Wall Street Journal 08_04_2020

PUBLISHING Texas couple cashes in as children’s workbooks become bestsellers.B5

TECHNOLOGY: FACEBOOK’S WHATSAPP BATTLES CORONAVIRUS MISINFORMATION B4

S&P2659.41g0.16% S&PFINÀ0.94% S&PITg1.06% DJTRANSÀ0.35% WSJ$IDXg0.80% LIBOR3M 1.320 NIKKEI (Midday)19039.91À0.47% See more at WSJ.com/Markets

BUSINESS & FINANCE

the workers will retain benefits such as health care. Nissan workers stopped re- ceiving paychecks on Sunday except for a handful deemed essential, a company spokeswoman said. She declined to

The Honda furloughs start
Monday.
Affected workers at both
Honda and Nissan can apply
for enhanced unemployment
benefits from the govern-
ment. Both companies said

Two of Japan’s largest car
companies,Nissan MotorCo.
andHonda MotorCo., are fur-
loughing U.S. factory workers
without pay, adding to unem-
ployment in an industry that
has seen sales plummet during
the spread of the coronavirus.
Nissan said on Tuesday it
would place about 10,000 U.S.
hourly workers employed at
plants in Tennessee and Mis-
sissippi on furlough until late
April, calling the move a tem-
porary layoff.
Honda also this week noti-
fied staff it would furlough
about 14,400 factory employ-
ees in the U.S. as it extends a
production shutdown to May

BYSEANMCLAIN
ANDBENFOLDY

some protection from their union contracts, factory workers at most foreign car makers in the country aren’t unionized. Japanese car makers typically are loath to lay off U.S. workers, and have used that as a justification for the lack of union representa- tion at their plants in the country. Toyota MotorCorp. hasn’t furloughed any workers de- spite idling production last month, a company spokesman said. Production workers are re- ceiving full pay through Fri- day and can use paid time off the following week, he said, noting that Toyota’s North American plants are set to re- open April 20. In March, U.S. car sales fell nearly 40% from a year ear- lier, according to MarkLines, a Japanese automotive-data firm. Nissan’s sales fell 48%. Honda also reported a 48% Please turn to page B2

say how many of the workers would be rehired, although Nissan has said that rebuild- ing sales in the U.S. is a key part of its plan to reverse years of declining revenue and profit. At Honda, the company will pay workers’ wages for part of this week and allow them to use paid time off to cover the rest, a spokesman said. The U.S. has had record jobless claims after many cities locked down to block the virus’s spread. Manufacturers, and partic- ularly car makers, have been among the worst-hit. The auto industry shut down nearly all U.S. production in March, and combined,Gen- eral MotorsCo.,Ford Motor Co. andFiat Chrysler Auto- mobiles NV have laid off about 150,000 hourly employ- ees. While workers at the De- troit car makers may draw

Nissan, Honda Furlough 24,000

Cost-saving steps at

U.S. factories will last

through end of month

as car sales plunge

Exxon MobilCorp. said it would cut its 2020 capital spending by 30% as global demand for oil is sapped by the coronavirus. The largest portion of the $10 billion in cuts will be in the Permian Basin, the biggest U.S. oil field in Texas and New Mex- ico. Exxon said it would evalu- ate how the cuts would affect production. “We haven’t seen anything like we are facing today,” Chief Executive Darren Woods said Tuesday morning. Mr. Woods said the impact on Exxon’s oil production this year would be insignificant, but would grow in 2021. In the Permian, production could be down by as much as 150,000 barrels a day next year, he said. Exxon didn’t announce any cuts to its shareholder dividend, which it spent nearly $15 billion on last year. Mr. Woods said the company would pre- serve cash for the dividend, the size of which is determined by Exxon’s board of directors. With the announcement, Exxon became the latest major oil firm to significantly reduce its budget in response to a crash in oil prices caused in large part by the response to the virus. Ri- val Chevron Corp. said last month it would cut its spending by $4 billion, or 20%. Exxon’s move comes ahead of a virtual meeting set for Thursday by the Organization of the Petroleum Exporting Countries with other oil-pro- ducing nations including Can- ada and Russia to discuss an agreement to cut oil production. But Russian and Saudi Arabian officials have said any truce in their fight for market share, which has also helped crater oil prices over the past month, must be accompanied by a production cut in the U.S. Exxon, Chevron and other large U.S. oil companies are ad- amantly opposed to mandated production cuts, believing that a free market should sort things out. Many U.S. shale wells aren’t economic at current prices and producers will ultimately be forced to shut-in some wells. But even globally coordinated production cuts would likely be insufficient to stem the rapidly building oil glut as the new coronavirus batters oil demand. Rystad Energy estimates global demand may shrink by 25 million barrels a day, meaning that even the 10 million to 15 million barrels in cuts proposed by some Saudi and Russian officials wouldn’t be enough.

