard this business is in the pandemic, and not only come out to have fun and support us, but also tip the team well.”


fortune--2020-05-13--Sidewalk Labs’ Toronto project was dead on arrival

How accurate are the coronavirus tests used by the White House ?
A new report is raising questions

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Last week, Sidewalk Labs, the Google sibling behind a controversial plan for a “smart city” development on Toronto’s waterfront, finally pulled the plug and backed out of the project.
The official reason from Sidewalk’s CEO Dan Doctoroff was that “unprecedented economic uncertainty” resulting from the coronavirus pandemic derailed the project. “It has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan,” he wrote in a blog post.
But by the time I showed up at the Quayside site to report on the debacle in late January—well before the damage to be wrought by the pandemic would become clear—people were already speaking about the Alphabet-backed project as though it were dead. They said Sidewalk had made too many concessions, that the company had scaled back the footprint of the development site and relinquished ownership over valuable intellectual property and data, perhaps to the point of untenability. The dream had shrunk to a pale shadow of its initial ambition.
Jim Balsillie, former co-CEO and chairman of BlackBerry (formerly known as Research in Motion) and a leading opponent of the project, told me then he considered Sidewalk’s proposal to be “a defanged and mangled mess” that is “being put in an ever-smaller box.”
I dug back into my reporting notebook this morning to see what else foretold the project’s doom. Here’s a tidbit from my conversation with Balsillie that didn’t make it into my story.
“Have you seen Monty Python and the Holy Grail?” Balsillie asked me. He compared the Sidewalk project to the British comedy flick’s seemingly un-killable, blood-squirting Black Knight, who claims that the mortal wounds inflicted upon him are “but a scratch.” The knight, limbless himself, threatens, “I’ll bite your legs off!”
Balsillie said he viewed Sidewalk as being in the same situation. “We’re at the point where he says he can still spit on us, and we’re deciding whether to put a bucket on his head as we walk away,” Balsillie said.
I asked Dan Doctoroff at the time whether he had studied Amazon’s failure move forward with its plan to build its HQ2 in Long Island City. He said he learned that “there’s real benefit in sticking it out, and listening really matters.” Did he believe Sidewalk’s project would move forward? “I’m very optimistic, but there’s no guarantee.”
I think Doctoroff already saw the writing on the wall then. Even if economic shutdowns related to the pandemic provided the final blow, the project had lost its legs well beforehand.
Robert Hackett
Twitter: @rhhackett
Email: robert.hackett@fortune.com
THREATS
Taking a mental health day. Facebook has agreed to pay $52 million to compensate content moderators tasked with cleaning up the site. A minimum of $1,000 apiece will paid to 11,250 moderators; if any moderators developed post-traumatic stress disorder or related conditions during their tenure, then they'll be entitled to more money. Meanwhile, Facebook is one tech firm behind a new lobbying group, American Edge, that's intended to advocate on behalf of Silicon Valley.
Cast your vote. The Atlantic's Franklin Foer is raising an alarm about the various vulnerabilities of the U.S. electoral system. He warns that Russia is poised to take advantage of them—from poking holes in state-by-state voting systems to sowing divisive disinformation. As if that weren't bad enough, Alex Stamos, the former security chief of Facebook, says TikTok could be a source of disinformation this year. Is nothing sacred?
Hua-waiting outside in the cold. Tiny tech-wonderland Estonia passed a law that's being described as the "Huawei law," after the Chinese telecom giant. The new rule will require network equipment providers to submit to thorough security reviews by the government and its intelligence services. Meanwhile, a ban on U.S. companies supplying tech to Huawei is hurting its business; the company is struggling live without the Google Android software that's powered its smartphones for so long.
Placing an order for takeout. As the coronavirus pandemic pushes more people to order food from home, dealmaking is underway. Meal delivery service GrubHub is reportedly entertaining a takeover offer from Uber, according to the Wall Street Journal. Grocery deliverer Instacart is considering raising new venture capital at a valuation of $12 to $14 billion, 50% higher than its last appraisal by private investors, The Information reports. A pizza delivery platform just raised $43 million. And the founder of Webvan, the famous dot-com flameout, is back.
Celebs get exposure.
ACCESS GRANTED
In the field of information security, practitioners casually toss around the phrases "white hat" or "black hat" when identifying a person as either a good egg or a rotten one. The dividing line is not so clear-cut though. In its latest magazine issue, Wired profiles Marcus Hutchins, a cybercriminal turned global hack-thwarting hero, in a hopeful tale that should inspire everyone to come to the "light side" of the Force.
At around 7 am on a quiet Wednesday in August 2017, Marcus Hutchins walked out the front door of the Airbnb mansion in Las Vegas where he had been partying for the past week and a half. A gangly, 6'4", 23-year-old hacker with an explosion of blond-brown curls, Hutchins had emerged to retrieve his order of a Big Mac and fries from an Uber Eats deliveryman. But as he stood barefoot on the mansion's driveway wearing only a T-shirt and jeans, Hutchins noticed a black SUV parked on the street—one that looked very much like an FBI stakeout.
FORTUNE RECON
Facebook removes 10 million posts for hate speech as tensions rise on the social network by Danielle Abril
What life is like for more than 90,000 cruise workers that have been stuck at sea for two months by Jonathan Levin and K. Oanh Ha
The Coronavirus Economy: This custom drapery business is now making masks by Rachel King
Uber bids for Grubhub to create a food-delivery giant by Ed Hammond
Broadway’s ‘Hamilton’ will premiere on Disney+ in July, instead of going to theaters first in 2021 by Radhika Marya
We don’t have data that represents the new normal by Jonathan Vanian
Antibody testing will be key—once we understand what the results mean by Sy Mukherjee
Ford versus Tesla: design thinking and the return to work by Clay Chandler and Eamon Barrett
ONE MORE THING
The success of a "contact tracing" app rolled out in Iceland yielded mixed results, despite being downloaded by 38% of the island nation's population—a greater proportion of the populace than in any other country. “The technology is more or less … I wouldn’t say useless,” Gestur Pálmason, an Icelandic Police Service detective in charge of overseeing contact tracing efforts, told MIT Technology Review. But "it wasn’t a game changer for us."
Manual tracing, aided by phone calls, had a more significant impact, he said. The good news: Iceland has gotten its coronavirus infection rate under control; only three new cases were confirmed this month.


