By Karen Brettell

NEW YORK (Reuters) – The dollar fell Tuesday after data showed that U.S. job openings fell in March, a day before the Federal Reserve is expected to hike interest rates by an additional 25 basis points.

U.S. job openings fell for a third straight month and layoffs increased to the highest level in more than two years, suggesting some softening in the labor market that could aid the Fed’s fight against inflation.

The U.S. Commerce Department also said that factory orders rose by 0.9% in March, below expectations for a 1.1% gain.

The data comes as investors try to gauge whether the Fed is likely to pause rate hikes when it concludes a two-day meeting on Wednesday, or if further increases are possible if inflation remains high.

“The big question is does the Fed signal that policy is restrictive enough, or provide enough hints for the market to think that we’re not going to require the further tightening of policy,” said Edward Moya, senior market analyst at OANDA in New York.

The dollar index fell 0.22% to 101.93 after earlier reaching 102.40, the highest since April 11. The euro rose 0.23% against the greenback to $1.1001, after earlier dipping to $1.0940, the lowest since April 21.

The single currency fell after data showed that euro zone banks are turning off the credit taps and a key gauge of inflation is finally falling, boosting the case for a smaller rate increase by the European Central Bank on Thursday.

The ECB has been seen as possibly hiking rates by 50 basis points this week. The single currency has risen since mid-March on expectations that the interest rate differential with the U.S. dollar will continue to shrink.

“The expected forward US rate advantage versus the euro is the lowest in 10 years,” Steve Englander, head, global G10 FX research and North America macro strategy at Standard Chartered Bank said in a note. And “euro-area equities are experiencing the most extended outperformance versus US equities in a decade.”

The Aussie dollar rose 0.51% to $0.6664, after earlier getting to $0.6717, the highest since April 21.

The currency jumped against the dollar after the Reserve Bank of Australia (RBA) unexpectedly lifted the cash rate to 3.85% and said further tightening may be required to ensure that inflation returns to target in a reasonable time frame.

“I would think the RBA now thinks they need to see a 4 in front of the cash rate before thinking they might be done,” said Ray Attrill, head of FX strategy at National Australia Bank.

“Certainly, the data flow since April has been on the strong side,” he added. “It’s very probable that another one is to come, though whether it’s as soon as June remains to be seen.”

The yen gained, reversing earlier losses after last week’s Bank of Japan decision to maintain ultra-low interest rates.

The dollar fell 0.56% to 136.67 yen, after earlier hitting 137.78, the highest since March 8.

========================================================

Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 101.9300 102.1700 -0.22% -1.507% +102.4000 +101.8900

Euro/Dollar $1.1001 $1.0976 +0.23% +2.67% +$1.1007 +$1.0940

Dollar/Yen 136.6700 137.4600 -0.56% +4.25% +137.7650 +136.3300

Euro/Yen 150.40 150.91 -0.34% +7.20% +151.6100 +149.8400

Dollar/Swiss 0.8933 0.8959 -0.29% -3.39% +0.8995 +0.8928

Sterling/Dollar $1.2469 $1.2495 -0.20% +3.11% +$1.2512 +$1.2436

Dollar/Canadian 1.3619 1.3543 +0.59% +0.54% +1.3637 +1.3529

Aussie/Dollar $0.6664 $0.6631 +0.51% -2.24% +$0.6717 +$0.6621

Euro/Swiss 0.9825 0.9828 -0.03% -0.69% +0.9867 +0.9816

Euro/Sterling 0.8821 0.8782 +0.44% -0.26% +0.8822 +0.8780

NZ $0.6208 $0.6164 +0.72% -2.22% +$0.6218 +$0.6164

Dollar/Dollar

Dollar/Norway 10.8000 10.7340 +0.64% +10.08% +10.8290 +10.6960

Euro/Norway 11.8828 11.7726 +0.94% +13.24% +11.8965 +11.7425

Dollar/Sweden 10.3013 10.3018 +0.06% -1.02% +10.3446 +10.2666

Euro/Sweden 11.3331 11.3267 +0.06% +1.65% +11.3388 +11.2684

(Reporting by Karen Brettell: Additional reporting by Kevin Buckland in Tokyo and Alun John in London; Editing by Bernadette Baum and Jonathan Oatis)

By David Shepardson

WASHINGTON (Reuters) -White House senior adviser John Podesta said Toyota Motor Corp “had been the laggard” on producing electric vehicles but is now “fully committed” after he met recently with senior company officials at the Japanese automaker.

