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Southwest Airlines’ COO told staff that the company will have to make “difficult decisions” to boost the carrier’s profits.
The airline has already said it will switch to assigned seating, start red-eye flights and sell seats with extra legroom .
Southwest is under pressure from activist Elliott Investment Management, which is seeking a leadership change.

A Southwest Airlines Boeing 737-7H4 approaches San Diego International Airport for a landing from Houston on June 28, 2024 in San Diego, California. 
Kevin Carter | Getty Images

Southwest Airlines has warned employees that it will have to make “difficult decisions” ahead to boost profits as the carrier faces pressure from activist Elliott Investment Management, which has sought leadership changes at the company.
Southwest over the summer announced a host of major changes to its more than 50-year-old business model to drum up revenue. It plans to ditch open seating for assigned seats, offer seats with more legroom that fetch a higher fare and start red-eye flights.

It has also started allowing its flights to be listed on Google Flights and Kayak and has changed its ads to target more younger consumers, COO Andrew Watterson said in a video message to staff last week.
“Now, all that’s not enough. We also have to change our network,” Watterson said in the video, a transcript of which was seen by CNBC.
“We have a couple of difficult decisions heading our way. It’s not station closures. But we need to keep moving the network to help us drive back to profitability,” Watterson said. “And so I apologize in advance if you as an individual are affected by it.”
Southwest plans to release an updated schedule on Wednesday for flights for sale through June 4. The carrier said Watterson’s video was part of a routine video series about the company’s initiatives.
Southwest isn’t planning to announce furloughs, but it could cut its footprint in certain cities and staff could transfer to other locations, according to a person familiar with the matter. The airline is seeking to reduce costs and focus on profitable flying, the company has said.

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Other carriers like JetBlue have cut routes this year to deploy aircraft on flights that generate higher revenue.
Southwest is set to provide more details about its initiatives and route changes at an investor day this Thursday at its Dallas headquarters.
Elliott has pushed for a leadership change at the airline and has criticized Southwest management for not doing enough to improve the company’s bottom line. Earlier this month, executive chairman and former CEO Gary Kelly said he would step down after the carrier’s shareholder meeting next year.
The message was reported earlier by the View from the Wing industry blog.

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EV sales data provided to CNBC by the Detroit automaker, which publicly reports sales quarterly, shows a notable increase for GM through August.
GM sold nearly 21,000 EVs in the U.S. in July and August – almost matching its full second-quarter EV sales.
Those two back-to-back record months for GM’s EVs have it within striking distance of Ford through August.

Mary Barra, GM chair and CEO, speaks during the unveiling of the Cadillac Celestiq electric sedan in Los Angeles, Oct. 17, 2022.
Frederic J. Brown | AFP | Getty Images

WARREN, Mich. – If everything had gone to plan for General Motors over the last three years, the Detroit automaker would be well on its way to catching Tesla in sales of electric vehicles.
In October 2021, GM CEO Mary Barra declared the automaker would “absolutely” catch up to the U.S. EV leader by 2025. Instead, after slower-than-anticipated EV adoption across the industry and GM-specific challenges with production, software and supply chains, the company remains well behind Elon Musk’s carmaker, as well as Hyundai Motor/Kia and Ford Motor.

While GM has withdrawn most of its previously announced electric vehicle targets, the automaker believes its EV sales momentum is finally building thanks to an expanding lineup of all-electric vehicles – spanning a price range of roughly $35,000 to more than $300,000.
“We are definitely outstripping the industry in terms of growth, in terms of EVs,” Rory Harvey, GM president of global markets, including North America, told CNBC. “We have the most comprehensive EV lineup out of any manufacturer in the industry, in the U.S., at the moment.”

EV sales data provided to CNBC by the Detroit automaker, which publicly reports sales quarterly, shows a notable increase for GM through August. GM sold nearly 21,000 EVs in the U.S. in July and August – almost matching its full second-quarter EV sales. GM’s EV sales through August were up about 70% compared with a year earlier.
“It’s a step change in terms of our EV performance,” Harvey said during an interview this month at GM’s Cadillac headquarters in suburban Detroit.
Those two back-to-back record months for GM’s EVs have it within striking distance – about 2,000 units – of Ford through August. It still remained more than 20,000 units shy of Hyundai/Kia EV sales through last month. Both Ford and Hyundai/Kia report sales monthly.

The legacy automakers are still fighting for a distant second behind Tesla, which Motor Intelligence estimates to have sold more than 164,000 EVs during the second quarter – roughly double the sales of GM, Hyundai/Kia and Ford combined during that time.     
Harvey declined to speculate when, or if, GM expects to overtake its competitors in EV sales, but the automaker is forecasting a strong finish to the end of the year.
“We have momentum on our side,” Harvey said. “We anticipate quarter four will be strong in terms of EV adoption. So, we’re looking forward to that close, and looking forward to taking a disproportionate share of the upside.”

