Business

STANTON, TENNESSEE, looks like a place from a bygone age. The town hall quaintly resembles a 1960s grocery store. Next door is a cannery, where townsfolk use communal stoves to make soups and peach preserve for winter. For much of its history, Stanton’s main source of income has been cotton farming, which was so depressed, many smallholders upped sticks and left.Yet amid the cotton fields something remarkable is taking shape. Ford, one of America’s three big carmakers, is setting up the biggest industrial complex in its history, including an electric-vehicle (EV) plant, a battery factory and a base for its suppliers, with an investment of $5.6bn. A year after it broke ground thousands of acres have been covered with concrete and steel. Construction workers in high-vis jackets stomp into Suga’s Diner, the only food joint in the 400-person town, for lunches of fried chicken and catfish. When Ford announced the project in 2021, the diner had a sign lamenting a shortage of chicken. Now a help-wanted sign points to a shortage of staff. “We are rushed off our feet,” says Lesa “Suga” Tard, the owner.It is a similar story in De Soto, Kansas. Its industrial activity was abruptly cut short decades ago when an army munitions factory was mothballed. In April construction began on a $4bn Panasonic battery factory, the largest investment in the state’s history. Driving to the 9,000-acre site in his pickup truck, Rick Walker, the mayor, points out diggers turning a country road into a four-lane highway, counts the cranes—nine of them—helping erect the factory’s second storey, and talks optimistically about a giant solar farm due to be built nearby.image: The EconomistA drive over several days down parts of America’s “auto alley”, which stretches from the Great Lakes to the Gulf of Mexico, provides a glimpse of industrial history in the making. The country is in the grip of an investment boom in everything from semiconductor “fabs” to solar farms (see map). By late 2022, firms had announced a cumulative $210bn of investments in EV and battery factories in America, up from $51bn at the end of 2020, according to Atlas Public Policy, a data gatherer. Such investments have already contributed to a boom in American construction spending, which has doubled since the end of 2021, according to government statistics.Several factors explain what some are calling America’s manufacturing renaissance. President Joe Biden claims much of the investment is the result of financial incentives resulting from the Chips and Science Act and the Inflation Reduction Act (IRA), two of his signature policies. But state and local giveaways also help. So does the desire to outcompete China, as well as reshoring after supply-chain chaos during the pandemic. In the case of carmakers like Ford, which decided to build at Stanton before the IRA was passed, the fear is that unless they seize the initiative on electrification, they will lose their dominance of America’s car industry to Tesla, the EV front-runner.Given how attached Americans outside a few coastal cities remain to their gas guzzlers, the surge in EV and battery factories may seem like white elephants in the making. Yet the companies behind them clearly see a commercial logic. And the factories are already playing a role in national debates. The EV and battery plants are important points of contention in a strike against Detroit’s big three carmakers, Chrysler (part of Stellantis, whose biggest shareholder part-owns The Economist’s parent company), Ford and General Motors (GM). Both Mr Biden and Donald Trump are due to visit Michigan in coming days, to support the strikes. The United Auto Workers (UAW) is worried that the new factories will be hard to unionise. But the cost of labour is likely to be pivotal in determining whether America’s manufacturers can regain their mojo or not.There is little evidence of a full-blown migration of the car industry from the unionised north to the less union-friendly south. James Rubenstein of Miami University, in Oxford, Ohio, who specialises in the geography of the car industry, notes that non-American carmakers have been building factories in the south for decades. And as much new activity is happening in the old carmaking states as in the new ones. GM’s first contiguous EV and battery plant is in Detroit, close to the dilapidated and graffitied factories left over from the city’s heyday. Two hours’ drive away, Ford plans to build a battery plant in Marshall, Michigan, using technology from a Chinese company, CATL. “Everyone’s getting a pretty fair share of the largesse, both north of the Ohio River and south,” says Mr Rubenstein.image: APThe megaprojects may not, then, be reconfiguring America’s large-scale industrial geography. But at the local level, their impact is extraordinary. They are sprouting up in left-behind places that for years waited in frustration for a manufacturing revival to arrive. These places have several things in common.First, they long ago earmarked huge spaces of unproductive land for industrial development. Allan Sterbinsky, mayor of Stanton, says the town set aside 4,000 acres for industrial development decades ago; the state government even set up an office in Japan to promote it. Toyota, a Japanese car giant, made a few exploratory approaches. But it took Ford to ensure that the town’s ambitions could be realised, he says. In Kansas, De Soto started drawing up plans to rezone 9,000 acres for development a decade ago.The second common feature is the availability of labour. Though many of the new factories are in rural backwaters, they have access to big pools of workers within commuting distance. Once up and running, Ford’s operations are expected to employ 6,000 workers, about 15 times more than Stanton’s meagre population. A technical college on site will in time train future workers. For now, it will be fairly easy to find them in Memphis, which is about a 40-minute drive away, and which the car industry has hitherto overlooked. De Soto has 1.5m potential workers within a 30-minute radius, including Kansas City, so Panasonic should have no problem hiring 4,000 people, says Mr Walker.The new factories will nevertheless contribute to further clustering in the American car industry—a third shared trait. This is helpful in order to minimise the cost of transporting heavy batteries. Ford will have SK On, its South Korean battery partner, on site in Stanton. It will also have car-parts suppliers, such as Magna, directly on its doorstep. Unlike the gigafactory in Nevada, where Panasonic has teamed up with Tesla, the Japanese firm’s De Soto plant will supply more than one customer, and make different types of lithium-ion batteries.The projects’ reliance on copious sources of clean energy, meanwhile, makes them symbiotic with the proliferation of wind and solar developments nearby. The skyline along the Kansas prairies is thick with wind turbines, which generate almost half of the state’s electricity. The Tennessee Valley Authority, a multi-state utility, is investing heavily in new solar and other forms of generation capacity to meet sharply rising electricity demand in the south because of projects like Ford’s.Still, there are a few big bones of contention. One is the cost and efficacy of government incentives to promote the investment boom. Ford and SK, which are also building two battery factories in Kentucky, have conditionally been granted a $9.2bn loan from the Department of Energy. They also hope to qualify for a battery-production tax credit under the IRA. Panasonic will reportedly receive $830m in state-funded tax credits, as well as potential IRA support.A new report by Ahmed Medhi and Tom Moerenhout, of the Centre on Global Energy Policy at Columbia University, calculates that the IRA tax credits provide savings of more than 30% for battery manufacturers, helping bridge the gap between the cost of producing batteries in America and China. However, their success in stimulating investments may make their fiscal costs higher than projected. They are also triggering “subsidy wars” with the European Union. Although they might boost factory towns, that comes at a cost to the taxpayer, and perhaps in the long term, blunts the industry’s incentives to innovate. De Soto had to offer tax breaks and the like to lure Panasonic, which for many months kept its identity secret even from town officials so as not to tip off competitors.Another concern is the environmental and social impact of investments. Companies want to develop greenfield sites in places where demand for labour is not too fierce. But that can stir hostility from locals who resist turning fields into factories and worry about pollution and overuse of local resources, even in the service of a “green revolution”. Some also fear that industrial development will destroy the traditional character of their towns, or increase living costs. At a café in De Soto, Kira Horn, a waitress, describes how at night the lights on the cranes, which work around the clock, make the site look “like a city”. Although people like her boss, who is also an estate agent, are already relishing the business and property boom, some of her young friends worry that it will price them out of buying homes.Then there is the union challenge. Neither Kansas nor Tennessee are union-friendly states. In contrast to GM, which has a unionised factory near Nashville, Tennessee, Ford’s workers at Stanton will not automatically be required to join the UAW. This has caused friction. In June the UAW’s president, Shawn Fain, blasted the Biden administration for lending money to the Stanton project without agreeing wage requirements up front.Ford caught a breather on September 22nd when the UAW decided to expand its strike only at factories run by GM and Stellantis, saying it had made progress in negotiations with Ford. But the carmaker will be loth to give much ground on Stanton. Erik Gordon of the University of Michigan’s Ross School of Business says that the revitalisation of American manufacturing will hinge on automation and labour. The Detroit carmakers’ EVs will be uncompetitive if labour costs are too high, he says.If America’s entrepreneurial muscle is to be rebuilt and left-behind places revived, as the champions of local projects hope, these hurdles will need to be overcome. And Mr Biden’s turn towards subsidies could still bring with it economic costs for the country at large. But, although it is early days, the prospects for Stanton look encouraging. The presence of Ford’s supply chain so close to the factory floor is likely to attract more small businesses. The mayor’s projections show that, as a result of Ford’s investment, the town’s population is likely to grow about 20-fold in just over a decade. Mr Sterbinsky is already securing investments in water, sewage and other infrastructure to support that growth. He has toured southern states to learn how to turn sleepy places into creative hotspots that attract enterprising types. Stanton’s genuine southern treasures, such as the cannery and Suga’s Diner, are a good start. ■ More

