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United, Alaska find loose parts on 737 MAX planes, raising pressure on Boeing

REUTERS

WASHINGTON/CHICAGO — Boeing’s latest 737 MAX crisis deepened after United Airlines and Alaska Airlines said they had found loose parts on multiple grounded MAX 9 aircraft, raising new concerns among industry experts about how its best-selling jet family is manufactured.

US regulators grounded 171 MAX 9 planes after a panel blew off an Alaska Airlines-operated flight not long after taking off from a Portland, Oregon, airport on Friday, forcing pilots to scramble to land the plane safely.

Alaska Airlines said late on Monday that initial reports from its technicians indicated some “loose hardware” was visible on some aircraft in the relevant area when it conducted checks of its fleet.

It was waiting for final documentation from Boeing and the US Federal Aviation Administration (FAA) before formal inspections could begin.

United, the other US carrier that flies this Boeing model with the panels, said its preliminary checks found bolts that needed tightening on several panels.

The disclosures heightened concerns about the production process of the MAX 9 jets that have been grounded.

A source familiar with the matter said United has so far found close to 10 airplanes with loose bolts during its preliminary checks, up from an initial five first reported by industry publication The Air Current, and the figure may increase.

There are still ongoing discussions between Boeing, the FAA and the airlines on the precise inspection guidelines.

Boeing is expected to revise the guidelines it submitted to airlines earlier on Monday, and the FAA would have to sign off on those changes before the airlines could begin repairs, sources said.

Boeing said it was staying in close contact with MAX 9 operators and would help customers address any findings during inspections.

“We are committed to ensuring every Boeing airplane meets design specifications and the highest safety and quality standards,” the planemaker said. “We regret the impact this has had on our customers and their passengers.”

Several industry insiders said airlines have started to hear passengers voice concerns about the safety of the aircraft, even though the MAX 9 in question is only used by a handful of carriers.

Any prolonged concerns may increase pressure on Boeing, which has suffered from numerous production issues since the wider grounding of the 737 MAX family in March 2019 that lasted 20 months after two deadly crashes killed 346 people.

“This changes a lot because it is now a fleet problem. This is a quality control problem,” said US aircraft safety expert John Cox.

Investigators said on Sunday it was too early to determine the cause.

Boeing shares sank 8% on Monday.

FLIGHT CANCELLATIONS
Boeing’s largest single-aisle model in production has a panel known as a door plug to replace an exit that would be installed on planes configured to carry more passengers. Most operators use the lower-density version with the door plug.

People familiar with the process have said the panel is fitted in two stages, first by supplier Spirit AeroSystems and later completed by Boeing. Investigators said they would examine both manufacturing and maintenance records.

Spirit shares fell 11% on Monday.

The FAA declined to comment on the loose bolt reports.

“Since we began preliminary inspections on Saturday, we have found instances that appear to relate to installation issues in the door plug – for example, bolts that needed additional tightening,” United said in a statement.

Once the final process is approved by the FAA, inspections are expected to take several days, forcing the cancellation of numerous flights. One senior industry source said the timing was increasingly unpredictable and that the FAA, under a recently appointed leader, would be cautious.

The FAA said planes would remain grounded “until operators complete enhanced inspections which include both left and right cabin door exit plugs, door components, and fasteners.”

Alaska Airlines pilots on Friday turned the plane around and landed it safety, and no major injuries were reported even as oxygen masks deployed and personal items were sucked out of the plane.

“It was really important to figure out whether it was that specific aircraft from Friday night,” said Anthony Brickhouse, an air safety expert at Embry-Riddle Aeronautical University.

“The fact that United has now found some aircraft with loose bolts, that just means that the investigation is going to be expanded.”

A diagram of the 737 MAX 9 door plug posted by the U.S. National Transportation Safety Board on Sunday shows four bolts – two in the upper corners of the plug and two lower hinge brackets – that secure the plug to the fuselage.

The plug is further fastened in place by “stop fittings” at 12 different locations along the side of the plug and the door frame. Those components hold the door plug in place and prevent it from being pushed out of the airframe.