Growing EV lineup

GM currently offers eight “Ultium-based” EVs for consumers — referring to its electric vehicle architecture and battery technologies.
They range from mainstream models such as the Chevy Equinox and Blazer crossovers to three large pickup trucks and luxury models from Cadillac, including a bespoke $300,000 Celestiq. Two additional Cadillac vehicles – an electric Escalade and entry-level Optiq crossover – are expected to join the lineup by year’s end, bringing the total to an industry-leading 10.
“They’re doing what they said they were going to do. Their plan was to have Ultium and have it underneath a lot of cars relatively quickly,” said Stephanie Brinley, principal automotive analyst at S&P Global. “It didn’t come online quite as fast as they wanted it to. But this was the plan.”

2025 Cadillac Escalade IQ
Michael Wayland / CNBC

For comparison, Tesla’s five vehicles range from the roughly $39,000 Model 3 sedan to the more than $100,000 Cybertruck. Hyundai, including its Genesis luxury brand and Kia sibling, has a lineup of nine cars and crossovers ranging from about $34,000 for the Hyundai Kona electric to $80,000 for the Genesis G80.
With so many GM models, the expectations to increase sales are high. The automaker has spent billions of dollars to develop the vehicles, and now “the pressure is on to sell them,” Brinley said.
“The pressure is on to be able to guide consumer demand and meet it,” she said. “But this is a 10- to 15-year thing to get to a place where EVs are going to be more dominant than [internal combustion engines], and it can still take time for consumers to warm up.”
Cox Automotive expects EVs to make up roughly 10% of overall U.S. vehicle sales by the end of the year, up from 7.3% in the first quarter.

The Chevrolet All-Electric Blazer EV.
Scott Mlyn | CNBC

Selling more EVs is still somewhat counterintuitive for GM: They remain far less profitable than other gas-powered models, but the automaker expects EVs to be profitable on a production, or contribution-margin basis, once it reaches output of 200,000 units by the fourth quarter.
EVs, which also help the company to meet tightening federal fuel economy standards, have been a major growth area under Barra. The CEO has yet to fully withdraw a target announced in January 2021 that the automaker would exclusively offer all-electric vehicles for consumers by 2035.
Harvey told CNBC the automaker is “doing a terrific amount now in terms of roadshow events, in terms of getting customers into our vehicles, making sure that our fleets at our dealerships have the right level of EVs.”
“In the U.S., you say, ‘Butts in the seat sells cars,’ in the U.K., we say, ‘Feel at the wheel, seals the deal,” said Harvey, a U.K. native. “But it’s the same thing.”

EV targets

The 2035 target, which Barra has said will be guided by customer demand, was a transformational goal for GM. The Detroit automaker was the first legacy carmaker to go “all in” on EVs and reshaped its business to focus on the vehicles, including announcing several other targets that have since been withdrawn or adjusted.

Withdrawn targets for 2025 include North American production capacity of 1 million EVs and EV profits comparable to gas models. The status of other targets, such as revenue of $50 billion from all-electric vehicles by next year, is unclear.
GM maintains a nearer-term target of producing between 200,000 and 250,000 EVs this year, a range that was revised downward from a previously announced goal of 200,000 to 300,000.
Harvey said the company will continue to be guided by customer demand for EVs.
“You have to plan a number of years ahead in terms of what you’re going to do,” Harvey said. “If you reach some peaks and drops as you go through, then we have the ability to either increase production or to slightly detune production, so that we can meet the customer demand. I don’t think we’ve overinvested in EVs.”

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Foot Locker celebrated its 50th anniversary this month and is looking to ensure that it will survive in the decades to come.
CEO Mary Dillon and other C-suite executives spoke with CNBC about the strategies that are working and how its new stores are improving sales.
To reclaim its throne as the market leader in sneakers, Foot Locker must differentiate itself from competitors and ensure that it properly executes its new strategies, analysts said.

An employee arranges Nike basketball shoes on display at the House Of Hoops by Foot Locker retail store at the Beverly Center in Los Angeles.
Patrick T. Fallon | Bloomberg | Getty Images

During a recent event celebrating Foot Locker’s 50th anniversary in New York City, it was hard to imagine that the legacy sneaker chain was appearing on bankruptcy watch lists as recently as March.
Grammy-nominated rapper Coi Leray was there to celebrate the company with a special performance of her hit song “Players” as influencers, journalists and handpicked members of the company’s revamped loyalty program sipped on lavender margaritas and champagne cocktails.