“TO WALK AWAY and retire, it’s a pretty dismal prospect,” Rupert Murdoch told an interviewer in 1998, when he was already well into pensionable age. If he ever did stop working, he added, he would “die pretty quickly”.So the announcement on September 21st that the 92-year-old is stepping down as chairman of Fox Corporation and News Corp, the television and newspaper empires he has built up over more than 70 years, should be treated with some scepticism. Mr Murdoch will stay on as “chairman emeritus” and says he will remain “involved every day in the contest of ideas”. This week he advised staff: “When I visit your countries and companies, you can expect to see me in the office late on a Friday.” It was both a promise and a warning.
The handover of Mr Murdoch’s empire has been a gradual process. He has shied away from earnings calls since the sale of 21st Century Fox, the bulk of his film and TV assets, to Disney in 2019. The question of succession was in effect settled the following year, when James Murdoch, the younger son and sometime heir apparent, left the News Corp board, citing “disagreements over certain editorial content published by the company’s news outlets and certain other strategic decisions”. This left the path clear for Mr Murdoch’s elder son, Lachlan, who will take over from his father at the two family firms.image: The EconomistWhy the change in titles now? Mr Murdoch said in his letter to staff this week that he was in robust health. But investors have recently begun to question those assurances. Vanity Fair reported in April that he had quietly suffered a series of health problems including a broken back, seizures and two bouts of pneumonia. His testimony in a recent legal case against Fox brought by Dominion Voting Systems, which accused the company of damaging its reputation, seemed to lack some of the mogul’s old sharpness.These concerns have coincided with a series of missteps. Fox pursued a calamitous legal strategy in the Dominion case, eventually paying up nearly $800m to settle it. (A related case brought by another voting-technology company, Smartmatic, is expected to go to trial in 2025; Smartmatic is seeking $2.7bn.) It has suffered public spats with some of its anchors, including Tucker Carlson, who was jettisoned in April and has since set himself up on the social network formerly known as Twitter. And an attempt by Mr Murdoch to unify his two companies earlier this year was shot down by shareholders.Those investors may be reassured by Mr Murdoch’s more modest new title. In recent years analysts have come to speak of a “Murdoch discount” applied to Fox and News Corp. Mr Murdoch’s new title means that “his interface with the public markets is over,” says Claire Enders, a media analyst. “But it is obvious that he is the ultimate decision-maker as long as he is alive.”That is reflected nowhere so clearly as his choice of successor. Mr Murdoch set up a decades-long audition between three of his children: Elisabeth, Lachlan and James (his eldest child, Prudence, has mostly stayed away from the company; his two youngest children by another marriage, Grace and Chloe, are still in their early 20s). Though it was James who set up the auction of 21st Century Fox, selling to Disney at the top of the market for $71bn, the job has gone to Lachlan, the child who gets on best with his father. Whereas James and Elisabeth have both criticised the political positions of their father’s companies, Lachlan appears to share the elder Murdoch’s politics. Any changes are likely to be minor: perhaps a little more focus on streaming (Tubi, Fox’s advertising-supported streamer, is performing well) and less on British news media (TalkTV, a recent venture there, has not been a big hit so far).When Murdoch père eventually dies, things may change more. Control of the family trust, which ultimately holds sway over both companies, will pass to the four eldest siblings. The newspaper and television industries are both going through a bumpy digital transition, opening up new possibilities. Assets such as Fox News could be changed, or sold off, when the next generation takes control. But it may be a while before that happens. Mr Murdoch’s mother lived to be 103. One person close to the family, asked what will happen when Mr Murdoch passes, reports simply: “He insists he won’t.” ■ More