“I think they’re going to stick with plug-in hybrids for a while, maybe longer than some of the other companies but they’re fully now committed under their new leadership to electrification,” Podesta told Reuters reporters and editors in a roundtable meeting on Tuesday.

He met with Toyota Research Institute CEO Gill Pratt and Toyota North America chief administrative officer Christopher Reynolds.

Last month, Toyota said it would introduce 10 new battery-powered models and target sales of 1.5 million EVs a year by 2026.

Toyota, including its Lexus luxury brand, now has just three battery models on the market and last year sold fewer than 25,000 of them worldwide.

Investors and environmental groups have criticized Toyota as slower to embrace battery-powered cars than Tesla and others.

Toyota in August said it would boost its planned investment in a planned North Carolina battery plant from $1.29 billion to $3.8 billion.

Last month, the U.S. Environmental Protection Agency proposed sweeping emissions cuts for new cars and trucks through 2032. EPA estimates 67% of new vehicle sales by then will be EVs.

The Biden administration has repeatedly declined to endorse setting a firm date to phase out gasoline-only vehicles as California has done. “I don’t think we think that’s necessary at this point,” Podesta said Tuesday.

White House infrastructure adviser Mitch Landrieu and Podesta met with Tesla CEO Elon Musk in January. Landrieu said in the joint Reuters interview with Podesta the administration had constructive conversations with Musk on EVs.

“They’re a key player. They were the first ones out there,” Landrieu said. “They were very open and workable and they’ve been a great partner.”

Biden committed to building a U.S. network of 500,000 EV charging stations by 2030 using $7.5 billion in infrastructure funds.

“We got (Tesla)… to open up their network which took us much closer and much faster to the eventual goal of building the spine of EV charging stations. We have 500,000 of them we have to push out. We need about 3 million plus,” Landrieu said.

(Reporting by David Shepardson; Editing by David Gregorio)

By Andrea Shalal and Nandita Bose

WASHINGTON (Reuters) -President Joe Biden will not negotiate over the debt ceiling during his meeting with four top congressional leaders on May 9, but he will discuss starting “a separate budget process” to talk about spending priorities, the White House said on Tuesday.

Biden on Monday summoned the four Senate and House of Representatives leaders — two fellow Democrats and two Republicans — to the White House next week, after the U.S. Treasury warned the government could run short of cash to pay its bills as soon as June 1.

“He is not going to negotiate on the debt ceiling,” White House press secretary Karine Jean-Pierre said. But the president “is willing to have a separate conversation about their spending, what they want to do with the budget.”

The debt limit was increased three times under Republican former President Donald Trump without an issue, she added.

The White House and Biden have previously asked Republicans for a clean debt ceiling hike and offered to discuss spending once the risk of default is off the table. Biden’s position to discuss spending reflects a subtle shift in the White House’s position to have discussions even as the risk of default looms.

Treasury’s June 1 estimate raised the risk that the United States could be headed into an unprecedented default that would shake the global economy, adding urgency to political calculations in Washington, where Democrats and Republicans were girding for a months-long standoff.

Treasury Secretary Janet Yellen said in a letter to Congress that the agency will be unlikely to meet all U.S. government payment obligations “potentially as early as June 1” without action by Congress.

The White House knew Yellen’s letter would be released on Monday, Jean-Pierre said. The president thought it was a “good opportunity to remind Congressional leaders that we must not default,” she said.

Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to the May 9 White House meeting. The two leaders haven’t sat down to discuss the issue since February.

Jean-Pierre said “it is time for the speaker and the MAGA Republicans to stop the brinksmanship and act to prevent default.”

Biden also made calls to the minority leaders in the Senate and House, Republican Senate leader Mitch McConnell and House Democratic leader Hakeem Jeffries, and to Senate Majority Leader Chuck Schumer.

(Reporting by Andrea Shalal and Nandita Bose in Washington; Editing by Heather Timmons, Leslie Adler and Jonathan Oatis)

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings fell for a third straight month in March and layoffs increased to the highest level in more than two years, suggesting some softening in the labor market that could aid the Federal Reserve’s fight against inflation.

Still, the labor market remains tight, with the monthly Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday showing 1.6 vacancies for every unemployed person in March. That was the lowest reading since October 2021 and compared to 1.7 in February.

Fed officials, who started a two-day policy meeting on Tuesday, are closely watching this ratio, which remains above the 1.0-1.2 range that economists say is consistent with a jobs market that is not generating too much inflation.