Employees – and not just those in the glare of the company’s PR team – gushed about CEO Mary Dillon as Adidas staffers celebrated the company’s new store design, which showcases individual brands instead of mixing them on nondescript shoe walls. 
Foot Locker turns 50 while on a bit of an upswing two years into Dillon’s tenure as CEO. Last month, it released fiscal second-quarter results and full-year guidance that beat expectations, as comparable sales grew for the first time in six quarters.
As Foot Locker revamps its sprawling store footprint, and perhaps benefits from some good timing, it’s making strides in winning back its critical brand partners like Nike and Adidas, the latter of which co-hosted the Monday night party and helped secure Leray’s performance. 

Coi Leray performs at Foot Locker 50th anniversary event on September 16, 2024 in New York.
Courtesy: Mike Vitelli and Isabella Picicci

“Our last quarter was a really good indication that the hard work that we’ve been putting into the Lace Up plan is working, and that makes me feel really, really great, because I really see the next 50 years of growth for Foot Locker and our future,” Dillon told CNBC in an interview, referencing the company’s turnaround plan. “I really think that there’s layers of category growth that we can drive by just making sneakers that much more inclusive, that much more fun, that much more easy to access.”
But as Foot Locker stares down the next 50 years, the company is still at a crossroads and must answer some fundamental questions: can it once again be the market leader in sneakers, and can it not just survive, but thrive, as brands rely less and less on wholesalers?

“With the combination of more direct to consumer from the brands, the deepening of specialists like [Dick’s Sporting Goods], the incursion of JD Sports, Foot Locker still looks risky,” said Neil Saunders, a retail analyst and managing director of GlobalData. “In some ways, they’re just a sort of distributor of everyone else’s products.”
Dick’s has a big private-label business and sells other categories like sporting goods, while JD Sports has strong loyalty programs and a robust fashion business, he said.
“Whereas Foot Locker looks vulnerable because it just doesn’t have all these other strings to its bows,” said Saunders. “The truth is that although they’re getting better, there is still this question: Do we need this specialist sneaker retailer?” 

From mall legend to has been

Foot Locker can be traced back to the legendary retailer Frank Winfield Woolworth, whose namesake company branched into footwear in the 1960s and later opened the first Foot Locker in City of Industry, California, in September 1974. 
From the beginning, Foot Locker was a mall retailer. Over the next two decades, it opened thousands of stores in malls across the U.S. and abroad. 
By the turn of the century, it was the world’s largest retailer of athletic footwear and apparel, with a 20% market share in the U.S., according to a 2002 Forbes report. It was the primary place to buy Nike sneakers and was responsible for 26% to 28% of Nike’s total domestic revenue. Nike accounted for more than half of Foot Locker’s total sales at the time.
“It was a simpler retail world. I think in the years that they were initially really experiencing strong growth, it was as simple as being in the mall, having a large mall footprint and having the right brands and they had that footprint,” said Janine Stichter, a retail analyst and managing director at BTIG, who has been covering the retail industry since 2008. “They were the No. 1 partner of Nike. Nike, at the time, was strong and growing, and I think they were really viewed as like the destination in an environment that was a lot less competitive.” 
When Foot Locker’s chief commercial officer, Frank Bracken, joined the company in 2010, the retailer’s relationship with Nike was poised to get even stronger. By the end of the decade, 75% of the products Foot Locker sold were from Nike.
“This was [pre-direct-to-consumer], Foot Locker was definitely ‘most favored nations’ with most of our brand partners at that time, Nike was about to go on a pretty epic run alongside Jordan, and so I actually joined at a really good time,” Bracken said in an interview.
Bracken recalled how from 2012 to about 2018, Foot Locker’s stock rose to record highs as revenue grew at a mid-to-high single-digit compound annual growth rate. But as the 2020s neared, the company got “complacent” and began taking its position as the market leader in sneakers “for granted,” said Bracken. 
“[We] got some weak signals about where the industry was headed, from our partners and from competition, and then Covid, you know, paralyzed everybody momentarily and I think we lost some time, candidly, during Covid,” he said. “Competition used it as an opportunity to invest in technology and capability and the business, and maybe we probably stood a little bit too still at that point in time.” 

As consumers moved online and away from malls, Foot Locker did too little to update its e-commerce capabilities and its real estate footprint, said Bracken. At the same time, competitors were getting bigger and savvier, adjusting their real estate strategies as malls across America sputtered and died. 
In North America, the company let its banners — Foot Locker, Footaction and Champs Sports — overlap too heavily with each other in terms of assortment, location and marketing, and brands “started to take note of that,” said Bracken.
At the end of 2021, Foot Locker was winding down its Footaction business and had acquired WSS – an off-mall athletic apparel retailer that caters to the Hispanic community – to help differentiate itself from competitors.
But by then, it was too late.
Nike, carrying out a new strategy to cut off wholesalers and sell directly to consumers through its own websites and stores, had started reducing the number of sneakers it was selling to Foot Locker, the company said on an earnings call in February 2022. It chose instead to reserve its best products for Foot Locker’s primary competitors: Dick’s and JD Sports. 
For a company that relied almost exclusively on Nike, the change was devastating and posed an existential threat. By the end of fiscal 2022, comparable sales had fallen 7.2% in North America. The declines would only mount in the quarters to come. 