PANEL FOUND IN BACKYARD
The panel was recovered on Sunday by a Portland schoolteacher who found it in his backyard, NTSB Chair Jennifer Homendy said.

Homendy said the cockpit voice recorder did not capture any data because it had been overwritten. She again called on regulators to mandate retrofitting existing planes with recorders that capture 25 hours of data, up from the two hours required in the U.S. at present.

Alaska Airlines cancelled 141 flights, or 20% of its scheduled departures, on Monday after grounding its 65 MAX 9s. The carrier said travel disruptions were expected to last through at least mid-week. United, which has grounded its 79 MAX 9s, cancelled 226 flights on Monday, or 8% of its scheduled departures.

Of the 171 planes covered by the order, 144 are operating in the United States, aviation analytics firm Cirium said.

Turkish Airlines, Panama’s Copa Airlines and Aeromexico said they had grounded affected jets. Indonesia said it had suspended the use of three jets not covered by the order. — Reuters

Spain considers nationwide hospital mask rule, as flu and COVID cases spike in Europe

MASKMEDICARE SHOP-UNSPLASH

MADRID — Spain’s government proposed a nationwide mandate for people to wear masks in hospitals and health clinics on Monday, and Italy said respiratory illness infection rates had hit a record, as flu and COVID spread across Europe.

The European Center for Disease Prevention and Control recommended that people on the continent stay home if they feel sick, and consider wearing masks in crowds or healthcare settings, with flu spreading as it typically does this time of year but hitting some countries harder than others.

It said Europeans should follow national guidelines on vaccinating vulnerable groups. Flu is now circulating at higher levels than other common respiratory pathogens, including the Sars-CoV-2 virus that causes coronavirus disease 2019 (COVID-19), it said.

Several Spanish regions already ordered patients, visitors and staff at hospitals to wear masks last week. Spain’s central government proposed on Monday extending that requirement nationwide, but regional leaders in charge of health policy have so far rejected that, with a decision expected on Wednesday.

“One thing we know will limit epidemics and protect vulnerable people is the mask,” Health Minister Monica Garcia said on TVE. “It is a commonsense measure, scientifically supported and widely accepted by the public.”

The government has also proposed allowing people to self-diagnose lighter cases and take three days off work rather than needing a doctor’s note, Garcia said.

Spain was among the last European countries to drop requirements to wear face masks following the COVID-19 pandemic, with people told to wear them on public transport until February 2023, and in health centers and pharmacies until July.

RECORD HIGH
In Italy, people suffering from flu-like illnesses, which include both flu and COVID-19, reached a record high in the last two weeks of 2023, superseding even the COVID epidemic, according to data issued by the issued by National Health Institute (ISS).

The incidence in Italy was 17.5 cases per thousand people in the 52nd week and 17.7 cases per thousand people in the previous week.

ISS experts said the rise could be blamed on the fact that most people were no longer wearing masks and that fewer people had sought vaccinations so far this season. So far there has been no sign that the Italian government is considering re-introducing mask mandates.

Portuguese Health Minister Manuel Pizarro said on Monday there’s currently no reason for a generalized recommendation regarding mask use while acknowledging the country was experiencing a flu epidemic that had increased waiting times in hospital emergency wards to more than 10 hours in recent weeks.

In intensive care units, the proportion of influenza cases reached a record 17% in the last week of 2023, according to the health authority.

Countries in other parts of the world were also adopting mask usage once more. Hospitals in at least four U.S. states have reinstated mask mandates amid a rise in cases of COVID, seasonal flu and other respiratory illness. — Reuters

Legal migration to EU must increase as workforce ages

Shoppers walk around the Schildergasse shopping district in Cologne, Germany, Dec. 15, 2020. — REUTERS

ATHENS — Legal migration to the European Union will have to increase by 1 million people a year to make up for losses in the bloc’s ageing workforce, the European Union’s (EU) home affairs chief said on Monday.

Migration to the EU hit about 3.5 million last year with more than 300,000 irregular entries according to EU statistics, but European Commissioner for Home Affairs, Ylva Johansson, said the number of people arriving legally needs to increase.