The U.S. central bank is expected to raise its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range on Wednesday before potentially pausing its fastest monetary policy tightening campaign since the 1980s.

“The decline in the ratio of job vacancies to unemployment in the last three months represents a reduction in the excess demand for labor that will be welcomed by the Fed,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

“However, with the ratio still higher than at any time prior to November 2021, the labor market is still tight by historical standards.”

Job openings, a measure of labor demand, were down 384,000 to 9.59 million on the last day of March, the lowest level since April 2021. Data for February was revised higher to show 9.97 million job openings instead of the previously reported 9.93 million. Economists polled by Reuters had forecast 9.775 million job openings. They have dropped by 1.6 million since December.

The decline in March was concentrated in small businesses, those with one to 49 employees, the main drivers of the labor market’s phenomenal growth. There were 144,000 fewer vacancies in the transportation, warehousing and utilities industry.

Professional and businesses services job openings declined by 135,000. Retailers reported a drop of 84,000 in vacancies. There were notable decreases in healthcare and social assistance, but educational services reported an additional 28,000 job openings. There were 34,000 government job openings.

Vacancies fell in all four regions, with steep declines in the Midwest and West. The job openings rate fell to 5.8%, the lowest since March 2021, from 6.0% in February.

Stocks on Wall Street were trading lower as investors focused on a warning by Treasury Secretary Janet Yellen that the federal government could run out of money within a month amid a standoff to raise its $31.4 trillion borrowing cap. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

DEMAND SLOWING

Hiring was little changed at 6.1 million, keeping the hiring rate unchanged at 4.0%. Economists expected slowing demand for labor to be replicated in April’s employment report, scheduled to be published on Friday.

Nonfarm payrolls are expected to have increased by 179,000 jobs last month, the smallest gain since December 2020, after rising 236,000 in March, according to a Reuters survey of economists.

The JOLTS report showed layoffs jumped by 248,000 to 1.8 million, the highest level since December 2020. The increase was led by the construction industry, which shed 112,000 positions. The decline likely reflected the job losses in the housing market, which has been hammered by higher mortgage rates.

Accommodation and food services lost 63,000 jobs, while the health care and social assistance category reported 42,000 layoffs. Employment in the leisure and hospitality sector remains below it’s pre-pandemic levels.

Professional and business services layoffs increased by 49,000. Small and medium-sized businesses accounted for the bulk of the layoffs. All four regions reported rises in job losses.

The layoffs and discharge rate rose to 1.2%, the highest since December 2020, from 1.0% in February.

With job openings steadily declining and layoffs rising, fewer people are voluntarily quitting their jobs. Resignations dropped to 3.85 million, the lowest level since May 2021, from 3.98 million in February.

Quits declined in the accommodation and food services sector. They dropped in the South and West, but rose in the Northeast and Midwest.

The quits rates, which is viewed as a measure of labor market confidence, dipped to 2.5% from 2.6% in February. It is down from the 2.9%-3.0% range seen in late 2021 and early 2022 when job hopping was at its peak.

“The job openings and quits rates remain historically high, and the layoff rate remains historically low, but all three are moving in the direction of a cooler labor market,” said Michael Feroli, chief U.S. economist at JPMorgan in New York.

“The signs of labor market softness won’t be a game-changer for tomorrow’s Fed meeting, though they do suggest that the cumulative amount of policy tightening is starting to have its desired effect on businesses’ labor demand.”

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

By Blake Brittain

(Reuters) – VMware Inc must pay $84.5 million for infringing two patents belonging to rival software company Densify, a Delaware federal jury said on Monday.

The verdict, made public Tuesday, said VMware willfully violated Densify’s patent rights with its software for optimizing “virtual machines” used in cloud computing.

A VMware spokesperson declined to comment on the verdict, citing active litigation.

Densify CEO Gerry Smith said the company was “grateful” for the verdict, which “validated the hard work of our inventors.”

Canada-based Densify won a verdict worth nearly $237 million against VMware in the same case in 2020.

A federal judge threw out that verdict and ordered a new trial later that year. Densify’s patent-holding subsidiary owned the patents at issue, and Judge Leonard Stark said the parent company did not have sufficient rights to the patents to be involved in the case at the time.

Densify accused Palo Alto, California-based VMware’s vROps, vSphere and other software of infringing patents covering “virtualization” technology that enables multiple computer systems to run on a single server.