fortune--2020-05-13--Uber seeks to dominate the food delivery wars

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Uber has an appetite for a mega acquisition.
The ride-hailing giant approached food-delivery company Grubhub with a takeover offer, per multiple reports. Though the duo are apparently at odds over the exact pricing of the deal, an acquisition is expected to be in the billions (with Grubhub currently valued at about $5.5 billion in public markets).
If the two combined, Uber Eats and Grubhub would represent about 55% of the food delivery market, per estimates by Dan Ives over at Wedbush in an analyst note. This would overtake Doordash, which eclipses the two individually at 35% of the market as of the first quarter. It would be the first time since 2017 that a single player held over half of the red-hot market.
Pundits have been waiting for this. The food delivery industry has been ripe with rumors of takeovers recently, as the likes of Uber, Doordash, Caviar, and Postmates have undercut each other with lower fees and discounts in a fevered and unprofitable bid for dominance. Now, as ride-sharing takes a hit and food delivery becomes its bright spot in earnings, Uber appears to be making its move.
Antitrust concerns aside, the deal will undoubtedly strike fear in the hearts of competitors.
But it will be interesting to see how another Uber rival, Lyft, zigs and zags. Lyft made no concerted push into the food delivery market pre-coronavirus—but then it launched a on-demand delivery service earlier this month. While Lyft revealed a rise in revenue in the first quarter of the year, suggesting that the business was more resilient than thought against the coronavirus, it also laid off nearly 1,000 employees.
Golden hour for activist investors: Activist campaigns ticked up sharply in 2007 and 2008 amid falling asset prices. Will the same pattern repeat during the coronavirus pandemic? Per my colleague, Ryan Derousseau, on activists in 2020:
“The pattern may well repeat itself amid the chaos wreaked by COVID-19. The price/earnings ratio of the S&P 500 has tumbled from 23.5 in January to 20.9 today—hardly rock-bottom by historic standards, but cheap enough to bring out the market’s hammerheads and great whites. Dramatic moves in March by activist hedge fund Elliott Management, which elbowed its way onto Twitter’s board, and Carl Icahn, who put three allies on the board of Occidental Petroleum, were aided by the firms’ plummeting stock prices.”
However, in the last few weeks, equity markets shot up rapidly in a V-shaped recovery, despite unemployment rates. So are some activist investors betting on a W-shaped recovery?
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Dingdong Maicai, a Chinese fresh food delivery startup, raised $300 million in funding valuing it at $2 billion, per Reuters citing sources. General Atlantic led the round. Read more.
- Kopi Kenangan, an Indonesian beverage retailer, raised $109 million in Series B funding. Sequoia Capital led the round, and was joined by investors including B Capital, Horizons Ventures, Verlinvest, Kunlun, Sofina, and Alpha JWC Ventures. Read more.
- Kriya Therapeutics, a gene therapy startup, raised $80.5 million in a Series A funding. QVT, Dexcel Pharma, Foresite Capital, Bluebird Ventures, Narya Capital, Amplo, Paul Manning, and Asia Alpha were the investors.
- Members Exchange (MEMX), a New York-based market operator, raised $65 million. BlackRock, Wells Fargo, Flow Traders, Manikay Partners, and Williams Trading were the investors.
- SirionLabs, a Seattle-based provider of vendor management software, raised $44 million in funding. Tiger Global and Avatar Growth Capital led the round. Read more.
- Slice, a New York-based ordering and marketing tech platform for local pizzerias, raised $43 million in Series C funding. KKR led the round and was joined by investors including GGV Capital.
- Morning Consult, a Washington D.C.-based political polling company, raised $31 million in Series A funding. Lupa Systems and Advance Venture Partners led the round, valuing it at $306 million.
- SiMa.ai, a San Jose, Calif.-based machine learning startup, raised $30 million in Series A funding. Dell Technologies Capital led the round and was joined by investors including Amplify Partners, Wing Venture Capital, and NanoDimension Capital also participated in the round
- Zenjob, a Berlin, Germany-based digital recruitment company, raised €27.6 million ($30 million) in Series C funding. Forestay Capital led the round, and was joined by investors including Redalpine, Acton Capital, Axa Venture Partners and Atlantic Labs.
- Pillar Biosciences, a cancer diagnostics maker, raised $29.7 million in Series C funding from ORI Healthcare Fund.
- M17, a Taiwan-based live streaming entertainment startup, raised $26.5 million in Series D funding. Vertex Growth Fund led the round, and was joined by investors including Stonebridge Korea Unicorn Venture Fund, Innoven Capital Singapore, Kaga Electronics, and ASE Global Group. Read more.
- Sleeper, a San Francisco-based fantasy sports startup, raised $20 million in funding. Andreessen Horowitz led the round, and was joined by investors including Kevin Durant, Baron Davis, JuJu Smith-Schuster, and Twitch CEO Kevin Lin. Read more.
- MemVerge, a San Jose, Calif.-based in-memory computing company, raised $19 million in funding. Investors included Intel Capital, Cisco Investments, NetApp, and SK hynix.
- Modulr, a London-based payments API platform, raised £18.9 million in funding. Highland Europe, a leading European Growth Capital led the round, and was joined by Frog Capital.
- GreenLight Biosciences, a Boston-based maker of mRNA vaccines, raised $17 million in funding. Investors include Flu Lab, Xeraya Capital and Baird Capital. Read more.
- ALTR, an Austin, Texas-based blockchain data security firm, raised $15 million in funding. John Stafford III (CEO of Ronin Capital) participated.
- Vise, a San Francisco-based AI-based platform portfolio management platform for investment advisors, raised $14.5 million in Series A funding. Sequoia led the round, and was joined by investors including Founders Fund and Ben Ling at Bling Capital.
- VanMoof, a Dutch e-bike maker, raised €12.5 million ($13.6 million) in funding. Balderton Capital and SINBON were the investors.
- Wallbox, a Barcelona-based smart EV charging company, raised $13 million (€12 million) in its second tranche of Series A funding. Seaya Ventures led the round, and was joined by investors including Endeavor Catalyst and Iberdrola.
- accessiBe, a Tel Aviv-based AI web accessibility provider, raised $12 million in funding from K1 Investment Management.
- Stellar Health, a New York-based health tech startup, raised $10 million in Series A funding. Point72 Ventures led the round, and was joined by investors including Primary Venture Partners.
- Tock, a Chicago-based restaurant reservation site, raised $10 million in funding. Valor Siren Ventures, a fund backed by Starbucks, led the round. Read more.
- Mos, a San Francisco-based startup focused on college aid, raised $13 million in Series A funding. Sequoia Capital led the round, and was joined by investors including Stephen Curry, Zoom founder Eric Yuan, Emerson Collective, and Lux Capital.
- Dyno Therapeutics, a Cambridge, Mass.-based gene therapy startup, raised $9 million in Series A funding. Polaris Partners and CRV led the round. Read more.
- GrowFlow, a Los Angeles-based Saas company for the cannabis and hemp industry, raised $8.4M in Series B funding. TVC Capital led the round.
- Resilia, a New Orleans-based SaaS platform for deploying grants, raised $8 million in Series A funding. Mucker Capital and Callais Capital Management led the round, and was joined by investors including Cultivation Capital.
- Northspyre, a New York-based platform for real estate owners, raised $7.5 million in Series A funding. Craft Ventures led the round, and was joined by investors including Tamarisc Ventures.
- Ziva Dynamics, a Vancouver-based maker of character simulation software, raised $7 million in seed funding. Grishin Robotics, Toyota AI Ventures, and Millennium Technology Value Partners invested.
Yardbird, a Minneapolis-based outdoor furniture brand, raised $4.4 million in funding. Read more.
- Intricately, a San Francisco-based platform for cloud sales and marketing teams, raised $4 million in Series A funding. Counterpart Ventures led the round, and was joined by investors including Bloomberg Beta, Singtel Innov8, and Susa Ventures.
- Primer, a homeschooling education company, raised $3.7 million in seed funding. Keith Rabois at Founders Fund led the round and was joined by investors including Lachy Groom, Naval Ravikant, Jed York, Cyan Bannister and John Danner.
- Intelliboard, a U.S.-based developer of a data visualization and analytics platform for educators, raised $3.4 million in Series A funding. Connecticut Innovations, Flashpoint VC, Smarthub VC, and LETA Capital were the investors.
- Continuum Industries, an Edinburgh-based provider of AI tools for engineering professionals, raised £1.5 million in seed funding. Playfair Capital and Credo Ventures led the round, and were joined by investors including Techstart Ventures, Simon Blakey, Michael Blakey and others. Read more.
- Emteria, an Aachen, Germany-based of an Android platform for industrial applications, raised €1.5 million in seed funding from Runa Capital and German High-Tech Gründerfonds.
- RPA Labs, a San Jose, Calif.-based automation platform, raised $1.2 million in pre-seed funding. Schematic Ventures led the round and was joined by investors including PSA unboXed, Global Etrade Services, and Supply Chain Ventures.
- Wynd Technologies, a Redwood City, Calif.-based air purification and measurement startup, raised funding from the corporate venture arm of Green Generation, GreenGen Ventures. Financial terms weren't disclosed.
- Intel Capital invested $132 million in 11 startups across AI, autonomous computing, and chip design. The companies are Anodot, Astera Labs, Axonne, Hypersonix, KFBIO, Lilt, MemVerge, ProPlus Electronics, Retrace, Spectrum Materials and Xsight Labs. Read more.
PRIVATE EQUITY
- KKR will acquire a 55% stake in the Commonwealth Bank of Australia's wealth management unit for A$1.7 billion ($1.1 billion).
- Clearhaven Partners invested in TimeTrade Systems, a Tewksbury, Mass.-based enterprise scheduling software maker. Financial terms weren't disclosed.
- Francisco Partners will invest up to $225 million in Eventbrite (NYSE: EB), a San Francisco-based global self-service ticketing website.
- Parthenon Capital invested in RxSense, a Boston-based prescription savings solutions. Financial terms weren't disclosed.
- GTCR formed Dreamscape, a Salt Lake City, Ut.-based marketing technology business with Scott Knoll, David Hahn and Michael Iantosca.
- Symphony Technology Group acquired a majority equity stake in Nomis Solutions, a Toronto-based provider of SaaS-based pricing and profitability management solutions for retail banks. Financial terms weren't disclosed.
- M/C Partners invested in TowerCom, a Jacksonville, Fla.-based communications tower developer. Financial terms weren't disclosed.
OTHERS
- SonarSource acquired RIPS Technology, a German application security firm. Financial terms weren't disclosed.
- Indian metals tycoon Anil Agarwal launched a $2 billion bid to buy out minority shareholders in Vedanta, the oil-to-aluminium conglomerate. Read more.
- Forge Global and SharesPost, two private securities marketplaces, agreed to merge. Financial terms weren't disclosed.
- Rakuten (TYO:4755) acquired Innoeye, a Herndon, Va.-based engineering company. Financial terms weren't disclosed.
IPOS
- Dada Nexus, a Shanghai-based grocery delivery platform, filed to raise $100 million in an initial public offering. It posted revenue of $437.8 million in 2019 and a loss of $348.1 million. JD Group (51.4%), Sequoia Capital China (11.4%), and Walmart (10.8%) back the firm. It plans to list on the Nasdaq as “DADA.” Read more.
BANKRUPTCIES AND BREAKUPS
- Covea has walked away from a $9 billion purchase of PartnerRe, a Bermuda-based reinsurer owned by Exor. Read more.
EXITS
- Banca Farmafactoring (BIT: BFF) plans to acquire a 76% stake in DEPObank, an Italian depository bank, from Equinova, an investment vehicle owned of private equity firms Advent International, Bain Capital and Clessidra. Read more.
F+FS
- Hg raised $11 billion for three funds, Bloomberg reports citing sources. About $10 billion will be divided between its second large-cap fund, Saturn, and its ninth mid-cap fund, Genesis. Another $1.5 billion will go to its third small-cap fund, Mercury. Read more.
- BDT Capital Partners raised $9.1 billion for its third fund, per an SEC filing. Read more.
- Redstone is raising $217 million for its Future Industry Ventures Fund. Read more.
- Thayer Ventures, an early stage venture capital firm focused on travel and transportation, raised $30 million for its third fund.
PEOPLE
- Shamrock Capital named Laura Held and Jason Sklar as Partners.
- Lytical Ventures hired Graham Carroll as a Principal,