A new leader arrives

When Dillon, the former CEO of Ulta Beauty, took the helm of Foot Locker in September 2022, Wall Street breathed a collective sigh of relief. Highly regarded among peers, Dillon was known for her ability to win over brands, and appeared to have the necessary chops to turn Foot Locker around. 
“In a way, she soothed investors … they know that she can deliver and they know that she understands retail and the sector and she’s got good operation control and all the rest of it,” said Saunders from GlobalData. “That’s obviously starting to come through a little bit more now.”
In her first major public event as CEO, Dillon hosted an investor day last March where she touted a revitalized relationship with Nike. She pledged the “fruits of our renewed commitment to one another” would begin to show up in results by the end of the year. 
She outlined her Lace Up turnaround strategy, which focused on four key pillars: better marketing, a new real estate plan, a revamped loyalty program and an emphasis on online sales. 
But as the year wore on, the macroeconomic picture worsened, which hit Foot Locker hard because about half of its customers are considered low income. The company went on to cut its guidance twice, suspend its dividend and delay a key financial target that it outlined at its investor day. 
“As a CEO, it’s hard to go out and make a commitment and have to change it, but because I believe so much in the plan and where we’re heading, I felt confident that it was the right thing to do,” said Dillon. “Now I believe we’ve kind of worked past that.”
Beyond the macro situation, the company likely underestimated the challenges it was facing, and how much the Nike breakup would hurt its business, Saunders and Stichter said. 
“You don’t really know until you do it how impactful that’s going to be and I think that they thought they’d be able to offset more of that loss more quickly,” said Stichter. 

Signs of a turnaround

While Foot Locker’s fiscal 2023 turned out worse than it originally anticipated, the company is seeing some of its turnaround efforts start to take hold. While Nike is still its biggest partner, it’s focusing more on other brands, such as upstarts like Hoka and On and legacy incumbents like Birkenstock and Ugg.  
Online sales are growing. Foot Locker plans to relaunch its mobile app at the end of the year, and it recently unveiled its revamped loyalty program FLX, which allows customers to earn discounts, access to product launches and perks like free returns. 
“We know that we only capture a fraction of this annual sneaker spend that our existing customers spend on sneakers,” said Kim Waldmann, Foot Locker’s chief customer officer. “[FLX] isn’t necessarily about getting you to buy 10 more sneakers per year, it’s an opportunity for us to drive share of wallet consolidation by the fact that you’re getting value back in shopping with us.” 
When Waldmann started in the role last year, she learned from consumer research that customers loved having access to a wide variety of brands at Foot Locker’s stores and enjoyed the product knowledge that its employees, known as “Stripers,” had. 
“The thing that they wanted to see more from us is like we’re just not top of mind. A lot of consumers just hadn’t seen us in a while,” said Waldmann. “And I think that was really the opportunity to take what is an iconic brand and make it influential and top of mind again, and that’s really the work that we’ve been doing.” 
The company is marketing more toward women and has partnered with stars such as Leray, who was part of Foot Locker’s spring style and trend campaign. 
Perhaps most critically, Foot Locker is finally doing the work necessary to overhaul its aging store fleet, which is responsible for about 80% of its sales. Since Dillon took over, she’s closed around 500 stores, opened about 200 new shops and remodeled or relocated another 200 or so doors. Earlier this year, Foot Locker unveiled its “reimagined” store concept and its plans to move away from its traditional format, which tends to be two walls of shoes with a middle section used for trying on sneakers. 

Foot Locker store location on 34th street in New York City.
Courtesy: Foot Locker

As more and more brands move away from wholesalers in favor of their own stores and website, the strategy change was critical to Foot Locker’s survival. Its business does not work if it doesn’t have the support of its brand partners, which want to ensure that their assortments are showcased individually – not mixed together with competitors. 
“When you talk to a company like On they’re like, yeah, we’re selective about who we sell to, we don’t want to be just another shoe on the wall,” said Stichter. “They’re really investing behind putting more signage and just investing in the displays … that’s what makes the brands want to work with them.” 
Since May, Foot Locker has brought the new design concept to at least 80 of its stores, which it says have better comparable sales and margins compared with the balance of the chain. The company is working to refresh two-thirds of its global Foot Locker and Kids Foot Locker doors by the end of 2025, and said 40% of its North American footprint is now off-mall. 
The new store approach couldn’t come at a better time for Foot Locker. Over the last year, Nike has begun to walk back its direct selling strategy after acknowledging that it went too far in cutting out wholesalers. 
“Nike is our largest partner and they’re the largest in the industry so for us, it’s also about, how do we make sure that we have a really terrific long-term growth relationship with Nike? And I’m proud about the fact that we’re going back to growth [with Nike] starting in the fourth quarter of this year,” said Dillon. “Also … at the same time, Nike has been very public about the role of retailers and the importance of that for them as well so maybe it was good timing, right?” 

