WEBVTT - Apple and Amazon vs. the Virus 0:00:05.080 --> 0:00:10.360 Welcome to Prognosis. I'm Laura Carlson. It's day thirty four 0:00:10.640 --> 0:00:15.400 since coronavirus was declared a global pandemic. Our main story 0:00:15.440 --> 0:00:20.720 today what the coronavirus outbreak means protect giants Apple and 0:00:20.880 --> 0:00:25.439 Amazon with hundreds of thousands of employees globally and a 0:00:25.560 --> 0:00:29.080 complex supply chain that's spread around the world. The fate 0:00:29.120 --> 0:00:32.040 of these companies tells us a lot about the world economy. 0:00:32.960 --> 0:00:48.960 But first, here's what happened today. The shape of the 0:00:49.120 --> 0:00:52.920 long term damage coronavirus has done to the global economy 0:00:53.320 --> 0:00:57.480 is starting to come into view. The International Monetary Fund 0:00:57.560 --> 0:01:01.000 said that what they're calling the Great law Down Recession 0:01:01.280 --> 0:01:05.679 will be the steepest in almost a century, and if 0:01:05.720 --> 0:01:09.560 the virus lingers or returns in waves, things could be 0:01:09.600 --> 0:01:13.279 even worse. The i m F predicted in its World 0:01:13.319 --> 0:01:17.160 Outlook report that the global economy would shrink by three 0:01:17.200 --> 0:01:21.280 percent this year. It would be the deepest dive since 0:01:21.319 --> 0:01:26.360 the Great Depression. In the US, White House Economic advisor 0:01:26.480 --> 0:01:30.000 Larry Cudlow said that the three hundred forty nine billion 0:01:30.040 --> 0:01:33.440 dollars that had been allotted to help rescue small businesses 0:01:33.480 --> 0:01:36.320 in trouble because of the outbreak will run out of 0:01:36.360 --> 0:01:41.000 money as early as this Thursday. The money was part 0:01:41.080 --> 0:01:44.319 of the two point to trillion dollar stimulus package that 0:01:44.440 --> 0:01:48.360 Trump signed into law late last month. A plan to 0:01:48.400 --> 0:01:51.160 add an additional two hundred fifty billion dollars to the 0:01:51.240 --> 0:01:56.920 Small Business Association program has stalled in Congress, and a 0:01:56.960 --> 0:01:59.880 new report from McKinsey adds to the growing evidence that 0:02:00.080 --> 0:02:04.919 COVID nineteen is taking a disproportionate toll on America's black population. 0:02:06.000 --> 0:02:09.720 The disease is more likely to kill Black Americans, and 0:02:09.880 --> 0:02:13.440 for those who survive, the pandemic will take a devastating 0:02:13.480 --> 0:02:18.840 toll on their jobs and future earning potential. Black Americans 0:02:18.880 --> 0:02:21.960 are more likely than white Americans to have underlying health 0:02:22.000 --> 0:02:26.000 conditions that exacerbate the effects of the virus. They're also 0:02:26.160 --> 0:02:34.880 overrepresented in high contact essential services. And now for today's 0:02:35.040 --> 0:02:41.800 main story, big tech versus the virus. The coronavirus has 0:02:41.840 --> 0:02:45.520 dealt a severe blow to the global supply chain, with 0:02:45.760 --> 0:02:48.960 fewer workers to produce certain goods and a sudden surgeon 0:02:49.040 --> 0:02:52.600 people demanding them. There have been shortages of everything from 0:02:52.720 --> 0:02:57.320 life saving equipment like ventilators two household staples like toilet 0:02:57.360 --> 0:03:01.720 paper two of the world's big guest companies, Apple and 0:03:01.760 --> 0:03:05.440 Amazon rely on a supply chain for electronics and goods 0:03:05.560 --> 0:03:09.040 that is spread all across the world in many countries 0:03:09.040 --> 0:03:12.520 that have been hardest hit by the coronavirus. The Czech 0:03:12.600 --> 0:03:16.240 giants employ hundreds of thousands of people, so their fate, 0:03:16.400 --> 0:03:20.000 in many ways is the fate of the global economy. 0:03:20.800 --> 0:03:23.160 To take a close look at how badly hit these 0:03:23.160 --> 0:03:25.880 companies will be by the virus and what they're doing 0:03:25.919 --> 0:03:30.480 about it, here's Bloomberg's head of Global Tech coverage, Brad Stone. 