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Chip shortages force German carmakers to throttle production even as demand recovers.

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Daily Business Briefing

July 21, 2021, 8:08 a.m. ET

July 21, 2021, 8:08 a.m. ET

Credit…Kai Pfaffenbach/Reuters

The global semiconductor shortage is disrupting production in the German car industry just as demand rebounds strongly from the pandemic-induced downturn.

Automakers Daimler and BMW said this week that the lack of chips had forced assembly lines to slow down or stop, cutting output by tens of thousands vehicles and leading to longer wait times for customers.

This week, BMW temporarily stopped production or cut back the number of shifts at three factories in Germany and one in Britain, as well as at factories owned by suppliers in the Netherlands and Austria that assemble vehicles under contract, the company said.

As a result, production fell short by 10,000 vehicles for the week, and there is likely to be a similar shortfall next week, a BMW spokeswoman said Wednesday.

Daimler has been trying to cope with chip scarcity by giving priority to its most expensive and most profitable models. But even they have been affected, Ola Källenius, the chief executive, said during a conference call with journalists Wednesday.

Daimler had to briefly stop assembly lines at a plant in Sindelfingen, near Stuttgart, that produces Mercedes-Benz S-Class luxury cars as well as the new EQS electric vehicle, Mr. Källenius said. One cause was a shutdown at a chip supplier in Malaysia.

“We could certainly have built more cars if we had more chips,” said Harald Wilhelm, the Daimler chief financial officer, adding that he could not predict when the supply of semiconductors will catch up with demand.

“We have to work with uncertainty,” Mr. Källenius told reporters.

The semiconductor drought does not seem to have hurt profit, however. On Wednesday Daimler reported a profit for the second quarter of 3.6 billion euros, or $4.2 billion, after sales surged 44 percent to 43.5 billion euros. During the same period last year, when many showrooms were closed because of the pandemic, Daimler reported a loss of 2 billion euros.

Kenneth C. Frazier, the former chief executive of the pharmaceutical giant Merck, in 2018. He will join General Catalyst as its chairman of health assurance initiatives.
Credit…Mike Cohen for The New York Times

Kenneth C. Frazier stepped down as Merck’s chief executive last month, but he has kept busy since. He remains executive chairman of the pharmaceutical giant and is a leader of OneTen, a start-up that aims to create one million jobs for Black Americans. Now, the DealBook newsletter was the first to report, he’s adding another role: venture capitalist.

Mr. Frazier will join General Catalyst as its chairman of health assurance initiatives, a new position in which he will focus on health care start-ups. It’s an area of focus for General Catalyst’s managing partner, Hemant Taneja, who recently spearheaded a $600 million fund dedicated to the sector.

Mr. Frazier was brought onboard by his friend Kenneth I. Chenault, who joined General Catalyst in 2018 as the venture firm’s chairman after retiring as American Express’s chairman and chief executive. The two first met at Harvard Law School and became among the few Black chief executives of Fortune 500 companies. The two most recently pushed hundreds of corporate leaders to publicly oppose states’ efforts to limit voting rights.

“As you can imagine, he had myriad choices about what he would do,” Mr. Chenault said of Mr. Frazier. “Clearly, our personal relationship was important, but that wouldn’t have been enough if Ken didn’t believe in the vision and what we’re trying to do in health care.”

Mr. Frazier said he had dealt with people at the “intersection between tech and life sciences” throughout his career. “These people are, in my experience, very fluent in digital technology and data science, analytics, machine learning,” he said.

But what is needed is “people who understand empathy,” he said: “We need people who have both data-led approaches as well as more human-centric approaches.”

Morgan Stanley has called most of its bankers back to the office. It wants its outside lawyers to do the same.

Late last week, Eric Grossman, the bank’s chief legal officer, sent a message urging the leading law firms it works with to bring employees back, according to a memo viewed by The New York Times. He expressed “grave concern” about the prospect of long-term remote working, and said in-office work provides better training, helps staff build relationships and provides an edge over competitors who are working from home.

“I feel the need to sound a warning in light of what I have generally observed about the lack of urgency to return lawyers to the office,” he said in the memo. “I firmly believe that the most productive meetings are those in person, and as we are already largely back in the office at Morgan Stanley, it is now clear to me that a hybrid meeting of live participants and Zoom participants is challenging at best.”

