Business

ON OCTOBER 4TH more than 75,000 employees of Kaiser Permanente, a large health-care chain, began a three-day strike. The walkout was the biggest in the history of America’s health sector, and called attention to the staffing shortages plaguing the country’s hospitals and clinics. In the same week ten drugmakers said they would negotiate medicine prices with Medicare, the public health-care system for the elderly, following legislation which all but forced them to. It will be the first time that companies have haggled over prices with the government.These events are symptoms of the deeper malaise in America’s dysfunctional health-care system. The country spends about $4.3trn a year on keeping citizens in good nick. That is equivalent to 17% of GDP, twice as much as the average in other rich economies. And yet American adults live shorter lives and American infants die more often than in similarly affluent places. Pharmaceutical firms and hospitals attract much of the public ire for the inflated costs. Much less attention is paid to a small number of middlemen who extract far bigger rents from the system’s complexity.Over the past decade these firms have quietly increased their presence in America’s vast health-care industry. They do not make drugs and have not, until recently, treated patients. They are the intermediaries—insurers, pharmacies, drug distributors and pharmacy-benefit managers (PBMs)—sitting between patients and their treatments. In 2022 the combined revenue of the nine biggest middlemen—call them big health—equated to around 45% of America’s health-care bill, up from 25% in 2013. Big health accounts for eight of the top 25 companies by revenue in the S&P 500 index of America’s leading stocks, compared with four for big tech and none for big pharma.Big health began as a constellation of oligopolies. Four private health insurers account for 50% of all enrolments. The biggest, UnitedHealth Group, made $324bn in revenues last year, behind only Walmart, Amazon, Apple and ExxonMobil, and $25bn in pre-tax profit. Its 151m customers represent nearly half of all Americans. Its market capitalisation has doubled in the past five years, to $486bn, making it America’s 12th-most-valuable company. Four pharmacy giants generate 60% of America’s drug-dispensing revenues. The mightiest of them, CVS Health, alone made up a quarter of all pharmacy sales. Just three PBMs handled 80% of all prescription claims. And a whopping 92% of all drugs flow through three wholesalers.With little room left to grow in their core businesses, and trustbusters blocking attempts to buy direct rivals, the oligopolists have in recent years expanded into other bits of the health-care supply chain. Besides adding to the top line, such vertical integration is also juicing margins. The Affordable Care Act of 2010 limited the profits of health insurers to between 15% and 20% of collected premiums, depending on the size of the health plan. But it imposed no restrictions on what physicians or other intermediaries can earn.The law created an incentive for insurers to acquire clinics, pharmacies and the like, and to steer customers to them rather than rival providers. The strategy channels revenue from the profit-capped insurance business to uncapped subsidiaries, which in theory could allow insurers to keep more of the premiums paid by patients.According to Irving Levin Associates, a research firm, between 2013 and August 2023 the nine health-care giants spent around $325bn on over 130 mergers and acquisitions. Some of these deals have pushed the firms deeper into each other’s turf. In 2017 CVS offered $78bn for Aetna, a large health insurer and a competitor of UnitedHealth’s. The following year Cigna, another big insurer, swallowed Express Scripts, a big PBM, for $67bn. In 2022 UnitedHealth paid $13bn for Change Healthcare, a data-analytics firm which processes insurance claims for large parts of the industry, including UnitedHealth’s rivals.Both UnitedHealth and CVS have been buying up health-care providers, too. Optum Health, a subsidiary of UnitedHealth, has spent over $23bn on such transactions in the past six years, and now treats more than 20m patients through a network of 2,200 clinics. It has more doctors on its books—70,000 employed or affiliated physicians—than the biggest hospital chains in the country. CVS runs 1,100 or so neighbourhood clinics and this year alone paid $18bn for two companies focused on the lucrative elderly-care market.Industry executives say that bringing all parts of patient care—primary-care clinics, pharmacy services, PBMs and insurance—under one roof is beneficial for all. In the old fee-for-service model, big health argues, doctors or hospitals are paid for each service they provide, encouraging them to perform as many as possible and charge as much as they can. If doctors and insurance companies are part of the same business, by contrast, incentives should be aligned and overall costs should be lower.That, at least, is the theory. And there is some truth to it. Despite its recent labour troubles, Kaiser Permanente has historically been hailed as a role model for efficient and high-quality health care. Its business, with 39 hospitals and over 24,000 doctors, is highly integrated, with Kaiser’s insurance plans covering members’ treatment at its hospitals and clinics. This April Kaiser announced it would acquire Geisinger Health, a Pennsylvania-based health system, to expand its model of integrated care to more states.Yet vertical integration can have adverse side-effects. For example, many studies have found that after hospitals acquire physician practices, prices increase but quality of care does not. A health-care company that controls many aspects of patient care could raise prices for rivals wishing to access its network. Some also worry about physicians being nudged towards offering the cheapest treatment to patients, lowering the quality of care.There is as yet no evidence of trouble with the model, argues Richard Frank of the Brookings Institution, a think-tank. But elsewhere in big health signs of oligopolistic behaviour are already on display. Consider PBMs. These middlemen are in the crosshairs of lawmakers and regulators for their role in determining drug prices. At least four different bills that seek to regulate PBMs are making their way through Congress. For almost two decades, the Federal Trade Commission (FTC), America’s main antitrust agency, pushed back against efforts to increase oversight of PBMs, arguing that such moves would harm consumers. In July 2022, however, the ftc changed tack and launched an investigation into the business practices of the largest PBMS.At issue is PBMs’ opaque pricing, which takes a drug’s list price and shaves off discounts that the PBM wrangles from drugmakers. PBMs claim that they are a counterweight to big pharma. But critics argue that large PBMs don’t pass on the discounts to the health plans, instead keeping much of the difference for themselves, and limit access to treatments that are less profitable for them. In August Blue Cross of California, a regional health insurer, ditched CVS’s PBM in favour of smaller firms to save on drug costs for its nearly 5m members.Indeed, America’s health-care intermediaries are unusually profitable. Research by Neeraj Sood of the University of Southern California and colleagues found that intermediaries in the health-care supply chain earned annualised excess returns—defined as the difference between their return on invested capital and their weighted average cost of capital—of 5.9% between 2013 and 2018, compared with 3.6% for the S&P 500 as a whole.Big health’s giant pool of excess profits is at last attracting newcomers. Upstart health insurers like Bright Health Group and Oscar Health have positioned themselves as a transparent and consumer-friendly alternative to the old guard. Mark Cuban Cost Plus Drug Company, an online pharmacy started by the eponymous billionaire, bypasses the middlemen by buying cheaper generics directly from manufacturers and selling them to consumers at a fixed 15% mark-up.Perhaps the biggest disruption to big health could come from Amazon. In 2021 its health-care ambitions suffered a setback owing to the closure of Haven Healthcare, a not-for-profit joint venture with JPMorgan Chase, America’s biggest bank, and Berkshire Hathaway, its biggest investment firm. Haven had aimed to reduce health-care costs for the three firms’ own employees. But despite Haven’s failure, Amazon is still expanding its health-care business. Last year it paid $3.9bn for One Medical, a primary-care provider. It also runs Amazon Clinic, an online service offering virtual consultations, and RxPass, which lets members of its Prime subscription service buy unlimited generic medications for a small fee. John Love, who heads Amazon’s pharmacy business, believes that the tech giant’s focus on customer experience, combined with its vast logistics network, makes it well-suited to shake up the industry.So far the newcomers’ impact has been muted. Lisa Gill of JPMorgan Chase reckons that most of them underestimate the complexity of the business of health. The entrenched firms have built their networks of doctors, hospitals, insurers and drugmakers over decades. Replicating that takes time and institutional knowledge. Mr Cuban admits that it is difficult to get drugmakers to list branded drugs on his pharmacy, as they are wary of upsetting the large PBMs. And without branded drugs and the support of large health insurers, his firm’s reach remains small. The cap on insurers’ profits makes life tough for upstarts in that business, who struggle to compete against the negotiating power of the integrated giants. Even Haven, which represented its three backers’ 1.2m American employees, did not command enough market power to compel lower prices from health-care providers. Amazon’s pharmacy business has yet to break into America’s top 15 pharmacy chains. Big tech may be powerful. But for now even it bows before big health. ■ More