fortune--2020-05-13--Box CEO talks COVID-19, activist investors, and parenting

Like many executives during the coronavirus pandemic, Box CEO Aaron Levie is managing on-the-fly more than before.
Since mid-March, employees at the business software company have worked from home. And there is no planned date for them to return to the office, in contrast to enterprise software maker Salesforce, which has set a tentative date.
“It started to get so comical, because we were updating people two times a week, and what we were doing was pushing dates,” Levie says. “We’re going to be working from home, honestly, for the foreseeable future, and we’ll give people ample time to go back to the office when it’s safe.”
In an interview with Fortune, Levie described how Box is being more careful about spending. Although it’s still filling open positions in critical areas, the company is more cautious about hiring because Levie says he “wants to protect the existing employees.”
In September, activist investor Starboard Value started urging Box to improve its finances, an obvious catalyst to Box’s new profitability plan. In reaction, the company debuted a new financial plan that emphasized profitability after years of losses.
In fiscal 2020, which ended Jan. 31, Box lost $144.3 million, 7.2% more than the $134.6 million it lost in the previous year. Sales grew 14% year-over-year to $696.3 million.
Starboard’s campaign had been ignited by Box’s poor stock performance. Its shares closed Tuesday at $16.90, or 27% lower than where they were on the day the company went public in January 2015.
In March, Box said it had reached an agreement with Starboard to install three new Starboard-approved board members and to create a new board committee “to identify and recommend opportunities for further improvement in growth and margin performance.”
“I think our settlement was super important,” Levie says. He described the company’s new Starboard-approved financial plan as being “ultimately very fortuitous” considering the coronavirus pandemic has required companies to be more financially prudent.
Box is best-known for its core online storage product. But over the years, it has spent hundreds of millions of dollars to build and market newer work-collaboration tools and security features.
The coronavirus pandemic has influenced the company’s product strategy. With the explosion in remote working, Box decided to pause developing some features in favor of newer tools specifically tailored for remote workers. These new tools include better integrations of Box’s tools with the popular video-conferencing service Zoom and a way for users to leave annotations on digital documents stored in Box that others can access during video meetings.
Because of the pandemic, Levie says that many companies are spending more on basic cloud software used by remote workers, like chatting services or tools to help IT staff troubleshoot problems remotely. But at the same time, he says some companies are pausing big and costly tech upgrades, such as implementing trendy container technology that require businesses to upend their existing IT infrastructure.
In general, the coronavirus pandemic has caused companies to reduce their technology spending, says Levie, pointing to retailers and small-to-medium sized businesses. But healthcare providers, biotech businesses, and some government agencies, he adds, are still buying new technology.
As for how the coronavirus has personally impacted Levie’s daily work, he says he has been spending more time with his one-year-old son Max, “way more than I would have been able to do.”
“The great thing is a late-night meeting now, I can still pop out for 25 minutes, give him a bath, and then come back and work versus a late-night meeting six months ago,” says Levie. “You’re stuck in a restaurant and you just miss those types of things.”
But being a parent and a worker during the coronavirus pandemic can be challenging, so Box is allowing workers a more flexible work schedule.
“Honestly if somebody wants to do an hour of work from 9:00 to 10:00 p.m., and they want to not do three hours of work during the day, totally fine,” Levie said. “You have to have that type of flexibility.”


fortune--2020-05-13--Europe’s plan to save the sacred summer vacation depends on contact-tracing apps—but there’s a probl

Europe’s plan to save the sacred summer vacation depends on contact-tracing apps—but there’s a problem

Countries in the European Union are being urged to make their COVID-19 contact-tracing apps interoperable—for the sake of Europe’s $2 trillion tourism industry.
Very little non-essential travel between EU countries is allowed at the moment, as governments rapidly closed borders in March to stem the spread of the coronavirus outbreak.
This has contributed to devastation in the tourism sector, with countries such as Spain and Greece experiencing major hits to their economies. In the latest blow caused by the crisis, German travel giant TUI announced a whopping 8,000 job cuts on Wednesday.
Now, the European Commission is trying to get those borders made invisible again, as they effectively were before the pandemic struck. The EU executive branch does not have the power to force member states to do this—some, such as Germany and Austria, are moving independently to reopen their borders in mid-June—but on Wednesday it unveiled a package of recommendations in an attempt to pave the way for the wide return of free movement.
One key recommendation is that the contact-tracing apps deployed by various EU countries should be able to talk to one another, “so citizens can report a positive test or receive an alert, wherever they are in the EU and whatever app they are using,” the Commission said.
Using wireless Bluetooth technology, contact-tracing apps establish when users are close to one another and create a record of that event. If a user subsequently tests positive for COVID-19, they can give this information to the app so that other people, who came in close vicinity of that person, can be warned that they may need testing or quarantine.
If people are able to cross borders again, it’s not hard to see how a lack of interoperability would stymie the apps’ objective. However, each country is preparing its own contact-tracing app—and some have different ideas about how the technology should work.
The biggest momentum is behind the decentralized approach supported by Apple and Google, in which individuals’ health information is fully shielded from the governments and companies that allow apps to talk to one another. This is the approach that countries such as Germany and Italy are choosing.
But other countries, such as the U.K. and France, are currently on track to adopt a more centralized approach that would allow more integration with manual contact-tracing efforts, but that has riskier privacy implications—and that, without the support of the companies that make smartphone operating systems, could also prove buggy. “We are not against Apple and Google but we don’t want to be forced into a certain technology approach,” French digital affairs minister Cédric O told the Financial Times. “States should be able to make their own choices on such a critical matter—it’s a question of sovereignty.”
European countries do have sovereignty when it comes to their borders and health systems, but a lack of coordination won’t help getting travel and tourism back on track, the Commission is arguing.
“Interoperability is crucial, so that wide, voluntary take-up of national tracing apps can support the relaxing of confinement measures and the lifting of restrictions of freedom of movement throughout the EU,” it said Wednesday.
Not all EU countries are keen on the idea of contact-tracing app use being a prerequisite for border crossings—but they may have little choice. “Let’s be honest, if Germany or France were to impose a tracing app for any Luxembourger to cross their border, how could we oppose it?” asked Luxembourg parliamentarian Sven Clement, according to Politico.
App coordination wasn’t the only measure recommended Wednesday. To support travel firms that are in big trouble right now, the Commission wants to make vouchers rather than cash refunds a more attractive option for travelers whose trips have been cancelled—it said vouchers should be protected against the travel firms’ insolvency, and made automatically refundable if they aren’t claimed within a year.
The Commission set out a framework for the safe reintroduction of tourism, including factors such as health-system and testing capacity, and is also setting up a website featuring a digital map that will give tourists real-time information about border situations and travel restrictions.


fortune--2020-05-13--Patagonia and Nasdaq CEOs on how to ‘reopen’

