Weakened by pressure from planemakers, US aerospace firms face a wave of bankruptcies
SEATTLE/NEW YORK — Before the 737 MAX and COVID-19 crises rocked aviation, Boeing offered a major 737 supplier, Teledyne Controls, a take-it-or-leave-it deal.
If the Teledyne Technologies unit also wanted to be a top-tier supplier on the blockbuster 737 MAX program and a future jet codenamed NMA, it had to slash prices for its data systems, according to a person familiar with the situation.
It also needed to give Boeing a share of the higher-margin work for repairs.
Like hundreds of suppliers facing similar demands from Boeing and European rival Airbus, Teledyne agreed to sell its parts at razor-thin margins. In exchange, Teledyne and other US suppliers thought they were guaranteed profits for 20 years, fueled by record output of Boeing 737s and Airbus A320s.
But the 15-month-old MAX grounding, prompted by two crashes, and now the COVID-19 pandemic have left the plans in tatters.
Already weakened by a decade of pressure from Boeing and Airbus to cut prices and invest in new technology, US aerospace firms now face a wave of bankruptcies, restructurings, takeovers, and mergers, industry sources and bankers say.
Teledyne Controls has laid off more than half of the 600 or so workers at its El Segundo, California factory, and closed its Seattle-area office, with more cuts expected, the person familiar with the situation said.
Triumph Group, which makes parts for Boeing’s T-X training jet, is also planning a large layoff this summer and is studying selling off businesses and other options, according to another person familiar with the matter.
Teledyne and Triumph did not answer requests for comment.
Boeing declined to comment about individual suppliers.
The planemakers’ strategy toward suppliers had already triggered consolidation as companies looked to bolster their negotiating power.
Now, Boeing and Airbus face a dilemma between letting industrial juggernauts like Raytheon Technologies, with a $95 billion market value, absorb smaller companies and boost their pricing power, or shelling out precious cash to bring technology in-house.
PARTS SHORTAGES
Teledyne joins Kansas-based Spirit AeroSystems, Britain’s GKN, Montreal-based Heroux-Devtek, and many others in shedding jobs.
The downturn has led to grumbling from some suppliers that Boeing is not pulling its weight.
Boeing argues it poured billions of dollars into the supply chain by producing 737 MAXs for months even after the jet was grounded in March 2019, people familiar with its thinking say.
Boeing, which has also invested heavily in its factory and hiring to prepare for higher output, bears more of the risk throughout multibillion-dollar programs, they add.
“There are so many mouths to feed and not enough food to go round,” one supply chain source said.
In April, Boeing bypassed the government support it had initially lobbied for and raised $25 billion in debt, one of the largest investment-grade bond issues of all time.
At the time, Boeing said the sale would “keep liquidity flowing through our business and the 17,000 companies in our industry’s supply chain.” Boeing has also paid Spirit $225 million for fuselages it did not immediately need.
Now, industry sources say Boeing is putting pressure on its largest “tier 1” suppliers to flow money down to smaller “tier 3” and “tier 4” parts manufacturers, some of which have also applied for the COVID-related US payroll protection program.
Kevin Michaels, managing director of AeroDynamic Advisory, said Boeing needed to do more, such as paying supplier invoices in 60 days instead of 90, and backing off on a campaign to bring in-house technology long-supplied by outside firms.
With failures likely, planemakers face potential parts and skill shortages, Mr. Michaels said.
“I think the challenges ahead are underestimated by both Boeing and Airbus,” Michaels added.
A Boeing spokesman said: “We are working closely with our airline customers and our suppliers to manage through the unprecedented downturn and balance supply and demand going forward.”
Airbus was not immediately available for comment.
PAYCHECK TO PAYCHECK
Boeing has said it expects to reach production of 31 737s monthly during 2021. That means Boeing will more than double the rate in a few months, as industry sources say it will only reach 14 per month by the end of 2020.
Boeing sees 14 per month as low enough to begin to clear an inventory of 450 new 737 MAX jets once US regulators clear it for service, but high enough to keep suppliers on life support.
Airbus is also producing 40 narrow-body jets a month, partly to stabilize the supply chain, a senior European source said.
For some suppliers, the damage will be tough to reverse.
As of June, Teledyne Controls’ revenue had plunged some 50%, the person familiar with the situation said.
Nor is there much hope for new business on the horizon after Boeing shelved plans for its mid-market NMA jet.
