Raphael Stevens

Blue Origin CEO Dave Limp told CNBC that he only had one question for Jeff Bezos when he interviewed for the top job last year: Is the space company “a hobby or a business?”
“Jeff felt that [Blue Origin] needed manufacturing expertise; it needed decisiveness; it need a little bit of energy,” Limp said.
Limp is confident that the long-awaited debut of the towering New Glenn rocket will happen before the end of the year, one of his top goals as he leads Blue Origin “to scale to be a world class manufacturer.”

Blue Origin CEO Dave Limp, left, and founder Jeff Bezos look up at a New Glenn rocket on at the company’s LC-36 facility in Florida.
Blue Origin

Dave Limp had only one question for Jeff Bezos when he interviewed last year to become CEO of Blue Origin, the billionaire’s space venture.
“Jeff, is Blue Origin a hobby or a business?” Limp asked.

After 14 years as a senior Amazon executive, Limp told CNBC he made it clear to Bezos that he wasn’t interested in leading Blue Origin if the nearly 25-year-old venture wasn’t intended to be a serious company.
“I don’t know how to run a hobby,” Limp said, adding that “if it was a hobby, it’s not right for me.”
But he said Bezos was adamant that Blue Origin needed to be a business.

Read more CNBC space news

Limp admitted that it took some convincing from Bezos for him to make the move over to the space sector. “My initial reaction was: It’s not the right role for me because I’m not an aerospace engineer,” he said. But he decided to take the leap of faith.
“Jeff felt that [Blue Origin] needed manufacturing expertise; it needed decisiveness; it need a little bit of energy,” Limp said.

Limp has now been the CEO of Blue Origin for nine months and counting. He took the reins from prior leadership who had widely expanded the company’s workforce and infrastructure but had fallen years behind on several major programs and lost competitions for key government contracts.

CEO Dave Limp, third from the left, with Blue Origin employees at the company’s New Glenn facility in Florida.
Blue Origin

Blue Origin for years has been flying tourists and research to the edge of space on short jaunts, including Bezos himself. And over the past two decades, Bezos has been spending billions of dollars a year to turn Blue Origin into a space sector powerhouse. The company’s projects reach from rockets and spacecraft to space stations and lunar landers.
Yet in the industry table stakes of orbital missions, Blue Origin has not entered the serious rocketry game, as the U.S. launch market remains dominated by SpaceX, followed by United Launch Alliance, Rocket Lab and Firefly Aerospace.
But the company said it’s closer than ever to the long-awaited debut of its New Glenn rocket. Towering about 320 feet tall, the launch vehicle is advertised as lifting as much as 45,000 kilograms (or over 99,000 pounds) to low Earth orbit — double that of SpaceX’s workhorse Falcon 9 rocket.

A New Glenn rocket stands at LC-36 for the firs time for tanking and mechanical system testing on Feb. 21, 2024.
Blue Origin

Like Falcon 9, New Glenn is designed to be partly reusable. Blue Origin aims to return and land the rocket’s booster, its largest and most valuable section, to unlock the kind of cost and time efficiencies that SpaceX claims with its rockets.
New Glenn’s first launch attempt is slated for November. Blue Origin is in the final stages of putting it all together, including conducting a recent crucial test firing of the rocket’s upper stage last month.
Originally the company was aiming for the audacious feat of flying NASA’s ESCAPADE mission to Mars on New Glenn’s debut. But with a dwindling launch window, the agency delayed ESCAPADE to a later launch. In the mission’s place, Blue Origin will fly a demonstration of its spacecraft Blue Ring on the first New Glenn launch.

Culture shift

Company employees stand below a New Glenn rocket during testing in February 2024.
Blue Origin