The battle between extinction and survival

As Foot Locker looks ahead to the next 50 years, its ability to survive is still up for debate. Nike is at a low point and is cozying back up to the wholesale partners, but when it rebounds, will it cut off those retailers once again? 
Absent a robust private-label business, Foot Locker’s success is also highly dependent on the performance of its brand partners, which leaves it with less control over its own destiny than other retailers that have recently made big comebacks, such as Abercrombie & Fitch. 
If Nike has a major product launch, it can be a boon for Foot Locker’s sales, but if innovation dries up, Foot Locker will suffer. It has found itself in a similar quandary facing other multi-brand retailers, such as Macy’s, which has also struggled to find itself in a post-mall world. 
When asked if Foot Locker can survive another 50 years, GlobalData’s Saunders said the company is the “most at risk of extinction” of its peers. Stichter disagreed. 
“One thing we’ve learned is that consumers really do want a multi-brand experience. There are people who go to Nike.com or Adidas.com but people really like having that selection, having the service,” said Stichter. “So there is a reason for a concept like Foot Locker to exist. I think it all just depends on, can they execute well and be one of the preferred places for consumers who are looking for choice.”

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FIVE MILLION DOLLARS were on offer to contestants in “Beast Games”, a new game show being made for Amazon’s Prime Video streaming service. Instead, some participants received physical injuries, emotional distress and sexual harassment, according to a complaint filed in a Los Angeles court on September 16th. Amazon and the show’s creator, Jimmy Donaldson, a 26-year-old YouTuber known as MrBeast, have not commented on the lawsuit. But the fiasco has reassured some Hollywood executives that they have little to fear from social-media upstarts. More

Boeing machinists on the picket lines said they have saved money for the strike and plan to pick up temporary jobs to make ends meet.
More than 30,000 Boeing machinists walked off the job Sept. 13 after a tentative contract was rejected in a nearly 95% vote.
The strike brought most of Boeing’s aircraft production to a halt and is costing the company $50 million a day, according to Bank of America estimates.

Boeing factory workers gather on a picket line during the first day of a strike near the entrance of a production facility in Renton, Washington, U.S., September 13, 2024. 
Matt Mills Mcknight | Reuters

RENTON, Wash. — Cash-strapped Boeing is facing mounting costs from an ongoing machinist strike as workers push for higher pay. A failure to get a deal done could be even more expensive.
In the shadow of a factory outside Seattle where Boeing makes its best-selling planes, picketing Boeing machinists told CNBC they have saved up money and have taken or are considering taking side jobs in landscaping, furniture moving or warehouse work to make ends meet if the strike is goes on much longer.

The work stoppage by Boeing’s factory workers in the Pacific Northwest just entered its second week. The financial cost of the strike on Boeing depends on how long it lasts, though ratings agencies have warned that the company could face a downgrade if it drags on too long.
That would add to the borrowing costs of the company, already $60 billion in debt. Boeing has burned through about $8 billion so far this year in the wake of a near-catastrophic door plug blowout from one of its 737 Max planes in January.
Boeing hasn’t turned an annual profit since 2018, and its new CEO Kelly Ortberg is trying to restore the company’s reputation after months of manufacturing crises that have slowed deliveries to customers, depriving it of cash.

Boeing 737 Max planes sit at the airport in Renton, Washington.
Leslie Josephs | CNBC

At the local union office in Renton, machinists were preparing for what may become a lengthy strike: Union members carried in large pallets of bottled water, while someone mixed a giant tuna salad in the kitchen to make sandwiches for workers. Union vans visited demonstration sites around Renton offering transportation to bathroom breaks for workers on picket duty. Burn barrels provided heat for chilly overnight pickets.
Many workers spoke of their love for their jobs but fretted about the high cost of living in the Seattle area, where the majority of Boeing’s aircraft are made.