Since the turn of the century, Mexican liquors and beers have risen in popularity among U.S. consumers and gained significant market share in the country’s alcoholic beverages industry.
Effective marketing, shifting demographics and changing consumer trends have driven demand for tequila, mezcal and beer brands such as Modelo Especial and Corona Extra.
The industry is hoping to replicate this success overseas.

Packages of Modelo Especial beer are displayed for sale in a grocery store on June 14, 2023 in Los Angeles, California. 
Mario Tama | Getty Images

People in the U.S. are drinking less alcohol than they used to, but when they do indulge, they’re more likely than ever to opt for a beverage originating from Mexico.
The U.S. is the largest market for Mexico’s agave-based spirits and its top beers. In recent years, Mexican brands have begun to dominate the U.S. alcoholic beverages industry as drinkers develop a thirst for premium-priced products with authentic backstories.

Last year, Mexico’s native agave-based spirits tequila and mezcal overtook American whiskey to become the second-fastest growing spirits category by revenue and volume within the U.S., according to analysis by the Distilled Spirits Council of the United States, an industry trade association. In 2022 alone, nearly 30 million 9 liter cases of tequila and mezcal were sold in the U.S.
Experts say the segment is poised to pass vodka in 2023 to become the country’s fastest-growing spirits category in terms of volume.

Lea este artículo en español aquí.

“Tequila has been such a national treasure here in Mexico,” said Guilherme Espagnoli Martins, global brand director of Diageo-owned Don Julio Tequila. “Now, it’s breaking through geographies and flying to other countries as well.”
“It’s putting Mexico on the map,” he said.
The rise of Mexican alcoholic beverages into the mainstream U.S., more than 20 years in the making, is the result of authentic, savvy marketing aimed at making Mexican brands palatable to consumers outside of the brands’ home country, while still resonating with their traditional market.

Other factors driving the higher sales include consumers’ increasing willingness to spend more on higher-quality products across wine, spirits and beer.
The growth of tequila and mezcal in particular has been propelled by sales of premium or high-end brands such as Casamigos and Don Julio, which are priced higher at retail and are produced with 100% agave, without flavoring or additives.
The George Clooney-founded Casamigos, which came into the market a decade ago and paved the way for other celebrity-owned premium tequilas, is so far this year’s top-selling tequila across the alcohol e-commerce site Drizly, a Drizly spokesperson told CNBC. Don Julio was the second.

Since 2003, the tequila and mezcal category in the U.S. overall grew 273% in volumes, or at an average rate of 7.2% per year, while premium agave-based spirits skyrocketed 1,522%, DISCUS found. All the products driving the tequila boom originate from Mexico. While some brands such as Casamigos are based outside the country, the spirit legally has to be produced there.
Don Julio, a more than 80-year-old Mexican business now owned by British spirits giant Diageo, is rebranding and finding fresh success amid the new wave of appreciation for tequila. Martins said Don Julio’s smooth taste, versatility and perception as a purer, cleaner spirit has boosted the product.
This year-end, the brand saw double-digit growth in global sales and is up 20% in 2023 compared to last year, a spokesperson told CNBC. Last month, it debuted a new look and promotional film as it seeks to replicate the success it has had in the U.S. overseas.

Don Julio Tequila Blanco.
Courtesy: Don Julio

“As we take this brand global, there is a huge responsibility for us to put modern Mexico on the world stage,” Martins said of the campaign.

