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A pair of Alabama Mercedes-Benz plants put the brakes on several months of big union wins last week. Following large pay increases for unionized workers at Ford, General Motors and Chrysler and Jeep maker Stellantis late last year; a new contract with salary bumps for workers at a Daimler Truck last month and Tennessee Volkswagen plant workers recently voting to become unionized, workers at the two Alabama plants voted against it. About 56% of employees who cast ballots voted against joining the union.
The vote was the first big loss that the UAW has seen since last fall, and the first big loss in a while for unions in general. In the recent past, unions in different industries—including actors, Hollywood writers and Las Vegas hospitality employees—have been able to get contracts more favorable to employees and demonstrate the power of organization. So what happened in Alabama?
Forbes senior contributor Ed Garsten writes that the union faced stiff competition from outside forces, including the Business Council of Alabama, which created a website opposing auto plant unionization and capitalizing on past corruption at the UAW. Gov. Kay Ivey, as well as other state Republican leaders, fought against the vote as well and rejoiced in its failure. Ivey recently signed a bill that could withhold state economic incentives from companies that recognize unions. Experts told AL.com that without unions, Alabama can bill itself to large corporations as a business-friendly state—with cheap land, low taxes and regulation, as well as low wages for workers. And businesses have many reasons to oppose unionization. Garsten writes the UAW filed charges last month against Mercedes-Benz saying it fostered an aggressive anti-union campaign, which the union is saying is a human rights violation under German law.
Is this the end of the UAW’s forward movement? It’s unlikely. In remarks after the vote results, UAW President Shawn Fain said, “This is a David and Goliath fight. Sometimes Goliath wins a battle. But David wins the war.” The UAW is looking to get workers at other plants to unionize. It has a Hyundai plant in Alabama in its sights, and is looking at other automakers. And there likely are some disgruntled auto workers who aren’t unionized. The same day as the union election results were announced in Alabama, Tesla announced more than 600 job cuts in California.
While employees are a big part of every company’s balance sheet, revenues are necessary to keep your business going. But as the economy is tightening, it seems that more and more businesses are waiting to pay their bills. I talked to Capchase co-founder and COO Przemek Gotfryd about how to manage your finances in this situation. An excerpt from our conversation is later in this newsletter.
ECONOMIC INDICATORS
A trader wears a hat commemorating last week’s milestone of the Dow hitting 40,000 for the first time.
Michael M. Santiago/Getty Images
Inflation is still simmering, but the markets aren’t hurting. Last week, the Dow Jones Industrial Average, S&P 500 and Nasdaq hit their highest points ever. On Thursday, the Dow surpassed 40,000, on Wednesday the S&P 500 reached 5,279.26, and last Tuesday the Nasdaq hit a record 16,511. Juxtapose that with April’s inflation figures, released last week by the Labor Department. Headline inflation came in last month at a rate of 3.4%, and while this is the lowest inflation has been since April 2021, it’s still well above the less-than-3% figures prevalent during the two decades prior to the Covid-19 pandemic. (And yes, also well above the Federal Reserve Board’s 2% target to decrease interest rates.)
So what gives? Forbes’ senior reporter Derek Saul writes investors are paying more to become part of the market action, even though ratios of share prices to earnings and sales are at their highest levels since the dot com boom. While that stock bubble largely came from excitement about unproven online companies going public, excitement about AI is what’s buoying today’s market. (Though many of the companies making the biggest gains today are, at the very least, established in markets other than AI.)
Investors are also encouraged by indicators pointing to inflation decreasing and the economy in general getting weaker. This could make interest rate cuts come sooner, which would be a good move for business—though the economy as a whole seems to be taking its toll on consumers in the meantime. That inflation will no doubt be felt during the upcoming Memorial Day weekend, with pricier picnic favorites—meat is up 19%, while beer costs 10% more, according to the most recent consumer price index.
NOTABLE NEWS
Police officers clash with pro-Palestinian demonstrators at the University of California at Irvine.
Qian Weizhong/VCG via Getty Images
Protests against the ongoing war in Gaza between Israel and Hamas have been shaking college campuses, corporate offices and public events this spring. Protesters largely oppose the way Israel’s military tactics have brought inhumane conditions to Palestinians in Gaza, and are calling on their schools and businesses to stop doing business with the Israeli government or military. University of California academic workers even voted last week to authorize a strike based on the issue.
But divesting from Israel’s government and military is not a simple matter, writes Forbes’ Zachary Folk. Some businesses—including Amazon and Google—do business with a wide variety of governments and private businesses, and universities are often investing in them using mutual funds or ETFs. Trying to get out of these financial mechanisms often incurs transaction fees or investment penalties. Universities tend to keep detailed information about their holdings close to their chests, so it’s not always clear what is being invested where. There also is no overriding and clear interest to divest from companies doing business with Israel. Columbia University previously rejected a divestiture proposal, saying the idea lacked “broad consensus.” A total of 38 states have laws or executive orders designed to discourage boycotts of Israel, which has been a key U.S. ally for decades.
LEGAL ISSUES
A Red Lobster restaurant in Fremont, California.