The median home price in Washington state increased about 142% to $613,000 as of 2023, from $253,800 a decade earlier, according to the state’s Office of Financial Management. That outpaces the roughly 55% increase nationally over that period, according to data from the Federal Reserve Bank of St. Louis.
“We can’t afford [to own] a home,” said Jake Meyer, a Boeing mechanic who said he will start driving for a food delivery service during the strike and is looking at picking up odd jobs such as moving furniture. Meyer said although he’s striking for higher pay from Boeing, he enjoys the job of building airplanes.
“I take pride in my work,” he said.
Another Boeing machinist said he has been saving for months, forgoing things such as restaurants and paying three months of mortgage payments early.
“I can last as long as it takes,” said the worker, who spoke on the condition of anonymity.

$50 million a day

More than 30,000 Boeing machinists walked off the job at midnight Sept. 13 after turning down a tentative labor deal in a nearly 95% vote — 96% voted in favor of a strike. They received their last paychecks Thursday, and health benefits are set to end on Sept. 30. A strike fund from the union will soon give them $250 a week.
The strike is costing Boeing some $50 million a day, according to estimates by Bank of America aerospace analyst Ron Epstein. The strike halted production of most of Boeing’s aircraft, and that is rippling out to the aerospace giant’s vast network of suppliers, some of which have already been told to halt shipments. Boeing is still making 787 Dreamliners at its non-union factory in South Carolina.

Boeing Machinists union members count votes to accept or reject a proposed contract between Boeing and union leaders and whether or not to strike if the contract is rejected, at the Aerospace Machinists Union Hall in Seattle, Washington, on September 12, 2024. 
Jason Redmond | AFP | Getty Images

The battle pits a struggling Boeing against a workforce seeking wage increases and other improvements. Boeing’s most recent offer included 25% general wage increases over a four-year deal and was endorsed by the machinists union, the International Association of Machinists and Aerospace Workers District 751.
Workers said they were looking for wage increases closer to the 40% that the union had proposed as well as annual bonuses and a restoration of pensions lost more than a decade ago.
Boeing and the union were at the negotiation table this week, but both Boeing and union negotiators have said they were disappointed with the lack of progress.
“We continue to prioritize the issues you defined in the most recent survey,” union negotiators wrote to members Wednesday, “yet we are deeply concerned that the company has not addressed your top concerns. No meaningful progress was made during today’s talks.”
Ortberg, who is just six weeks on the job, announced temporary furloughs this week of tens of thousands of Boeing staff, including managers and executives, on the heels of a hiring freeze and other cost-cutting measures announced this week.
“During mediation with the union this week, we continued our good faith efforts to engage the union’s bargaining committee in meaningful negotiations to address the feedback we’ve heard from our team,” Ortberg said in a note to staff Friday.
“While we are disappointed the discussions didn’t lead to more progress, we remain very committed to reaching an agreement as soon as possible that recognizes the hard work of our employees and ends the work stoppage in the Pacific Northwest,” Ortberg wrote. 
The strike, which includes Boeing machinists in the Seattle area, Oregon and a few other locations, is just the latest in a series of labor battles in recent years that has included actors, autoworkers, port workers and airline employees, all of which have won raises after strikes or strike threats.
The Biden administration has encouraged Boeing and the union to reach a deal.
“I do believe that both parties want to get to a resolution here, and hoping to see one that makes sense for the workers and it works for a company that really needs to find its way forward on so many fronts,” Transportation Secretary Pete Buttigieg told CNBC’s “Squawk Box” on Thursday.

Tight labor market

Boeing is facing a tight labor market. During the last strike, in 2008, which lasted less than two months, the company was in better financial shape, and there was less job competition in the area.
One Boeing supplier told CNBC that furloughing or laying off workers would cause problems for months down the road because it takes so long to train staff on such technical and detailed work.
During the pandemic, Boeing and its suppliers shed thousands of workers. They’ve since struggled to hire and train workers in time for the resurgence in air travel and aircraft demand.
“You’re in an environment where skilled, technical labor is hard to get right now, particularly in aerospace and defense,” said Bank of America’s Epstein. “So what do you do to not only retain them but attract them? If they really want a pension, maybe that gives you a competitive advantage over people who are trying to attract talent.”

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Boeing’s new CEO Kelly Ortberg said the company’s defense unit chief Ted Colbert is leaving Boeing and that a replacement would be named later.
The defense unit accounted for about 40% of Boeing’s revenue in the first half of the year.

Former CEO for Boeing’s defense, space and security subdivision Ted Colbert speaks during a press conference in Dubai on Nov. 16, 2019.
Karim Sahib | AFP | Getty Images

The head of Boeing’s defense unit Ted Colbert is leaving the company effective immediately, said CEO Kelly Ortberg, marking his first major executive change since he took the top job in early August.
“At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us to enable their critical missions around the world,” Ortberg said in a staff memo on Friday. “Working together we can and will improve our performance and ensure we deliver on our commitments.”  