The Mexican beer boom

It’s not just tequila and mezcal — Mexican beer is booming, too.
Mexican beer imports into the U.S. are up 10.6% in 2023, according to alcohol research firm Bump Williams Consulting.
Earlier this year, Mexico’s Modelo Especial became the best-selling beer in the U.S., dethroning Bud Light, which held the top spot since 2001.
“Once [the beer’s owner] Constellation got their hands on Modelo, the company was really able to step up marketing investment and drive tremendous growth,” said TD Cowen analyst Vivien Azer.
Constellation Brands acquired Modelo in 2013 following an antitrust deal that blocked rival Anheuser-Busch InBev from buying the brand. Its rise to the top started before the conservative boycott against AB InBev’s Bud Light that began this spring.
Modelo, along with Constellation’s Corona Extra, has benefited from the U.S.’ steadily growing Hispanic population, Azer said. But the company sought growth outside of Hispanic drinkers as well.
“It was a deliberate strategy by Constellation to diversify away from Hispanic consumers and toward a wider market,” said Azer.

A spokesperson for Constellation told CNBC that Mexican beer sales grew as Hispanic culture gained a stronger foothold around the world.
“The popularity of Mexican beers can in part be tied to the Hispanic population growth and influence on culture,” the spokesperson said. “Younger generations are increasingly bicultural and Latin culture has had a huge impact on the mainstream.”
Constellation on Thursday reported quarterly results that topped Wall Street estimates, driven by the surge in demand for its Mexican beer brands.
The companies behind the lagers’ growth also attributed their success to a simple factor: taste. Mexican beers are “very easy to drink,” said Jonnie Cahill, chief marketing officer at Heineken USA, which distributes the Mexican beers Dos Equis and Tecate.
Cahill said that not only are Mexican beers riding on the tailwinds of changing consumer preferences toward lighter-tasting, more expensive imported lagers, but also the category has been lifted by “authentic” marketing, such as the pairing of lime and beer, which is played up in advertisements, at bars and for holidays such as Cinco de Mayo.
“We focus on authentic Mexican flavors whenever we innovate and we avoid randomness, because that’s the opportunism that people often reject,” Cahill said of Heineken’s Dos Equis brand, which peaked in the mid-2000s with its iconic The Most Interesting Man in the World campaign.
It’s a competitive space, admitted Cahill. Sales for Dos Equis have declined in recent years. In the week ending Sept. 9, Dos Equis retail sales off premise were down 1.7%, while Modelo and Corona were up 10.6% and 3.3% respectively, according to Bump Williams Consulting.
Cahill said the brand is trying to ramp up distribution across the U.S. in hopes of competing with rivals.

A family affair

Eduardo “Lalo” González grew up in the agave fields where his grandfather Don Julio began a tequila empire that would reach all parts of the world.
“I always had this dream and this idea of continuing this legacy of my family,” said González. “Believe it or not, there’s a lack of Mexican ownership in tequila brands.”

Eduardo “Lalo” González, the founder of LALO Blanco Tequila and grandson of Don Julio González, in a field of agave.
LALO Blanco Tequila

Diageo acquired Don Julio in 2015. In 2020, González launched LALO Tequila, a blanco tequila free of flavors or additives and made with 100% agave distilled in González’s home region of Jalisco, just one of five Mexican states where tequila can be legally produced.
“It’s all about embracing family and embracing legacy and embracing traditions,” González said, as the brand begins to find its footing in the U.S. “We’re building our own story by honoring our ancestors, and also by bringing people into our culture.”
What’s next for the category?
Tequila and mezcal prices may increase as American demand continues to surge and the agave plant suffers some shortages, said González. Agave takes about seven years to grow and can only be planted in certain Mexican regions.
González said more farmers have begun harvesting the succulent as the industry plants the seeds for similar growth in overseas markets. More

Novavax’s updated Covid vaccine is arriving nearly three weeks after new jabs from Pfizer and Moderna reached Americans — but analysts aren’t worried about that delay. 
It still appears well positioned to compete with the other companies in the U.S. Covid vaccine market this fall, particularly after logistical issues hampered the rollout of the other shots.
That’s good news for Novavax, which is working to strengthen its financial position after raising doubts about its ability to stay in business at the beginning of the year.

A health worker prepares a dose of the Novavax vaccine as the Dutch Health Service Organization starts with the Novavax vaccination program on March 21, 2022 in The Hague, Netherlands.
Patrick Van Katwijk | Getty Images

Americans can finally get their hands on Novavax’s newest Covid vaccine after U.S. regulators greenlighted the shot this week.
The vaccine’s arrival comes nearly three weeks after new jabs from Pfizer and Moderna reached the public, and after more than 4 million patients rolled up their sleeves to get a shot in September. But Wall Street analysts aren’t worried about that delay.

They said Novavax appears well positioned to catch up and compete this fall with the other companies in the U.S. Covid vaccine market, particularly after logistical issues hampered the rollout of the other shots and a Food and Drug Administration label that allows for wide accessibility to Novavax’s jab, among other factors.
“I’m really not concerned about the timeline or lag relative to the other shots,” B. Riley Securities analyst Mayank Mamtani told CNBC. He added that regulators cleared Novavax’s new shot only slightly later than what the company had estimated, which was late in the third quarter.
That’s good news for Novavax, which is working to strengthen its financial position after raising doubts about its ability to stay in business at the beginning of the year. The biotech company is banking on sales of its updated Covid vaccine — its only commercially available product — and a broad cost-cutting push to help it stay afloat. 
Public health officials see Novavax’s vaccine as a valuable alternative for people who don’t want to take messenger RNA shots from Pfizer and Moderna, which teach cells how to make proteins that trigger an immune response against Covid. Novavax’s shot fends off the virus with protein-based technology, a decades-old method used in routine vaccinations against hepatitis B and shingles.
Silvia Taylor, Novavax’s chief corporate affairs and advocacy officer, told CNBC that the company has collected data showing that 25% to 30% of people prefer a protein-based vaccine.