The United Auto Workers is expanding strikes to 38 parts and distribution locations across 20 states for General Motors and Stellantis, UAW President Shawn Fain said Friday morning.
The union will not initiate additional strikes at Ford Motor, as the company has proven it’s “serious about reaching a deal,” Fain said in a Facebook Live comment.
The strikes at the GM and Stellantis parts suppliers will add roughly 5,600 autoworkers, including roughly 3,500 employees at GM, to the UAW’s ongoing strikes at the Detroit automakers.

DETROIT — The United Auto Workers is expanding strikes to 38 parts and distribution locations across 20 states, targeting General Motors and Stellantis, UAW President Shawn Fain said Friday morning.
The union will not initiate additional strikes at Ford Motor, as the company has proven it’s “serious about reaching a deal,” Fain said in a Facebook Live comment.

“We still have serious issues to work through, but we do want to recognize that Ford is showing that they’re serious about reaching a deal,” said the outspoken union leader. “At GM and Stellantis, it’s a different story.”
Fain said the union and Ford have made progress on issues including eliminating some wage tiers, reinstating cost-of-living adjustments and an improved profit-sharing formula.
He also said the union won the right to strike over plant closures during the term of the deal as well as an immediate conversion of temporary, or supplemental, workers — those with at least 90 days of employment — upon ratification.
Ford said the company is “working diligently with the UAW to reach a deal,” but “we still have significant gaps to close on the key economic issues.”