Good morning, Broadsheet readers! Runner Mary Cain has a new sponsorship—and job, the women who run Scotland and Northern Ireland object to Boris Johnson’s plan to emerge from lockdown, and two CEOs weigh in on reopening. Have a wonderful Wednesday.
– ‘Reopening’ x 2. Two CEOs, from two very different industries, weighed in yesterday on what ‘reopening’ from coronavirus lockdowns will mean for their companies.
In an interview with Bloomberg, Nasdaq CEO Adena Friedman says her staff’s return to the physical workplace will be voluntary for the foreseeable future. She made that determination after an employee survey found that the vast majority of workers want to keep working from home as they evaluate the wider world’s virus recovery.
When workers do return to the office, they may be subject to temperature tests, sit in spaced-out desk arrangements, and have to wear masks.
She acknowledged that her industry is privileged to be able to work remotely. “We have the luxury of patience,” she said. “[W]e have the ability to work from home very effectively.”
Generally speaking, Patagonia CEO Rose Marcario doesn’t have that luxury with a workforce scattered across retail stores and warehouses. The outdoor apparel and equipment company has been hit hard by coronavirus shutdowns, with North American sales plunging 50% since it temporarily closed its 39 stores and e-commerce business there on March 13; it was one of the first major retailers to do so.
Patagonia resumed online orders on April 9 once it had revamped its Reno, Nev., distribution center. Workers wear gloves and face coverings, they stand 30 feet apart, the cafe is closed, shared refrigerators are off-limits, and overall staffing is at 50%.
Even with the pressure of slumping sales and few remote working options, Marcario told The New York Times Patagonia is not hurrying to reopen physical stores like retail peers Macy’s and Gap Inc. In fact, the company is not expecting to open retail locations for in-store shopping until June at the earliest. It may not even happen until the fall or early winter.
Patagonia has established itself as a progressive force in Corporate America in recent years, particularly in regards to climate change. It’s also certified as a B corp, meaning it’s required to consider the interests of “workers, the community, and the environment” in addition to shareholders.
That first stakeholder—employees—is top-of-mind for Marcario who says the company may eschew state decrees to reopen.
“We were one of the first to shut down, we might be closer to the last to reopen fully—I don’t really care,” Marcario said. “We are doing everything we can to ensure that our employees are taken care of in the best way possible and we’ll make those decisions as we come to them.”
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Special results. Republican Mike Garcia took the lead over Democrat Christy Smith in yesterday's special election to fill former Rep. Katie Hill's California seat, which she resigned in 2019. Hill won the district by nine points for Democrats in 2018. After the tallies are finalized, both candidates are expected to run again for the usual term in November. Politico
- Running the show. Runner Mary Cain, who shared her story of being "physically and emotionally broken down" by her Nike team, is now one of the first two professional athletes to be sponsored by running company Tracksmith. Along with her sponsorship, Cain will also work as a community manager for the brand. New York Times
- Behind the bestsellers. Carolyn Reidy, president and CEO of Simon & Schuster since 2008, died of a heart attack at 71. Reidy's colleagues credit her with the success of books by authors from Doris Kearns Goodwin to Hillary Clinton. Fortune
- Tragedy in Kabul. Gunmen in Kabul stormed a hospital's maternity ward Tuesday in an attack that left 16 people dead, including mothers, newborns, and nurses. Afghanistan interior ministry spokesperson Marwa Amini called the attack, which was one of two on Tuesday, "unforgivable." NPR
MOVERS AND SHAKERS: Luckin Coffee fired CEO Jenny Qian amid an investigation into fabricated sales.
IN CASE YOU MISSED IT
- Four nations, two plans. Northern Irish leaders Arlene Foster and Michelle O'Neill joined Scottish First Minister Nicola Sturgeon in rejecting U.K. Prime Minister Boris Johnson's "stay alert" plan to ease the coronavirus lockdown. "We will not be driven by a timetable," said Foster, Northern Ireland's first minister. Guardian
- South Dakota standoff. South Dakota Gov. Kristi Noem says she plans to take the Cheyenne River Sioux Tribe and Oglala Sioux Tribe to federal court as the tribes attempt to prevent the spread of the coronavirus on their reservations. Tribal leadership has declined to remove highway checkpoints onto tribal land and cites treaties and a court decision that give them the power to do so. NPR
- Top chefs. Even though restaurants are largely closed, Food & Wine has highlighted the best chefs of 2020—those who will shape the future of the restaurant industry after the pandemic. They include Philadelphia-based K'Far's Camille Cogswell, New York eatery Kāwi's Eunjo Park, Los Alamos restaurant Bell's chef Daisy Ryan, and Detroit-based Selden Standard's Lena Sareini. Food & Wine
ON MY RADAR
Netflix scores movie rights to iconic 1999 U.S. women’s soccer team Variety
The women’s jail at Rikers Island is named for my grandmother. She would not be proud New York Times
Trump wanted a coronavirus victory event. It ended when he stalked off after clashing with two female reporters Washington Post
PARTING WORDS
"I am tired, but hopeful."
-Christine McLean, owner of the Alabama home decor business The Red Pincushion, which has sewn 79,000 face masks


fortune--2020-05-13--Tesla’s lockdown lawsuit is about much more than Tesla

Tesla’s lawsuit against a county government to open its Fremont, Calif. factory will do more than impact whether the company can continue making cars there. It could also, according to legal experts, help define how America reopens amid the coronavirus pandemic, and even more broadly, influence the power states have over local governments.
Tesla’s suit, filed in the U.S. District Court for Northern California, came just days after its CEO, Elon Musk, referred to coronavirus lockdown orders as ‘fascist.’ Then late Monday, Musk declared that his company’s factory would reopen in direct defiance of orders by Alameda County, where the plant is located.
The standoff is high-stakes for Tesla. The Fremont factory is the only plant producing Tesla cars, such as the Model 3 sedan, for the U.S. and European markets. Every day it is not making cars threatens the company’s bottom line.
But several health law experts say the case could have broader implications as U.S. states move to end coronavirus lockdowns. In particular, it may influence whether courts elsewhere rule that state-level orders trump city or county orders. In South Carolina, for instance, there has been uncertainty over whether the City of Greenville can enact a stronger stay-at-home order than the rest of the state.
The outcome of Tesla’s case could be particularly influential because the carmaker is the highest-profile company to sue in opposition to lockdown orders. Other suits have come from smaller businesses, which have also alleged unconstitutional violations of due process and equal protection, or argued that they are essential businesses that should be free to open.
Tesla’s decision to openly defy government health orders—it reopened its factory this week despite the county government’s position—should not impact the court case itself, according to Edward Richards, a Louisiana State University law professor who has previously worked with the U.S. Department of Justice on pandemic preparedness issues.
“[Tesla] is willing to put their money where their mouth is,” says Richards. “That’s partly because they say the locality doesn’t have the authority to do this. If the judge finds that to be true … the locality can’t do anything.”
Tesla’s suit makes three main arguments, according to James Hodge, a health-law specialist at Arizona State University. Tesla argues, first, that the mixed messages sent by Alameda County violated the company’s constitutional right to the due process of law. Tesla further argues that, because factories in different parts of California are subject to different restrictions, its constitutional right to equal protection has been violated. Finally, the company argues that Alameda County’s more-restrictive orders are pre-empted by statewide orders, which it says give it clearance to operate.
All of the experts interviewed for this article urged caution in assessing the case, because Alameda County has not yet had the chance to respond in court filings with its own version of events. Still, Hodge says that there is some merit to the due process claim. Alameda County’s published guidelines stated that businesses that install “distributed solar, storage, and/or electric vehicle charging systems” could remain open, which Tesla says includes the Fremont factory. The county, says Tesla, later contradicted those statements in ordering the factory closed.
“If you act in an arbitrary or vague way,” says Hodge, referring to the county, “you’re outside the bounds of due process.”
Tesla’s equal protection argument is less persuasive both to Hodge and to Wendy Parmet, law professor and director of the Center for Health Policy and Law at Northeastern University. Tesla’s claim compares the treatment of its facility in Alameda County with the decision made in a different county. Parmet says comparing two different jurisdictions isn’t relevant to an equal protection claim.
“That makes almost no sense. Because [equal protection is] a question of whether the [same] county is acting differently to other businesses within their jurisdiction,” she says.
The third leg of Tesla’s case may be the most impactful, whether or not it helps Tesla directly. The company argues that the orders issued by California Gov. Gavin Newsom supersede any orders at the county level, and that the reopening of factories elsewhere in California indicates that the state approves of factories like Tesla’s reopening.
The question of whether states can force cities or counties to adopt specific pandemic-related policies is about to become a much bigger one as more states open up. Tesla’s case could act as a precedent of sorts if, for instance, a city in Georgia decides to impose stricter lockdown orders as the broader state reopens, and the state tries to overrule it.
Experts were divided on how the preemption question might play in Tesla’s case.
“Gov. Newsom did not preempt all [local orders],” says Hodge. “He just said if a county is directly violating the order, the state preempts. Otherwise, some of it is subject to local decision-making.” Richards, by contrast, describes Tesla’s argument that the state order takes precedence as “fairly strong.”
According to Parmet, Tesla’s case is part of an ongoing “backdrop of contestation between state and local governments” on states’ ability to override local ordinances. States have placed limits on local government regulations on ridesharing and minimum wage in recent years, but there remains uncertainty about whether those moves are legal. The Tesla case, according to Parmet, could help further clarify the question.
If a judge rules in Tesla’s favor, the company would be clear to reopen. The county could also rescind or revise its order, ending the case before it goes before a judge.
It’s less clear what would happen if Tesla loses, given that the factory reopened on May 11. In a public statement and letter sent to Tesla the same day, Alameda County said it is “addressing this matter using the same phased approach we use for other businesses which have violated the Order in the past, and we hope that Tesla will likewise comply without further enforcement measures.”
The court case is on an accelerated timeline, so could be decided in a matter of weeks.
Regardless of the legal outcome, Tesla’s aggressive opposition to lockdown orders could threaten its reputation as a company focused on social good. That’s particularly true because of Musk’s vocal defiance of public health orders, which polls find the vast majority of Americans support.
Alyssa Altman, an analyst who covers Tesla for the consulting firm Publicis Sapient, says that if the company appears to be focused on its own finances rather than worker safety, Tesla “could lose that perception of trying to take the world to a different place, emotionally as well as environmentally.”
Update 5/13: Just before publication of this article, Alameda County announced that, if some benchmarks are met, “we have agreed that Tesla can begin to augment their Minimum Business Operations this week in preparation for possible reopening as soon as next week.” The decision may ultimately render Tesla’s lawsuit moot.
More must-read tech coverage from Fortune:
—Remote work, online grocery shopping, cord cutting: What coronavirus trends will stick
—No buses, no problem. Some cities provide subsidized Uber rides amid pandemic
—How to choose a video chat app? Grade it on privacy
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Zoom’s ups and downs since the coronavirus crisis
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-05-14--‘Unacceptable:’ A new France-U.S. spat erupts over Sanofi’s coronavirus vaccine plans