0:03:33.400 --> 0:03:36.120 The tech industry is caught in the middle of the 0:03:36.200 --> 0:03:39.840 chaos at COVID nineteen is unleashed on the global economy. 0:03:39.920 --> 0:03:41.760 We spend a lot of time here on the tech 0:03:41.760 --> 0:03:45.040 team covering Apple and Amazon and the other big tech companies, 0:03:45.400 --> 0:03:48.640 and they once seemed invincible, and now they too are 0:03:48.680 --> 0:03:51.960 swaying under the pressure of this global pandemic. I'm here 0:03:51.960 --> 0:03:54.040 with one of our stellar reporters to break it down, 0:03:54.360 --> 0:03:58.160 Mark German. Let's start with Apple. Apple supply chain is 0:03:58.200 --> 0:04:00.000 often hailed as one of the best in the world. 0:04:00.000 --> 0:04:04.040 Old Tim Cook, Apple CEO, really made his name over 0:04:04.040 --> 0:04:07.280 the course of two decades assembling a network of manufacturers 0:04:07.280 --> 0:04:10.760 in China that could mass produce products like the iPhone. 0:04:11.200 --> 0:04:14.520 And so when the coronavirus first hit China in December, 0:04:14.920 --> 0:04:18.280 you know, how did Apple and its manufacturing partners respond. 0:04:19.160 --> 0:04:22.680 Right when coronavirus hit, you know, Apple supply chain immediately 0:04:22.720 --> 0:04:25.640 came into focus, and you know, it was nearly decimated 0:04:25.720 --> 0:04:28.599 depending on how hard this was gonna hit the area 0:04:28.600 --> 0:04:31.560 where Apple's factories are across China and other parts of Asia. 0:04:32.080 --> 0:04:35.200 And what really slowed this down was this hit during 0:04:35.240 --> 0:04:37.560 the Lunar New Year holiday, where lots of workers and 0:04:37.600 --> 0:04:40.320 Fox On other facilities or elsewhere in China and in 0:04:40.320 --> 0:04:42.840 the world visiting family. So what they had to do 0:04:42.960 --> 0:04:45.400 was they had to quarantine for about two weeks or 0:04:45.440 --> 0:04:48.320 maybe more in some cases upon return, which slowed down 0:04:48.360 --> 0:04:50.880 the return to work process. But as we sit here 0:04:50.880 --> 0:04:54.440 today in early April, Apple supply chain in China is 0:04:54.480 --> 0:04:56.920 nearly back up to speed. I mean, do you think 0:04:56.960 --> 0:04:59.920 Apple and and companies like Fox Con were in part 0:05:00.160 --> 0:05:03.440 fortunate that workers weren't crowded into those factories where they 0:05:03.440 --> 0:05:05.479 could have spread the virus. Yeah, you know, bred that 0:05:05.480 --> 0:05:08.200 that's a good point that they are fortunate in that sense. 0:05:08.240 --> 0:05:11.080 That people were elsewhere. They weren't all crowded together hundreds 0:05:11.120 --> 0:05:14.200 of thousands of people in dorms and inside the factory floors, 0:05:14.360 --> 0:05:16.920 versus the spread that would have come into place if 0:05:16.960 --> 0:05:19.240 you had those hundreds of thousands of workers all there 0:05:19.240 --> 0:05:21.800 together at the same time for the entire period of 0:05:21.800 --> 0:05:24.360 the virus. This probably did end up saving a lot 0:05:24.400 --> 0:05:26.960 of lives just by the fact that this was during 0:05:26.960 --> 0:05:30.119 that holiday period. So I think in the popular imagination, 0:05:30.520 --> 0:05:34.320 Apple supply chain is sort of concentrated in China, but 0:05:34.480 --> 0:05:36.960 really it's spread out, and now, of course the pandemic, 0:05:37.040 --> 0:05:40.080 unfortunately has spread out. So how has Apple fared elsewhere 0:05:40.120 --> 0:05:43.039 in the world. Yeah, that that's true, Brad. China is 0:05:43.080 --> 0:05:47.040 basically the the engine for final assembly, but a lot 0:05:47.080 --> 0:05:49.840 of the components are sourced from all over. You see 0:05:49.880 --> 0:05:53.960 Apple being very impacted in places like Israel and South 0:05:54.080 --> 0:05:57.720 Korea and Italy and London and other parts of Europe 0:05:57.760 --> 0:05:59.839 and Middle East that are hit by coronavirus. So this 0:05:59.920 --> 0:06:01.960 is going to take some time to to smooth through. 