Headquartered in the Seattle suburb of Kent, Washington, Blue Origin has over 10,000 employees there and in half a dozen other major locations around the country, including in industry strongholds of Texas, Florida and Alabama. Speaking plainly, Limp said Blue Origin has been “in kind of an R&D phase for a long time,” an aspect of the company’s culture he’s trying to change.
“We were very, very good at building shiny factories and very good at building high fidelity prototypes. And some of those prototypes even flew … but that’s not what we want to do to scale to be a world class manufacturer,” Limp said. 
“We need to be able to build things a lot,” he added.
But he said he sees genuine excitement for space across Blue’s workforce, calling that passion the foundation of a “missionary culture.” In Limp’s view, Amazon’s customer-centric principles drive the tech giant’s culture — but Amazon doesn’t have “the vehement mission that exists at Blue.”
“People’s eyes light up, almost to a T. They grew up thinking about space, they always wanted to work in the space industry and here they are at Blue working on space,” Limp said.
Now he’s trying to install Amazon’s customer-centric focus as a key part of Blue Origin. While Blue’s customers — the likes of NASA, ULA, and suborbital astronauts — are quite a bit different than the consumers Limp used to focus on, his message to Blue’s employees is to make delivering for its customers the top priority.
“Even if the technology is really nice and fun … the customer has to be front and center,” Limp said.
To further shift Blue’s culture, Limp highlighted a number of key leadership additions: Allen Parker as CFO after past executive finance roles at Zillow and Amazon; Jennifer Pena-Leanos as chief people officer, after running human resources in Limp’s prior Amazon Devices team; Ian Richardson as senior vice president of manufacturing operations after a long stint as SpaceX production director; and Tim Collins as the vice president of global supply chain after previously leading global operations for Flexport and Amazon.
Limp also made a change by moving more of the company’s headcount to the factory floor.
“You can walk into a factory and know when it’s running well and know when it’s not,” he said. “It doesn’t matter how much capex you put in place, what kind of machines you have, if you’re not using them the right way. It’s like having a shiny new car that just sits in the driveway — what fun is that?” 

2024 top priorities

A test of a BE-4 engine at Blue Origin’s Launch Site One facility in West Texas, Aug. 2, 2019.
Blue Origin

Limp has two main goals for his first year as CEO: Launch New Glenn and get Blue’s engine production humming.
“We aren’t going anywhere without engines, and we had to figure out how to build engines at rate,” Limp said.
Blue Origin’s BE-4 engine powers both its New Glenn rocket as well as ULA’s Vulcan rocket. The latter requires two engines per launch.
With ULA aiming for four Vulcan launches this year — with two down and two to go — Blue has delivered eight flight-ready BE-4 engines to ULA, as well as seven BE-4 engines for its first New Glenn launch. On the first two Vulcan launches, the BE-4 engines performed as expected.
“We’d like to [be delivering] about an engine a week by the end of the year. I’m not sure we’ll get exactly to a week, but it’ll be sub-10 days … [and] by the end of 2025, we have to be faster than that,” Limp said.

A United Launch Alliance Vulcan Centaur rocket launches from pad 41 at Cape Canaveral Space Force Station at 7:25 a.m. on October 4, 2024 in Cape Canaveral, Florida.
Paul Hennessy | Anadolu | Getty Images

Limp has “a very high level of confidence” that New Glenn will launch before the end of the year. And Blue plans to scale the cadence of New Glenn missions quickly, wanting to perform as many as 10 New Glenn launches next year. Yet it still has a ways to go to rival SpaceX, which is targeting nearly 150 Falcon rocket launches this year.
Perhaps even more optimistically, Blue aims to land New Glenn on its very first launch, cheekily naming the booster “So You’re Telling Me There’s a Chance.” No company has stuck the landing on the first try with an orbital rocket booster, and New Glenn will be aiming for a 200-foot-wide pad on a vessel named Jacklyn in the Atlantic Ocean.
“It’ll be adventurous. It’ll be fun. I’m excited about it … but if we [don’t] stick the landing the first time, that’s OK. We’ve got another booster right behind it. We’ll build more,” Limp said.

The first flight New Glenn rocket booster.
Blue Origin

It seems almost inevitable that New Glenn’s future will involve a crew spacecraft — especially given Blue’s long-standing mission: “We envision millions of people living and working in space for the benefit of Earth.” Currently, only SpaceX’s Dragon spacecraft is certified by NASA to fly astronauts to-and-from orbit after Boeing’s Starliner suffered another setback this summer. 
But Limp deferred when asked about development of a New Glenn crew capsule: “Nothing to say about that.”
Blue Origin has gained experience in the lower-risk, suborbital realm of human spaceflight with its New Shepard rocket and capsule. Limp noted that Blue Origin is working to get “New Shepard back to a cadence of regular flights,” flying both crews and research cargo.
It’s done two New Shepard missions this year, and is aiming for a third next week. That mission will also feature a new rocket booster and capsule to add a second vehicle “to better meet growing customer demand,” the company said, having lost a booster during a cargo flight failure in September 2022.
Beyond New Glenn and engine production, Blue’s making more progress: Last year it won a $3.4 billion NASA contract to build a lunar lander for the agency’s astronauts. In the spring, Blue got entry into the Pentagon’s lucrative National Security Space Launch program, a turnaround from having missed out on the previous phase of NSSL in 2020.
As for Limp, he’s spending his time on “a little bit of a round trip between” Blue Origin’s facilities every 2½ weeks. He goes from its Seattle headquarters, to meeting with customers in Washington, D.C., to seeing engine production and testing in Huntsville, Alabama, and finally checking out New Glenn work at Cape Canaveral, Texas. It’s all part of his interest in leading a proper space company, rather than a billionaire’s hobby.
“Let’s have the financial discipline to build a business that we love, and let’s make decisions quickly, knowing that we’ll make some mistakes. But let’s not make the same mistakes, and let’s cure them quick,” Limp said. More

