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U.S. opens $3 billion aviation manufacturing wage subsidy program


A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren/File Photo

WASHINGTON, June 15 (Reuters) – The U.S. Transportation Department said Tuesday it had launched a $3 billion aviation manufacturing payroll subsidy program that will cover up to half of eligible companies’ compensation costs for as long as six months.

The program, funded by Congress, requires companies to commit to not conducting furloughs without employee consent or laying off employees covered by subsidies during the six-month period. Applications must be filed by July 13.

Companies eligible include aircraft, engine, propeller or component manufacturers and companies that repair or overhaul airplanes and parts.

The subsidy program cannot cover more than 25% of an employer’s total U.S. workforce as of April 2020 and can only cover employees with total annual compensation of $200,000 or less.

To qualify, a company must have involuntarily furloughed or laid off at least 10% of its total workforce, or have experienced at least a 15% decline in 2020 total operating revenues.

More than 100,000 jobs have been lost in the aerospace industry since the start of the COVID-19 pandemic, according to the Transportation Department. Before then, the U.S. aerospace industry was estimated to employ approximately 2.2 million workers, including 1.2 million who worked in various parts of the supply chain nationwide.

Boeing Co (BA.N), which has had extensive job cuts, Raytheon Technologies (RTX.N) and Spirit Aerosystems (SPR.N) did not immediately respond to questions about whether they are considering applying. General Electric’s (GE.N) aviation unit said it would not seek assistance from the program.

The International Association of Machinists and Aerospace Workers had strongly urged Congress to fund the program.

Congress has provided assistance to other aviation industry firms, including giving U.S. airlines $54 billion for payroll since March 2020 and that funding will continue to pay much of airline workers’ salaries through Sept. 30.

Reporting by David Shepardson
Editing by Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.



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Toshiba unit hacked by DarkSide, conglomerate to undergo strategic review


A Toshiba Corp (6502.T) unit said it was hacked by the DarkSide ransomware group, overshadowing an announcement of a strategic review for the Japanese conglomerate under pressure from activist shareholders to seek out suitors.

Toshiba Tec Corp (6588.T), which makes products such as bar code printers and is valued at $2.3 billion, was hacked by DarkSide – the group widely believed to be behind the recent Colonial Pipeline attack, its French subsidiary said.

It added, however, that only a minimal amount of work data had been lost.

“There are around 30 groups within DarkSide that are attempting to hack companies all the time, and they succeeded this time with Toshiba,” said Takashi Yoshikawa, a senior malware analyst at Mitsui Bussan Secure Directions.

Employees accessing company computer systems from home during pandemic lockdowns have made firms more vulnerable to cyber attacks, he added.

Screenshots of DarkSide’s post provided by the cybersecurity firm said more than 740 gigabytes of information was compromised and included passports and other personal information.

Reuters could not access DarkSide’s public-facing website on Friday. Security researchers said DarkSide’s multiple websites had stopped being accessible.

Ransomware attacks have increased in number and amount of demands, with hackers encrypting data and seeking payment in cryptocurrency to unlock it. They increasingly release stolen data as well, or threaten to unless they are paid more.

Ireland’s health service said on Friday it had shut down its IT systems after what it described as a “significant” ransomware attack. read more

Investigators in the U.S’s Colonial case say the attack software was distributed by DarkSide, which includes Russian speakers and avoids hacking targets in the former Soviet Union. DarkSide lets “affiliates” hack into targets elsewhere, then handles the ransom negotiation and data release. read more

STRATEGIC REVIEW

Amid calls from shareholders to explicitly seek offers from potential suitors after dismissing a $20 billion take-private bid from CVC Capital this year, Toshiba said it was setting up a strategic review committee and had appointed UBS (UBSG.S) as financial adviser.

Reporters raise their hands for a question during a Toshiba news conference at the company headquarters in Tokyo, Japan, June 23, 2017. REUTERS/Issei Kato

The review will be conducted by independent directors and is designed to help the board consider a new business plan to be put forward by management by October.

The CVC offer faced strong opposition within the company. Its plan to retain management was perceived by some as aimed at shielding former CEO Nobuaki Kurumatani from activist shareholders.

At a briefing by the company on Friday, 3D Investment Partners and Farallon Capital Management, its No. 2 and No. 3 shareholders respectively, both criticised Toshiba for appearing reluctant to consider offers to go private.

Chief Executive Satoshi Tsunakawa responded that the company has “no reluctance to consider various proposals to increase corporate value, including going private.”

Sources have said other private equity investors such as KKR & Co Inc (KKR.N) and Bain Capital are interested in Toshiba. read more

However, the Asahi newspaper reported on Friday that Bain Capital is not considering buying Toshiba, citing an interview with Yuji Sugimoto, the head of Bain Capital’s Japan operations.

Battered by accounting scandals, massive writedowns for its U.S. nuclear business as well as the sale of its chip unit, Toshiba is a shadow of its former self.