Justin Sullivan/Getty Images
There is a steep price for endless shrimp, it turns out. Popular restaurant chain Red Lobster announced it filed for bankruptcy on Sunday, and the all-you-can-eat deal for the small crustacean has been cited as one of the reasons. The filing was not surprising, considering seafood titan Thai Union had been looking to sell its stake in the restaurant, and the chain unexpectedly shuttered more than 50 locations last week. The company reported between $1 billion and $10 billion in debt in its bankruptcy filing, and had struggled to grow for the last decade.
Forbes contributor Louis Biscotti analyzes the reasons for the restaurant’s closure, finding some poor business decisions coupled with unfavorable economic conditions are likely to blame. In order to try to boost traffic, Red Lobster extended its weekly Ultimate Endless Shrimp special to a daily promotion. Foot traffic increased 4%, Biscotti wrote, but the promotion became so popular, the discounted shrimp wrecked the company’s margins and contributed to an $11 million loss in the third quarter of 2023. Red Lobster also suffered from increased competition, both from other restaurants and other types of food. While plant-based meat isn’t giving any traditional sector a run for its money yet, Biscotti said the number of people who wanted to eat that instead of seafood took away from its business. And, he said, Thai Union may not have been the best owner for the restaurant. While the company has many of the world’s best known seafood brands in its portfolio, CPG and wholesale seafood is a much different business than food service, which also includes aspects like rent and employees.
OFF THE LEDGER
Capchase COO Przemek Gotfryd On How To Get Paid Faster
Capchase cofounder and COO Przemek Gotfryd.
Capchase, Getty
Capchase, which announced a €105 million credit facility warehouse led by Deutsche Bank today, works with financing of early-stage software companies, and cofounder and COO Przemek Gotfryd noticed that the days sales outstanding metric, which measures how long it takes for customers to pay their bills, was increasing. Between 2021 and the early days of 2024, this metric has increased nearly 30%—from 31 days to 40 days. I talked to him about what this means and how businesses in all industries can handle it. This conversation has been edited for length, clarity and continuity.
For a company on the receiving end of these longer payment terms, what can they do to narrow the gap and get paid in a more timely fashion?
Gotfryd: There are ways that I would categorize into pricing and packaging: How you deliver the product, how you bill for it and what you do there, and the ways in which you’re trying to collect.
There’s something these companies can do to request the payment before they commence work. Call it an implementation fee, [which is] typically an upfront fee. The CTO will go to their finance equivalent at the customer’s company and say, ‘Hey, I need to pay this before my engineers can jump on and implement this new solution that’s going to increase our productivity.’ I think that can be a very powerful and smart way to do this.
In terms of the ways of collecting and processes and procedures, most of the work today is done manually. You have somebody typically on a finance and operations team, following up with some frequency and maybe putting calendar invites or reminders, or sending some emails from HubSpot [to remind about payment] with some frequency. The degree for error, it’s a very big problem. It’s a very labor-intensive process and the downside is that you don’t collect as well as you could.
If a company were to require some form of upfront payment, does it run the risk of losing business?
It’s a balancing act. I think if you’re trying to force your customer to pay as much upfront as possible, there’s probably quite a bit of friction that you’re introducing. It depends on the internalized economic stability and strength of the customer you’re selling it to. There are some tools that allow you to look at the potential—maybe a credit score or a proxy for a credit score of the customer. You also want to be signing a good business. Ultimately, you want to get paid, especially if you’re delivering some of these services heavily upfront, and you’re investing to deploy them. At the end of the day, it’s more business, but it will cost.
Right now, times are tough for many small businesses. But do you see this metric changing as things get better from an economic sense?
If you’re implementing procedures and policies to derive a specific benefit, there’s no reason why you’d be giving it up when times get better. Ultimately, you’re trying to run your business in a more and more efficient way. And even if the 40 days that we’re seeing now come back to become 35 or 32, this is still a cash gap of over a month equivalent, right? There’s still quite a lot to close.
I think that this cycle can be helpful in terms of just improving efficiency across the system, in how cash circulates, to enter into helpful processes and procedures. But if firms are starting to raise more funding through VCs and other sources, this becomes just one of the tools they have at their disposal to get that cash. But investing into a cash collection tool is still an economically sound decision.
FACTS + COMMENTS
Target announced this week it is lowering prices on frequently shopped items this summer as a response to persistent inflation.
5,000: Total number of items that will get price cuts. Prices have already been lowered on about 1,500 items
$1 billion: Amount Target lost on the stock market Monday morning following the announcement. Its share price has not recovered
‘We know consumers are feeling pressured to make the most of their budget’: Rick Gomez, Target’s executive vice president and chief food, essentials and beauty officer said in a statement
STRATEGIES + ADVICE
AI can make rote tasks easier, but it can also help you solve problems and think outside the box. Here’s how to use AI to unlock innovative ideas.
In this day and age, corporate officers are likely to be pulled into investigations and litigation involving the company. Here’s what you need to know to reduce your liability.
VIDEO
QUIZ
FDIC Chairman Martin Gruenberg said he is ready to step down once his successor is confirmed. What is the impetus for his departure?
A. To spend more time with his family.
B. An outside report found a culture of sexual harassment, discrimination and misconduct at the FDIC.
C. His wife is running for Congress.
D. He’s been investigated for potential insider training.
See if you got the answer right here.