Stellantis is suing the United Auto Workers, escalating a monthslong battle between the trans-Atlantic automaker and American union, CNBC has learned.
In an internal message to employees that was confirmed to be authentic, the company said it is suing the UAW as well as a local chapter in California.

Carlos Tavares, chief executive officer of Stellantis NV, speaks to the media at the Stellantis auto manufacturing plant in Sochaux, France, on Thursday, Oct. 3, 2024. 
Nathan Laine | Bloomberg | Getty Images

DETROIT — Stellantis is suing the United Auto Workers, escalating a monthslong battle between the trans-Atlantic automaker and American union, CNBC has learned.
In an internal message Friday to employees that was confirmed to be authentic, the company said it is suing the UAW as well as a local chapter in California that participated in a strike authorization request vote at Stellantis’ Los Angeles Parts Distribution Center.

“This lawsuit would hold both the International and the local union liable for the revenue loss and other damages resulting from lost production due to an unlawful strike,” Tobin Williams, Stellantis senior vice president of North America human resources, said in the message.
A supermajority of UAW members at Stellantis’ Los Angeles Parts Distribution Center voted to request strike authorization from the International Executive Board if the company and union can’t reconcile, the union said Friday morning.

United Auto Workers (UAW) President Shawn Fain speaks to the attendees during a campaign rally for U.S. Vice President and Democratic Presidential candidate Kamala Harris and her running mate Tim Walz in Romulus, Michigan, U.S., August 7, 2024. 
Rebecca Cook | Reuters

The complaint is intended to “prevent and/or remedy a breach of contract” by the UAW, according to a copy of the lawsuit that was filed Thursday in U.S. District Court in the Central District of California.
The lawsuit argues that if the union does strike, the court “should award Stellantis monetary damages” that result from a breach of contract.
UAW President Shawn Fain addressed the lawsuit Friday in a letter to union leadership at Stellantis. He called it and other actions by the company “desperate actions from a desperate executive who has lost control.”

“Our legal team has complete confidence in our right to strike. The company’s legal threats are just that—threats intended to intimidate us, so we won’t fight back,” Fain said.
The dispute between the two sides centers on the union alleging Stellantis has not kept contractual obligations as part of a deal the two sides reached late last year. It comes after Stellantis has made several cuts to plant production, conducted worker layoffs and delayed potential investments outlined as part of the 2023 contract.
Fain has routinely said the union will strike if needed, however Stellantis has argued that would be unlawful under the contract.
The automaker has contended that there’s language in the contract that gives it leniency to change plans based on market conditions, plant performance and other factors.
The company reiterated that stance in its lawsuit and cited “Letter 311,” which includes the company’s expected investments: “The planned future investments in the letter are conditional, require Company approval, and are subject to change based on these business factor contingencies.”
The lawsuit came the same day Fain and union members held their latest rally against Stellantis in suburban Detroit.
“We’re here today for one reason. Stellantis CEO Carlos Tavares is out of control and it’s once again up to UAW members to save this company from itself,” Fain said during the event. “A strike will cripple this company. And if we have to strike, it’s Stellantis’ decision to do so because they are not honoring their commitment.”
The union and several local chapters have filed grievances against the automaker regarding contract obligations and other issues.
Stellantis, in the lawsuit, called the grievances a sham designed to “justify mid-contract strikes against Stellantis that otherwise would violate the [contract’s] no strike clause.”

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First Street just launched a suite of climate risk data for every for-sale property listed on Zillow.
Each for-sale listing on Zillow now displays First Street risk scores for flood, fire, wind, air and heat. They also show those same risk percentages estimated 15 years and 30 years into the future.
More than 80% of buyers now consider climate risk when purchasing a home, according to a survey by Zillow. Respondents ranked flood risk as their highest concern, followed by fire.

Insured losses for Hurricane Helene are now estimated at over $6 billion, but the uninsured losses are far higher. That’s because the vast majority of homes impacted by the storm, especially in hard-hit North Carolina, did not have flood insurance.
New risk-assessment technology is designed to help change that for the future.