Companies are rolling back ‘ hazard pay ’ for essential workers—even as risks remain

Sanofi Chief Executive Officer Paul Hudson’s suggestion that the U.S. may get the French drugmaker’s coronavirus vaccine first sparked outrage in France, with one government minister calling the prospect “unacceptable.”
“For us, it would be unacceptable that there be privileged access for this or that country on a pretext that would be a financial pretext,” Junior Economy Minister Agnes Pannier-Runacher said in an interview Thursday on Sud Radio.
The U.S. will likely be first in line should Sanofi succeed in developing a vaccine because the country was the first to fund the French company’s research, Hudson said this week in an interview with Bloomberg News. The U.S., which expanded a vaccine partnership with the company in February, expects “that if we’ve helped you manufacture the doses at risk, we expect to get the doses first,” Hudson said.
Hudson’s comments highlighted the conflicts facing multinational companies and governments in the race to develop a vaccine against Covid-19. More than 140 world leaders and experts signed an open letter released by UNAIDS and Oxfam on Thursday, calling for a “people’s vaccine” as well as treatments that would be available swiftly to all for free.
“Nobody should be pushed to the back of the vaccine queue because of where they live or what they earn,” said South African President Cyril Ramaphosa.
National Priorities
Health advocates have warned that the race could leave out countries that can’t afford protective doses, making them vulnerable to mass fatalities and economic wreckage, amid signs some countries will give their population priority.
Supplies of an experimental shot from the University of Oxford will be prioritized for the U.K. before other parts of the world, Pascal Soriot, CEO of AstraZeneca Plc, which will manufacture the vaccine, said last month.
Hudson’s comments on possibly giving Americans a vaccine first sparked broad outrage at home. Olivier Faure, the head of France’s Socialist Party, suggested on Twitter that Paris-based Sanofi risked being nationalized because “health is a common good to be shielded from market games.”
The World Health Organization weighed in on the brewing controversy. Vaccines are “global public goods, which belong to everybody around the world,” Takeshi Kasai, the WHO’s director for the Western Pacific region, said in a media briefing Thursday.
Asked on BFM Business TV if the U.S. would be first in line for a Sanofi vaccine, Olivier Bogillot, the head of Sanofi France, said, “No, I don’t confirm it. It’s evident that if Sanofi discovers a medicine, a vaccine against Covid-19, and if it’s effective, it will be available to all.”
Sanofi has partnered with U.K. rival GlaxoSmithKline Plc on the project supported by the U.S. and says it could make 600 million doses annually.
Production of Sanofi’s vaccine in the U.S. will mainly go to that market, while capacity elsewhere will cover Europe and the rest of the world, the company said in an emailed statement following Bloomberg’s report. The drugmaker is having “very constructive conversations” with the French and German governments and European Union institutions, it said.
France’s Pannier-Runacher said she immediately contacted Sanofi after Hudson’s interview, and the local head of the company confirmed that the vaccine would be available to all countries, including France, especially because the company has production capacity there.


fortune--2020-05-14--Companies are rolling back ‘hazard pay’ for essential workers—even as risks remain

Who pays for the pandemic when insurance companies refuse ?

The hazard pay is disappearing. The hazard is not.
Some essential employees across the U.S. have received bonuses or pay bumps to compensate for the risk that comes with clocking in at supermarkets, hospitals and other crowded workplaces during a pandemic.
Now companies are walking back those wage increases, even as the threat of Covid-19 lingers.
This weekend, Kroger Co. is rescinding the $2 raise it gave to store and warehouse workers. Target Corp. and Amazon.com Inc. will follow later this month, with other firms charting similar moves.
The planned cutbacks have rankled unions, employees and customers who are accusing companies of putting profits ahead of worker well-being. They also raise questions about how to value the essential workers who are keeping society functioning. Many continue to put their health and safety on the line in exchange for relatively low wages.
“How do you go from a hero to zero when there’s still a pandemic out there?” said Steve Vairma, secretary-treasurer of the International Brotherhood of Teamsters’ Local 455 in Denver, whose members include Kroger distribution center workers. “What has changed? Our folks are still risking their safety and health by showing up for work.”
What’s changed, some experts say, is the gradual lifting of shelter-in-place orders that has people returning to workplaces. The pay premiums were meant to compensate those who had no choice but to come in, said Adrienne Altman, managing director at HR-consulting firm Willis Towers Watson Plc.
“When everyone’s back, there’s no reason for that offset,” Altman said.
But the virus, which has infected more than 1 million Americans and killed over 80,000, remains, and workplaces are still potential hotspots.
Employers, for their part, say they’ve made efforts to increase worker safety. Kroger, which will end its so-called “hero bonus” on May 16, said it will continue to offer employees testing, emergency leave and face masks. In April, it also gave full-time workers a $300 bonus and part-timers half that.
“We are committed to the continued support of our associates’ safety and mental well-being” and will continue discussions with unions, said Kristal Howard, a Kroger spokesperson. She added that without the premium employees make on average $15 an hour.
Amazon, which has been criticized for its treatment of warehouse employees, recently extended its $2 wage bump through May. The company said it has stepped up cleaning and other precautionary measures, including leave of absence options for high-risk individuals and those impacted by school closures.
Target, which plans to roll back its raise at the end of this month, said it will continue to provide resources for workers and their families. The company offers two weeks of paid leave for employees who test positive for the virus or need to quarantine, and double that for those deemed vulnerable.
Workers on the front lines of the pandemic are some of the lowest-paid in America. Retail cashiers earn a median hourly wage of $11.37, according to the Bureau of Labor Statistics, while the typical agricultural worker makes $12.52 and slaughterhouse employees bring home about $14 an hour.
Many in these risky jobs have seen no wage increases at all. But even with a hazard premium, workers in low-wage retail jobs can earn less than they would on unemployment, which the federal government is supplementing by $600 a week through July.
Knowing that it’s controversial to roll back pay bumps, many companies opted for one-time bonuses instead. Walmart Inc. in April gave its workers bonuses and said Tuesday that it will grant another round of payments next month. CVS Health Corp. doled out as much as $500 and extended paid sick leave to part-time employees.
Neither approach properly compensates employees for the risks, said Columbia University economics professor Suresh Naidu, who calculated that front line workers should get at least an extra $10 an hour.
“If this was a normal labor market, you imagine that wages would respond on their own,” Naidu said. Instead, companies don’t need to increase compensation to keep scared employees coming to work because, “the bottom has fallen out of the market. If you’re an essential worker, there’s no other job than the job you currently have.” And employees who quit aren’t eligible for unemployment benefits.
They’re “basically forced labor,” he said.
Lawmakers across the country have proposed an array of initiatives for government-subsidized hazard pay for essential workers.
A $3 trillion coronavirus relief bill proposed by House Democrats on May 12 includes a $200 billion “Heroes Fund” that aims to boost pay for essential workers by $13 an hour.
Republican Senator Mitt Romney floated “Patriot Pay,” a temporary $12-per-hour raise for low- and middle-income essential workers, and a bipartisan group of senators have called for a 25% raise for federal employees who can’t properly distance from others while working. The senators argued that the Trump administration has legal authority to issue the hazard pay.
So far, none of the efforts have been successful, in part as deficit concerns have cooled interest among Republican lawmakers for additional stimulus.
State legislators have run into similar issues. Officials from California to Vermont have pushed for higher pay for essential workers in both the public and private sector, but have run into budget constraints. After Vermont’s state senate approved a $60 million bill to fund hazard pay, the state’s Republican Governor Phil Scott said he “supports the intent, but needs to see how it will be funded.”
Without government action, most pay premiums for essential workers will likely expire this summer, if not earlier. That will send legions of workers back to their old wages even as the safety requirements like face masks and distancing remain.
“The retailers have made pretty clear that these are temporary in nature,” said Edward Jones retail analyst Brian Yarbrough. “I don’t think workers have a lot of leverage.”
One complicating factor for large retailers and others is what to do with pay if the virus begins spreading in some areas but not others.
Hazard pay policies are already inconsistent, even within workplaces. At the Veterans Affairs Medical Center in Iowa City, all employees wear masks and face shields but only those working directly on the Covid-19 ward are getting extra pay.
“Coming into work and wearing a mask all day long—even if you’re not going into the ‘hot zones’—there’s a cost to that,” said Patrick Kearns, a registered nurse and president of the local chapter of the American Federation of Government Employees union, which is pushing the VA to expand hazard pay. “There’s a psychological toll that takes on people.”