“We look forward to meeting this demand and more in the wake of new variants and rising COVID cases,” Taylor said in a statement.
Shares of Novavax jumped more than 10% on Tuesday after the FDA cleared its new shot. But the company’s stock is still down more than 25% year to date after shedding more than 90% of its value last year.

Novavax’s shot has a broad authorization label

The FDA authorized Novavax’s updated vaccine — which targets the omicron subvariant XBB.1.5 — for emergency use in people ages 12 and older. Patients previously vaccinated with an older Covid vaccine are eligible to receive one dose of Novavax’s new jab, while unvaccinated people can receive two doses, according to the authorization.
The FDA similarly approved the new shots from Pfizer and Moderna for people ages 12 and older, but the agency also authorized those vaccines for emergency use in children ages 6 months through 11 years old.
Still, Mamtani said the authorization label for Novavax’s new vaccine is “broad and without any notable restrictions for the first time,” which will likely make the shot as widely accessible to teens and adults as the new mRNA jabs. That puts Novavax on more of a level playing field with Pfizer and Moderna this fall, even as a late entrant to the game.
The label for Novavax’s last Covid booster was far more restrictive. Last year, the FDA authorized it as a first booster dose for people ages 18 and older who couldn’t receive a new mRNA shot for accessibility or clinical reasons. That “basically disqualified a lot of people” from getting it last fall, according to Mamtani. 

A health-care worker administers a dose of the Novavax Covid-19 vaccine at a pharmacy in Schwenksville, Pennsylvania, US, on Monday, Aug. 1, 2022.
Hannah Beier | Bloomberg | Getty Images

“Finally, after three years, Novavax has a label that puts its vaccine at parity with the mRNA shots,” Mamtani said. “I think the most powerful words on that label was that people can get it regardless of their previous Covid vaccination history.” 

Logistical issues slowed down Pfizer, Moderna

Novavax’s vaccine is entering the market after Pfizer and Moderna had a bumpy start to the rollout of their shots. Insurance and supply-related issues left many Americans unable to find or access the new mRNA vaccines for free, which may give Novavax an opportunity to catch up and get more people to take its shot. 
“We know that a lot of people have tried to get an mRNA vaccine, but they aren’t able to because of logistical challenges of access and distribution,” Jefferies analyst Roger Song told CNBC. “So, that’s one reason why the two or three weeks delay won’t necessarily be a hurdle for Novavax.” 
There’s no way of knowing whether the rollout of Novavax’s new shot will see similar logistical snags or if it will have a smoother launch. The federal government shifted Covid vaccine distribution and coverage to the private market for the first time this fall. That has proved to be a tricky transition for the U.S. health-care system. 

A sign advertises COVID-19 (coronavirus) vaccine shots at a Walgreens Pharmacy in Somerville, Massachusetts, August 14, 2023.
Brian Snyder | Reuters

However, health-care providers and pharmacies have signaled that they are ironing out logistical issues and will be better equipped to handle them in the future.
Last week, a group of insurers told the Biden administration they were “largely, if not completely,” done with fixing delays in insurance coverage for the new Covid shots. Those delays had resulted in some patients getting charged up to $190 for a shot at pharmacies.
“Should further issues arise, we stand ready to swiftly implement system improvements,” the insurers said in a letter. 
Some pharmacies, like Walgreens, also appear to be resolving supply disruptions, which left many stores without any new Covid shots for patients to receive.

Covid vaccinations could peak later this fall

What’s more, Novavax’s new shot might actually be arriving at just the right time: a month before Covid vaccine demand is expected to peak in the U.S. this fall and winter. 
Jefferies’ Song said the peak could follow a similar pattern as last season when most Covid boosters were administered in November. That’s partly because there is “less urgency” among Americans when it comes to Covid shots compared to early on in the pandemic, which could cause them to get vaccinated later rather than earlier.
“During the first season of Covid, everyone rushed to get vaccinations because it was really an emergency state. But now people have a mindset where they’re saying, ‘OK, I will wait and see how bad Covid really gets,'” Song said.
By November, Novavax’s new shot will likely be as widely available as shots from Pfizer and Moderna at pharmacies, doctor’s offices and other vaccine distribution sites. 
But the biggest uncertainty this fall for all three companies is how many Americans will decide to get another Covid vaccine, Song said.
Last year’s uptake was already feeble: Only about 17% of the U.S. population — around 56 million people — received last year’s boosters, according to the Centers for Disease Control and Prevention.
“We don’t know how big the overall pie will be because we’ve never been in a commercial market for Covid vaccines,” he told CNBC. “This fall will set a new benchmark for the entire Covid vaccine space.” More

UAW members are getting ready to vote on a labor agreement with Volvo Group-owned Mack Trucks.
Those workers are hoping they can get similar benefits to what their brethren are seeking from the Detroit automakers.
But Mack Trucks — which is offering 19% wage increases, ratification bonuses, increased 401(k) company payments and other benefits — is not in the same position as the Big Three automakers.

Striking United Auto Workers members from the General Motors Lansing Delta Plant picket in Delta Township, Michigan, on Sept. 29, 2023.
Rebecca Cook | Reuters

DETROIT — United Auto Workers members with Volvo Group-owned Mack Trucks will vote this weekend on a tentative agreement that falls significantly short of what the union is demanding in negotiations currently being held with Detroit automakers.
The Sunday vote by roughly 3,900 union members could test the willingness of workers to ratify a lesser deal compared to raised expectations set by UAW President Shawn Fain for hourly pay increases, equal pay for equal work, inflation protection and, potentially, shorter work weeks.