Most homeowners in North Carolina do not have flood insurance, because they are not in flood zones designated by the Federal Emergency Management Agency. Government-backed mortgages require flood insurance in those designated areas.
Just 4% of North Carolina homes are in a FEMA flood zone. But climate risk firm First Street, which incorporates the effects of climate change into its property risk scores, shows nearly 12% of homes in the state at flood risk.
First Street just launched a suite of climate risk data for every for-sale property listed on Zillow.
“Climate risks are now a critical factor in home buying decisions,” said Skylar Olsen, chief economist at Zillow, in a release. “We’re providing buyers and sellers with clear, property-specific climate data so they can make informed decisions. As concerns about flooding, extreme temperatures, and wildfires grow, this tool also helps agents inform their clients in discussing climate risk, insurance, and long-term affordability.”

A house along the Broad River in the aftermath of Hurricane Helene on October 1, 2024 in Bat Cave, North Carolina. 
Sean Rayford | Getty Images

Each for-sale listing on Zillow now displays First Street risk scores for flood, fire, wind, air and heat. They also show those same risk percentages estimated 15 years and 30 years into the future — the standard lengths for fixed-rate mortgages.

On properties with some risk now, it often shows that risk rise over time, as First Street incorporates the effects of climate change. This is especially true for the flood risk, because climate change is already intensifying the severity of rainfall, even in minor storms.
The data also includes a recommendation as to whether the homeowner should have flood insurance and a link to the First Street site, which will help estimate insurance costs.
“A lot of people think that they are safe from flood if they’re not in a FEMA flood zone, and that’s decidedly not true. Heavy rainfall can affect many, many people across the country, and there’s no indication from the FEMA flood zone designation that that is a risk for you,” said Ed Kearns, chief science officer at First Street. “We’ve created these new flood maps that do bring that into account, that will allow consumers to make that informed choice about whether they need flood insurance.”
More than 80% of buyers now consider climate risk when purchasing a home, according to a survey by Zillow. Respondents ranked flood risk as their highest concern, followed by fire.
A Zillow analysis of August listings found that more homes nationwide had a major climate risk than did those listed for sale five years ago. That was true across all five climate risk categories, the analysis found. For new listings in August, 16.7% are at major wildfire risk and 12.8% show a major risk of flooding, according to Zillow and First Street data.
As more and more consumers consult these climate scores in their purchase decisions, the effect on home values will surely increase. The cost of insurance is already factored into home prices, and as both the cost and necessity of insurance rise, home values in the most affected areas will fall.
“I think that’s going to be the most direct impact of having scores on homes that quantify risk is that there may be some direct impact on real estate values, but a lot of that is going to go through the amount of insurance necessary to cover that home,” Kearns added. More

The average rate on the 30-year fixed mortgage is now 6.53% according to Mortgage News Daily.
That is 42 basis points higher than the day before the Federal Reserve cut its benchmark rate by half a percentage point. 

The average rate on the 30-year-fixed mortgage jumped 27 basis points Friday morning following the release of the government’s monthly employment report. The rate is now 6.53%, according to Mortgage News Daily.
That is 42 basis points higher than Sept. 17, the day before the Federal Reserve cut its benchmark rate by half a percentage point. Mortgage rates do not follow the Fed, but they loosely follow the yield on the 10-year U.S. Treasury.

For mortgage rates, it is all about what the expectation is next for the Fed. As such, there was a lot of anticipation leading up to this particular monthly report, since the last two pointed to weaker labor market conditions.
“Indeed, the Fed’s decision to cut by 0.50 vs 0.25 last month had much to do with the fear/expectation that reports like today’s would be in shorter supply going forward,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “The only salvation here would be the notion that this is just one jobs report in a recent run that’s been mostly weaker and that perhaps the next one won’t be so damning for bonds.”
However, the report does shift the outlook slightly for rates going forward, since most had assumed the trajectory would be lower.
“MBA’s forecast is for longer-term rates, including mortgage rates, to remain within a relatively narrow range over the next year,” the Mortgage Bankers Association’s chief economist, Michael Fratantoni, wrote after the jobs report was released. “This news will push mortgage rates to the top of that range, but we do expect that mortgage rates will stay close to 6% over the next 12 months.”
Today’s homebuyers are highly sensitive to rate moves, as house prices continue to rise from year-ago levels. There is also still very low inventory on the market, which has only served to keep prices higher. Rates are a full percentage point lower than they were a year ago, but the housing market has not seen much of a boost yet.