“With how ugly business looks and how bad the forecasts look, I would not be surprised if Teledyne (Controls) is sold off,” the person said. “The question is, who would buy it?” — Reuters
Chatbots, motorbikes: Southeast Asia HIV centers adapt to coronavirus
BANGKOK — Five days after a coronavirus lockdown was imposed in Manila, charity LoveYourself hired 20 former motorcycle taxi riders, gave them a crash course on HIV, and sent them off to deliver life-saving medication after signing confidentiality agreements.
The restrictions on movement and a lack of public transport in the city meant many of the charity’s 6,000 clients could not get to its centers for medication, tests, and other services, said LoveYourself senior program manager Danvic Rosadino.
The center also added more staff to run its hotline and social media platforms, introduced chatbots, and launched a pilot self-test program so people at risk could test for HIV in their homes, he told the Thomson Reuters Foundation.
“Everyone was anxious—about getting COVID, but also about not having access to HIV medication and other services. So we had to act quickly to ensure none of our essential services were disrupted at this crucial time,” he said.
“At the same time, maintaining confidentiality was very important: medications were packed in plain brown paper bags, drivers were discreet and sometimes met clients outside their homes if they didn’t want deliveries at home.”
Lockdowns globally have prevented people with HIV from getting treatment—and potentially putting their compromised immune systems at risk if they contract COVID-19, according to HIV/AIDS groups concerned about a surge in infections after the coronavirus.
They also faced harassment from authorities, and fear that the collection of health data in relation to the coronavirus will expose their HIV status and open them up to more discrimination.
“During the lockdown, people had to show identity documents and doctor’s notes to get their medication,” said Richard Bragado, program head of the People Living With HIV Response Center in Manila.
“That made their HIV status public, and led to some instances of harassment and public shaming,” he said.
MISSING TARGETS
About 38 million people worldwide are currently infected with HIV, with the AIDS pandemic killing nearly 35 million people worldwide since it began in the 1980s.
In the Asia-Pacific region, about 5.8 million people are living with HIV, with 3.5 million on antiretroviral (ARV) treatment that helps lower viral levels so the virus is not transmissible and prevent full-blown AIDS.
Thailand had about 470,000 people living with HIV last year, according to UNAIDS. The Philippines had nearly 100,000 cases, while Indonesia reported 640,000 in 2018.
The lockdowns and border closures imposed to stop COVID-19 are impacting the production and distribution of medicine, leading to supply issues and cost increases, and stalling progress on new infections, according to UNAIDS.
“In the last decade, declines in new HIV infections have stalled in Asia Pacific, although declines have been reported in some Southeast Asian countries,” said Eamonn Murphy, director of the UNAIDS regional support team for Asia and the Pacific.
“Key 2020 global targets will be missed—COVID-19 risks exacerbating the situation.”
The loss of jobs and income is partly responsible. The International Labor Organization estimates that nearly half the world’s workforce is at risk of losing livelihoods.
SWING, a Thai HIV non-profit for sex workers, began providing meals to some of the estimated 200,000 sex workers who had no income during the lockdown, said co-founder Surang Janyam. Many also lost their homes, she said.
In a survey in April of young people living with HIV in Asia Pacific, nearly half the respondents said lockdowns had led to a loss of jobs and income—particularly for sex workers, daily-wage earners, and those in entertainment and hospitality.
Of those on ARV treatments, about half said the lockdowns had posed a challenge in getting their medication, with nearly a fifth saying they did not have refills on hand.
Many said they also experienced delays or disruptions in accessing HIV prevention services and psychological support.
In Bangkok’s Pulse Clinic, which provides HIV services, founder Deyn Natthakhet Yaemim ramped up home deliveries of medications and test kits, as well as online counseling.
With its reputation for being LGBT-friendly and for providing quality healthcare, many people living with HIV in the region come to Thailand to buy ARVs and for tests, but have been unable to do so since the borders closed, Mr. Deyn said.
“People were stuck in countries where they didn’t have access to an HIV center or to their medication—including countries where there is greater stigma around HIV,” he said.
“But going without HIV medication for even a few weeks, or taking a different regimen, opens the window to drug-resistant HIV. We fear we will see a surge in infections after COVID-19.”
RUNNING OUT
Earlier this month, the World Health Organization (WHO) said 73 countries have warned that they are at risk of running out of ARV medicines as a result of the coronavirus pandemic.
A modeling exercise by WHO and UNAIDS in May showed that a six-month disruption in access to ARVs could lead to a doubling in AIDS-related deaths in sub-Saharan Africa in 2020 alone.