fortune--2020-05-14--Intel pledges ambitious water-use goal by 2030: to go ‘net-positive’

Intel has set out a range of environmental goals for the next decade, including a shift to 100% green energy, zero landfill waste from its manufacturing operations, and a target of “net-positive water use.”
In its latest Corporate Responsibility Report, out Thursday, the chipmaker also said it would double by 2030 the number of women and underrepresented minorities in senior management.
Crucially, Intel wants to use its clout to influence trade partners to take up the same corporate-responsibility ambitions through cross-industry standards and benchmarks. For example, it wants to help set up what it calls a Global Inclusion Index, which would provide common metrics that companies can use to track progress in boosting diversity across senior and technical positions.
“The world is facing challenges that we understand better each day as we collect and analyze more data, but they go unchecked without a collective response–from climate change to deep digital divides around the world to the current pandemic that has fundamentally changed all our lives,” said Intel CEO Bob Swan in a statement.
Intel came in at No. 4 on Fortune’s Change the World Sustainability All-Stars list last year, largely for its water-restoration efforts—the company is headquartered in drought-prone California. It already had a target of 100% water restoration from its manufacturing activities by 2025, but now it wants to go even further by 2030.
The concept of net-positive water use involves not only the optimization of consumption and heavy recycling of water—no easy task in an industry such as chip manufacturing, where wastewater is usually very toxic—but also capturing water from rainfall or storms, in order to put more back into the system than is taken out.
Intel said Thursday that it would collaborate with PC manufacturers to boost energy efficiency through the use of sensors and more efficient processor architectures (which is what every new generation of processor architecture has always aimed for: Sustainability aside, this enables processors to be used in new ways, such as in wearable technology.)
Ideally, Intel said, it wants to see a PC “that eliminates carbon, water, and waste in its design and use.”
On the health front, Intel is already a major contributor in the fight to quell the COVID-19 outbreak and to prepare for future pandemics. It is now more broadly talking about applying “technology in strategic manufacturing, transportation, and health care initiatives, including accelerating cures for diseases and improving health care.”
Intel also says it will push for global safety technologies and standards in the field of autonomous vehicles.
More must-read tech coverage from Fortune :
—Remote work, online grocery shopping, cord cutting: Which coronavirus trends will stick
—No buses, no problem. Some cities provide subsidized Uber rides amid pandemic
—How to choose a video-chat app? Grade it on privacy
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: Zoom’s ups and downs since the coronavirus crisis
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-05-14--CEOs don’t see a full economic rebound happening for years

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Big changes in store for the world of business, according to the Fortune 500 CEOs who answered our annual survey. A majority believe economic activity won’t return to the level it was before the pandemic hit until the first quarter of 2022. A majority also believe that business travel will never return to pre-pandemic levels. And 27% say that a substantial portion of their workforce (more than 10%) that moved to working from home during the pandemic will stay there indefinitely.
The CEOs also give Fed Chairman Jerome Powell and U.S. governors high marks for their handling of the crisis. But they give President Trump, the U.S. Congress, the Chinese government and the World Health Organization low marks. You can view the details, which were published online this morning, here.
As I mentioned earlier this week, roughly half the CEOs believe the crisis will accelerate the move toward stakeholder capitalism. One who falls firmly in that camp is Intel CEO Bob Swan–his company is a regular on Fortune’s Change the World list. This morning, Swan announced an ambitious set of targets for his company and his industry to reduce greenhouse gas emissions, transition to green power, restore clean water to local communities, eliminate landfill waste, combat human rights abuses in the supply chain, and double the number of women and minorities in leadership positions.
I talked with Swan last week about why he was ramping up these social goals. “I have found this so helpful internally,” he said, “including as we confronted COVID. We said let’s make sure we are using our purpose as a screen for how we attack these problems. It is not “How is our product going to be the best?,” but rather “How do we make sure we enrich lives on earth?”
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Stocks down
Yesterday's stock market drop in the U.S., which was precipitated by Fed Chair Jerome Powell's warming about a prolonged recession, has continued around the world. The Hang Seng dropped by 1.5% and the Nikkei 225 by 1.7%, after which the Stoxx Europe 600 fell by a similar amount. At the time of writing, U.S. futures suggest a flat open. P.S.: Some Wall Street heavyweights are also saying stocks are overvalued right now. Wall Street Journal
Vaccine outrage
A French government minister has said it would be "unacceptable" for the U.S. (or any other country) to get priority access to a Sanofi vaccine against the novel coronavirus. Although Sanofi is a French company, the U.S. was the first to fund its research, so CEO Paul Hudson said this week that the U.S. expects to get the resulting vaccine first. World leaders and experts are pushing for a global "people's vaccine". Bloomberg
Facebook settlement
Facebook has paid $52 million to settle a class action lawsuit brought about by its content moderators, over the heavy psychological consequences of their jobs, i.e. reviewing videos of things like rape or terrorism to keep them off the social network. The settlement only applies to U.S.-based content moderators working through third-party companies; expect similar cases to hit other platforms that require heavy content moderation, such as YouTube and Twitter. Washington Post
Google diversity
Google has recently scaled back or completely cut its diversity and inclusion initiatives, multiple current and former employees have told NBC News. One program to be cut was Sojourn, in which workers were taught about implicit bias and how to talk about race and inequality. All of the sources apparently said independently that they believed Google was trying to avoid a conservative backlash. NBC News
AROUND THE WATER COOLER
Food crisis
"You can have a food crisis with lots of food. That’s the situation we’re in," said senior economist Abdolreza Abbassian, of the U.N.'s Food and Agriculture Organization. The problem lies in the broken-down transport of produce, combined with the collision of soaring prices and shrinking incomes. In other words, it’s both a demand-side and supply-side crisis, at a global level. Wall Street Journal
Russian hacking
German Chancellor Angela Merkel has blamed Russia for the "outrageous" hacking attack on her country's parliament back in 2015. "I can honestly say that it hurts me," said Merkel (who speaks fluent Russian and has had an amicable relationship with Putin). "On the one hand, I try to improve relations with Russia on a daily basis, and when then, on the other hand, we see that there is hard evidence that Russian forces are operating in such a way, then we are working in a field of tension, which is something that—despite the desire for good relations with Russia—I cannot completely erase from my heart." Politico
Who pays?
Who pays for the pandemic when insurance companies will not? That's the question delved into by Fortune's Jeff John Roberts, who writes: "As many businesses are belatedly discovering, most policies contain language requiring the loss to be a consequence of physical events. Interruptions caused by 'civil authorities,' seemingly including stay-at-home orders, are also often covered. Even in those cases, however, businesses must still typically experience physical damage, either to their buildings or nearby, to trigger coverage…These hurdles haven’t stopped enterprising lawyers for policyholders to seek loopholes." Fortune
Restarting tourism
Europe's attempt to restart tourism will need to be accompanied by interoperable contact-tracing apps, the European Commission has said. Each EU country is building its own contact-tracing app, and there are two diverging approaches being taken—which would hamper the functionality of these essential coronavirus-warning systems when users cross borders for a holiday. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-05-14--The government’s mortgage forbearance policies exclude 61% of Americans