0:06:02.400 --> 0:06:05.159 But you know, it's really hard to take hold of 0:06:05.160 --> 0:06:08.919 the situation because Apples a global company and this is 0:06:08.960 --> 0:06:13.640 a global pandemic and Brad, You're the expert on all 0:06:13.720 --> 0:06:16.479 things Amazon, so I should really ask you, how is 0:06:16.520 --> 0:06:19.440 this global giant being impacted in terms of being that 0:06:19.560 --> 0:06:22.560 logistics company that can bring anything to your home? How 0:06:22.600 --> 0:06:25.080 is that being changed because of the coronavirus. Yeah, I 0:06:25.120 --> 0:06:27.640 would say everything has changed, and they've made some difficult, 0:06:28.040 --> 0:06:32.159 perhaps impressive, but very controversial choices in their fulfillment centers. 0:06:32.440 --> 0:06:35.880 These are the hundreds of warehouses really across the world 0:06:35.960 --> 0:06:39.520 at store and then ship products to people's homes. The 0:06:39.600 --> 0:06:42.840 first thing that Amazon did was they really prioritize the 0:06:42.839 --> 0:06:47.839 shipment of essential products, so groceries and medical equipment. You know, 0:06:47.920 --> 0:06:50.719 you used to end the good old days be able 0:06:50.760 --> 0:06:53.640 to get everything within a day if you're a Prime member, 0:06:53.880 --> 0:06:56.720 and now it takes sometimes days or even weeks if 0:06:56.760 --> 0:06:59.880 you're ordering something like say a book, you know, the 0:07:00.000 --> 0:07:03.440 original item that Amazon used to sell. But of course, 0:07:03.440 --> 0:07:06.160 Bred being a company with tens of thousands of workers 0:07:06.200 --> 0:07:09.359 in these warehouses, dealing with these new requirements in the 0:07:09.400 --> 0:07:13.000 middle of a global situation like like the coronavirus, they 0:07:13.120 --> 0:07:15.600 might not all be happy. Right. What's the union, the 0:07:15.720 --> 0:07:20.280 labor the whole pr situation that everyone's talking about around that. Yeah, 0:07:20.280 --> 0:07:22.320 there are a couple issues. I think the biggest one 0:07:22.360 --> 0:07:25.280 is safety. You know, Amazon, like a lot of other companies, 0:07:25.600 --> 0:07:30.160 wasn't able to get ahold of the personal protective equipment 0:07:30.240 --> 0:07:34.200 like like masks that it really needed to ensure the 0:07:34.200 --> 0:07:37.040 safety of its workers. And those workers have to come 0:07:37.040 --> 0:07:40.720 into some you know, sometimes very crowded facilities, work shoulder 0:07:40.760 --> 0:07:43.680 to shoulder, and they're taking a big risk. And you know, 0:07:43.720 --> 0:07:46.280 they asked Amazon to do more. You know, Amazon, to 0:07:46.360 --> 0:07:48.840 its credit, you know, raised that it raised their wages 0:07:48.880 --> 0:07:51.320 by a couple of dollars. It offered things that it 0:07:51.400 --> 0:07:54.840 hadn't offered in the past, like paid sick leave or 0:07:54.920 --> 0:07:59.160 workers who had signs of the virus and unlimited unpaid leave. 0:07:59.600 --> 0:08:02.640 And yet you know, we saw workers really um you know, 0:08:02.720 --> 0:08:05.120 asking them to do more and making their voices heard. 0:08:06.000 --> 0:08:08.480 So what is you know, Amazon doing about these efforts 0:08:08.520 --> 0:08:12.800 to organize unions in these facilities. There's a developing situation 0:08:12.840 --> 0:08:16.000 that really illustrates how Amazon is thinking about it. There 0:08:16.080 --> 0:08:20.040 was a longtime Amazon worker named Christian Smalls who organized 0:08:20.120 --> 0:08:23.520 a protest at the Staten Island facility, and actually a 0:08:23.600 --> 0:08:26.520 day after the protest, he announced live on Bloomberg TV 0:08:26.920 --> 0:08:29.280 that he had been dismissed by Amazon. He said the 0:08:29.320 --> 0:08:33.680 company accused him of exposing other workers to the virus. Well. 0:08:33.720 --> 0:08:37.320 A couple of days later, a memo leaked to the 0:08:37.320 --> 0:08:40.600 news organization Vice And this was a memo that was 0:08:40.640 --> 0:08:43.439 written by a senior executive at