In Thailand, authorities have been working with community organizations to reach at-risk populations and people living with HIV to encourage them to get testing and medications, said Taweesap Siraprapasiri, the government’s chief medical officer.
Organizations in countries with greater stigma around HIV have had to innovate.
In the Philippines, #OplanARVayanihan—a combination of ARV and bayanihan, or community spirit—provides information on the nearest ARV centers and delivery options.
Some services such as home deliveries and online counseling may persist even after the pandemic as they help preserve confidentiality and are convenient, said Mr. Murphy at UNAIDS.
“So there may be a demand for these to continue,” he said.
But for Acep Gates, an HIV-positive activist who usually goes to Jakarta once a month to collect his medication, nothing beats a friendly interaction in a country that is seeing rising discrimination against LGBT+ people and those with HIV.
“I am waiting to go back to Jakarta to collect my medication because I need to do my check-ups,” said Mr. Gates, who has been receiving his medication by post in his hometown in Cianjur in West Java since the lockdown began. — Thomson Reuters Foundation
Hinatuan Mining declares success in coral gardening
Hinatuan Mining Corp. (HMC) announces with pride the success of its coral nursery project in the island of Hinatuan, Tagana-an, Surigao del Norte. HMC is a subsidiary of Nickel Asia Corp. (NAC).
“The coral nursery initiative, designed and implemented by HMC’s Mine Environmental Protection and Enhancement Department (MEPEO), aims to further enhance the growth of the natural coral reef systems around the marine waters of the island,” explainsForester Manuel A. Torres, Jr.,HMC’s MEPEO lead and Envi-Manager.
For Jusua dela Peña, HMC’s dedicated marine biologist, ‘success’ means that in less than a year of establishing the nursery – initially with 343 coral fragments in 4 nursery beds – the coral fragments have fully recovered with an excellent growth rate and a yield of 90% survival against a mortality rate of 10%. Thenursery begins the successful coral gardening in Hinatuan Island as healthy coral “outgrowths” are transplanted to propagate the coral garden.
The United Nations (UN) connects coral gardening to the current narratives about the pandemic, detailing how humans and our livelihood are connected to corals in so many ways: the fish that live on coral reefs provide food; coral reefs are draws for tourists whobring in the cash that provide livelihood; that there are new medicines being developed from species found in coral reefs; and, that coral reefs help in the protection of our shores from erosion and pollution.
“We know that the priority right now is to keep the communities and our workforce healthy and safe from the virus, but we at HMC will never stop finding ways to also protect the environment and enhance the island’s marine resources,” explains dela Peña.
Engr. Francis J. Arañes, Jr., HMC’s Resident Mine Manager, is most happy about the success of the company’s ‘coral gardening’ because it showcases the healthy waters surrounding the mine site, which is something to be greatly proud of as a miner.
“The coral nursery is located 200 meters from the mine site’s pier and 6 meters in depth from the water line. The excellent growth of the corals signifies that the water quality around the mine and HMC’s marine resources are a healthy support to the overallwater ecosystem,” Arañes explains.
“The objective of this program is to highlight NAC-HMC’s sustainable best practices in marine protection, emphasizingour initiatives, as a responsible mining company, in resources protection and tourism development,” Arañes adds.
As a marine biologist, dela Peña attests to‘growing corals’ as being labor-intensive, requiring dedication and focus. The nursery is monitored twice weekly with the help of experts and licensed-divers. Every inch of growth is recorded, ever recovery rate or otherwise, graphed.
“We cannot emphasize enough the importance of ‘coral gardening’ and we at HMC, as responsible miners, are obviously very passionate about this. Coral gardeningplays a significant part in the sustainable development of our environment and inmaintaining the integrity of our ecosystem,” dela Peña adds.
Dela Peña explains further that,most importantly, the involvement of the community is a vital component tothe success of the coral garden.
Everyone in the mining communities must be taken in as part of the drive to reach the full potentials of the project. This means intensive information, education and communication (IEC) campaigns about corals and, also,to declare the site of the nurseryas marine protected area in order to minimize disturbance to allow the corals to reach its full growth to be healthy enough for massive propagations.
The Hinatuan mine site, also known as the “Tagana-an Nickel Project”, is located in Barangay Talavera, Hinatuan Island, municipality of Tagana-an, the Province of Surigao del Norte. Its area of operations is within the Surigao Mineral Reservation.