“Legal migration works very well, but it’s not enough,” she said in a speech during a visit to Athens, adding that the EU workforce is shrinking by 1 million people a year.

“That means that the legal migration should grow more or less by one million per year,” she said adding that this should be done “in an orderly way”.

Ms. Johansson also urged countries to crack down on the illegal migration that brings hundreds of thousands of migrants to Europe each year from Africa, the Middle East and elsewhere, often by deadly routes.

Irregular migrant arrivals to the EU are way down from the 2015 peak of more than 1 million, but have steadily crept up from a 2020 low to more than 260,000 last year, with more than half crossing the Mediterranean from Africa, through Italy, Greece, Spain, Cyprus and Malta. The EU last year agreed on news rules to share the cost of hosting migrants more evenly and to limit the number of people coming in using smugglers’ networks.

“We have to avoid those people that use the smugglers often risking their lives with the irregular arrivals. This need to be prevented, “ Ms. Johansson said adding that there is a need of “global alliance” to face smugglers networks. — Reuters

Spanish court convicts arbitrator who awarded $15 billion to sultan’s heirs in Malaysia dispute

REUTERS

MADRID — A Spanish arbitrator who awarded $15 billion to the descendants of a former sultan in a land dispute with Malaysia dating back to the 19th century has been convicted of contempt of court, it was announced on Monday, a significant victory in Malaysia’s efforts to annul the case.

Gonzalo Stampa was accused by the Spanish state prosecutor and Malaysia of failing to comply with a Madrid court ruling to drop the case by instead moving it to a court in Paris.

Mr. Stampa was sentenced to six months in jail and barred from operating for one year, according to the ruling.

In February 2022, Stampa awarded $14.9 billion to the Sultan of Sulu’s heirs, who have since sought to enforce the award against Malaysian state-owned assets around the world. Malaysia has obtained a stay on the case in France, but the ruling remains enforceable globally under a United Nations arbitration treaty.

“Congratulations to all Malaysians! The efforts by this (government) in addressing and putting a stop to the Sulu Fraud have not been in vain,” Law Minister Azalina Othman Said wrote on X, formerly known as Twitter.

The dispute stems from an 1878 deal between European colonists and the Sultan of Sulu for use of his territory, which spanned parts of the southern Philippines and present-day Malaysia on the island of Borneo.

Malaysia paid a token sum annually to the sultan’s heirs to honor the agreement but stopped in 2013, prompting the heirs to seek arbitration, which has been funded by Therium, a London-based firm that provides financing for litigation and arbitration cases.

Mr. Stampa’s fees after delivering the award came to about $2.3 million, court documents showed. The heirs, who suffered a setback in June 2023 after a Paris court upheld the Malaysian government’s challenge against a partial award, are also trying to strengthen their case in Madrid.

They filed a criminal case against the Spanish justice system in December 2023, claiming that a court clerk in Madrid improperly sent an email ordering Mr. Stampa to step down from the case. — Reuters

Hungary takes aim at ‘shrinkflation’ with mandatory price warnings

FREEPIK

BUDAPEST — Hungary’s government will require large food retailers from March to display price warnings on products that have shrunk in size, the Economy Ministry said on Monday.

Hungary’s inflation rate peaked at 25% in the first quarter of last year, the highest in the European Union, and it is struggling to revive the economy as consumers’ purchasing power has declined.

Data published on Monday showed retail sales rising by 0.8% from the previous month in November, though they were still down by an annual 8.7% in the first 11 months as consumption fell.

Prime Minister Viktor Orban’s government is looking to revive the economy, which eked out its first quarterly growth in a year in the third quarter, with local government and European Parliament elections on the horizon.

“In the past months, the phenomenon where the size of certain products shrinks while their prices remain the same or even increase has attracted heightened attention in several countries,” the Economy Ministry said.

“This deceptive practice leads to consumers getting less of the purchased product for their money,” it said.

Under new rules from March that will be in effect for two months, food retailers with an annual turnover above 1 billion forints ($2.9 million) will be required to display price warnings for products that have shrunk in size compared to the period between Jan. 1, 2020 and July 1, 2023.