BYCHRISTOPHERM.MATTHEWS

Exxon’s

Capital

Spending

Cutby30%

Poison pills are antitake- over measures that can also be used to neutralize shareholder activists. When an outsider buys up more than a certain amount of the stock of a company with one, new shares flood the market and make it more expensive to acquire a controlling stake. Many investors frown on poison pills because they can insulate companies from sometimes- beneficial outside forces and suitors who might offer a significant takeover premium. The threshold for the Wil- liams pill, which will remain in effect until next March, is ex- ceptionally low compared with others. According to ISS, of the 14 companies that adopted poison pills between March 13 and March 30, all of the others chose triggers ranging from 10% to 20%. It calls the threshold for the Williams pill “ex- tremely rare.” The proxy firm adds that it recognizes this is a “unique time” and it doesn’t take a broad stand against imple- Please turn to page B2

An influential proxy adviser has taken the unusual step of urging shareholders to withhold votes for the chairman ofWilliamsCos. after the pipeline operator adopted a poison pill to fend off unwanted suitors. Institutional Shareholder ServicesInc.,orISS,recom- mends against supporting Wil- liams Chairman Stephen Berg- strom in director elections at the company’s annual meeting April 28, according to a client note from the proxy adviser thatwasviewedbyTheWall Street Journal. The report cites the “highly restrictive” nature of the pill, which kicks in if an unwanted shareholder buys a stake of just 5%. Williams, whose pipelines transport oil and natural gas, on March 19 joined a swell of more than 20 companies adopting poison pills as their shares plunge amid the coronavirus pandemic.

BYCORRIEDRIEBUSCH ANDREBECCAELLIOTT

Williams Poison Pill

Sparks Adviser Rebuke

INSIDE

Investment-gradebonds,whichareeligiblefor purchasebytheFederalReserve,havestabilized morethantheirhigh-yieldcounterparts.

TheFedsaysitwould launchfacilitiestobuynot justTreasurysbutalso corporate bonds carrying investment-grade ratings.

Sources: FactSet (ETFs); Dealogic (issuance)

Note: ETF performance chart shows iShares iBoxx $ Investment Grade Corporate Bond ETF and iShares iBoxx $ High Yield Corporate Bond ETF.

5

–20

–15

–10

–5

0

%

Jan. Feb. March April

Corporate-bond ETF performance, year to date

Investment- grade –3.3%

High-yield –14.3%

0

50

100

$150 billion

April Sept. Jan. 2019 2020

Corporate-bond issuance, monthly

HIGH-YIELDBONDS INVESTMENT-GRADE

March $194.3B +234% fromFeb.

March $4.2B –85% fromFeb.

April

In the quest to find markets
that look like they will weather
an impending economic down-
turn, many investors are turn-
ing to the Federal Reserve.
The central bank, faced with
seizing markets during the
spread of the coronavirus,
pledged in March to do essen-
tially whatever it takes to re-
store order in the marketplace.
The handful of markets in which
it has directly intervened by
purchasing assets or lending
against them have recouped
some of their losses since then,
a reassuring sign for investors
who were taken aback by the
indiscriminate selling that oc-
curred throughout much of
March.
But in riskier markets that
fall outside of the Fed’s pur-
view—including junk bonds, lev-
eraged loans and nongovern-
ment-backed mortgage bonds—
the pain has been slower to
abate. Some markets remain es-
sentially closed for business,
setting off a race against the
clock for borrowers to stay
afloat.
The growing disparity is add-
ing to the pressure investors
face as they try to identify
which investments look like dis-
counted buying opportunities
and which look likely to strug-

