This is an audio transcript of the FT News Briefing podcast episode: ‘UnitedHealth’s big shake-up’
Marc Filippino
Good morning from the Financial Times. Today is Wednesday, May 14th, and this is your FT News Briefing.
US President Donald Trump has already had an eventful trip to the Middle East, and Nissan’s problems have somehow got worse. UnitedHealth is hoping that a familiar face can help the US health insurance company bounce back. I’m Marc Filippino and here’s the news you need to start your day.
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President Donald Trump is looking for deals in the Middle East this week, and yesterday he announced some from Saudi Arabia. The White House said the kingdom is committing $600bn in investments towards artificial intelligence and defence. As part of it, Saudi Arabia will purchase hundreds of thousands of Nvidia chips over the next five years. The US will also beef up Riyadh’s air force, space, and missile capabilities. And while in Saudi Arabia, Trump had things to say about nearby Syria: the US has agreed to lift sanctions on the new government. Those were in place because of the country’s brutal civil war. But Arab states have been pushing for the US to relax them ever since the fall of Bashar al-Assad. Trump heads to Qatar and the United Arab Emirates next.
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Nissan’s bumpy road isn’t getting any smoother. Yesterday, the troubled Japanese carmaker announced a dramatic update to its emergency turnaround plant. Nissan is cutting 20,000 jobs, which is roughly 15 per cent of its workforce. And it’s not the only manufacturer that’s struggling. The FT’s Harry Dempsey has been reporting on this and he joins me from Tokyo. Hey, Harry.
Harry Dempsey
Hey, Marc.
Marc Filippino
So, Harry, give us more of the details about what’s going on with Nissan. We heard the company give its full-year report yesterday. What was in it?
Harry Dempsey
So Nissan unveiled a big deepening of their restructuring plan, and it will cut down its number of factories from 17 to 10. And you know, this comes off the back of them reporting a massive ¥670bn loss, which is about $4.5bn. I mean, it plans to do this by 2027. So it’s going to move really quickly to try and do this. So it is really in a difficult financial state and needs a turnaround plan to work.
Marc Filippino
As you mentioned, this is kind of the cherry on top of a rough go of it for a while, but especially the past few months. I mean, you’ve been on the show recently to talk about failed merger talks. Why is it having a hard time?
Harry Dempsey
I think the problems for Nissan are quite deep rooted, and one of the big things Nissan has lacked is hybrid vehicles, which has helped the likes of Toyota and Honda, who have done very well in the US market because of those vehicles. And Nissan has just entered into a bit of a spiral really, where it’s selling fewer vehicles, it’s not making as much money, and in recent quarters it’s just got so bad that the company said, look, we can’t carry on in this way with this many people, these many factories, and we have to cut costs and downsize for the reality that is we’re going to be a smaller company in the future.
Marc Filippino
Now, Nissan isn’t the only major global carmaker in Japan, obviously. How are other manufacturers in the country doing?
Harry Dempsey
So there are numerous other car companies in Japan. At the top of the pile is Toyota, and Toyota has done extremely well from the huge popularity of hybrids. It’s the world’s largest automaker, and even in spite of the tariffs, it’s doing very well. Honda, on the other hand, has been benefiting from the hybrids, but it is challenged. It explored a merger with Nissan at the end of last year. Those merger talks collapsed in spectacular fashion. Then there’s lots of other smaller Japanese automakers, such as Mazda, Subaru, Mitsubishi Motors. And these companies are highly exposed to the tariffs because they don’t have big production footprints in the US. And they mainly import vehicles into the US, which are subject to big tariffs. And so the landscape is mixed in Japan. But once you get below Toyota, everything’s looking rather shaky.
Marc Filippino
All right. So given the mixed picture, where does Japan’s car industry go from here?