The lawsuit alleged that VMware used Densify’s technology as a “blueprint” for its own. Densify said VMware “dominates the virtual infrastructure market” and that it could “outspend Densify and swamp Densify’s marketing and sales” if its infringement is not stopped.

VMware argued it did not infringe and that the patents were invalid. It later filed its own patent infringement lawsuit against Densify, which is still ongoing.

(Reporting by Blake Brittain in Washington)

By Yuvraj Malik

(Reuters) -Uber Technologies Inc forecast quarterly core earnings above estimates on Tuesday, after a surge in demand for travel and food delivery helped the U.S. ride-sharing giant report better-than-expected results for the January-March period.

Shares of the company rose 7% and helped drive small gains in those of rival Lyft Inc, which reports earnings on Thursday.

Uber is benefiting from its dominant position in key global markets as travel rebounds from a pandemic-induced lull. A jump in the number of people looking for extra income has also helped it offer lower incentives to gig workers, analysts have said.

“Our clear lead on driver preference has allowed us to better serve this growing demand: 5.7 million drivers and couriers earned $13.7 billion (including tips) on Uber during the quarter, both all-time highs,” CEO Dara Khosrowshahi said.

After a tepid performance in the last two years, “the rideshare category in the United States and Canada is now growing faster in 2023,” he said.

Uber expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $800 million and $850 million for the June quarter, compared with analysts’ projection of $749.1 million, according to Refinitiv.

The company said it was on track to post operating income profitability this year and that it was keeping its workforce flat after headcount fell sequentially in the first quarter.

Uber also forecast gross bookings of between $33 billion and $34 billion, compared with the expectations of $33 billion.

“Return to work/travel tailwinds are causing mobility to outperform ‘normal’ 1Q seasonality,” Oppenheimer & Co analyst Jason Helfstein said, adding that increased driver density and trips were boosting the fee Uber gets on transactions.

Uber’s first-quarter revenue jumped 29% to $8.82 billion, beating estimates of $8.73 billion, thanks to a 72% surge in the ride-hailing segment.

The food delivery unit’s revenue growth was slightly above expectations at 23% and Uber said it expected “strong growth” in the coming quarters.

Adjusted EBITDA was $761 million, Uber’s highest on record, while the adjusted loss of 8 cents per share was narrower than expected.

Regarding competition with Lyft, Uber’s Khosrowshahi said on a post-earnings conference call that “they’re looking to price competitively with us” but “the days of paying for share and essentially using shareholder money to buy share temporarily, those days are over.”

Lyft has been forced to become more disciplined with driver incentives, prompting Uber to do the same and helping its margins, Oppenheimer’s Helfstein said.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Anil D’Silva)

By Arunima Kumar

(Reuters) -Marathon Petroleum Corp said on Tuesday it expects strong margins throughout 2023 as demand grows while supply constraints persist, after the top U.S. refiner beat Wall Street estimates for quarterly profit.

Closure of facilities during the pandemic and demand recovery have lifted refiners’ margins, further bolstered by tight crude supplies following Russia’s invasion of Ukraine and a jump in jet fuel demand due to a travel boom.

While CEO Michael Hennigan was optimistic about the company sustaining strong margins, he cautioned that “much will depend on the ongoing recovery in China and … recessionary impacts”.

Marathon refining and marketing margin soared 70.8% to $26.15 per barrel during the January-March quarter, compared with a year earlier.

“While we expect refining profits to decline from record highs … they will likely remain above historical averages given solid product demand and negligible new global refining capacity additions near-term,” Edward Jones analyst Faisal Hersi said.

Following its strong quarterly performance, Marathon also expanded its share buyback programme by $5 billion, bringing its total stock repurchase authorization to $9 billion.

The company said crude capacity utilization was 89% in the reported quarter, lower than last year’s 91% due to planned maintenance activity in the Gulf Coast region.

U.S. oil refiners dialed back operating runs during the quarter due to maintenance activities after solid demand recovery led to sky-high utilization rates last year.

Marathon’s quarterly throughput of 2.8 million barrels per day was largely the same compared with the year-ago period.

For the current quarter, it expects throughput to be 2.86 million bpd.

The company reported earnings per share of $6.09 compared with analysts’ average estimate of $5.74, according to Refinitiv data.

Shares fell 5.7% to $115.54, along with a more than 4% decline in crude prices on worries about a U.S. bond default and weak economic data from China.