Food makers, importers and suppliers will also be required to notify retailers of any size reductions.

“Although we believe that households will initially focus on deleveraging and rebuilding their reserves, consumption could also start to grow,” economists at ING said about the latest retail sales figures.

“However, for this change to be significant and lasting, consumer confidence must first be restored, which is a more protracted process.” — Reuters

GCash among highly recommended Philippine brands in 2023 with 92% net promoter score

GCash achieved a 92% net promoter score (NPS) in December 2023, indicating it’s a highly recommended and trusted brand among Filipinos. The NPS has been a globally recognized metric since 2003 and was created by top management consulting firm Bain and Company.

Based on an internal study among active GCash users, significant gains seen in the major categories of usefulness, ease of usage, security, and customer service drove GCash’s total NPS. The survey aimed to determine accurate customer sentiment by accounting for positive and negative feedback.

Under the primary metrics of the report, GCash achieved an all-time high in customer recommendations for the following criteria: Usefulness, 93; Ease of Use, 93; Security, 88; and Customer Service, 81.

“The net promoter score is one of our many ways to show that we are truly listening to our customers. At GCash, we believe that the best way to promote the brand is for customers themselves to share their experience with others, which has so far been positive according to the report. Among the good things that customers are saying is that GCash products and services are relevant to their needs, have a wide range of online and offline partners, and is a more convenient way than conventional offline methods that are always available when needed,” said GCash VP and head of corporate communications Gilda Maquilan.

Regarding ease of use, GCash users say it is easy to navigate and get used to. It is available for use in most transactions they need it for. Education materials are helpful and easy to understand. Customers are also saying that self-help articles are easy to access.

Security, which helps build trust among customers, also scored positive sentiment. Customers say security measures are sufficient to protect their accounts, especially from scammers and fraudsters. The report reveals that customers feel safe with their private data and the integrity of their accounts as long as they don’t share their MPIN and OTP with others.

In terms of customer service, the ease of getting help with GCash has significantly improved, as issues are resolved with fast and timely replies and updates.

Earlier in 2023, GCash was also cited as one of the most endearing brands by independent research firm PUBLiCUS Asia. In its PAHAYAG 2023 Second Quarter Survey, GCash was shown as a “clear leader in the financial services category,” with a dominant 80% endearment score.

 


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Pag-IBIG gets ECOP support on new contribution rates

Pag-IBIG Fund gained the support of the Employers’ Confederation of the Philippines (ECOP) on its plan to increase the monthly contribution (savings) rates for both employers and members, the agency’s top executive announced on Jan. 9.

With the agency gaining ECOP’s support, Pag-IBIG Fund has now secured both employer and labor groups’ backing as it plans to increase its nearly four-decade old savings rate this year.

“Over the years, Pag-IBIG Fund and ECOP have engaged in productive discourse to help shape responsive policies for the benefit of our stakeholders. We appreciate their recognition of the need for us to finally implement our new rates, after having deferred its implementation since 2021, so that we can increase our members’ benefits, address the growing loan demand of our members, maintain the affordability of our home loans, and ensure the sustainability and growth of Pag-IBIG Fund,” said Pag-IBIG Fund Chief Executive Officer Marilene C. Acosta.

Under Pag-IBIG Fund’s new savings rates, the maximum monthly compensation to be used in computing the required two percent (2%) employee savings and two percent (2%) employer share of Pag-IBIG Fund members shall be increased to ten thousand pesos (P10,000), from the current five thousand pesos (P5,000). As a result, the monthly savings of Pag-IBIG Fund members, for both the employee’s share and the employer’s counterpart, shall increase to two hundred pesos (P200) each from the current one hundred pesos (P100).

In 2019, agency officials approved the increase of its members’ monthly savings rates after obtaining the concurrence of stakeholders to implement a planned increase in 2021. During that time, the agency saw the increase necessary as it projected that the amount of loans disbursed will eventually outpace the total collections from both loan payments and members’ savings. However, recognizing the effects of the pandemic to the economy, requests made by the business community led by ECOP, and the directive of President Ferdinand Marcos, Jr. early last year to provide workers and employers with relief from the continuing effects of the pandemic, Pag-IBIG Fund deferred the implementation of the new rates in years 2021, 2022 and 2023.