Harry Dempsey
It’s the big question which really Nissan themselves are trying to answer and they are looking for a new strategic partner to anchor them for the future and should that partner be someone in Japan or should the Japanese auto industry look outside of the country and look to other industries such as the tech industry and Taiwan’s Foxconn, which is the biggest supplier of Apple’s iPhones, and they have been very interested in entering the auto industry and becoming a contract manufacturer for electric vehicles. And they have been very interested in partnering with Nissan. And so it’s not clear where the Japanese auto industry is going, but it’s being put under pressure to make those decisions faster about what its future will look like for the next couple of decades to come.
Marc Filippino
Harry Dempsey is the FT’s Tokyo correspondent. Thanks, Harry.
Harry Dempsey
Thank you.
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Marc Filippino
US inflation fell more than expected to 2.3 per cent last month, a drop in the cost of things like airfares, hotels, and sporting events drove the decline. The Federal Reserve is definitely watching this news closely. April was the same month that Donald Trump imposed his global tariffs, and the US central bank has been on high alert for any signs that prices are ticking up because of the trade war. But it doesn’t mean we’re totally out of the woods on the inflation front. Economists are warning that a lot of the impact from tariffs hasn’t shown up in the data yet. Still, markets rose on the inflation report. The S&P 500 climbed nearly 1 per cent and the index now has erased all of its losses since the beginning of the year.
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There’s a shake-up going on at UnitedHealth. The US health insurance giant said yesterday that its CEO, Andrew Witty, is stepping down and that its former CEO, Stephen Hemsley, is stepping back in. The company shares are not doing too hot. They’ve fallen more than 38 per cent since the start of this year. Here to tell us more is the FT’s Patrick Temple-West. He covers the healthcare industry. Hey, Patrick.
Patrick Temple-West
Hello, Marc.
Marc Filippino
So, what exactly did UnitedHealth say yesterday about why Witty was leaving?
Patrick Temple-West
So not much. They said he was leaving the job for personal reasons, which could be anything. They also withdrew their guidance for the year. This is what analysts and investors rely on for the health of the company going forward. So whenever they pull guidance, that’s a concerning signal that the company doesn’t quite know what direction it’s headed in and how it’s going to perform in the months ahead. So that combined with a CEO . . . an abrupt CEO turnover. I mean, this caught everybody off guard. And that’s why you’re seeing the shares plunging on Tuesday.
Marc Filippino
Tell me a little bit more about the challenges the company is facing. Obviously, some of them have got a lot more press than others.
Patrick Temple-West
Yes, there are ongoing problems as UnitedHealth has grown into a larger and larger company, embraced more and more customers and health insurance clients. It is struggling with the surge in demand for medical services from some of its customers far above what it had expected. On top of all that, we’re having some regulations from the Trump administration for the health sector. I mean, just on Monday, the Trump administration announced some changes that they would like to see to lower the cost of healthcare for Americans, including in that a direct-to-consumer drug programme, which would cut out some of the middlemen companies and UnitedHealth as a division that serves that space. And this comes after last year, I mean, the real tragedy here in New York, when one of UnitedHealth executives, Brian Thompson, was gunned down outside of a hotel. Just more challenges and trouble for the company that’s already been experiencing a lot of turmoil in recent months.
Marc Filippino
So obviously a litany of things affecting UnitedHealth. I want to turn back to the new CEO announcement. Did Hemsley or the company say anything about how they plan to turn things around?
Patrick Temple-West
Not really, and that also might be a reason for the sagging share price. Yesterday morning, the company had a hastily arranged call with analysts, and it was just brief, just a lot of prepared remarks. The analysts were hoping for more specifics from the company, but I think it’s just too early for the new CEO, for Hemsley, to say much other than just sort of apologise for the performance setbacks that the company has encountered so far, and he put the blame both on internally at the company itself and external factors.
Marc Filippino
That’s the FT’s Patrick Temple-West in New York. Thanks, Patrick.
Patrick Temple-West
Thank you, Marc.
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Marc Filippino
You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.