(Reporting by Arunima Kumar in BengaluruEditing by Vinay Dwivedi)

By Howard Schneider

FARIBAULT, Minnesota (Reuters) – Demand for Daikin Applied Americas Inc’s climate control equipment is soaring, and worker recruitment is in hyperdrive, with hiring trips to women’s shelters and immigrant support groups and an open door for applicants with no high school degree or manufacturing experience.

For Minnesota’s healthcare industry, an estimated 5,000 open nursing positions have sparked the invention of a new specialty, the nurse retentionist who is focused on convincing colleagues to stay on the job. It has also prompted talk of capping workloads and led to up to an 18% pay increase over three years for unionized nurses.

Government officials, worried about a constrained labor force in a state where population growth has stalled, have taken a cover-the-waterfront approach. That includes proposals for training in high-growth occupations and subsidies for accommodations at small businesses looking to hire workers with disabilities, efforts to pull members of minority groups off the employment sidelines, a push to reintegrate ex-offenders into the workforce, and grants to study how to speed occupational licensing for immigrants trained abroad.

“It’s a pretty basic supply and demand curve,” Jeff Drees, chief executive of the U.S. unit of Japan’s Daikin Industries Ltd, said in an interview from the company’s Faribault plant about 50 miles (80.5 km) south of Minneapolis. “We will hire as many as we can take right now … because every employee we bring on will just help us reduce our lead time.”

After raising starting wages from $17 an hour to around $24 and overhauling hiring strategies, Drees still has 200 open jobs at this and two nearby facilities, where he is hoping to add to current staffing of 1,200. Daikin’s order book is bulging, he said, amid demand driven by buildings being upgraded with better air conditioning systems in the wake of the COVID pandemic, a rush of new data centers and electric vehicle plants, and federal dollars flowing under recent infrastructure and environmental legislation.

To Federal Reserve officials wondering when wage growth might slow as they try to cool the economy and inflation, his prognosis is not soon. “I don’t think it’s leveling off.”

(Listen to a related podcast here: )

Graphic: The jobs mismatch – https://www.reuters.com/graphics/USA-ECONOMY/LABOR/klvygbbjkvg/chart.png

WORKER DEMAND

Labor shortages have plagued the U.S. since the first months of the pandemic. Initially, reopened businesses found workers reluctant to return to jobs because of health concerns and an ability to wait it out because of pandemic relief payments, enhanced unemployment insurance and other programs.

As health fears eased and support programs lapsed, a realization set in that the pandemic had realigned American work, from the occupations in demand to the willingness of people to do them.

That reshuffling may be one reason the Fed is finding it harder than expected to slow a job market struggling to match workers into open positions. It also may mute any job losses from U.S. central bank efforts to curb overall demand and tame inflation.

Recent Bureau of Labor Statistics data suggest that while some key occupational gaps were driven by the pandemic, others were well-established when the health crisis struck in 2020, and continue to fuel the high demand for workers the Fed wants to ease.

Some of those gaps may eventually respond to Fed efforts to slow the economy. Food preparation and service jobs, for example, fell by about 1 million from 2019 to 2022, the BLS data shows. But the industry’s high rate of job openings – more than 8% of potential positions were open as of February – shows firms are still trying to attract employees. If a Fed-induced slowdown causes households to cut down on restaurant meals, hiring pressure should ease.

The dislocation, though, is nearly as bad for services like healthcare, where spending is less by choice and demand, and thus less influenced by economic conditions. Healthcare employment surged by 3 million from 2016 to 2019, before the pandemic, and by another 463,000 from 2019 to 2022. Yet the industry’s job openings rate remains above 7%.

Graphic: Job openings to unemployed – https://www.reuters.com/graphics/USA-ECONOMY/VACANCIES/zdpxobkxmvx/chart.png

‘NEXT TO NO GROWTH’

Along with sectoral gaps, geographic ones exist as well.

The experience of Minnesota, where a strong industrial and corporate base has collided with flatlining population growth, suggests the process of finding a new balance, so central to the evolution of the economy, wages and inflation, will be neither fast nor cheap.

On the upside, there is some evidence for a hope shared by many Fed officials that as the economy slows, companies will trim the current high level of job openings but not fire employees who may be hard to recruit back.

At roughly 10 million open positions nationally as of the end of February, there were about 1.7 jobs open for each of the roughly 5.9 million unemployed jobseekers, down from the peak of around 2-to-1 last year but well-above pre-pandemic levels.