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Tiger Woods’ apparel company Sun Day Red sued Tigeraire in federal court.
Tigeraire claims that Sun Day Red’s logo is too similar to its own.
Trademark attorney Josh Gerben said the escalation could lead to costly litigation.

USA’s Tiger Woods lines up a putt on the 2nd during day two of The Open at Royal Troon, South Ayrshire, Scotland. Picture date: Friday July 19, 2024. 
Jane Barlow | PA Images | Getty Images

A logo dispute between Tiger Woods’ apparel company Sun Day Red and Tigeraire, a company that makes cooling products for athletes, is now in the hands of the federal court system.
Last week, Tigeraire filed a notice of opposition with the U.S. Patent and Trademark Office against Sun Day Red’s Tiger logo, saying the golf legend’s company “unlawfully hijacked” Tigeraire’s design into its own branding.

In a subsequent court filing, Woods’ legal team sued Tigeraire, accusing the company of trying to capitalize off Sun Day Red’s status as a bigger brand. Sun Day Red has filed a motion to dismiss the patent claim.
“This case, unfortunately, presents the time-worn circumstance of an opportunistic, misguided business attempting to extract an unwarranted financial windfall from a larger and more successful brand, based on threats of legal action and demands for exorbitant sums,” the suit says.

Arrows pointing outwards

Applicant’s Marks and the Registered Mark.
U.S. Patent and Trademark Office

According to the lawsuit, which was filed last week in U.S. District Court for the Central District of California, Sun Day Red says it has attempted in good faith to resolve the infringement claims though negotiation and that Tigeraire has sent “outrageous monetary demands” to Sun Day Red, which is owned by TaylorMade.
The suit also says Tigeraire recently started attending golf tournaments and changed its website’s homepage to prominently feature golfers in an attempt to demonstrate market overlap.
Tigeraire did not immediately respond to request for comment on the lawsuit. A representative for Woods and TaylorMade declined to comment on the matter.

A detail of hats and a club cover during the launch of Tiger Woods and TaylorMade Golf’s new apparel and footwear brand “Sun Day Red” at Palisades Village on February 12, 2024 in Pacific Palisades, California. 
Kevork Djansezian | Getty Images Sport | Getty Images

Trademark attorney Josh Gerben called the lawsuit an “aggressive response” to the trademark dispute.
He noted bringing a case to federal court makes the matter much for expensive for a smaller company like Tigeraire.
“A lot of time these cases favor the party with the resources to litigate, and that can make it a challenge,” Gerben said.
Sun Day Red was launched in May after Woods ended his 27-year partnership with Nike.
The brand’s name pays homage to the fact that Woods always wears red on Sundays, and the logo is a tribute to the 15 majors he’s won over the course of his career, Woods said previously. More

GM has temporarily halted vehicle production at two U.S. factories that assemble highly profitable large pickups and SUVs due to impacts to suppliers as a result of Hurricane Helene.
The automaker canceled shifts Thursday and Friday at plants in Flint, Michigan, and Arlington, Texas.
GM said Thursday the company was working with impacted suppliers “to resume operations as quickly and safely as possible.”

Line workers work on the chassis of full-size General Motors pickup trucks at the Flint Assembly plant on June 12, 2019 in Flint, Michigan.
JEFF KOWALSKY / AFP / Getty Images

DETROIT — General Motors has temporarily halted vehicle production at two U.S. factories that assemble highly profitable large pickups and SUVs due to impacts to suppliers as a result of Hurricane Helene.
The automaker canceled shifts Thursday and Friday at a plant in Flint, Michigan, that produces its heavy-duty trucks as well as at Arlington Assembly in Texas, which produces full-size SUVs such as the Chevrolet Tahoe, Cadillac Escalade and GMC Yukon.

A GM spokeswoman declined to speculate on when the plants were expected to restart production as of Friday morning. A Thursday message to workers in Arlington viewed by CNBC said production at that plant was expected to resume Monday.
“We are working with these suppliers to resume operations as quickly and safely as possible for their employees and communities, as we seek to minimize impacts on our plants,” GM said in an emailed statement.
Hurricane Helene made landfall in Florida late last week and hit the southeastern United States and parts of western North Carolina particularly hard. At least 215 people have died and hundreds are still missing.
GM declined to disclose what suppliers are impacted or where they are located.
Jeffrey Morrison, GM vice president of global purchasing and supply chain, on Thursday said the hurricane and the port workers strike were disruptive events for the automaker. The strike ended later Thursday and dockworkers returned to the job Friday.