(L-R) Supporter Ryan Sullivan, and United Auto Workers members Chris Sanders-Stone, Casey Miner, Kennedy R. Barbee Sr. and Stephen Brown picket outside the Jeep Plant on September 18, 2023 in Toledo, Ohio.
Sarah Rice | Getty Images

“In the end, the issues are interconnected and must work within an overall agreement that supports our mutual success,” Ford said in a statement Friday.

The strikes at the GM and Stellantis parts suppliers will add roughly 5,600 autoworkers, including roughly 3,500 employees at GM, to the UAW’s ongoing strikes at the Detroit automakers.
“Today’s strike escalation by the UAW’s top leadership is unnecessary,” GM said in a statement. “We have now presented five separate economic proposals that are historic, addressing areas that our team members have said matters most: wage increases and job security while allowing GM to succeed and thrive into the future.
“We will continue to bargain in good faith with the union to reach an agreement as quickly as possible,” the automaker said.
Stellantis said in a statement it questions “whether the union’s leadership has ever had an interest in reaching an agreement in a timely manner.”
Roughly 12,700 UAW workers went on strike a week ago at the following locations: GM’s midsize truck and full-size van plant in Wentzville, Missouri; Ford’s Ranger midsize pickup and Bronco SUV plant in Wayne, Michigan; and Stellantis’ Jeep Wrangler and Gladiator plant in Toledo, Ohio.
Parts distribution centers have been a major point of concern during these talks, especially at Stellantis. The automaker has proposed consolidating 10 “Mopar” parts and distribution centers, which are scattered across the country, into larger Amazon-like distribution centers.
GM has agreed to eliminate the wage differences at its parts and components plants, according to Fain. He commended the Detroit automaker for that action but condemned it for resisting further measures that Ford has agreed to with the union.
Targeting the parts and distribution centers is a unique strategy. It does not affect the production and assembly of vehicles but rather the distribution of parts to dealers.
The new work stoppages, if prolonged, could cause significant disruption for dealers, which could in turn delay fixes for customers. Repair wait times have already been problematic due to recent supply chain issues.
“This will impact these two companies repairs operations,” Fain said. “Our message to the consumer is simple: The way to fix the frustrating customer experience is for the companies to end price gauging. Invest these record profits into stable jobs and stable wages and benefits.”

Many, including Wall Street analysts, expected the union to expand work stoppages to full-size truck plants of the Detroit automakers, which are crucial to the profitability of the companies.
The affected facilities for GM include 18 plants in 13 states: Michigan, Ohio, Colorado, Wisconsin, Illinois, Nevada, California, Texas, West Virginia, Mississippi, North Carolina, Tennessee and Pennsylvania.
For Stellantis, the extended strikes affect 20 facilities in 14 states: Michigan, Ohio, Wisconsin, Minnesota, Colorado, Illinois, California, Oregon, Georgia, Virginia, Florida, Texas, New York and Massachusetts.
“This expansion will also take our fight nationwide,” Fain said. “We will keep going, keep organizing and keep expanding the stand-up strike as necessary.”

UAW began targeted strikes after the sides failed to reach tentative agreements by the expiration of the previous contracts at 11:59 p.m. Sept. 14.
The additional plant strikes come despite record contract offers from the automakers, including roughly 20% hourly wage increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.
Stellantis said on Friday it had made a “very competitive offer” that would see current full-time hourly employees earning between $80,000 and $96,000 a year by the end of the contract, constituting a 21.4% compounded increase; a long-term solution for an idled factory in Belvidere, Illinois; and, “significant product allocation that allows for workforce stability through the end of the contract.”
“We still have not received a response to that offer,” the company said.
The union has demanded 40% hourly pay increases, a shortened workweek, a shift back to traditional pensions, the elimination of compensation tiers and a restoration of cost-of-living adjustments, among other improvements.

United Auto Workers members and supporters rally at the Stellantis North America headquarters on September 20, 2023 in Auburn Hills, Michigan.
Bill Pugliano | Getty Images News | Getty Images

The additional strikes come a day after The Detroit News Thursday night reported leaked messages involving UAW communications director Jonah Furman that raised questions about the union’s motives for the work stoppages.
In the undated private group messages, viewed by CNBC, Furman describes UAW’s strategy and targeted strikes as causing “recurring reputations damage and operational chaos.”
Furman, who did not respond for comment, said if the union “can keep them wounded for months they don’t know what to do.”
Fain did not address the messages on Facebook Live beyond discussing the union’s strategy of “doing things differently” to “win record contracts.”
— CNBC’s Gabriel Cortes and John Rosevear contributed to this report. More

Major automakers are calling into question the United Auto Workers’ motives in launching targeted strikes in light of leaked messages by a union director.
UAW communications director Jonah Furman discussed the union’s public posturing of issues and targeted strikes as causing “recurring reputations damage and operational chaos” to the automakers.
The leaked messages come as Fain on Friday announced additional plants the union plans to strike.