While Mack Trucks is a separate company and a different part of the union than the section that covers members with General Motors, Ford Motor and Stellantis, some workers were expecting that they would receive similar increases and benefits as their union brethren at the Detroit automakers.
“In my opinion, the master contract is not horrid. It’s not a bad contract, but it’s nowhere near what we were expecting,” a 12-year Mack Truck worker at the company’s Lehigh Valley Operations in Pennsylvania told CNBC.
The worker and several other UAW members with Mack Trucks who asked not to be identified due to fear of retribution from the union or company said they plan to vote against the deal. Their reasons included the tentative agreement not meeting expectations, the length of the deal being a year longer than before and the pay increases and bonuses not being enough to offset inflation or reward them for working through the Covid-19 pandemic.

“When we were going in, we were following basically like the automakers,” the worker said. “They’ve changed some things for the better but, in my opinion, not enough.”
The Mack Trucks tentative agreement varies by location and job but for many workers, it includes a roughly 19% wage increase over the five-year deal, including 10% upon ratification; $3,500 ratification bonuses; increased 401(k) company payments; and other benefits. It does not include the elimination of wage tiers (it only has a one-year reduction that would bring the steps to five years); re-instatement of traditional pensions; cost-of-living adjustments to battle inflation; or shorter work weeks.

The Mack Trucks tentative agreement isn’t a bad deal, but it’s not close to the 40% pay increase, inflation protection, work/life balance and other bonuses and benefits Fain has set as the standard for negotiations with the Detroit automakers. For the Detroit automakers, pay tiers also have been at least cut in half from eight years — a time frame Fain, a former auto worker, said Friday was “not acceptable.”
Mack Trucks and UAW announced the tentative agreement early Monday, followed by releasing “highlights” of the deal later in the week to members. Neither UAW nor Mack Trucks have publicly released the tentative contract ahead of employee meetings to detail the agreement and voting this weekend. 
Another Mack Trucks worker descried the deal as “disgraceful” and an “insult” compared to their expectations and what’s currently being negotiated by UAW international leaders with the Detroit automakers, also known as the Big Three.
“We are low man on totem pole, and we are getting no backing from international,” said a more than 10-year material technician. “They are just pushing this [tentative agreement] through so they don’t have to deal with us while the Big Three are negotiating.”

United Auto Workers President Shawn Fain during an online broadcast updating union members on negotiations with the Detroit automakers on Oct. 6, 2023.
Screenshot

UAW declined to comment on the comparison in contracts between Mack Trucks and the Detroit automakers. Mack Trucks President Stephen Roy, in a Monday statement, said the tentative agreement “would deliver significantly increased wages and continue first-class benefits for Mack employees and their families,” while keeping the company competitive.
Another veteran worker at Mack Truck’s Lehigh Valley Operations in Pennsylvania said they were not expecting the same raises and benefits as what’s being negotiated with the Detroit automakers, but they were looking for more than what’s in the current tentative agreement.
“We pay dues just like the Big Three,” said the roughly 20-year Mack Trucks employee who has worked several positions with the company. “We should get at least the same type of negotiation options.”
One of the “options” mentioned by Mack Truck workers was conducting target strikes like what’s happening at the Detroit automakers to fight for additional wages and benefits, specifically, the reinstatement of cost-of-living adjustments to combat inflation.
“My honest opinion, I thought we were going out on strike because there’s no COLA in it,” the worker said. So, in five years, we’re going to be right back in the same hole.”
Marick Masters, a business professor at Wayne State University in Detroit who specializes in labor issues, said it’s important to note that Mack Trucks is not in the same position as the Detroit automakers. However, inflated expectations from union members can be a problem.
“The UAW can be a victim of its own success,” he said. “They get a good deal here and everybody’s going to say we want the same thing … but they operate in different industries or different segments of the larger industry that have different financial considerations, and I think that’s just what you’re seeing here.” More

Amazon’s first pair of prototypes for its Project Kuiper satellite internet system launched on Friday.
“We’ve done extensive testing here in our lab and have a high degree of confidence in our satellite design, but there’s no substitute for on-orbit testing,” a Project Kuiper executive said.
Project Kuiper is Amazon’s plan to build a network of 3,236 satellites in low Earth orbit, to provide high-speed internet access anywhere in the world.

Your Amazon order of internet satellite prototypes have shipped.
More than four years since the tech giant announced its ambitious plan to invest heavily in building a global satellite internet network, Amazon on Friday saw the first pair of satellites for its Project Kuiper system launch into space.

“We’ve done extensive testing here in our lab and have a high degree of confidence in our satellite design, but there’s no substitute for on-orbit testing,” Project Kuiper vice president of technology Rajeev Badyal said in a statement before the launch.

United Launch Alliance Atlas V rocket carrying the first two demonstration satellites for Amazon’s Project Kuiper broadband internet constellation stands ready for launch on pad 41 at Cape Canaveral Space Force Station on October 5, 2023 in Cape Canaveral, Florida, United States. 
Paul Hennessey | Anadolu Agency | Getty Images

United Launch Alliance Atlas V rocket carrying the first two demonstration satellites for Amazon’s Project Kuiper broadband internet constellation stands ready for launch on pad 41 at Cape Canaveral Space Force Station on October 5, 2023 in Cape Canaveral, Florida, United States. 
Paul Hennessey | Anadolu Agency | Getty Images

Amazon twice switched rides for the pair of satellites before finally deciding to go with the immediately available, albeit far overpowered, Atlas V rocket for the Protoflight mission. Amazon originally planned to launch on ABL Space’s RS1 rocket, before delays in RS1’s development moved the satellites to United Launch Alliance’s Vulcan rocket, but delays to Vulcan’s debut moved the satellites to Atlas V.
Information about the size and design of the pair of Amazon’s satellites has been scarce – with the company only sharing photos of the shipping containers that delivered the spacecraft to Florida. Even ULA’s details about the launch are limited, with the info provided comparable to when the rocket company flies classified spy satellites for the U.S. government.