Minnesota has had a particularly large imbalance: The 12-month moving average of available positions last year reached 2.75 for every unemployed person. That has edged down to around 2.6, yet the unemployment rate has remained at or below 3% since December 2021. The number of unemployed has risen since last year, but the three-month average has stabilized at about 90,000 since November – similar to the state’s pre-pandemic lows.

Still, given the outlook from companies like Daikin or the chronic shortages seen across industries like healthcare, it remains unclear how fast or far labor demand will fall.

Supply, meanwhile, is likely to improve only slowly, if at all.

In a dilemma offering a glimpse of the country’s future if birthrates and immigration remain low, companies are competing for workers from a labor pool little changed since 2017 and projected to see “next to no growth over the next decade,” Minnesota State Demographer Susan Brower estimated in a February labor-force outlook.

The U.S. as a whole isn’t there yet. But recent Congressional Budget Office projections estimated that by around 2040 the net number of births over deaths will approach zero, with any population increase from then the result of immigration.

Graphic: Minnesota job market – https://www.reuters.com/graphics/USA-ECONOMY/LABOR/lbvggzzzrvq/chart.png

PART-TIME NURSES

The situation has been great for job hunters and job switchers.

Juan Munhen moved to Faribault from Brazil last year to join his wife, who is originally from the city. Once his immigration documents and other papers were in order, things moved fast: nine days from his online application to receiving a job offer and a request to start as soon as possible.

For Anthony Clammer, the booming job market meant a switch that cut his commute from a previous job that was 40 minutes away by car, provided more flexibility to help care for his kids when needed, and offered a dependable first-shift schedule – a plum in the manufacturing sector.

“Nowadays you look online and there are just hundreds of day-shift job positions,” he said. “I don’t think in 2019 I would have gotten a day shift right away.”

In areas of chronic shortage, like nursing, the battle is not just getting bodies into jobs but keeping them there. It has become an expensive proposition, particularly as worker preferences have changed during the pandemic, said Rahul Koranne, president and CEO of the Minnesota Hospital Association.

The number of nurses only willing to work part-time, he said, has surged from between 30% and 40% before the pandemic to 57% last year.

“Was that the pandemic? Maybe,” Koranne said. “We also think it is generational,” with younger employees wanting better work-life balance.

Since those part-time positions typically still carry full-time benefits, it drives up the cost of filling the equivalent of a full-time employee.

State officials acknowledge the problem is one of numbers, and are putting efforts into marketing in hopes of convincing people to move there.

But Steve Grove, who was until March the commissioner of the Minnesota Department of Employment and Economic Development, said the state can’t count on a reversal of the population trends and must focus as well on reducing barriers for current residents.

“You have to get the number of warm bodies up,” he said, but “there is not one silver bullet … It is housing, training, benefits, retention. We are looking to be more assertive.”

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)

By Nick Carey

BRIXWORTH, England (Reuters) – Mercedes-Benz has plugged its Formula One team into the engineering process to build vastly more efficient mass-market electric vehicles (EVs), slashing development times by a quarter or more as it jump starts efforts to keep pace with Tesla.

F1 technology has always eventually bled over into mass-market vehicles. But Mercedes’ F1 collaboration to build more efficient EVs faster is unprecedented because it embeds that racing mindset and technological expertise directly in product development.

After decades of leadership in combustion-engine technology, legacy carmakers like Mercedes have lagged Tesla in electric vehicles. Mercedes’ F1 team can help it get back in the race, said Steven Merkt, head of transportation solutions at TE Connectivity, a major autos supplier.

“Nobody feels the pressure more than Mercedes to be innovation leaders here,” Merkt said. “They’ve got to push it out or they’re no longer Mercedes.”

Last year, Mercedes unveiled its EQXX concept car, a super-efficient EV capable of a range of more than 1,200 km (745 miles), which was jointly developed with the German premium carmaker’s F1 team in England.

The EQXX took just 18 months to develop, leaning on the F1 team’s experience of working rapidly to squeeze efficiency from engines and electric motors, aerodynamics and rolling resistance, the company said.

“We have an edge here with Formula One that others don’t have,” Mercedes Chief Technology Officer Markus Schaefer said. “Tesla doesn’t have it. Other teams don’t have it.”

Tesla did not respond to a request for comment.

Speed is ever more important because newer entrants, above all Tesla, can develop or tweak models far more quickly than legacy carmakers. Fast-moving Chinese EV makers have cut development time to an average of 2.5 years and are launching innovative, cheaper models in Europe.