United Auto Workers President Shawn Fain (center) marches with UAW members through downtown Detroit after a rally in support of the union’s members as they strike the Big Three automakers, Detroit, Michigan, Sept. 15, 2023.
Bill Pugliano | Getty Images

DETROIT — Major automakers are calling into question the United Auto Workers’ motives in launching targeted strikes in light of leaked messages by a union director calling to “keep them wounded for months.”
The private group messages on the platform X, formerly known as Twitter, show UAW communications director Jonah Furman discussing the union’s public posturing of issues and targeted strikes as causing “recurring reputations damage and operational chaos” to the automakers.

The messages, which were viewed by CNBC and first reported Thursday by The Detroit News, don’t align with UAW President Shawn Fain’s public statements that the union has been negotiating in good faith and is available “24/7 to bargain a deal.”
“It’s now clear that the UAW leadership has always intended to cause months-long disruption, regardless of the harm it causes to its members and their communities,” General Motors said in an emailed statement. “The leaked information calls into question who is actually in charge of UAW strategy and shows a callous disregard for the seriousness of what is at stake.”
Executives with the automakers, including GM CEO Mary Barra and Ford Motor CEO Jim Farley, publicly voiced frustration with the union’s bargaining, or lack thereof, ahead of a union-imposed strike deadline at 11:59 p.m. on Sept. 14.
Ford communications chief Mark Truby said in a statement Friday that the leaked messages are “disappointing, to say the least, given what is at stake for our employees, the companies and this region.”
Chrysler-parent Stellantis described the messages as “incredibly disturbing” and said they “strongly indicate that the UAW’s approach to these talks is not in the best interest of the workforce.”

“We are disappointed that it appears our employees are being used as pawns in an agenda that is not intended to meet their needs,” Stellantis said in an emailed statement.
Furman, who has been readily available during the negotiations, did not immediately respond to CNBC’s request for comment Friday. Calls to his phone went directly to a full voicemail.
In response to The Detroit News, Furman would not confirm writing the messages but according to the paper, called them “private messages” that “you shouldn’t have.”
Furman, a former staff writer and organizer for Labor Notes, is involved with the union’s messaging, media communications, speech writing and internal communications.
The leaked messages come as Fain on Friday announced additional plants the union plans to strike as part of its “stand-up strikes,” a nod to historic “sit-down” strikes by the UAW in the 1930s.
In one message, Furman describes Fain, who has touted faith and worship in recent messages to union members, as “our folksy gen x class struggle Christian white dude from Indiana who quotes Malcom X.”
The expanded strikes come despite record contract offers from the automakers, including roughly 20% hourly wage increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.
The union has demanded 40% hourly pay increases, a shortened workweek, a shift back to traditional pensions, the elimination of compensation tiers and a restoration of cost-of-living adjustments, among other contract improvements.
Each of the automakers said they will continue to collectively bargain with UAW negotiators in an attempt to reach tentative agreements for the 146,000 autoworkers under the contracts. More

Amazon said Prime Video will include ads beginning in 2024.
For an ad-free option, consumers can pay an additional $2.99 a month.
Prime Video joins rival streaming services in offering an ad-supported tier.

Rafael Henrique | Lightrocket | Getty Images

Ads are coming to Amazon’s Prime Video.
The company announced Friday that its streaming service – a part of Prime subscriptions that cost $14.99 a month – will now have limited ads in its TV series and movies.

Advertising on Prime Video, known for shows such as “The Boys” and “The Marvelous Mrs. Maisel,” will roll out in the U.S. and other cities in early 2024, with other countries to follow later in the year. If U.S. customers don’t want commercials, they will have to pay an additional $2.99 a month. (Live events and sports will continue to feature ads in this tier, the company said in its announcement.)
Prime customers will get an email in the weeks leading up to the advertising rollout, which will include the option to sign up for the ad-free tier.
“To continue investing in compelling content and keep increasing that investment over a long period of time, starting in early 2024, Prime Video shows and movies will include limited advertisements,” the company said in a post on Friday.
Amazon said it plans to have “meaningfully fewer ads than linear TV and other streaming providers.”
Prime Video will now join rival streaming services, including Netflix, Warner Bros. Discovery’s Max and Disney’s Hulu and Disney+, that are leaning on advertising. The ad-supported options are not only giving consumers a cheaper option as the list of streaming apps grows, but also bringing in an additional revenue source.