Last year, Amazon announced the biggest corporate rocket deal in the industry’s history to launch Kuiper satellites, signing launch contracts with ULA, Arianespace, and Jeff Bezos’ Blue Origin. As part of that deal, Amazon expects to pay about $7.4 billion for Kuiper launches over the next five years. 
It has booked 77 launches – deals that include options for more launches when needed – from that trio of companies to deploy the satellites fast enough to meet regulatory requirements. That massive purchase has come under scrutiny from an Amazon shareholder lawsuit, which alleges the company snubbed SpaceX for valuable satellite launch contracts because of Jeff Bezos’ personal rivalry with Elon Musk.
Amazon is playing catch up to SpaceX, which has grown its Starlink satellite internet service to more than 2 million customers. Crucially, SpaceX says it is no longer absorbing the cost of the Starlink antennas it sells with the service, and the more than 5,000 satellites its launched so far now serve consumer, enterprise, and government customers.
Earlier this week, Amazon reiterated that its first production Kuiper satellites are on track to launch in the first half of next year – with plans to begin beta testing the network with customers by the end of 2024.

The “ultra-compact” version of the Project Kuiper

Protoflight represents an “end-to-end” test of Kuiper. Amazon will look to verify the prototype satellites can connect to ground antennas and relay that connectivity on to its small customer terminals.
This year Amazon revealed a trio of satellite antennas that it plans to sell to Kuiper customers. The company has yet to say what it expects to charge customers for the hardware or service. Earlier field testing of Amazon’s Kuiper antennas saw download speeds of up to 400 Mbps.
The company’s main Kuiper facilities are near Seattle – in the Washington cities of Redmond and Kirkland. Amazon has other locations in San Diego, Austin, Texas, New York City and Washington, D.C. More

The UAW will not expand its strikes for the first week since work stoppages began, after the sides failed to reach tentative agreements by Sept 14.
The union had been gradually increasing its strikes against the Detroit automakers but said it’s making progress in negotiations.
Only 25,200 workers, or roughly 17% of UAW members covered by the expired contracts with the Detroit automakers, are currently on strike.

United Auto Workers President Shawn Fain during an online broadcast updating union members on negotiations with the Detroit automakers on Oct. 6, 2023.
Screenshot

DETROIT – The United Auto Workers will not expand strikes against the Detroit automakers this week amid progress in the talks, including General Motors agreeing to include battery cell workers under the company’s national agreement.
This is the first week since targeted strikes by the UAW started on Sept. 15 that the union will not expand the work stoppages at GM, Ford Motor or Chrysler-parent Stellantis.

Fain said the union was planning to shut down GM’s Arlington Assembly plant that produces highly profitable full-size SUVs until a last-minute proposal by the company to place the automaker’s battery cell workers under its national agreement.
“Just that threat has provided a transformative win,” Fain, wearing an “EAT THE RICH” T-shirt, said during an online broadcast Friday. “We’ve been told for months that this is impossible … and now we’ve called their bluff. What this will mean for our membership cannot be understated.”
GM declined to immediately comment on the battery cell workers, citing the ongoing negotiations: “Our goal remains to reach an agreement that rewards our employees and allows GM to be successful into the future.”
GM, with its battery plant in Ohio, is the only Detroit automaker with a joint venture battery plant in operation and unionized in the U.S. The automaker has announced plans for two other U.S. battery cell plants with LG Energy Solution as well as one with Samsung SDI.

Battery plants

GM’s agreement will put pressure on crosstown rivals Ford and Stellantis to do the same, as the UAW tends to pattern agreements off one another for members to receive “equal pay for equal work,” a longstanding motto of the union.

“The plan was to draw down engine and transmission plants and permanently replace them with low-wage battery jobs,” Fain said. “We had a different plan, and our plan is winning at GM. And we expect it to win at Ford and Stellantis as well.”

Electric vehicle battery plants have been a major point of contention in this year’s talks between the union and the three Detroit automakers. Each automaker has formed joint ventures with battery makers to manufacture EV batteries in the United States — a move the union has characterized as a plan to shut it out of the new factories, many of which are under construction now.
Officially, because they’re owned by joint ventures, the battery plants aren’t covered by the automakers’ agreements with the union. The automakers have said that because of that status, the plants shouldn’t be a factor in contract negotiations with the union.
But the UAW has made a “just transition” — meaning, a plan to protect their members as the industry shifts to electric vehicles — a centerpiece of this year’s negotiations, something that has frustrated the automakers. Ford CEO Jim Farley said last week that the UAW is “holding the deal hostage over battery plants.”
Ford declined to comment following Fain’s comments Friday, referring to a statement issued earlier in the week that the company remains “open to the possibility of working with the UAW on future battery plants in the U.S., reminding that these are multibillion-dollar investments and have to operate at sustainably competitive levels.”
Fain said in his Friday presentation that the union had expected to announce an expansion of the strike against GM. “But today, because of our power, GM has agreed to lay the foundation for a just transition,” he said.

‘Significant progress’

UAW has been gradually increasing the strikes since the work stoppages began, after the sides failed to reach tentative agreements by Sept 14. The targeted, or “stand up,” strikes are taking place instead of national walkouts in which all plants simultaneously strike.
“I wish I were here to announce a tentative agreement at one or more of these companies, but I do want to be really clear: We are making significant progress,” Fain said. “In just three weeks, we have moved these companies further than anyone thought was possible.”
Fain said Ford has offered a 23% raise over the life of the expected four and a half year contract, while GM and Stellantis are at around 20%. Stellantis and Ford also have agreed to reinstate a cost-of-living adjustment that the union lost more than a decade ago, among other enhanced proposals by each of the companies.
Stellantis North America Chief Operating Officer Mark Stewart, who’s overseeing the negotiations, said the sides “are making progress, but there are gaps that still need to be closed.”
“While we still have some work to do, I remain optimistic that our discussions are providing a pathway to a tentative agreement,” Stewart said.