“For three consecutive years, Pag-IBIG Fund heeded our request to postpone the implementation of their new monthly savings rates in view of the difficulties brought by the pandemic. This time around, after having discussed the need for its implementation, we pose no further objection to their plan to push through with it this year,” said ECOP Honorary Chairman and President Sergio Ortiz-Luis, Jr.

“Our support is also a reflection of how we have seen Pag-IBIG Fund properly manage the funds that their members entrust to them. We also understand that the increase in Pag-IBIG’s savings rates means added benefit for their members, as this equates to an increase in their forced savings,” Ortiz-Luis added.

ECOP is one of the largest organizations representing employers in the Philippines. It serves as the umbrella organization for the country’s business community on important national issues on employment, industrial relations, labor issues and related social policies.

 


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[B-SIDE Podcast] Philippines, Taiwan, and the uncertain future

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The Philippines is so close to Taiwan that, as the old joke suggests, one could swim across the Bashi Channel to get there. Their connection goes beyond that, with the future of their geopolitical fates in question.

In this B-Side episode, Girard Mariano L. Lopez, a Filipino student in Taiwan and representative of the Asian pro-democracy group Milk Tea Alliance, discusses with BusinessWorld reporter Beatriz Marie D. Cruz how activists from the Philippines and Taiwan see the tensions with China.

“Taiwanese activists and Filipino activists here, obviously, support the Filipino victory within the Hague and the South China Sea,” Mr. Lopez, said, citing the 2016 landmark ruling by a United Nations-backed arbitration court that voided China’s claim over most of the South China Sea.

As a Filipino in Taiwan, Mr. Lopez said that the Philippines’ tricky relationship with China and the United States is something to watch out for.

President Ferdinand R. Marcos, Jr.’s granting of additional military bases to the US through the Enhanced Defense Cooperation Agreement (EDCA) is crucial, in particular, as some believe the EDCA sites could support Taiwan in case it is attacked by China.

Mr. Lopez noted the dilemma of allowing the US military’s soft power—in light of colonial baggage, environmental damage, and gender-based violence—in relation to the Philippines and US military bases that trace back to the Second World War, as well as the Visiting Forces Agreement (VFA).

Mr. Marcos has said that the EDCA sites won’t be used to attack neighboring countries.

CHINA-TAIWAN TENSIONS

China identifies the self-ruled Taiwan as a province that must be “unified” with the mainland.

In April, China’s Foreign Minister, Qin Gang, said that “those who play with fire on Taiwan will eventually get themselves burned.”

That same month, Chinese Ambassador Huang Xilian asked the Philippines to oppose Taiwan’s independence if the country “cares genuinely” about the welfare of more than 150,000 overseas Filipino workers there.

The Philippines remains subscribed to the One China Policy, which recognizes Taiwan as part of China.

However, Mr. Lopez said the Philippines could be missing out on several partnerships with Taiwan due to the One China Policy, which has limited relations to investment, trade, labor, and tourism agreements.

“There are some things that Taiwan and the Philippines could have more formally worked together on, especially on strategic alliances and the protection of their common territory,” he said.

Mr. Lopez added that official allies of Taiwan, like Belize and Guatemala, enjoy higher quotas for

scholarships dedicated to foreign students through Taiwan’s Ministry of Education and Ministry of Foreign Affairs.

On the flip side, Mr. Lopez noted that the European Union has kept its recognition of the One China Policy yet continued to build ties with Taiwan.

“These countries have taken the initiative to sort of move away from giving China those revenue streams and offering those to Taiwan as well. And I think that’s something the [Philippine] government [can bolster] in the future,” he said.

Mr. Lopez scored the need for Filipinos to also be more conscious of Taiwan’s situation with China, given that the Philippines’ ally, the US, is backing Taiwan, angering Beijing.