Morrison said that since GM dealt with disruptions during the pandemic, the automaker has taken a deeper look into its supply chains to better track parts and potential issues.
“Covid really helped us map our value chain a lot deeper,” he told CNBC during an auto conference for the Rev. Jesse Jackson’s Rainbow Push Coalition in Detroit. “Pre-Covid, understanding what the sub-tiers were was more difficult. We’ve got a great inventory of what those sub-tiers are now. Not only can we control the material we directly buy, we can talk to all of our suppliers.”
Morrison also said the automaker tries to assist such suppliers as much as possible with production disruptions. More

CVS has engaged advisors in a strategic review of its business, CNBC has reported Monday. One option being weighed is splitting up its retail pharmacy and insurance units.
It would be a stunning reversal for the company, which has spent tens of billions of dollars on acquisitions over the last two decades to turn itself into a one-stop health destination for patients. 
CVS risks losing customers and revenue if it splits up its vertically integrated business segments, which includes health insurer Aetna and the major pharmacy benefits manager Caremark.

A sign outside of a CVS pharmacy store on February 07, 2024 in Miami, Florida. 
Joe Raedle | Getty Images

It’s time for a wellness check at CVS Health.
Shares of the company are down more than 20% this year as it grapples with higher-than-expected medical costs in its insurance unit and pharmacy reimbursement pressure, among other issues.

As it seeks to claw back faith with Wall Street, the company is considering breaking itself up.
CVS has engaged advisors in a strategic review of its business, CNBC reported Monday. One option being weighed is splitting up its retail pharmacy and insurance units. It would be a stunning reversal for the company, which has spent tens of billions of dollars on acquisitions over the last two decades to turn itself into a one-stop health destination for patients.
Some analysts contend that a breakup of CVS would be challenging and unlikely. 
CVS risks losing customers and revenue if it splits up its vertically integrated business segments, which includes health insurer Aetna and the major pharmacy benefits manager Caremark. That could translate to more lost profits for a health-care giant that has slashed its full-year 2024 earnings guidance for three consecutive quarters. 
“There really is no perfect option for a split,” said eMarketer senior analyst Rajiv Leventhal, who believes a breakup is still a possibility. “If that does happen, one side of the split becomes really successful and prosperous, and the other would significantly struggle.”

Notably, CVS executives on Monday met with major shareholder Glenview Capital to discuss how to fix the flailing business and recover its stock, CNBC previously reported. But Glenview on Tuesday denied rumors that it is pushing to break up the company.
If CVS stays intact, CEO Karen Lynch and the rest of the management team will have to execute major changes to address what industry experts say are glaring issues battering its bottom line and stock price.
The company has already undertaken a $2 billion cost-cutting plan, announced in August, to help shore up profits. CVS on Monday said that plan involves laying off nearly 3,000 employees.

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Some analysts said the healthcare giant must prioritize recovering the margins in its insurance business, which they believe is the main issue weighing on its stock price and financial guidance for the year. That pressure drove a leadership change earlier this year, with Lynch assuming direct oversight of the company’s insurance unit in August, displacing then-president Brian Kane.
CVS’ management team and board of directors “are continually exploring ways to create shareholder value,” a company spokesperson told CNBC, declining to comment on the rumors of a breakup. 
“We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model,” the spokesperson said in a statement. 
Investors may get more clarity on the path forward for the company during its upcoming earnings call in November.

The Caremark question

Some analysts said the likelihood of CVS separating its retail pharmacy and insurance segments is low given the synergies between the three combined businesses. Separating them could come with risks, they added. 
“The strategy itself is still vertical integration,” Jefferies analyst Brian Tanquilut told CNBC. “The execution might not have been the greatest, but I think it’s a little too early to really conclude that it’s a broken strategy.”
Many of CVS’ clients contract with the company across its three business units, according to Evercore ISI analyst Elizabeth Anderson. Anderson said “carving out and pulling apart a whole contract” in the event of a breakup might be “quite difficult operationally” and lead to lost customers and revenue. 
Pharmacy benefits managers like CVS’ Caremark sit at the center of the drug supply chain in the U.S., negotiating drug rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans and reimbursing pharmacies for prescriptions. 
That means Caremark also sits at the intersection of CVS’ retail pharmacy operation and its Aetna insurer, boosting the competitive advantage of both of the businesses. In the event of a breakup, it’s not clear where Caremark would fall.