gle further. High-yield bonds, for in- stance, are so beaten down that they might look tempting, said Lauren Goodwin, multiasset portfolio strategist at New York Life Investments. But with the economy in crisis and investors widely expecting a wave of de- faults over the coming months, Ms. Goodwin believes investments that have received Fed support are more promising buying opportunities. Other observers agree. So far, “the markets that the Fed has most directly intervened in have been the ones that are closest to getting back to nor- mal,” said Stephen Stanley, chief economist at Amherst Pierpont. Corporate bonds are among the biggest beneficiaries of the Fed’s recent programs. Before the central bank’s intervention in March, sales of corporate bonds had come to a virtual standstill, hurt by the tumult rippling across global markets. And investors yanked a record $43.8 billion out of mutual funds and exchange-traded funds tracking high-grade bonds in the U.S. in the week through March 18, according to Bank of America Global Research. After Please turn to page B10

BYBENEISEN
ANDAKANEOTANI

Fed Widens Gap

Between Market

Haves, Have-Nots

The car makers both reported 48% declines in U.S. sales in March as the coronavirus spread. A Nissan assembly line in Smyrna, Tenn.

WILLIAM DESHAZER/REUTERS

Dow industrials blow advance of 900 points............. .B11

Amazon is suspending the service because it needs its people and capacity to handle a surge in its own customers’ orders, according to a person familiar with the matter. The company has said it wants to hire 100,000 warehouse workers and is focusing on shipping essential items during the coronavirus outbreak. Amazon had sought to woo shippers to the service by offering simpler rates, including the elimination of many fees and surcharges that other car- riers add on to pad their reve- nues. It tested the program in London and Los Angeles, but didn’t make it widely available in the U.S. Amazon remains a force in the shipping industry, with over 30,000 vehicles, 20,000 trailers and dozens of aircraft that move packages across the country. In addition to its own delivery drivers, Amazon hands off a significant chunk of its home deliveries to UPS and the U.S. Postal Service.

Amazon last year ended a shipping contract with FedEx, which increasingly viewed the online merchant as a competi- tive threat because of its growing shipping prowess. FedEx and UPS have experi- enced a Christmaslike boom in home deliveries in recent weeks as people shop from home, while shipments have deteriorated to stores or businesses that have closed. Meanwhile, the virus has upended the daily routine of delivering packages. Amazon, FedEx and UPS have each had to implement new safety measures and scramble to provide protective equipment as some workers test positive for the coronavirus. A UPS spokesman declined to comment. FedEx said its ground net- work is well prepared to man- age the current surge in e- commerce. “We are continuing to work with our small business customers during this time to support their growth,” a FedEx spokeswoman said.

Amazon.com Inc. will halt
a delivery service for non-Am-
azon packages, according to
people familiar with the mat-
ter, as it re-evaluates the na-
scent offering that competes
directly withFedExCorp. and
United Parcel ServiceInc.
Amazon told shippers the
service, known as Amazon
Shipping, will be paused start-
ing in June. It was available in
just a handful of U.S. cities.
Under the program, Ama-
zon drivers would pick up
packages from businesses and
deliver them to consumers,
rather than have orders
shipped from Amazon ware-
houses.
“We understand this is a
change to your business, and
we did not take this decision
lightly,” Amazon said in a note
to shippers reviewed by The
Wall Street Journal. “We will
work with you over the next
several weeks so there is as
little disruption to your busi-
ness as possible.”

BYPAULZIOBRO

Amazon Halts Delivery Unit

That Rivals UPS and FedEx

BUSINESS UFC vows to keep fighting, assuming it can find arenas.B3

JASON SILVA/REUTERS

Wall Street Journal 08_04_2020

BUSINESS & FINANCE

Get our desktop app

Company

Features

Documentation

Resources