Volkswagen AG, a member of the R&D World Index, announced a significant workforce reduction last week, agreeing with its labor union to cut over 35,000 jobs and billions of dollars in costs, concluding three months of intense negotiations and narrowly avoiding factory closures in Germany. In other news, Merck & Co. invested strategically in Chinese weight loss drug development, signing a $112 million upfront deal with Hansoh Pharma that could reach $1.9 billion with milestones. The Biden administration committed $15 billion in low-interest loans to PG&E for climate change mitigation projects. At the same time, Honeywell International revealed it is considering spinning off its aerospace division following pressure from activist investors. The R&D World Index closed at 3,822.91 for the week ending December 20, 2024, down 2.11%, as seventeen of the twenty-five index members lost value, led by Stellantis NV’s 7.60% decline amid production challenges in Italy.
Automotive R&D
VW to cut 5% of its workforce
Image courtesy of Volkswagen
RDW Index member Volkswagen AG, Wolfsburg, Germany, announced last week that it had agreed with its labor union to reduce its workforce by more than 35,000 and cut billions of dollars a year in costs while averting immediate factory closures in Germany. The company said it would gradually reduce staffing levels through early retirement and other measures. Workers will also forgo pay increases and lose specific bonuses. The company agreed to not make any compulsory job cuts until 2030 and to keep all of its German factories open. The deal concludes three months of negotiations between VW management and the union. VW said in September it was considering closing some German factories for the first time in its history to boost its competitiveness. The final round of negotiations in Hanover, Germany, lasted an unprecedented 70 continuous hours. The staffing and bonus reductions agreed to reduce VW’s costs by about $1.7 billion.
Stellantis NV struggles with production cuts
Europe’s second-largest automaker, Stellantis NV, Hoofddorp, Netherlands, recently paused production in its Italian factories to control inventories, leading to a standoff with its auto unions and the Italian government. Like Volkswagen, Stellantis is also facing market headwinds and tightening labor negotiations as demand and costs fluctuate.
Defense & Shipbuilding
U.S. shipbuilding labor shortages become national security issue
[Adobe]
Contrary to the European automotive industry, which is dramatically reducing its workforce, the U.S. shipbuilding industry is struggling to find workers to meet its demands, according to a report last week in the Capital Account section of the Wall Street Journal. According to the report, naval shipyards’ labor shortages have become a national security problem. Shipyards are losing up to 20% of their workforces each year due to retirements, quits, and dismissals, compared to just 10% before the pandemic. These shortages are now responsible for lengthy navy shipbuilding schedules and over-budget programs. Higher salaries for these jobs would help, but shipbuilders are constrained by ship contracts signed before the pandemic.
Pharmaceutical & Healthcare R&D
Merck & Co. invests in Chinese weight loss pill
[Adobe]
RDW Index member Merck & Co., Rahway, New Jersey, announced last week that it would pay Hansoh Pharma, Jiangsu, China, $112 million upfront for the rights to develop, manufacture and commercialize the Chinese-developed weight loss drug. The deal could be valued at up to $1.9 billion should certain milestones be reached. The value here is that the Merck pill is easier for patients to take than the current injection weight loss medicines. The pill has yet to be tested in humans, a process that could take several years.
Pfizer maintains 2025 forecast despite policy impacts
RDW Index member Pfizer, New York City, announced its 2025 forecast last week, which was in line with market expectations despite an expected $1 billion hit from redesigned federal drug benefits. The guidance comes less than two months after the pharma posted positive third-quarter results and raised its outlook for 2024, pushing back at activist investor Starboard Value, New York City, which has said that poor investments in R&D helped destroy billions of dollars in market value.
Energy & Infrastructure
Biden administration approves $15B loan commitment for PG&E
Last week, the Biden administration announced that it would provide $15 billion in low-interest loan commitments to PG&E (Pacific Gas & Electric), San Francisco, to support hundreds of projects to fight the effects of climate change and improve the electrical grid. The U.S. Department. of Energy’s Loan Programs Office is slated to fund projects that refurbish PG&E’s hydroelectric infrastructure and upgrade power lines to support renewable energy projects, data centers, and electric vehicles. The loan office had planned to provide a $30 billion loan to PG&E a few weeks ago. However, the loan was cut in half because PG&E was concerned about the hefty upfront payments such a large loan would have required. The loan office plans to close the loan before President-elect Trump takes office.
Volkswagen AG invests in Patriot Battery Metals
Last week, Volkswagen AG announced a $48 million investment in Patriot Battery Metals, Quebec, Ontario, to secure a lithium supply for its automotive battery manufacturing plans. As part of the 9.9% stake, VW has a binding agreement to purchase 100,000 tons of spodumene concentrate annually for 10 years once the Shaakichiuwaanaan Project in Quebec begins production. Both parties will explore further collaborations, potentially including a lithium conversion facility to meet growing battery demand.