Media companies in particular have been trying a variety of ways to make the streaming business profitable, from advertising to password-sharing crackdowns to cost-cutting.
Streaming behemoth Netflix switched gears late last year and began offering a cheaper, ad-supported plan. Netflix was slow to embrace advertising, but as subscriber growth slowed, the company instituted the option in an effort to boost revenue.
The company recently removed its cheapest, ad-free plan in a push to get more sign-ups for its ad option. Company executives have said the economics of its ad plan were higher than the basic plan, and that advertising is incremental to Netflix’s revenue and profit. More

McDonald’s franchise royalty fees for U.S. restaurants will rise from 4% to 5% for operators opening new locations.
The fast-food giant hasn’t hiked royalty fees in nearly three decades.
While the change won’t affect many operators initially, backlash will likely come, due to the company’s rocky relationship with its U.S. franchisees.

A McDonald’s golden arches logo is seen at a franchise restaurant owned by Rippon Family Restaurants.
Paul Weaver | Lightrocket | Getty Images

McDonald’s franchisees who add new restaurants will soon have to pay higher royalty fees.
The fast-food giant is raising those fees from 4% to 5%, starting Jan. 1. It’s the first time in nearly three decades that McDonald’s is hiking its royalty fees.

The change will not affect existing franchisees who are maintaining their current footprint or who buy a franchised location from another operator. It will also not apply to rebuilt existing locations or restaurants transferred between family members.
However, the higher rate will affect new franchisees, buyers of company-owned restaurants, relocated restaurants and other scenarios that involve the franchisor.
“While we created the industry we now lead, we must continue to redefine what success looks like and position ourselves for long-term success to ensure the value of our brand remains as strong as ever,” McDonald’s U.S. President Joe Erlinger said in a message to U.S. franchisees viewed by CNBC.
McDonald’s will also stop calling the payments “service fees,” and instead use the term “royalty fees,” which most franchisors favor.
“We’re not changing services, but we are trying to change the mindset by getting people to see and understand the power of what you buy into when you buy the McDonald’s brand, the McDonald’s system,” Erlinger told CNBC.

Franchisees run about 95% of McDonald’s roughly 13,400 U.S. restaurants. They pay rent, monthly royalty fees and other charges, such as annual fees toward the company’s mobile app, in order to operate as part of McDonald’s system.
The royalty fee hikes probably won’t affect many franchisees right away. However, backlash will likely come, due to the company’s rocky relationship with its U.S. operators.
McDonald’s and its franchisees have clashed over a number of issues in recent years, including a new assessment system for restaurants and a California bill that will hike wages for fast-food workers by 25% next year.
In the second quarter, McDonald’s franchisees rated their relationship with corporate management at a 1.71 out of 5, in a quarterly survey of several dozen of the chain’s operators conducted by Kalinowski Equity Research. It’s the survey’s highest mark since the fourth quarter of 2021, but still a far cry from the potential high score of 5.
Despite the turmoil, McDonald’s U.S. business is booming. In its most recent quarter, domestic same-store sales grew 10.3%. Promotions such as the Grimace Birthday Meal and strong demand for McDonald’s core menu items, such as Big Macs and McNuggets, fueled sales.
Franchisee cash flows rose year over year as a result, McDonald’s CFO Ian Borden said in late July. The company said average cash flows for U.S. operators have climbed 35% over the last five years.
— CNBC’s Kate Rogers contributed to this report More

Saudi Crown Prince Mohammed bin Salman embraced accusations of “sportswashing” during a Fox News interview that aired Wednesday night.
“Well, if sportswashing is going to increase my GDP by way of 1%, I will continue doing sportswashing,” he said during the interview.
The Saudi government has been under fire for its broad investment in sports, with critics speculating its part of a larger effort to use sportswashing to gain international influence.

Saudi Arabian Crown Prince Mohammed bin Salman Al Saud attends Partnership for Global Infrastructure and Investment event on the day of the G20 summit in New Delhi, India, September 9, 2023. 
Evelyn Hockstein | Reuters

Saudi Crown Prince Mohammed bin Salman embraced accusations of “sportswashing” to rehabilitate the country’s image, as the kingdom beefs up its spending and influence in the major international sports of golf and soccer.
“Well, if sportswashing is going to increase my GDP by way of 1%, I will continue doing sportswashing,” he said during an interview with Fox News that aired Wednesday night.