But it remains one of Japan’s few manufacturers of nuclear power reactors and makes defence equipment, meaning any sale of would require government approval.

Toshiba on Friday forecast a 63% rise in annual operating profit to 170 billion yen ($1.6 billion), rebounding from pandemic-induced pain in the last year and as restructuring measures bear fruit. That follows a 20% slide in profit last year.

Toshiba also nominated four new board members after Kurumatani resigned last month. Kurumatani had been under fire due to allegations that investors were pressured before a shareholder meeting last year to support desired board nominations.

Shareholders in March successfully voted for an independent investigation into those allegations, marking a watershed victory for corporate governance in Japan. The probe is due to conclude before this year’s annual general meeting on June 25.

The board nominations announced on Friday included George Olcott, a former UBS banker who is also an independent board member at Japanese beer maker Kirin Holdings (2503.T).

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Review: Blockbuster’s demise had many culprits


The Blockbuster movie rental store is open for business in the Denver suburb of Broomfield, Colorado April 6, 2011. REUTERS/Rick Wilking

In early 2000 Reed Hastings and his partner traveled to Blockbuster’s headquarters in Dallas. The Netflix (NFLX.O) founder tried to pitch the video rental behemoth on a deal to buy his fledging DVD-by-mail startup for $50 million. Blockbuster declined. Two decades later Netflix, now a streaming-video giant worth $243 billion, is broadcasting a documentary about the fall of its one-time desired suitor. The schadenfreude is cinematic. Yet while Netflix played a role in killing Blockbuster, its demise has many culprits.

“The Last Blockbuster” examines how the once-mighty corporate juggernaut went belly up through the eyes of its charming hero, Sandi Harding. She is the gatekeeper of the last Blockbuster store of the film’s title in Bend, Oregon. While the documentary includes lots of crunchy financial details it never gets bogged down in them. Meanwhile a cast of oddball characters and B-list actors including “Clerks” director Kevin Smith and Ione Sky, the object of John Cusack’s boom box serenade in the 1989 rom-com “Say Anything,” round out the story with their reflections on life before on-demand television.

Harding, who started working at Blockbuster in 2004 when the chain had about 9,000 stores and 60,000 employees, is known as the “Blockbuster mom” because she has employed so many of Bend’s teenagers. She pours her energy into keeping the video rental dream alive. It’s a store frozen in time: the cheerful yellow and blue schematic, bright lights, displays of candy and popcorn, computer systems that run on floppy discs, and racks and racks of DVDs. Her devotion to the business is so fierce that she knits hats in Blockbuster colors to sell to customers who flock from all over the world in search of a bit of nostalgia.

The documentary intersperses Harding’s efforts to retain the rights to the Blockbuster name – currently owned by Charlie Ergen’s Dish Network (DISH.O) – with details of the company’s history. The video rental empire was founded in the mid-1980s by a Texas-based oil and gas software engineer who developed an ingenious database to keep track of movie titles, allowing him to offer consumers a bigger selection. The concept of a clean family-friendly video rental destination was a smash hit. At one point Blockbuster was opening a new store every 17 hours.

The company caught the attention of mogul Sumner Redstone, who was locked in an epic takeover fight with rival Barry Diller over movie studio Paramount. In a surprise move Redstone’s Viacom and Blockbuster in 1994 agreed to an $8.4 billion merger. Blockbuster become the media company’s piggy bank, as Redstone drew on its cash flows to sweeten his bid for Paramount. Though Redstone got the studio, the rationale for owning a chain of stores was a flop.

Several disastrous corporate decisions added to the cash drain. To better compete with scrappy newcomer Netflix, Blockbuster decided to spend $400 million to eliminate late fees on rentals and build an online presence. Its inventory of DVDs declined because customers no longer had an incentive to return movies. Eventually, Viacom spun off Blockbuster after loading it up with nearly $1 billion in debt. The stock fell. Activist investor Carl Icahn launched a distracting proxy fight.

When Netflix launched its streaming service in 2007, the rental chain’s revenue of $5 billion was still more than 4 times that of its upstart rival. But as former Blockbuster executive Tom Casey explains, the financial crisis marked the beginning of the end. The company’s rental business faced fierce competition from retailers like Walmart (WMT.N) and Target (TGT.N), which were selling ever-cheaper DVDs. With capital markets frozen at the beginning of 2009, Blockbuster’s $780 million of debt proved fatal. It filed for bankruptcy a year later.

Netflix’s ascendancy pushed Blockbuster towards the grave. But as “The Last Blockbuster” shows, it took corporate raiders, a series of bad decisions and a global financial panic to nail the lid on its coffin.

On Twitter https://twitter.com/jennifersaba

CONTEXT NEWS

– “The Last Blockbuster” started streaming on Netflix March 15.

– For previous columns by the author, Reuters customers can click on

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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