The message echoed that of Morgan Stanley’s chief executive, James P. Gorman, who has emphasized the face-to-face nature of finance. Many of the bank’s employees are already back on site, and most others are expected to report back by September. Banking giants like JPMorgan Chase and Goldman Sachs have been quicker to call back their workers, while Wells Fargo said it would allow more flexibility.

At least one recipient of the memo agreed with Mr. Grossman’s sentiments. “It’s a lot easier to be in a courtroom, in a negotiation, in a meeting, when you’re together,” said Richard Rosenbaum, executive chairman of Greenberg Traurig. “That’s where your most important work is done.”

Hacks that were conducted by units of China’s People’s Liberation Army are now carried out by an elite satellite network of contractors.
Credit…Alex Plavevski/EPA, via Shutterstock

China has long been one of the biggest digital threats to the United States. But a decade ago, breaches were conducted via sloppily worded spearphishing emails by units of the People’s Liberation Army.

Now they are carried out by an elite satellite network of contractors at front companies and universities that work at the direction of China’s Ministry of State Security, according to U.S. officials.

On Monday, the United States again accused China of cyberattacks. The Biden administration’s indictment for the cyberattacks, along with interviews with dozens of current and former American officials, shows how China has reorganized its hacking operations, Nicole Perlroth reports for The New York Times.

“What we’ve seen over the past two or three years is an upleveling” by China, said George Kurtz, the chief executive of the cybersecurity firm CrowdStrike. “They operate more like a professional intelligence service than the smash-and-grab operators we saw in the past.”

China’s new tactics include exploiting “zero-days,” or unknown security holes in widely used software like Microsoft’s Exchange email service and Pulse VPN security devices, which are harder to defend against and allow China’s hackers to operate undetected for longer periods.

China has clamped down on research about vulnerabilities in widely held software and hardware, which could potentially benefit the state’s surveillance, counterintelligence and cyberespionage campaigns. Last week, it announced a new policy requiring Chinese security researchers to notify the state within two days when they found security holes, such as the “zero-days” that the country relied on in the breach of Microsoft Exchange systems.

  • The White House administration said on Tuesday that it would nominate Jonathan Kanter to be the top antitrust official at the Justice Department, a move that would add another longtime critic of Big Tech and corporate concentration to a powerful regulatory position. President Biden’s plan to appoint Mr. Kanter, an antitrust lawyer who has made a career out of representing rivals of American tech giants like Google and Facebook, signals how strongly the administration is siding with the growing field of lawmakers, researchers and regulators who say Silicon Valley has obtained outsize power over the way Americans speak with one another, buy products online and consume news.

  • Steve Doocy, the conservative co-host of “Fox & Friends” on Fox News, has intensified his warnings about the coronavirus. “It will save your life,” he said on Tuesday. And he’s not the only one: Sean Hannity urged viewers on Monday to “please take Covid seriously — I can’t say it enough.” Fox News has not changed overnight — other personalities have continued to issue counterpoints. But some leading Republicans have grown alarmed at the deadly toll of the virus in conservative states and districts.

United Airlines announced Tuesday that it lost $434 million during the three months that ended in June, but said that it fared better than anticipated during the quarter and that it expected to turn a profit in the second half of the year. The airline reported revenue of $5.5 billion in the quarter, about half of what it collected in the same quarter in 2019.

“Thanks to the professionalism and perseverance of the United employees who have worked so hard to take care of our customers through the pandemic, our airline has reached a meaningful turning point: We’re expecting to be back to making a profit once again,” Scott Kirby, the airline’s chief executive, said in a statement.

United said lucrative corporate and international travel was recovering faster than it had forecast. The airline expects a pretax profit in the third quarter, which would be its first since late 2019. United also projected that capacity in that quarter, which ends in September, would be down about 26 percent, compared with the same quarter two years ago.

The upbeat tone mirrors that of United’s peers. Last week, Delta Air Lines reported a profit of $652 million — lifted by federal stimulus funds — for the three months that ended in June, its first profitable quarter since the pandemic began. American Airlines, which is expected to report earnings on Thursday, previewed its financial results last week, saying it may report a slight profit for the quarter.

The industry has enjoyed a boom in summer travel within the United States, fueled by widespread coronavirus vaccinations in the spring. Airline stocks fell Monday on fears that the Delta variant threatened that recovery, but have since rebounded.

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