The need for speed is coupled with a push among carmakers to make EVs more efficient and thereby reduce costs – by lowering weight, improving range, and using less battery materials already in short supply. Suppliers say efficiency is now baked into some EV contracts as carmakers seek to make their vehicles more affordable.

“Efficiency is a key enabler to accelerate adoption of EVs globally,” Schaefer said.

Parts of what Mercedes learned from the EQXX will feature in a new EV platform that will go into production in 2024, including aerodynamic features, parts of the powertrain and the vehicle’s software system.

Schaefer said applying its F1 approach, Mercedes has cut new vehicle development time from an average of 58 months to go from the drawing board to mass production to “the low 40s”. For derivative models – similar models built using the same platform – the target is “the low 30s”.

The F1 engine team at Mercedes AMG High Performance Powertrains (HPP) in Brixworth in central England is now working on at least half a dozen new projects developing parts for mass-market Mercedes models – batteries, invertors and new generations of motors, Schaefer said.

‘READY FOR THE NEXT RACE’

HPP advanced technology director Adam Allsopp said he took the call from Mercedes headquarters in Stuttgart that kickstarted the EQXX project standing in a former cowshed while on holiday on the Isle of Wight in August 2020. It came with a clear, tough challenge – build an EV capable of driving 1,000 km on a single charge.

F1 fuel limits imposed in 2014 forced HPP to develop engines and cars that squeeze the most out of every drop and to “chase every single watt of loss” from two electric motors, Allsopp said.

“A fundamental part of who we are is always getting ready for the next race,” Allsopp said.

Applying that racing mindset, F1 engineers in Brixworth and nearby Brackley worked with a team in Stuttgart to produce the EQXX – using a flexible approach that allowed the team to move forward with development before the EV’s batteries were ready and then adapt plans when they were.

The EQXX featured a battery pack half the size of Mercedes’ flagship EQS SUV, compact electronics hardware and new operating system. Coupled with sleek aerodynamics, that allowed it to drive more than 1,200 km from Stuttgart to Silverstone in England on a single charge, spending 8.3 kilowatt hours (kWh) of energy per 100 km.

By comparison, Tesla says its long-range Model 3 spends 16 kWh per 100 km.

To maintain speed for bringing elements of the EQXX to mass production in 2024 on its new compact Mercedes Modular Architecture (MMA) vehicle platform, the German carmaker has developed a digital model of its plant in Rastatt – the same car will also be built in Hungary and China – to “simulate the assembly process,” and thus accelerate the physical changeover of the plant to build the new EVs, CTO Schaefer said.

Traditionally, carmakers have conducted “mid-life” upgrades on vehicle models after three or four years, but Schaefer said “updates to EVs will be way more frequent.”

‘NAME OF THE GAME’ IS EFFICIENCY

Others in the auto industry are also ramping up the race for speed and efficiency.

Ford Motor Co has announced plans to follow Mercedes with a return to F1 racing in 2026, providing “an incredibly cost-effective platform to innovate, share ideas and technologies,” CEO Jim Farley said in February.

And Volkswagen has said it aims to cut its time to market for new Chinese models from four years to closer to the Chinese 2.5-year average, partly by localizing more research and development.

Carmakers are so focused on efficiency some now include penalties for suppliers who fail to meet efficiency targets, said Liam Butterworth, CEO of supplier Dowlais, whose sideshafts are used in nine of the world’s top ten selling EVs.

OneD Battery Sciences adds silicon to EV battery anodes that cut weight, reduce cost and charge batteries faster. General Motors has invested in the Palo Alto, California-based company and is researching using the technology in the U.S. carmaker’s Ultium batteries, both companies said.

OneD CEO Vincent Pluvinage said that during the second quarter the company will announce more agreements with carmakers seeking cheaper, more efficient EVs. He declined to provide further details of the deals.

“Increasing performance and reducing costs is the name of the game,” Pluvinage said. “If you have a technology that works but you’re asking a premium, carmakers are no longer interested.”

So far, carmakers have added more batteries to vehicles to increase EV range, exacerbating a looming shortage of raw materials such as lithium and cobalt. But HPP’s Allsopp said making EVs more efficient allows carmakers to use smaller batteries, making them both greener and cheaper.

“Just throwing batteries at something is not an intelligent solution,” Allsopp said. “If you find clever ways to achieve the same range: it’s better for customers, carmakers and the planet.”