Both former US House Speaker Nancy Pelosi’s visit to Taiwan in Aug. 2022 and Taiwanese Vice President William Lai’s visit to the US in August this year were condemned by China, even calling Mr. Lai a “troublemaker.”

“Taiwan is our neighbor to the north and anything that happens to Taiwan will eventually trickle down towards the Philippines, especially if China launches a very brash offensive,” Mr. Lopez said.

He also emphasized the welfare of overseas Filipino workers who will be affected by an invasion. “There are more Filipinos that work in Taiwan than in mainland China itself.”

“Our kababayans loss of revenue or being able to fend for their family and their very lives [will be] endangered because bombs don’t discriminate when they land, as we see with the current Gaza crisis or with eastern Ukraine.”

Recorded remotely on Dec. 4, 2023.

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Japan to expand FY2024/25 budget reserves for earthquake aid

PEOPLE walk on Shibuya crossing in Tokyo, Japan on April 23, 2021, in this photo taken by Kyodo. — KYODO/VIA REUTERS

 – Japan plans to expand its budget reserves for fiscal 2024/25 to support recovery from the Noto peninsula earthquake, Minister of Finance Shunichi Suzuki said on Tuesday.

The cabinet earlier on Tuesday approved 4.74 billion yen in spending from fiscal 2023/24 reserves for such aid as water, food, diapers and heaters, Mr. Suzuki also said.

Using reserves allows for a faster and more “realistic” response than compiling an extra budget, Mr. Suzuki told a press conference, indicating the possibility of further expenditure from reserves as damage from the temblor becomes clearer.

The magnitude 7.6 earthquake that hit Noto in Ishikawa prefecture on Japan’s west coast on New Year’s Day killed at least 180 people, making it the deadliest since the 2016 quake in Kumamoto on the southern island of Kyushu.

Changes to the 2024/25 budget plan will be submitted to parliament’s regular session starting later this month. The government had approved a total budget of 112 trillion yen ($780 billion) just 10 days before the quake, including 500 billion yen for general reserves and another 1 trillion yen in reserves for inflation countermeasures.

Mr. Suzuki declined to comment on the size of the addition to reserves or how it will be financed, saying only that the government is still examining the fiscal needs of quake-hit areas. Media outlets including the Nikkei and Yomiuri reported the expansion will be funded by more government bond issuance.

Mr. Suzuki said he cancelled a trip to Cambodia slated for Tuesday to focus on disaster response, but will visit Sri Lanka on Jan. 11-12.

Japan has urged Sri Lanka and its creditor nations to sign a Memorandum of Understanding on the island-nation’s debt restructuring following an agreement reached in principle late last year. – Reuters

Cathay Pacific needs to address capacity issues, Hong Kong leader says

MDS AYON

 – Plans by Hong Kong’s Cathay Pacific Airways to slash flights during the busy Lunar New Year period show the airline needs to address its capacity problems, the city’s leader said, while its pilot union called for a government enquiry.

Cathay will cut a dozen flights a day on average until the end of February due to stretched operations, the airline said on Sunday, aiming to avoid cancellations as the Lunar New Year travel season approaches.

John Lee said Hong Kong’s government was “very concerned” about the situation and had already communicated with Cathay’s management to ensure passengers suffer minimal inconveniences.

“Cathay must face up to these problems seriously,” he told a weekly media briefing, adding that Hong Kong needs to rebuild its aviation capacity quickly.

Cathay, which said in November it intended to recruit 5,000 more staff during 2024, drastically cut headcount in response to the COVID-19 pandemic and changed staff contract terms and conditions.

The Hong Kong Aircrew Officers Association, which represents some of its pilots, said a review needed to be done to examine Cathay’s current problems “which lie in decisions made by management in 2020.”

“These measures have led to cancellations and chronic staff shortages which undermine Hong Kong’s position as a global hub,” it said in a statement on Tuesday.

Cathay’s passenger business is now staffed by 58% of the pilots it had before the pandemic, the union said last month. – Reuters

Mayo Clinic pairs with Cerebras Systems to help develop AI for health care

FREEPIK

The Mayo Clinic, a nonprofit medical center based in Rochester, Minnesota, on Monday said it will partner with Silicon Valley startup Cerebras Systems to develop artificial intelligence (AI) models for the health care industry.