“I don’t care … I’m aiming for another one and a half percent. Call it whatever you want, we’re going to get that one and a half percent,” the crown prince said.
Critics have long said that Saudi Arabia’s government is using sports investments to gain political influence around the world, as well as to mend the kingdom’s tarnished reputation from human rights abuses like the killing of Washington Post journalist Jamal Khashoggi. The practice has been dubbed sportswashing.
The kingdom has ramped up investments in sports in recent years, taking stakes in Saudi soccer clubs and recruiting top players like Cristiano Ronaldo and Neymar from Europe to Saudi Arabia with deals reportedly as high as $175 million. It also lured pro golfers like Dustin Johnson and Bryson DeChambeau away from the PGA Tour to its rival LIV Golf with massive paydays — before the organizations ultimately agreed to merge.
The Saudi Public Investment Fund (PIF), an entity controlled by Crown Prince Mohammed, has backed Saudi soccer clubs and LIV Golf. PIF has a range of investments in areas from electronic vehicles to entertainment. The fund is worth over $700 billion, up from $528 billion in 2021, Reuters reported earlier Thursday.
The LIV Golf merger with the PGA Tour has faced widespread scrutiny. Critics say the deal, announced in June, is in part an attempt to rehabilitate Saudi Arabia’s image.

The deal could also pose a threat to national security, lawmakers have said. U.S. officials have found that Saudi Arabia has ties to the 9/11 attacks, though the Saudi government has denied involvement. Fifteen of the 19 hijackers were Saudi nationals, and the late al-Qaeda leader Osama bin Laden was born in the country.
Key U.S. lawmakers have criticized the pending golf merger as an attempt by the kingdom to distract from its human rights record.
Saudi Arabia is “a regime that has killed journalists, jailed and tortured dissidents, fostered the war in Yemen, and supported other terrorist activities, including 9/11. It’s called sportswashing,” Senate Homeland Security and Governmental Affairs Investigations Subcommittee chair Sen. Richard Blumenthal, D-Conn., said during a panel hearing in July examining the deal.
PGA Tour officials Jimmy Dunne and Ron Price said during that hearing that the golf organization faced an existential threat from LIV before the proposed merger. Prior to the deal, LIV Golf sued the PGA Tour for alleged anticompetitive practices, which prompted the PGA Tour to countersue, saying LIV Golf was stifling competition.
“We are in a situation where we faced a real threat … you could go elsewhere for $1 billion, $3 billion, maybe $50 billion,” Price said at the time. “We could do it, but if we went down that path, we would end up giving up total control.”
Earlier this month, the Senate subcommittee held a second hearing on the LIV Golf and PGA Tour merger, where one witness said the agreement was not about business.
“At its core, then, this is not a business deal,” said Benjamin Freeman, director of the Democratizing Foreign Policy Program at the Quincy Institute for Responsible Statecraft. “This is an influence operation. It’s meant to shape U.S. public opinion and U.S. foreign policy.”
— CNBC’s Lillian Rizzo and Chelsey Cox contributed to this report More

A noon Friday deadline for expanded strikes by the United Auto Workers union against the Detroit automakers is closing in.
The union and General Motors, Ford Motor and Stellantis are all holding their ground on demands, and it appears likely the union will strike additional plants.
Major issues such as hourly pay, retirement benefits, cost-of-living adjustments, wage progression and work-life balance remain central to the discussions.

(L-R) Supporter Ryan Sullivan, and United Auto Workers members Chris Sanders-Stone, Casey Miner, Kennedy R. Barbee Sr. and Stephen Brown picket outside the Jeep Plant on September 18, 2023 in Toledo, Ohio.
Sarah Rice | Getty Images

DETROIT — With a deadline for expanded strikes by the United Auto Workers against the Detroit automakers closing in, the “serious progress” called for by the union seems all too elusive.
The UAW and General Motors, Ford Motor and Stellantis are all holding their ground on demands, and it appears likely the union will strike additional plants at some, if not all, of the automakers at noon Friday — as it’s warned.

While talks are ongoing, there has been little reported movement in proposals since the strikes were initiated on Sept. 15 at assembly plants in Michigan, Ohio and Missouri. Sources familiar with the talks describe a “big” gap in demands and the parties being “far apart.”
Headline economic issues and benefits such as hourly pay, retirement benefits, cost-of-living adjustments, wage progression and work-life balance remain central to the discussions. All issues play into one another and can change based on demand priorities.
Each automaker has its own unique issues, but overall the companies want to avoid fixed costs and what they’ve called “uncompetitive practices” such as traditional pensions. The union, in contrast, is attempting to regain benefits lost during past talks and secure significant increases to pay and other benefits, while retaining platinum health care for members.
In the end, it comes down to money, and how much a deal will cost the companies. Wall Street is currently expecting record costs to come from a settlement, though still below the $6 billion to $8 billion in demands the union would like, according to Wells Fargo.
Here’s a general overview of where the union and companies stand on key issues.