The most overlooked cataclysm from the COVID-19 pandemic is the coming crunch on America’s low-income homeowners and renters. The families most in need may be facing the biggest wave of evictions and foreclosures since the Great Recession.
Reading the headlines, you’d think the U.S. is doing a great job supporting Americans struggling to make their rent and mortgage payments. Indeed, as the pandemic was obliterating 30 million jobs starting in early March, virtually every federal agency that provides housing or backstops home loans unveiled widely lauded forbearance programs that allow tenants and borrowers to forgo payments for extended periods targeted to carry them through to the recovery.
The government’s approach to housing relief, however, suffers from a basic weakness. It helps only the households holding mortgages backed by federal government sponsored enterprises and federal agencies such as Fannie Mae, Freddie Mac, and the FHA. Fannie and Freddie impose rigorous income and credit standards, so that, in general, borrowers who obtain government-backed loans are in a stronger financial position than those who get mortgages from private lenders.
What the government’s programs don’t do is provide assistance for either the generally more stressed families living in dwellings with home loans provided by private lenders, or to folks renting those homes. Not only do those Americans far outnumber households that benefit from federally supported financing, they’re also the restaurant employees, construction workers, farmhands, and hospital orderlies whose jobs and incomes suffered most from the crisis. The hardest-hit families are blue-collar tenants that in the best of times pay a huge portion of their slender incomes on rent.
“The housing policies arising from COVID-19 have created a gap between government- and nongovernment-supported households that does not address financial needs,” says Sandeep Bordia, director of research at Amherst Holdings, a real estate investment and financing firm. “It isn’t driven toward helping families that make, say, $40,000 a year and lost their incomes. Instead, those programs typically help higher-income people who happen to have government-backed mortgages.” Those middle-class borrowers and renters, he adds, are also far more likely to have kept their jobs.
Amherst warns that the U.S. could undergo as many foreclosures over the next couple of years as the 7.8 million the nation endured during the Great Recession. That’s a worst-case scenario, he adds, assuming that Washington provides no targeted support to the most at-risk owners and renters, and that the recovery is a slow one. If that happens, around one in 15 of all the dwellings in America could be repossessed by lenders and resold, possibly at distressed prices. Fortune also estimates that evictions would spike by around one-quarter, to over 1 million a year—levels witnessed in 2008 and 2009.
Federal housing agencies are providing robust relief
Amherst recently issued a study examining how the gulf between the generous assistance in the government-backed sector will cushion family finances, while the lack of aid for privately financed homeowners and renters spells big trouble. The topic is central to Amherst’s business: Its Main Street Renewal arm manages 20,000 single-family houses—and owns most of them—leased to mainly blue-collar tenants, ranking in the top five among the single-family rental companies, a group that includes Invitation Homes, American Homes 4 Rent, and Progress Residential.
In the report COVID-19 Relief Helps Some, Leaves Over Half of Households Vulnerable, Amherst points out that 48.1 million, or 39%, of America’s 124.1 million households, defined as dwellings occupied by a single person or a family are supported by U.S.-guaranteed home loans backed chiefly by Fannie Mae, Freddie Mac, Ginnie Mae (for FHA mortgages), or the Veterans Administration.
These government-sponsored enterprises purchase and guarantee mortgages originated by banks and other financial institutions. Under the CARES Act, borrowers can qualify for 180 days of forbearance and, thereafter, request an additional 180 days. Hence, households that lost income because of the pandemic can skip payments for a total of 12 months. At the end of the grace period, the owners will still owe the full amount, including past-due interest and principal. But the FHA has stated that its borrowers won’t be forced to get current by paying the big lump sums, and other guarantors are likely to follow the FHA’s lead. That means borrowers will get still more breathing room as overdue payments are spread well into the future.
How about tenants in houses and apartments owned by landlords that hold government-guaranteed mortgages? Federal regulators stipulate that starting March 27, tenants can miss paying rent for 120 days without being evicted; when the moratorium ends, the landlords must provide 30 days’ notice before forcing the tenant to leave. But because the stressed landlords will reduce their own cash burden by forgoing mortgage payments for up to a year, it’s likely that they will extend forbearance to their tenants well beyond the four months required by regulators.
The mortgage have-nots
By contrast, the remaining 77 million households, 61% of the total, own or rent homes that don’t have government-backed mortgages. But those are Americans with both the lowest incomes and the most devastating job losses. Of that group, around 33 million own their homes free and clear, or hold properties that don’t generate rent, often because they’re offered free to family members. That leaves 44 million who live in houses or apartments financed by private lenders. Meet the Americans most battered by the pandemic.
It’s remarkable that the proportion of tenants versus owners skews much higher in this nongovernment-backed sector. In part, that’s because the ranks of renters have swelled dramatically since the Great Recession. “After the financial crisis, it became much harder for people to qualify either for a private or a federally guaranteed mortgage,” says Bordia. “It was the shortage of credit that drove the rental wave.” Since 2007, the number of rental households has jumped by 4 million. That’s an outsize share of all the families and singles that moved into a new dwelling over the past 13 years. In the last couple of years, a buoyant economy has lifted home ownership and curbed rentals. Nevertheless, all told, over the past 13 years, rental households have ballooned from 32.5% to 36% of all U.S. households, constituting the biggest single trend in U.S. housing.
Of the 48 million households covered by agency mortgages, only 12.3 million, or 20%, are renting. But in the much larger, privately financed category, more than twice as many, 28 million properties, are occupied by tenants. Of those, almost two-thirds live not in high-rises or garden apartments but in single-family homes or buildings with four or fewer units. And all but a sliver of the market managed by big investors such as Amherst and Invitation are owned by the likes of local lawyers, dentists, or restaurateurs and other stalwarts of suburbia.
Low-income renters are hardest hit
Here’s the mismatch: The Americans living in privately financed homes are mainly renters who aren’t getting housing aid, and those occupying dwellings with agency mortgages are mostly owners benefiting from holidays on mortgage payments. Yet the renters need the relief a lot more, for a fundamental reason: Their incomes are a lot skimpier than paychecks for homeowners.
Bordia cites data from the American Community Survey spotlighting that wide disparity. The median income for America’s tenant households was $40,000, less than half the figure for homeowners holding mortgages—once again, the leading profile for the households targeted for housing assistance. On average, renters spend one-third of their income on housing versus one-quarter for owners. One tenant in four channels over 50% of their pay on rent, versus one in nine for homeowners with a mortgage.
The lockdown has hit low-wage earners far harder than the middle class and above. By Amherst’s estimates, one-quarter of workers making $30,000 or less lost their jobs since early March. The rate was still extremely high at one in five for folks earning from $30,000 to $70,000, but from $70,000 and up, only one in nine joined the parade of the unemployed. It’s clear that America’s most vulnerable are renters living paycheck to paycheck. That’s precisely the group that desperately needs aid earmarked at helping them remain in their homes and apartments, and they aren’t getting it.
Where the big gap in housing policy could lead
The raft of relief programs designed to help Americans weather the shutdown includes a number of provisions that do help that big, super-fragile army of low-income renters. The stimulus measures include the $1,200 one-time payments per adult, and the $600-a-week federal boost to the unemployment benefits provided by the worker’s state of residence. The U.S. also mandated that the regular jobless benefits be extended from 26 to 39 weeks.
But that extra income isn’t nearly enough to ensure that the Americans most at risk for eviction and foreclosure can keep paying their rent, or their mortgages plus property taxes and insurance. Many states do not provide unemployment payments unless the worker’s income is lowered by at least 20%, and many workers get no help even though their incomes fell just short of that threshold. The $600 federal payments run out on July 31, and the cash payments for the jobless average $378 a week, or less than $15,000 over that extended, 39-week period.
The private lenders are also helping out. JPMorgan Chase and Wells Fargo are allowing borrowers to postpone payments for 90 days. But the scope of big lenders’ forbearance is limited by the need to protect their scarce capital against the threat of big looming credit losses. Both low-income owners with private home loans, and the millions of landlords that own and rent one or a couple of houses, are especially exposed to foreclosures.
As tenants stop paying, the mom-and-pop brigade will increasingly struggle to cover mortgage, taxes, and insurances on their rental homes. “Tenants may not pay rent, meaning that many families who may be dependent on incoming rental payments will be without a source of income until renters begin repayment,” cautions Bordia. The owners themselves may have lost jobs or part of their income as well. The trickle down from enhanced unemployment benefits won’t do much to offset the deficit when newly jobless tenants in two out of the owner’s three houses cease paying rent.
Bordia warns public policy is missing just the group it should be helping. If the country marshals relief specially crafted for these ultra-endangered renters and landlords, he says, a foreclosure and eviction flood can be averted. For families under financial stress not experienced since the Great Recession, nothing is so important as the protection of a safe place to live—and the government’s multitrillion-dollar response fails to address the needs of America’s most vulnerable.


fortune--2020-05-14--Who pays for the pandemic when insurance companies refuse?