Striking United Auto Workers (UAW) members from the General Motors Lansing Delta Plant picket in Delta Township, Michigan September 29, 2023.
Rebecca Cook | Reuters

Only 25,200 workers, or roughly 17% of UAW members covered by the expired contracts with the Detroit automakers, are currently on strike. Fain previously said the union would increase the work stoppages, based on progress in the contract negotiations.
The strikes began at an assembly plant for each of the Detroit automakers, followed by 38 parts and distribution centers for GM and Stellantis. A week ago, the union expanded strikes to assembly plants for GM in mid-Michigan and Ford in Illinois.
“We’ve been very careful about how we escalate this strategy,” Fain said.
Vehicle production impacted by the strikes include Ford’s Ranger midsize pickup and Bronco, Explorer and Lincoln Aviator SUVs; Stellantis’ Jeep Wrangler SUV and Gladiator small pickup; and GM’s Chevrolet and GMC midsize pickups, Chevrolet Traverse, Cadillac XT4 and Buick Enclave SUVs and Chevrolet Malibu sedan. The Malibu and XT4 production were idled due to parts shortages caused by the strike.
GM this week said the UAW’s strike cost it $200 million in lost production during the third quarter.
UAW negotiators have received counter proposals from each of the Detroit automakers during the past week, starting with Stellantis a week ago before Fain’s Friday strike announcement. Ford followed early in the week with a proposal and then GM submitted a counteroffer Wednesday night. More

Clorox and MGM Resorts are contending with the fallout from cyberattacks.
The problem has hit several other major corporations of late.

cyano66 | iStock | Getty Images

It has been a very eventful couple of weeks for cyberattack-related news.
It all kind of started Wednesday of last week when Johnson Controls revealed it had been hit by a cyberattack. The company warned it “experienced disruptions in portions of its internal information technology infrastructure and applications.” And while the financial impact of that attack has not yet been determined, it also cautioned, it “is assessing whether the incident will impact its ability to timely release its fourth quarter and full fiscal year results.”

But why is this specific cybersecurity incident of particular interest? Many of Johnson Controls’ customers are federal agencies, including the Department of Homeland Security. That agency is reportedly investigating if any floor plans and security information were exposed as a result of the attack.
Then on Wednesday of this week, Clorox gave a shocking earnings warning. The culprit was a significant cybersecurity breach from August — “which caused wide-scale disruption of Clorox’s operations, including order processing delays and significant product outages.”
What’s more, while it drastically took down fiscal first-quarter numbers, the company is “in the process of assessing the impact of the cybersecurity attack on fiscal year 2024 and beyond.” Clorox is now expecting a hefty year-over-year sales decline as well as a quarterly loss thanks to the incident.

Adam Jeffery | CNBC

And Thursday night, MGM Resorts revealed that the cyberattack it experienced in September will cost the company about $100 million. It explained that the incident caused “impacts to occupancy due to the availability of bookings through the company’s website and mobile applications.”
MGM noted that it was mostly contained to the month of September. It does expect that impact beyond the third quarter should be “minimal” and that, overall, it won’t be material to operations and results for the full year. It also reportedly refused to pay ransom.

Unlike its competitor, Caesars paid a $15 million ransom after suffering its own September data breach. It was fortunate, though, that the incident didn’t impact casino or online operations. The company has not yet disclosed a financial impact.

Vehicles pass in front of The Mirage Resort and Casino in Las Vegas, April 25, 2018.
Bridgett Bennet | Bloomberg | Getty Images

While those companies all shed light on developments in recent days, keep in mind some of the other marquee names we’ve seen throughout this year alone that have experienced significant cybersecurity issues as well. It’s been a problem all year for a variety of companies.
Campbell Soup didn’t suffer the same ugly fate as Clorox after experiencing a cyberattack that affected one of its facilities over the summer. The food maker said the incident had a minimal impact on operations and was immaterial to financials.
Another food maker — Dole — also suffered a cyberattack back in February. It absorbed $10.5 million in costs from the event, which also had a limited impact on operations.
Brunswick had to temporarily halt some operations after a June cybersecurity incident. That event cost the company about $85 million and caused second-quarter numbers to be “lower than initial expectations.” It apparently took more than a week for operations to resume.
Tempur Sealy and Estee Lauder also had to shut down some IT systems after getting hit by separate cyberattacks in July.
Back in March, Sysco disclosed a data breach that happened in January. While customer and employee data were stolen, there was no operational impact.
Likewise, miner Freeport-McMoRan suffered a cyberattack in August, but production impact from that was limited. More

Streaming platforms are chasing live sports rights to grow their audiences. Increasingly, those audiences are watching in Spanish.
Media companies like TelevisaUnivision, Canela Media, NBCUniversal’s Telemundo and Peacock, Disney’s ESPN+ and Amazon’s Prime Video are all bulking up on Spanish-language sports content.
Hispanic viewers have been at the “forefront of cord-cutting,” making them a key demographic in streaming growth.

Roberto Firmino of Liverpool shoots whilst under pressure from Eder Militao of Real Madrid during the UEFA Champions League Quarter Final Second Leg match between Liverpool FC and Real Madrid at Anfield on April 14, 2021 in Liverpool, England.
Shaun Botterill | Getty Images Sport | Getty Images

Streaming platforms are chasing live sports rights to grow their audiences. Increasingly, those audiences are watching in Spanish.
Media companies that were already geared toward Hispanic audiences, like TelevisaUnivision and fledgling Canela Media, are bulking up on sports rights and content, while traditional English-language streamers, like NBCUniversal’s Peacock that features Telemundo content, Disney’s ESPN+ and Amazon’s Prime Video are adding simulcast content in Spanish.