A workers stocks the shelves in a CVS pharmacy store on February 07, 2024 in Miami, Florida. 
Joe Raedle | Getty Images

Separating Caremark from Aetna would put the insurance business at a competitive disadvantage since all of its largest rivals, including UnitedHealth Group, Cigna and Humana, also have their own PBMs, said eMarketer’s Leventhal. 
But Caremark, in some cases, also funnels drug prescriptions to CVS retail pharmacies, he said. That has helped the company’s drugstores gain meaningful prescription market share over its chief rival, Walgreens, which has been struggling to operate as a largely standalone pharmacy business. 
CVS is the top U.S. pharmacy in terms of prescription drug revenue, holding more than 25% of the market share in 2023, according to Statista data released in March. Walgreens trailed behind with nearly 15% of that share last year. 
Now, CVS drugstores must maintain an edge over competitors at a time when the broader retail pharmacy industry faces profitability issues, largely due to falling reimbursement rates for prescription drugs. Increased competition from Amazon and other retailers, inflation and softer consumer spending are making it more difficult to turn a profit at the front of the store. Meanwhile, burnout among pharmacy staff is also putting pressure on the industry. 
CVS’ operating margin for its pharmacy and consumer wellness business was 4.6% last year, up from 3.3% in 2022 but down from 8.5% in 2019 and 9.9% in 2015.

CVS and Walgreens have both pivoted from years of endless retail drugstore store expansions to shuttering hundreds of locations across the U.S. CVS is wrapping up a three-year plan to close 900 of its stores, with 851 locations closed as of August.
The rocky outlook for retail pharmacies could make it difficult for CVS to find a buyer for its drugstores in the event of a split, according to Tanquilut. He said a spinoff of CVS’ retail pharmacies would be more likely.
“There’s a reason they’re cutting down stores. Why break it up when the relationship between Caremark and CVS retail is what keeps it outperforming the rest of the pharmacy peer group?” Tanquilut said. 

Fate of Oak Street Health

CVS has other assets that would need to be distributed in the event of a breakup. 
That includes two recent acquisitions: fast-growing primary care clinic operator Oak Street Health, which the company acquired for $10.6 billion last year, and Signify Health, an in-home healthcare company that CVS bought for about $8 billion in 2022. Those deals aimed to build on CVS’ major push into healthcare – a strategy that Walgreens and other retailers have also pursued over the last few years. 
Oak Street Health could theoretically be spun out with Aetna in the case of a split, Mizuho managing director Ann Hynes wrote in a research note Tuesday. 

An Oak Street Health clinic stands in a Brooklyn neighborhood on February 08, 2023 in New York City. 
Spencer Platt | Getty Images

The primary care clinic operator complements Aetna’s Medicare business because it takes care of older adults, offering routine health screenings and diagnoses, among other services. CVS also sells Aetna health plans that offer discounts when patients use the company’s medical care providers. 
But CVS has also started to integrate Oak Street Health with its retail pharmacies. The company has opened those primary care clinics side-by-side with some drugstore locations in Texas and Illinois, with plans to introduce around two dozen more in the U.S. by the end of the year. 
Several companies, including Amazon, Walmart, CVS and Walgreens, are feeling the pain from bets on primary care. That’s because building clinics requires a lot of capital, and the locations typically lose money for several years before becoming profitable, according to Tanquilut. 
Walgreens could potentially exit that market altogether. The company said in a securities filing in August it is considering a sale of its primary care provider VillageMD.
But Tanquilut said it may not make sense for CVS to sell Oak Street Health or Signify Health because “they’re actually hitting their numbers.” 
Signify saw 27% year-over-year revenue growth in the second quarter, while Oak Street sales grew roughly 32% compared to the same period last year, reflecting strong patient membership, CVS executives said in an earnings call in August.
Oak Street ended the quarter with 207 centers, an increase of 30 centers from last year, executives added. 
“Why get rid of them when they’re still strategic in nature?” Tanquilut told CNBC, adding that it would be difficult to find a buyer for Oak Street given the challenging market for primary care centers.

Improving the insurance unit

If CVS doesn’t undergo a breakup, the “single best value-creating opportunity” for the company is addressing the ongoing issues on the insurance side of the business, according to Leerink Partners analyst Michael Cherny. 
He said the segment’s performance has fallen short of expectations this year due to higher-than-expected medical costs — by far the biggest hit to the company’s financial 2024 guidance and stock performance, he said. Cherny said he is confident the issue is “fixable,” but it will depend on whether CVS can execute the steps it has already outlined to improve margins in its insurance unit next year. 
Aetna includes plans for the Affordable Care Act, Medicare Advantage and Medicaid, as well as dental and vision. Medical costs from Medicare Advantage patients have jumped over the last year for insurers as more seniors return to hospitals to undergo procedures they had delayed during the Covid-19 pandemic, such as hip and joint replacements. 
Medicare Advantage, a privately run health insurance plan contracted by Medicare, has long been a key source of growth and profits for the broader insurance industry. More than half of Medicare beneficiaries are enrolled in those plans as of 2024, enticed by lower monthly premiums and extra benefits not covered by traditional Medicare, according to health policy research organization KFF. 
But investors are now concerned about the skyrocketing costs from Medicare Advantage plans, which insurers warn may not come down anytime soon. 