Corporate News
[Honeywell Headquarters. Image courtesy of Honeywell]
Honeywell International considers aerospace spin-off
Honeywell International, Charlotte, North Carolina, announced last week that it was considering separating its aerospace business. This comes about a month after activist investor Elliott Investment Management, West Palm Beach, Florida, called for the industrial conglomerate to break up. The company gets about 40% of its annual revenue from the aerospace business, which makes engines and cockpit systems for Boeing and others.
The R&D World Index
The R&D World Index (RDWI) for the week ending December 20, 2024, closed at 3,822.91 for the 25 companies in the RDWI, down -2.11% (or -82.e basis points) from the previous week. Seven RDWI members gained value last week from 0.83% (Alphabet/Google) to 3.05% (Pfizer). Seventeen RDWI members lost value the previous week from -0.17% (Cisco) to -7.60% (Stellantis NV). One company (Volkswagen AG) remained unchanged (9.41).
R&D World’s R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial R&D spenders in 2020 were selected based on the latest listings from Schonfeld & Associates’ June 2020 R&D Ratios & Budgets. These 25 companies include pharmaceutical (10 companies), automotive (6 companies), and ICT (9 companies) that invested nearly $260 billion in R&D in 2019 — representing about 10% of all the R&D spent globally by government, industries, and academia combined, according to R&D World’s 2021 Global R&D Funding Forecast.
| Ticker | Exchange | 2020 R&D Billions $ | 12/13/24 | 12/20/24 | 12/13/24 to 12/20/24 | 1/1/22 to 12/20/24 | ||
|---|---|---|---|---|---|---|---|---|
| 1 | Alphabet/Google | GOOGL | NASDAQ | 27.303 | 191.38 | 192.96 | 0.83% | 33.21% |
| 2 | Microsoft | MSFT | NASDAQ | 17.198 | 447.27 | 436.60 | -2.39% | 29.82% |
| 3 | Volkswagen AG | VWAGY | OTC | 17.259 | 9.41 | 9.41 | 0.00% | -67.77% |
| 4 | Apple | AAPL | NASDAQ | 18.667 | 248.13 | 254.49 | 2.56% | 43.32% |
| 5 | Facebook/Meta | META | NASDAQ | 13.874 | 620.35 | 585.25 | -5.66% | 74.00% |
| 6 | Intel | INTC | NASDAQ | 14.503 | 20.34 | 19.52 | -4.03% | -62.10% |
| 7 | Johnson & Johnson | JNJ | NYSE | 13.750 | 146.62 | 144.47 | -1.47% | -15.55% |
| 8 | Roche Holdings AG | RHHBY | OTC | 14.143 | 35.39 | 34.50 | -2.51% | -33.26% |
| 9 | Merck & Co. | MRK | NYSE | 11.381 | 102.00 | 98.05 | -3.87% | 27.94% |
| 10 | Novartis | NVS | NYSE | 9.387 | 98.36 | 97.11 | -1.27% | 11.02% |
| 11 | Toyota | TM | NYSE | 10.724 | 175.86 | 178.17 | 1.31% | -3.85% |
| 12 | Pfizer | PFE | NYSE | 8.336 | 25.58 | 26.36 | 3.05% | -55.36% |
| 13 | Alibaba | BABA | NYSE | 6.006 | 87.82 | 82.28 | -6.31% | -30.73% |
| 14 | GM | GM | NYSE | 6.727 | 52.53 | 51.81 | -1.37% | -11.63% |
| 15 | Honda | HMC | NYSE | 8.806 | 25.46 | 23.89 | -6.17% | -16.03% |
| 16 | Ford | F | NYSE | 9.340 | 10.39 | 9.88 | -4.91% | -52.43% |
| 17 | AbbVie | ABBV | NYSE | 13.949 | 173.37 | 175.58 | 1.27% | 29.68% |
| 18 | Sanofi SA | SNY | NYSE | 7.750 | 46.80 | 47.71 | 1.94% | -4.77% |
| 19 | Cisco | CSCO | NASDAQ | 6.331 | 58.62 | 58.52 | -0.17% | -7.65% |
| 20 | Bristol-Myers Squibb | BMY | NYSE | 7.130 | 55.78 | 57.33 | 2.78% | -8.05% |
| 21 | Astra Zeneca PLC | AZN | NYSE | 6.056 | 66.58 | 65.35 | -1.85% | 12.19% |
| 22 | IBM | IBM | NYSE | 5.368 | 230.82 | 223.36 | -3.23% | 67.11% |
| 23 | Oracle | ORCL | NYSE | 6.928 | 173.39 | 169.66 | -2.15% | 9.29% |
| 24 | Eli Lilly & Co. | LLY | NYSE | 8.606 | 789.12 | 767.76 | -2.71% | 177.95% |
| 25 | Stellantis NV | STLA | NYSE | 5.309 | 13.95 | 12.89 | -7.60% | -34.03% |
| Total | 269.522 | 3905.32 | 3822.91 | -2.11% | 35.58% | |||
| ICT | 2078.12 | 2022.64 | -2.67% | 39.53% | ||||
| Automotive | 287.60 | 286.05 | -0.54% | -16.33% | ||||
| Biopharmaceutical | 1539.60 | 1514.22 | -1.65% | 47.26% |
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