It’s an effort to diversify viewership and advertising opportunities — and to capitalize on a growing Hispanic streaming audience.
“Sports is the pinnacle of premium content that can really help a streaming service,” said Shirin Malkani, co-chair of the sports industry group at law firm Perkins Coie. “If you offer it in Spanish as well as English you may not be doubling your audience but you’re certainly growing it by a large percentage. You are reaching an audience I would argue maybe we haven’t done a great job getting sports content to.”

Lea este artículo en español aquí.

Hispanic audiences spend nearly nine hours per day consuming media, the majority of which is TV viewership, according to a recent study from Nielsen based on viewership habits from July. The study noted the Hispanic audience has been at “the forefront of cord-cutting,” making it a growing majority of streaming viewership, too.
According to the findings, Hispanic viewers spend more than 50% of their time consuming TV through streaming, eclipsing the general population, at nearly 40%.
“When I think about the Latino space in particular … I think it’s an amazing opportunity,” said Eli Velazquez, executive vice president of Telemundo Deportes. “Latinos are pretty much the youngest demographic of all groups by about 13 years, and they’re early adopters of technology. They like to consume content on streaming platforms.”

Traditional media companies across the board have been doling out cash for sports as live games still command the highest traditional TV viewership. These companies are also fighting to make their streaming outlets profitable, with sports representing a key subscriber driver.
Chief among the value drivers is the rising popularity of soccer in the U.S.
Hispanic audiences have long been loyal fans of the sport, which is now gaining steam in American households, helped of late and in part by the arrival of soccer legend Lionel Messi to Major League Soccer’s Inter Miami.
Disney’s ESPN+ recently bought the rights to Spanish league LaLiga in both languages for an eight-year period.

Spanish-language lift

Leaning into Spanish-language broadcasts allows media companies to not only build up their streaming subscriber bases across various demographics but also opens up new advertising opportunities as ad-based subscription tiers help streaming platforms inch toward profitability.
“You can really have a personalized, customized ad load for the Spanish audience, and potentially a different set of advertisers,” Malkani said.
Peacock, for one streamer, has already reaped the benefits of its sports offerings.
Parent company Comcast touted the growing portfolio — Spanish-language sports, included — during a recent earnings call, noting that the 2022 FIFA Men’s World Cup in Qatar helped the company to add 5 million subscribers during the fourth quarter.

Lionel Messi of Argentina reacts in the penalty shoot out during the FIFA World Cup Qatar 2022 Final match between Argentina and France at Lusail Stadium on December 18, 2022 in Lusail City, Qatar. 
Julian Finney | Getty Images

Streaming made up 30% of total viewership for the 2022 FIFA Men’s World Cup, compared to 9% in 2018, according to Telemundo Deportes.
Telemundo and Peacock aired the matches in Spanish. Fox holds the English-language rights.
Peacock, which has relied heavily on its cheaper, ad-supported offering, had 24 million subscribers as of June 30. Other streamers like Netflix and Disney+ have followed suit with ad-supported subscription options.
“I think accessibility and convenience is why we’re leaning more into the streaming product,” Velazquez said, noting he often works with the NBC Sports and Peacock teams to figure out the best streaming strategy for Telemundo’s sports.
Peacock also airs Spanish-language broadcasts of some Premier League soccer games as well as the NFL’s “Sunday Night Football.”
NFL media rights across languages are sold to U.S. media companies, who are then able to sub-license them to other companies if they don’t have a Spanish-language outlet.
Amazon’s Prime Video, the exclusive home of “Thursday Night Football,” has a Spanish-language simulcast each week, too.
“It’s really cool when you have that hardcore fan base that’s learning [the sport] and follows the Thursday night broadcast,” said Rolando Cantu, a former NFL player and analyst on “TNF en Espanol.” “Now we’re part of the Latino culture, and Spanish-speaking people want to engage and consume our broadcast.”
Meanwhile, TelevisaUnivision will air the Super Bowl in Spanish in 2024, although it’s unclear if it will be available on both traditional TV and streaming via the company’s Vix platform, which launched in 2022.
Paramount’s broadcast network CBS will air the English-language version of the game on TV and streaming.

Streaming expansion

TelevisaUnivision has been snapping up more sports rights in a bid to expand its audience. Streaming offers an additional platform to air more games.
High-profile soccer matches featuring the English Premier League, LaLiga and Serie A often take place at the same time making it difficult to land space on traditional broadcast channels.
“Five years ago it was very difficult for us to put anything on screen, because if you’re a soccer fan you know that most soccer happens on Friday, Saturday, Sunday and sometimes Monday. So obviously there’s overlap, right?” said Olek Loewenstein, global president of sports at TelevisaUnivision, adding that it was difficult to cater to various audiences and soccer fan bases.
“That’s where streaming comes into play. We can suddenly cater to Argentinians with the Argentinian league and Brazilians with the Brazilian league,” Loewenstein said.
TelevisaUnivision recently renewed its deal for the rights to UEFA’s Champions League, paying about $225 million over three years, according to a person familiar with the matter. TelevisaUnivision will also air major soccer events including the Copa America tournament and UEFA’s Euro games next summer. That’s happening on top of the rights to broadcast other soccer leagues, such as Liga MX.
“Over the past 10 years, premium rates [for sports rights] have gone up exponentially and non-premium rights have started to disappear,” Loewenstein said. “People are betting on the premium rights out there, because those are the ones that drive either audience or subscriptions.”
Loewenstein said the amount being invested in sports now is the most he’s seen joining TelevisaUnivision in 2011. Having more to offer the viewer, he said, has played a key role in Vix’s growth.
“I need to be able to convince you to come back the next month or the next week. And I think that’s where sports plays a great role,” Loewenstein said. “For us, sports has been a very key component of the strategy of growth for the base.”
Disclosure: NBCUniversal is the parent company of CNBC, Telemundo and Peacock. More