Ortberg thanked Colbert for his 15 years of service at Boeing and said the unit’s Chief Operating Officer Steve Parker would take over until the company names Colbert’s replacement.
Boeing’s defense, space and security unit generated nearly 40% of Boeing’s revenue in the first half of this year, but it has struggled with production problems and cost overruns, including on the new 747s that will serve as Air Force One aircraft. In the space sector, Boeing’s Starliner is returning without the NASA astronauts who took it to the International Space Station in June. They will instead take SpaceX’s Crew-9 vehicle back, NASA said last month.
Colbert did not immediately respond to CNBC’s request for comment.

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The Federal Trade Commission on Friday sued three large U.S. health companies that negotiate insulin prices, arguing the drug middlemen boost their profits while “artificially” inflating costs for patients. 
The suit targets the three biggest so-called pharmacy benefit managers, UnitedHealth Group’s Optum Rx, CVS Health’s Caremark and Cigna’s Express Scripts, and their affiliated group purchasing organizations.
The FTC may also recommend suing insulin manufacturers Eli Lilly, Sanofi and Novo Nordisk in the future.

Lina Khan, Chair of the Federal Trade Commission (FTC), testifies before the House Appropriations Subcommittee at the Rayburn House Office Building on May 15, 2024 in Washington, DC. 
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The Federal Trade Commission on Friday sued three large U.S. health companies that negotiate insulin prices, arguing the drug middlemen use practices that boost their profits while “artificially” inflating costs for patients. 
The suit targets the three biggest so-called pharmacy benefit managers, UnitedHealth Group’s Optum Rx, CVS Health’s Caremark and Cigna’s Express Scripts. All are owned by or connected to health insurers and collectively administer about 80% of the nation’s prescriptions, according to the FTC. 

The FTC’s lawsuit also includes each PBM’s affiliated group purchasing organization, which brokers drug purchases for hospitals and other health-care providers. The agency said it could recommend suing drugmakers Eli Lilly, Sanofi and Novo Nordisk in the future as well over their role in driving up list prices for their insulin products.
A UnitedHealth spokesperson said the suit “demonstrates a profound misunderstanding of how drug pricing works, noting that Optum RX has “aggressively and successfully” negotiated with drug manufacturers.
A CVS spokesperson said Caremark is “proud of the work” it has done to make insulin more affordable for Americans, adding that “to suggest anything else, as the FTC did today, is simply wrong.”
And, a spokesperson for Express Scripts said the suit “continues a troubling pattern from the FTC of unsubstantiated and ideologically-driven attacks” on PBMs. It comes three days after Express Scripts sued the FTC, demanding that the agency retract its allegedly “defamatory” July report that claimed that the PBM industry is hiking drug prices.
PBMs sit at the center of the drug supply chain in the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers and federal health plans. They also create lists of medications, or formularies, that are covered by insurance and reimburse pharmacies for prescriptions. The FTC has been investigating PBMs since 2022. 

The agency’s suit argues that the three PBMs have created a “perverse” drug rebate system that prioritizes high rebates from drugmakers, which leads to “artificially inflated insulin list prices.” It also alleges that PBMs favor those high-list-price insulins even when more affordable insulins with lower list prices become available. 
The FTC is filing its complaint through its so-called administrative process, which initiates a proceeding before an administrative judge who would hear the case.
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed,” Rahul Rao, deputy director of the FTC’s Bureau of Competition, said in a statement. 
“The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers,” Rao continued. 
Roughly 8 million Americans with diabetes rely on insulin to survive, and many have been forced to ration the treatment due to high prices, according to the FTC.
President Joe Biden’s signature Inflation Reduction Act has capped insulin prices for Medicare beneficiaries at $35 per month. That policy currently does not extend to patients with private insurance.
The Biden administration and Congress have ramped up pressure on PBMs, seeking to increase transparency into their operations as many Americans struggle to afford prescription drugs. On average, Americans pay two to three times more than patients in other developed nations for prescription drugs, according to a fact sheet from the White House.

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The FTC said it remains “deeply troubled” by the role insulin manufacturers play in higher list prices, arguing that they inflate prices in response to PBMs’ demands for higher rebates. Eli Lilly, Sanofi and Novo Nordisk control roughly 90% of the U.S. insulin market.
For example, Eli Lilly’s Humalog insulin had a list price of $274 in 2017, a more than 1,200% increase from its $21 list price in 1999, according to the FTC.
The FTC said all drugmakers should “be on notice that their participation in the type of conduct challenged here raises serious concerns.”
An Eli Lilly spokesperson said the FTC’s suit concerns “aspects of the U.S. health care system that we have long been advocating to reform.” They added that the company last year became the first to cap out-of-pocket costs for all of its insulins at $35 per month for people with private insurance. Eli Lilly also cut some insulin list prices by up to 70%.
Sanofi last year announced a similar $35 monthly price cap for its most commonly prescribed insulin. Novo Nordisk last year also said it would slash the list prices of some of its popular insulins by up to 75%.
A spokesperson for Sanofi said the company has not seen and will not comment on the FTC’s complaint against PBMs. But the French drugmaker agrees with the FTC’s claim that PBMs have “leveraged their position as powerful industry middlemen and have exploited rebates…to benefit themselves while increasing costs for patients and payers at the same time.”
A Novo Nordisk spokesperson said the company is “committed to ensuring patients have affordable access to their medicines, including insulin.” Novo Nordisk does not control the prices patients pay at the pharmacy in the “complex U.S. healthcare system,” the spokesperson noted, pointing to the company’s insulin savings card programs.
Correction: This story has been updated to correct a quote from the FTC.