Aboitiz underscores long-term sustainability goals
The Aboitiz Group reaffirms its commitment to operate its businesses with a sustainability mindset that upholds best practices in environmental management, social responsibility, and good governance while ensuring long-term financial growth and business capability.
With the group’s involvement in critical sectors such as energy, banking, food, real estate, infrastructure, and construction, Aboitiz commitments to sustainability is at the core of its business operations.
“The Aboitiz Group believes in striking a balance between the interests of people, planet, and profit. We have made proactive investments to ensure that our success in business continues to bring meaningful societal change. This requires us to be fully informed in our long-term decisions that are anchored on enhancing the capabilities of our people and being mindful of our impact on the planet,” said Sabin M. Aboitiz, Aboitiz Group President and Chief Executive Officer.
Globally, companies’ Environmental, Social, and Governance (ESG) portfolios are fast becoming reliable benchmarks on its market position and ability to perform during challenging times.
The Group is also heeding the call of the United Nations Global Compact (UNGC) ー in which Aboitiz is a participant ー on the Sustainable Development Goals (SDG) Ambition, an accelerator initiative that urges participating companies to “set ambitious targets” and accelerate the integration of identified SDGs into their business operations.
Aboitiz Strategic Business Units (SBUs) have been implementing various initiatives to align with the Group’s overall sustainability goals.
Power subsidiary Aboitiz Power Corporation is looking to significantly increase its Cleanergy capacity in the next 10 years. This is in support of the government’s efforts to further promote renewable energy in the Philippines and AboitizPower’s contribution to the global RE targets. Sixty-five percent of the new capacities of AboitizPower will be sourced from renewables, resulting in an almost 50:50 Cleanergy: thermal capacity mix by 2029. The company is committed to ensuring that the country’s energy system is reliable, affordable, and environmentally sustainable.
Banking and financial services unit Union Bank of the Philippines is currently at the forefront of digital transformation in the banking sector using its fintech, peopletech and digital platform innovations to lead in social sustainability. From paperless and LEED-certified ARK branches to blockchain and platforms that connect rural banks and small to medium enterprises, UnionBank is actively defining how a bank practices ESG as it adheres to the sustainable finance policy mandate of the Bangko Sentral ng Pilipinas.
Recently, UnionBank partnered with the Bureau of Treasury and Philippine Digital Asset Exchange (PDAX) in developing Bonds.PH, a mobile app that empowers Filipinos to invest in risk-free treasury bonds. The app, the first in Asia, was launched in time with the announcement of the Progreso Bonds, the 24th retail treasury bond, which aims to raise at least P30 billion mainly to fund the government’s health initiatives against the coronavirus pandemic and help overseas Filipino workers and small businesses. UnionBank is also one of the joint issue managers.
Food subsidiary Pilmico Foods Corporation’s ultimate goal of feeding humanity recognizes the importance of food security in the country. Guided by the value of innovation, Pilmico has implemented projects that reduce its carbon footprint while improving its facilities’ efficiency. This includes two biogas facilities in its swine farms with the capacity
to generate 626 megawatt-hours (MWh) of energy output annually. The group also launched #M3Time, a campaign targeted towards backyard and large farmers, to raise awareness and consciousness on practicing biosecurity. The campaign started with house-to-house and farm visits, seminars and activations. Despite the current quarantine restrictions in various parts of the country, #M3Time continues to spread awareness through online campaigns, webinars, and e-consultations with Pilmico specialists.
Under its infrastructure unit Aboitiz InfraCapital, Apo Agua Infrastructura, Inc. is set to complete the construction of the PHP12.6-billion Davao City Bulk Water Supply Project, which will shift the dependence of Davao City’s main water supply from groundwater wells to the more sustainably-sourced surface water of the Tamugan River. Once operational, it is expected to provide Davaoeños with over 300 million liters per day.
A key component of the project is its use of the “water-energy nexus” concept to power its water treatment plant – a first in Southeast Asia. Since 2019, Apo Agua has also been working together with its stakeholders to ensure the protection of the Panigan-Tamugan Watershed by adopting a 50-hectare site in the watershed through the Davao City Water District’s Adopt-A-Site Project.
By building integrated townships anchored on its industrial zones, the Group’s real estate subsidiary Aboitiz Land, Inc. promotes sustainable economic growth, as well as decent work for the people in and around its estates. LIMA Technology Center in Lipa-Malvar, Batangas, and West Cebu Industrial Park and Mactan Economic Zone II collectively provide jobs to over 100,000 workers. With expansion plans in place, AboitizLand will be able to welcome more locators as well as more merchants in its commercial centers, thereby opening more job opportunities for its host communities.