Wages

Union leaders have been highly transparent during collective bargaining this year with the automakers. However, they’ve largely been quiet on any potential for compromise around a demand of 40% wage increases over four and a half years.
Media reports indicate the union has adjusted that demand to the mid-30% range. UAW President Shawn Fain last week said the union has not made an offer below 30%.
The automakers have countered with wage increases of around 20% over the length of the contract — what would still be a record — to a top wage of more than $39 per hour for a majority of workers.
Sources familiar with the talks say if the companies do increase hourly wages beyond that 20% level, they’re likely to lower other benefits or reduce jobs in the future to try to make up the difference.

A Ford source said the company’s current proposals would offer entry-level employees starting salaries of about $60,000, potentially increasing to $100,000 or more during the life of the deal. That includes base pay, expected overtime, profit-sharing and other cash bonuses.
Under GM’s latest proposal, President Mark Reuss said about 85% of current represented employees would earn a base wage of about $82,000 a year. That’s compared with the average median household income of $51,821 in nine areas where GM has major assembly plants, he said.

Tiers/’In-progression’/Temps

Wage tiers — putting autoworkers into distinct pay ranges or classifications — is a tricky, moving target.
The companies and union have defined tiers differently during past negotiations as well as during the talks this year. Tiers can signify the following scenarios: workers doing the same job for different pay and benefits; similar but different job responsibilities; or differences between workers at assembly and components plants, depending on the talks.
The UAW has called broadly for “equal pay for equal work.” It’s a cornerstone of the group’s platform, while automakers have historically argued for pay to be based on seniority, job classification and responsibilities.
So-called tiers were established in 2007 as a concession by the union to allow lower wages and benefits for workers hired after the contracts were ratified that year — what became known as a second tier. The starting pay of these workers was roughly half that of the incumbent workers, and they would not be eligible for the same active health-care benefits, pensions or retiree health-care coverage.
The union has won some similar benefits back for newer workers compared to veteran, or “legacy” ones, but there remains different classifications of workers and pay tiers that amount to “in-progression” wages, in which a worker earns more the longer they’re employed.

For this year, the automakers have largely proposed cutting an existing eight-year pay progression in half and eliminating some pay discrepancies between workers who do similar jobs such as parts and components.
The union would like to eliminate the in-progression pay structure entirely and have workers across the contract earning the same wage (after a 90-day adjustment period) including temporary, or supplemental, workers.
One source familiar with the talks said there’s a “philosophical difference” between the sides. Ford, which utilizes the fewest temporary workers, has agreed to move all current temps with 90 days of work to full-time employees.

COLA/Profit-sharing

The UAW suspended cost-of-living adjustments in 2009, as the companies attempted to cut costs. COLA helps employees maintain the value of their compensation against inflation.
The union now wants to reinstate COLA, especially following a period of decades-high inflation. But the automakers, in general, have proposed either lump-sum payments or suggested utilizing calculations based on inflation levels that the union argues wouldn’t be sufficient to offset increased costs.
Automakers have further argued that profit-sharing payments that have traditionally been based on North American profits of the companies have assisted in offsetting inflation.

The companies are attempting to change or lower profit-sharing payments to offset other increased costs, while the union would like an enhanced formula.
The UAW previously outlined a calculation of providing $2 for every $1 million spent on share buybacks and increases to normal dividends.

32-hour workweek

The union has proposed better work-life balance, including a potential 32-hour workweek for the pay of 40 hours. It has argued that salaried workers are allowed remote or hybrid work, giving them more time at home with their families.
A shorter workweek has been a non-starter for the automakers, which have countered with additional vacation time, added holiday pay such as for Juneteenth and two-week paternal leave, in some cases.

Product

For the UAW, product commitments equal jobs, meaning more members for the union.
UAW leaders are specifically concerned with vehicle production commitments at Stellantis, which has proposed closing, selling or consolidating 18 facilities. The locations included its North American headquarters, 10 parts and distribution centers and three manufacturing components facilities (two of which have already been fully or partially decommissioned).
A source familiar with the talks said GM has committed product to all of its facilities, following three closures four years ago.

Retirement benefits and savings

The UAW has demanded a “significant” increase in pay for retired workers. The union last week said the companies had rejected all such increases. However, GM CEO Mary Barra said the automaker included in its offer a lump-sum cash payment of $500 for retirees.
A Ford source said the company’s current offer includes a health-care retirement bonus program with lump sums of either $50,000 or $35,000, upon retirement, based on seniority, for newer workers.
Automakers also have pushed back on returning to traditional pensions in lieu of 401(k) plans.
A proposal last week by Ford included a 6.4% contribution from the company and $1 per hour for every hour worked, with a previous cap removed, according to a company source.
GM also offered an unconditional 6.4% company 401(k) contribution for employees who are not eligible for pensions. More