The Indiana Repertory Theatre is a fixture of cultural life in the Midwest. But after the COVID-19 outbreak struck, the theater had to scramble, briefly performing Agatha Christie’s Murder on the Orient Express in front of a smaller audience, and then, after the situation became too risky, shutting down completely. “We knew immediately we’d have over $1 million in lost revenue,” says managing director Suzanne Sweeney, who has had to lay off dozens of actors and stagehands to cut expenses.
Hoping to cushion the blow, Sweeney called the theater’s insurance broker to collect on a policy that the organization had to cover interruptions to its business. The insurer, however, refused to pay because it said the loss hadn’t come from physical damage like a fire. In response, the theater filed a lawsuit in state court in April, hoping that a judge would rule that its coverage applied.
The Indiana theater is one of hundreds of organizations and businesses, including restaurants, nail salons, and casinos, that have sued insurers for denying them a payout for their losses from the coronavirus. Their targets include insurance companies like American International Group, Liberty Mutual, and Hartford Financial.
40% U.S. companies that have business interruption insurance
The cases set the stage for a huge legal fight over who should pay for the hundreds of billions or even trillions of dollars in business losses related to the pandemic. The outcome will determine whether many companies can continue to operate or, possibly, whether the insurance industry will survive.
After most of London burned to the ground in 1666, insurers, who at the time covered mostly maritime disasters, expanded to covering fire as well. Since then, the scope of coverage available to merchants has steadily expanded, and today 40% of small and medium-size companies buy insurance to compensate for lost sales in the event of a disaster.
But as many businesses are belatedly discovering, most policies contain language requiring the loss to be a consequence of physical events. Interruptions caused by “civil authorities,” seemingly including stay-at-home orders, are also often covered. Even in those cases, however, businesses must still typically experience physical damage, either to their buildings or nearby, to trigger coverage.
$770 billion Amount of money U.S. insurance companies have in reserve
Complicating matters further for business owners is that many policies contain clauses that specifically exclude losses resulting from viruses. Such language began appearing in 2006 after the insurance industry, spooked by the SARS epidemic, sought to shield itself from pandemic claims.
These hurdles haven’t stopped enterprising lawyers for policyholders to seek loopholes. Some attorneys argue that the coronavirus should be defined as a physical event and therefore be covered, much like what happened in past cases involving asbestos and Legionnaires’ disease. Others point to language that excludes losses arising from bacteria, but that doesn’t specifically mention viruses, in the hope of overcoming the pandemic exclusion.
Will any of this creative lawyering lead to success? University of Virginia law professor Kenneth Abraham says probably not. But he cautions that previous campaigns against the insurance industry, especially over pollution, began as long shots but ultimately succeeded. “I’ve learned over 40 years that something that seems like a stretch to many people turns out not to be a stretch,” he says.
The outcome will determine whether many companies can continue to operate or, possible, whether the insurance industry will survive
The legal result for business owners is likely to depend on the law in various states. Meanwhile, lawmakers in at least seven states are trying to influence the outcome with calls for legislation that would bar business interruption insurers from excluding losses from pandemics.
But even if such gambits are successful—a questionable outcome considering how the U.S. Constitution restricts the government from revising private contracts—it’s unclear how much insurers can afford to pay. Experts say the cost will be much higher than previous lawsuits over asbestos and Superfund cleanups, which cost the insurance industry hundreds of billions of dollars. “It’s not comparable to anything for the magnitude of dollars at stake,” says Abraham.
According to insurance attorney Michael Menapace, U.S. insurers—including the reinsurers that backstop them and the retrocessionaires that back the reinsurers—currently hold a reserve of $770 billion, a sum he says would be wiped out in three or four months if courts ordered insurers to pay every business interruption claim. A major earthquake or extreme hurricane season would only compound the strains on the industry, Menapace adds.
The indiana Repertory Theatre is a fixture of cultural life in the Midwest. “We knew immediately we’d have over $1 million in lost revenue,” says managing director Suzanne Sweeney, who has had to lay off dozens of actors and stagehands to cut expenses. Courtesy of IRT
All of this explains why insurers have tried to shield themselves from paying for the fallout of a pandemic. The industry is equipped to pay for discrete disasters or for liabilities like asbestos that can be paid out slowly over multiple years. But it can’t cover what insurance types call “correlated risks” such as damage from war—or COVID-19—that can affect millions of people at the same time.
Chicago attorney Teresa Snider suggests the pandemic may result in a similar outcome to what followed 9/11: Namely, the federal government creating a new system in which the U.S. Treasury would help insurers pay for future pandemic claims.
In the meantime, she says, the debate over business interruption coverage will take years to be resolved. This won’t provide much comfort to workers at the Indiana theater, for whom an immediate insurance payout would probably have offered some protection from unemployment.
A version of this article appears in the June/July 2020 issue of Fortune with the headline “Who will pay for the pandemic?”


fortune--2020-05-14--As pain on the shale patch deepens, U.S. overtakes Saudi Arabia in cutting oil production

When it comes to oil supply cuts, don’t look to OPEC—look to Texas and North Dakota.
The U.S. will be the single largest contributor to a historic global drop in crude supply this year, according to an estimate from the International Energy Agency’s monthly oil report on Thursday.
Worldwide cuts to oil production are expected to decline by 12 million barrels per day by the end of the year, the agency said, with U.S. production expected to drop by 2.8 million barrels per day.
“By the end of 2020, it is the U.S. that is the biggest contributor to global supply reductions,” said Fatih Birol, the executive director of the Paris-based agency, surpassing even expected cuts from Saudi Arabia.
Those cuts are the result of rapid shut-ins in the U.S. shale patch, which went into the oil crash with high debt levels; activity levels dropped to record lows, and companies large and small cut unprofitable production.
And nowhere is that impact greater than in the Permian Basin, the producing region at the heart of the U.S. shale boom, which turned the U.S. from an oil importer to an exporter in a matter of years. Large-scale, immediate cuts to production by the region’s largest players, particularly Exxon Mobil and Chevron, have led the way, the IEA notes.
Those cuts come alongside sharp production declines from other non-OPEC+ countries, particularly Canada, but also Norway and Brazil, Birol said.
And the supply drop comes alongside the easing of global lockdowns, which is putting some life back in demand for oil for industry and travel, and producing early signs of a “gradual rebalancing” on oil markets, said Birol.
“It is still gradual, and it is still fragile,” he cautioned.
Crude prices continued their rebound on Thursday. The global benchmark, Brent Crude, was up nearly 4%, with West Texas Intermediate climbing more than 5%. Brent and WTI are down more than 50% year to date, among the commodities hardest hit by the economic fallout of the COVID-19 pandemic.
Global oil demand is expected to fall by 8.6 million barrels per day across 2020, the IEA estimated, a reduction of last month’s forecast of a fall of 9.3 million barrels per day, based on expectations that lockdowns will continue to ease, and there will not be a resurgence of COVID-19 later this year.
Last month, Birol warned that 2020 would see a record fall in annual demand, and said April would mark the bottom—“black April”—with a 29 million barrel per day drop in demand, coinciding with global lockdowns and arriving before large-scale production cuts could go into place. That overall picture has been borne out, he said Thursday.
“Our numbers do confirm that we are on track, that 2020 will be the worst year and April will be the worst month,” he said.
Stocks too, which have been dramatically built up as producers looked for space to store oil amid a storage crisis, could also start to decline in the second half of this year, the IEA said, as the drop in supply draws down strategic reserves.
However, Birol stressed that the market was far from rebalancing—oil markets are still in the midst of a historic hit to demand, he said.
“It is far too early to say we are soon going to reach a rebalancing of the markets. We are just in the beginning of that process.”