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Nearly all family offices, 97%, expect positive returns this year, and nearly half expect double-digit gains, according to Citi Private Bank’s 2024 Global Family Office Survey.
Nearly half of family offices surveyed say they plan to increase their allocation to direct private equity in the next 12 months, the largest share for any investment category.
The survey is the latest sign that family offices — the private investment arms of wealthy families — are starting to make more aggressive bets on market and valuation growth.

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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
Family offices are the most bullish they’ve been in years, putting their cash to work in stocks and alternatives as the Fed starts to cut interest rates, according to a new survey.

Nearly all family offices, 97%, expect positive returns this year, and nearly half expect double-digit gains, according to Citi Private Bank’s 2024 Global Family Office Survey.
“This is the most optimistic outlook we’ve seen,” said Hannes Hofmann, head of the family office group at Citi Private Bank, which has been conducting the survey for five years. “What we’re clearly seeing is an increase in risk appetite.”

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The survey is the latest sign that family offices — the private investment arms of wealthy families — are emerging from two years of hoarding cash and bracing for recession to start making more aggressive bets on market and valuation growth.
They especially like private equity. Nearly half, 47%, of family offices surveyed say they plan to increase their allocation to direct private equity in the next 12 months, the largest share for any investment category. Only 11% plan to reduce their PE holdings. Private equity funds ranked second, with 41% planning to increase their allocation.
With interest rates heading down, family offices are also regaining their appetite for stocks. More than a third, 39%, of family offices plan to increase their allocation to developed-market equities, mainly the U.S., while only 9% plan to trim their equity exposure. That comes after 43% of family offices increased their exposure to public stocks last year.

Public equities remain their largest holding by major asset class, with stocks making up 28% of their typical portfolio — up from 22% last year, according to the survey.

“Family offices are taking money out of cash, and they’ve put money into public equities, private equity, direct investments and also fixed income,” Hofmann said. “But primarily it’s going into risk-on investing. That is a very significant development.”
Fixed income has become another favorite of family offices, as rates start to decline. Half of family offices surveyed added to their fixed-income exposure last year — the largest of any category — and a third plan to add even more to their fixed-income holdings this year.
With the S&P 500 up nearly 20% so far this year, family offices are looking for 2024 to end with strong returns. Nearly half, 43%, expect returns of more than 10% this year. More than 1 in 10 large family offices — those with over $500 million in assets — are banking on returns of more than 15% this year.
There are risks to their optimism, of course. When asked about their near-term worries about the economy and financial markets, more than half cited the path of interest rates. Relations between the U.S. and China ranked as their second-biggest worry, and market overvaluation ranked third. The survey marked the first time since 2021 that inflation wasn’t the top worry for the family offices surveyed, according to Citi.
One of the big differences that sets family offices apart from other individual investors is their appetite for alternatives. Private equity, venture capital, real estate and hedge funds now account for 40% of the portfolios of the family offices surveyed. That number is likely to keep growing, especially as more family offices make direct investments in private companies.
“It’s a significant allocation that shows family offices are asset allocators who are long-term investors, highly sophisticated and taking a long-term view,” Hofmann said.
One of the biggest themes for their private investments is artificial intelligence. The family offices of Jeff Bezos and Bernard Arnault have both made investments in AI startups, and repeated surveys show AI is the No. 1 investment theme for family offices this year. More than half of family offices surveyed by Citi have exposure to AI in their portfolios through public equities, private equity funds or direct private equity. Another 26% of family offices are considering adding to their AI investments.
Hoffman said AI has already proven to be different from previous investment innovations such as crypto, and environmental, social and governance, or ESG. Only 17% of family offices are invested in digital assets, while a vast majority say they’re not interested.
“AI is a theme that people are interested in and they’re putting real money into it,” Hofmann said. “With crypto people were interested in it, but at best, they put some play money into it. With ESG, we’re finding a lot of people are saying they’re interested in it, but a much smaller percentage of family offices are actually really putting money into it.” More