The Mayo Clinic, which has three major campuses in the U.S. in addition to locations in the U.K. and United Arab Emirates, will use computing chips and systems from Cerebras to tap into decades of anonymized medical records and data to develop its own AI models.

Matthew Callstrom, Mayo’s medical director for strategy and chair of its radiology department, said some of the models will be able to read and write text to do things like summarize the most important parts of a lengthy medical record for a new patient. Other models will be able to scour images for patterns that the human eyes of trained medical experts may not detect or to analyze genome data. The systems themselves will not make medical decisions – that will still be done by doctors.

“How do you make the right decision for each patient? You have to weigh all those factors, you have to have a lot of experience. That’s where AI comes in to start to augment that,” Mr. Callstrom said in an interview.

Mayo plans to make the outcome of its work with Cerebras will eventually be made available on its Mayo Clinic Platform, a data network that is also used by the Mercy health care system in the US, the University Health Network in Canada, along with systems in Brazil and Israel.

Mr. Callstrom said Mayo has not yet decided how much it will charge for the AI technology. The clinic planned to disclose the new effort during an address at JPMorgan Chase’s health care conference in San Francisco.

Cerebras Chief Executive Officer Andrew Feldman said the deal was a “multi-million-dollar” agreement over several years but declined to give more specifics. Cerbras, which one of several AI chip starts aiming to challenge market leader Nvidia, will provide both hardware and software development services to Mayo under the deal. – Reuters

Biden administration to unveil contractor rule that could upend gig economy

Official White House Photo by Cameron Smith

The administration of US President Joe Biden will release a final rule as soon as this week that will make it more difficult for companies to treat workers as independent contractors rather than employees that typically cost a company more, an administration official said.

The US Department of Labor rule, which was first proposed in 2022 and is likely to face legal challenges, will require that workers be considered employees entitled to more benefits and legal protections than contractors when they are “economically dependent” on a company.

A range of industries will likely be affected by the rule, which will take effect later this year, but its potential impact on app-based services that rely heavily on contract workers has garnered the most attention. Shares of Uber Technologies, Lyft and DoorDash all tumbled at least 10% when the draft rule was proposed in October 2022.

Shares of DoorDash closed nearly 4% higher at $98.52 on Monday, while Lyft shares gained 5.8% to close at $13.55 and Uber stock closed 2.5% higher at $59.01.

The rule will likely decrease flexibility for workers, resulting in lost opportunities to earn money, according to Marc Freedman, vice president at the US Chamber of Commerce, the largest U.S. business lobby.

“It is likely to threaten the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy,” Freedman said in a statement.

In a draft version of the rule in 2022, the Labor Department said it would consider factors such as a worker’s “opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, (and) whether the work is an integral part of the employer’s business.”

The rule replaces a Trump administration regulation that said workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors.

The department’s sharp break from the Trump-era regulation will likely be the focus of lawsuits challenging the new rule, legal experts have said. Federal law requires agencies to adequately explain their decision to withdraw and replace existing rules.

The Biden administration has said the Trump-era rule violated US wage laws and was out of step with decades of federal court decisions, and worker advocates have said a more strict standard was necessary to combat the rampant misclassification of workers in some industries.

The left-leaning Economic Policy Institute in a report last year estimated that a truck driver treated as a contractor earns up to $18,000 less per year than one who is deemed an employee, while construction workers’ earnings drop by nearly $17,000 and home health aides lose out on up to $9,500 in pay and benefits.

Business groups sharply criticized the draft rule after it was proposed. Any change in policy is expected to increase labor costs for many sectors including trucking, retail and manufacturing.

Most federal and state labor laws, such as those requiring a minimum wage and overtime pay, apply only to a company’s employees, who studies suggest can cost companies up to 30% more than independent contractors.

Nearly 40% of US workers, or more than 64 million people, did some freelance work in the past 12 months, according to a December survey by freelancing marketplace Upwork. – Reuters