A general view shows a sign of CVS Health Customer Support Center in CVS headquarters of CVS Health Corp in Woonsocket, Rhode Island, U.S. October 30, 2023. 
Faith Ninivaggi | Reuters

Cherny said CVS faced a “double whammy” in Medicare Advantage this year, grappling with excess membership growth at a time when many seniors are using more benefits. 
In August, CVS also said its lowered full-year outlook reflected a decline in the company’s Medicare Advantage star ratings for the 2024 payment year. 
Those crucial ratings help patients compare the quality of Medicare health and drug plans and determine how much an insurer receives in bonus payments from the Centers for Medicare and Medicaid Services. Plans that receive four stars or above receive a 5% bonus for the following year and have their benchmark increased, giving them a competitive advantage in their markets.
Last year, CVS projected it would lose up to $1 billion in 2024 due to lower star ratings, the company disclosed in a securities filing. 
But things may start to look up in 2025. 
For example, one of the company’s large Medicare Advantage contracts regained its four-star rating, which will “create an incremental tailwind” in 2025, CVS executives said in August. 
“We’re giving them the benefit of the doubt because we know that the stars rating bonus payments will come back in 2025,” Tanquilut said. 
During a conference In May, CVS said it would pursue a “margin over membership” strategy: CVS CFO Tom Cowhey said the company is prepared to lose up to 10% of its existing Medicare members next year in an effort to get its margins “back on track.” 
The company will make significant changes to its Medicare Advantage plans for 2025, such as increasing copays and premiums and cutting back certain health benefits. That will eliminate the expenses tied to those benefits and drive away patients who need or want to use them. 
Those actions will help the company achieve its target of 100- to 200-basis-points margin improvement in its Medicare Advantage business, CVS executives said in August. 

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Shares of Rivian Automotive fell about 8% during premarket trading Friday after the electric vehicle startup lowered its annual production forecast for 2024.
Rivian said the lower production target — down from 57,000 units to between 47,000 and 49,000 — is due to a “production disruption.”
Rivian produced 13,157 vehicles at its manufacturing facility in Normal, Illinois, and delivered 10,018 vehicles during the third quarter.

Workers assemble second-generation R1 vehicles at electric auto maker Rivian’s manufacturing facility in Normal, Illinois, U.S. June 21, 2024. 
Joel Angel Juarez | Reuters

Shares of Rivian Automotive dropped about 8% during premarket trading Friday after the electric vehicle startup delivered fewer vehicles in the third quarter than analysts had expected and lowered its annual production forecast for 2024.
The company said the lower production target — down from 57,000 units to between 47,000 and 49,000 — was because of a “production disruption due to a shortage of a shared component” for its R1 vehicles and commercial van.

“This supply shortage impact began in Q3 of this year, has become more acute in recent weeks and continues. As a result of the supply shortage, Rivian is revising its annual production guidance to be between 47,000 and 49,000 vehicles,” the company said in a statement.
A Rivian spokesman said the component causing the problem is part of its in-house motors, but he declined to disclose any further details.
Rivian CEO RJ Scaringe during a Morgan Stanley investor conference last month alluded to problems with a number of suppliers: “We’ve had a couple of supplier issues of recent that have been challenging and in particular, a few issues around our in-house motors with some of the components that have been painful and a reminder of just how a multi-tiered supply chain can be difficult.”

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Shares of Rivian, Tesla and GM in 2024.

Despite the shortage, the company reaffirmed its annual delivery outlook of low single-digit growth as compared with 2023, which it expects to be in a range of 50,500 to 52,000 vehicles.
Rivian disclosed the part shortage as part of reporting its vehicle production and delivery for the third quarter.

The company produced 13,157 vehicles at its manufacturing facility in Normal, Illinois, during the period ended Sept. 30 and delivered 10,018 vehicles in that time. Analyst estimates compiled by FactSet expected deliveries of 13,000 vehicles during the third quarter.
Shares of Rivian are down by more than 50% in 2024, as EV demand has been slower than expected and the company has burned through a significant amount of cash.

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