Amazon, a lawyer named 0:08:43.520 --> 0:08:46.840 David Zapolski, and Zapolski, in a senior meeting with Jeff 0:08:46.840 --> 0:08:51.520 Bezos and other executives, wrote that Smalls was not smart 0:08:51.800 --> 0:08:55.200 or articulate, and he talked about an effort to paint 0:08:55.240 --> 0:08:58.640 Smalls as really part of a deliberate pr strategy to 0:08:58.720 --> 0:09:02.400 make him the quote face of the entire union organizing 0:09:02.440 --> 0:09:05.480 movement end quote. So what does that mean? You know, 0:09:05.559 --> 0:09:08.120 it shows that they're really trying to undermine the movement 0:09:08.400 --> 0:09:11.760 to take this one situation and maybe a perceived safety 0:09:11.840 --> 0:09:14.880 violation on the part of Smalls, and to undermine the 0:09:15.040 --> 0:09:19.760 entire union, you know, organizing effort that now threatens Amazon 0:09:19.920 --> 0:09:24.200 really for the first time and its twenty five year history. So, Brad, 0:09:24.240 --> 0:09:26.760 this begs the question, how bad is this for Amazon? 0:09:26.840 --> 0:09:29.320 How bad is this labor and union situation going to get? 0:09:29.880 --> 0:09:32.080 I think this is a setback I think the leaked 0:09:32.120 --> 0:09:36.439 memo gives some momentum to efforts to organize Amazon's workforce, 0:09:36.720 --> 0:09:39.400 but in the end, I don't think it's that much 0:09:39.440 --> 0:09:43.240 of an impediment to the company. You know, Amazon's uh force, 0:09:43.320 --> 0:09:45.760 it's like utility in our lives right now. We rely 0:09:45.880 --> 0:09:48.280 on it. It's one of the few retailers that's even 0:09:48.320 --> 0:09:51.199 operating right now. So this is a setback for sure. 0:09:51.520 --> 0:09:54.320 I don't think it's it's any sort of existential threat. 0:09:54.840 --> 0:09:57.040 And Mark, that leads me to the last question for you. 0:09:57.320 --> 0:09:59.640 I think it was a famous general who said supply 0:09:59.800 --> 0:10:03.080 chain haines win wars. So who has the most durable 0:10:03.120 --> 0:10:06.040 supply chain here? And who's going to be flexible enough 0:10:06.080 --> 0:10:09.080 to get through this global pandemic? You know? I mean 0:10:09.120 --> 0:10:12.040 you've seen Apple. You saw Apple bounce back very quickly 0:10:12.080 --> 0:10:15.120 from coronavirus in terms of their final assembly line in China, 0:10:15.600 --> 0:10:18.600 and with two hundred billion dollars in the bank in cash, 0:10:18.760 --> 0:10:20.920 it would be really hard to bet against them. But 0:10:20.960 --> 0:10:23.240 it would be also pretty difficult to bet against Amazon, 0:10:23.320 --> 0:10:26.160 which has shown a very strong ability to also roll 0:10:26.240 --> 0:10:30.440 with the punches. Mark German, thank you so much, Thank 0:10:30.440 --> 0:10:33.400 you for having me this is brad Stone signing off 0:10:33.440 --> 0:10:41.800 from my closet just north of San Francisco. That was 0:10:41.840 --> 0:10:46.160 Bloomberg's Global tech editor Brad Stone with tech reporter Mark German. 0:10:47.120 --> 0:10:50.240 And that's it for the Prognosis Daily Edition. For more 0:10:50.320 --> 0:10:53.360 on the pandemic from our bureaus around the world, visit 0:10:53.400 --> 0:10:59.440 bloomberg dot com, slash Coronavirus and one Small favor. If 0:10:59.520 --> 0:11:01.720 you like what we're doing, please take a second to 0:11:01.800 --> 0:11:04.400 rate the podcast and leave us a review on Apple 0:11:04.440 --> 0:11:08.600 Podcasts or Spotify. It helps more listeners find our global reporting. 0:11:09.440 --> 0:11:12.720 The Prognosis Daily Edition is hosted by me Laura Carlson. 0:11:13.360 --> 0:11:16.839 The show was produced by me Seawan Wen Tover foreheads 0:11:16.960 --> 0:11:22.560 Jordan Gaspoure and Magnus Hendrickson. Today's main story was reported 0:11:22.559 --> 0:11:26.959 by Bradstone and Mark German. Original music by Leo Sidrin. 0:11:27.800 --> 0:11:32.120 Our editors are Francesca Levi and Rick Shine. Francesca Levi 0:11:32.440 --> 0:11:35.720 is Bloomberg's head of Podcasts. Thanks for listening.