The company also takes pride in the thriving ecosystem of the Olive Ridley sea turtles at its Seafront Residences in Batangas. The company pledged to preserve the sanctuary and is continuously implementing programs to help nurture and conserve the endangered marine species.
For its part, Aboitiz Construction remains committed to environmental preservation in all its projects through the control and reduction of waste generation, waste elimination through resource recovery practices, as well as waste collection, segregation, and classification. Aboitiz Construction also ensures the use of scrap materials and reusable waste, contributing to sustainable construction operations.
Meanwhile, the Aboitiz Group also maintains the Aboitiz Cleanergy Park, a “pawikan” sanctuary where in 2019, 10,735 visitors were welcomed and 4,811 hatchlings were released. For the early part of 2020, two pawikans have been rescued and are currently under observation due to health conditions. Three pawikans are ready for release pending the Department of Environment and Natural Resources’ final schedule, while one will stay for further rehabilitation.
More than half of PHL firms uncertain of recovery: survey
By Beatrice M. Laforga, Reporter
MORE than half of companies in the Philippines are uncertain they can recover from the ongoing crisis, according to a survey on the impact of the coronavirus disease 2019 (COVID-19) on enterprises.
Asian Development Bank (ADB) Country Director for the Philippines Kelly Bird told BusinessWorld the survey, conducted together with the Finance department (DoF), showed 51% of the companies were still unsure of recovery, while 30% said they may need around six months to bounce back.
Only 18.6% of firms surveyed were optimistic that “they would fully recover within three months post-ECQ (enhanced community quarantine),” he said in an e-mail on Tuesday.
“One-third of enterprises said they have immediate cash flow problems, which puts them at risk of not surviving (some of these firms will adjust and survive),” Mr. Bird said, citing a survey of 2,481 enterprises in the Philippines conducted in May.
In his presentation before the Nordic Chamber of Commerce of the Philippines, Inc. last week, Mr. Bird said around two-thirds of the companies surveyed suspended operations in April and May. More than half of the firms either temporarily stopped wage payments for their employees or have “reduced payments with hours of work,” during the lockdown.
The government in mid-March placed Luzon, which accounts for over 70% of gross domestic product, under an ECQ that halted nearly all economic activity and domestic consumption.
The ADB-DoF conducted the survey of enterprises to assess the impact of the coronavirus pandemic on their operations at the height of the lockdown in April and May.
Majority or 48% of the respondents were based in Metro Manila. Of the total, Mr. Bird said 52% were micro businesses, 27% were small firms, 13% were medium-sized companies and 8% were large enterprises.
“The enterprises were broadly representative of the industrial structure with 35% in wholesale, retail, accommodation and food services, 10.5% in manufacturing, 9% in construction etc,” he added.
The complete results of the survey will be published within the month.
Lockdown restrictions in most areas including Metro Manila has been eased, with many businesses allowed to reopen but at limited capacity.
However, the number of COVID-19 infections continue to rise. The Health department reported 1,951 additional cases on Tuesday, bringing the tally to 70,764. The death toll is now at 1,837.
UNEMPLOYMENT RISES
With severe slowdown in the domestic economy and widespread business closures, Mr. Bird said the ADB projected the unemployment rate to hit 22% in the second quarter for the Luzon island alone.
“ADB is projecting unemployment in Luzon will peak around 22% in the June quarter and steadily decline as the economy gradually opens. We project unemployment at 12% in Q4 of 2020 and 9.0% by Q2 of 2021,” he said.
The latest Labor Force Survey showed unemployment rate surged 17.7% in April from the 5.1% recorded in the same month last year, or equivalent to a total of 7.25 million jobless Filipinos that month compared to the 2.27 million in April 2019.
“We won’t see a return to pre-COVID unemployment rates until 2022. This is because employment recovery lags economic recovery,” Mr. Bird said.
The multilateral bank also sees five million Filipinos will be pushed below the poverty line this year.
ADB’s baseline projection for the Philippine economy is a 3.8% contraction for full-year 2020, or settling between -2.3% and -5.3%.
“The employment recovery can be assisted or accelerated through large infrastructure investments, support to small- and medium-sized businesses, and active labor market programs such as reskilling workers and employment facilitation,” he added.