(Reporting By Nick Carey, editing by Ben Klayman and Daniel Flynn)

By Ron Bousso and Shadia Nasralla

LONDON (Reuters) – BP made a $5 billion profit in the first quarter of 2023, a rise on the previous three months on the back of stellar oil and gas trading, but its shares fell sharply as it slowed a share buyback programme.

The forecast-beating results from BP follow a strong showing by rivals including Exxon Mobil and Chevron last week as oil majors continue to benefit from energy prices that remain elevated despite some softening since the start of the year.

But BP’s shares closed more than 8% lower in London trading, their largest daily drop since March 2020, after it said it would repurchase shares worth $1.75 billion over the next three months, down from $2.75 billion in the previous three.

The smaller target is a result of a significant drop in operating cash flow to $7.6 billion during the quarter from $13.5 billion in the final quarter of 2022.

BP will still exceed its goal of using 60% of surplus cash to buy its own shares, but investors were disappointed and its forecast for lower oil and gas production in the second quarter also weighed on investor sentiment.

The lower share buyback “will more than offset the good operational performance as BP is the first international oil company…to cut buybacks this quarter,” Jefferies analysts said in a note.

The London-based company repurchased a total of $11.7 billion worth of shares in 2022.

EXCEPTIONAL TRADING

First-quarter underlying replacement cost profit, BP’s definition of net income, reached $4.96 billion, up from $4.8 billion in the fourth quarter of 2022 and above expectations of $4.3 billion in a company-provided survey of analysts.

The profit reflects “an exceptional gas marketing and trading result, a lower level of refinery turnaround activity and a very strong oil trading result”, BP said, noting a partial offset from lower oil and gas prices and refining margins.

Benchmark Brent crude oil prices averaged $81 per barrel in the first three months of the year, down 16% from a year earlier and 7% from the fourth-quarter.

BP had reported a $6.25 billion profit in the first quarter of 2022, on its way to a record $28 billion annual figure.

Its dividend remained unchanged at 6.61 cents per share after a 10% increase in February. BP had previously halved its payout in the wake of the pandemic.

Graphic: BP’s profit – https://www.reuters.com/graphics/BP-RESULTS/znpnbqkgepl/chart.png

WINDFALL TAX

BP said it expects oil and European gas prices to remain strong in the second quarter even as refining profit margins are expected to weaken due to lower diesel prices.

Fuel demand in Europe has been “a little bit” soft while consumption in China has been strong following the lifting of pandemic restrictions, BP Chief Financial Officer Murray Auchincloss told analysts on a call.

BP also said it expects to pay $1 billion under a UK windfall tax on the oil and gas sector between May 2022 and April 2023.

Graphic: BP’s operating cashflow – https://www.reuters.com/graphics/BP-CASHFLOW/zgpobykdkvd/chart.png

(Reporting by Ron Bousso and Shadia Nasralla; Editing by David Goodman, Kirsten Donovan and Alexander Smith)

By Bhanvi Satija and Raghav Mahobe

(Reuters) – Pfizer Inc on Tuesday reported higher-than-expected first-quarter revenue and profit, buoyed by demand for its COVID-19 products, and reaffirmed its 2023 earnings forecast as it banks on newer drugs to contribute to growth later this year.

The company has said it expects 2023 to be a low point for COVID product sales, before potentially returning to growth in 2024. But sales of both its vaccine and oral antiviral treatment came in above Wall Street estimates.

Pfizer still expects significantly lower sales of COVID products in the second quarter.

Wells Fargo analyst Mohit Bansal said it was a positive surprise that Pfizer did not lower its full-year COVID forecast.

Pfizer is pumping billions of dollars into research and acquisitions to mitigate an anticipated $17 billion hit to revenue by 2030 from patent expirations for top drugs, and a decline in demand for COVID products.

The company said it would become more balanced with allocating capital after a string of deals in the last two years once its recent $43 billion buyout of Seagen closes.

Graphic: Pfizer’s recent string of deals Pfizer’s recent string of deals – https://www.reuters.com/graphics/PFIZER-RESULTS/akpeqjaqbpr/chart.png

Pfizer said it remains on track to achieve its goal of 7% to 9% non-COVID revenue growth this year, driven by newer drugs.

“Given that a large number of launches are expected to occur in the third- and fourth-quarters of 2023, we anticipate that our non-COVID revenues will grow more quickly in the back half of the year,” Chief Financial Officer David Denton said on a call with analysts.

Citi analyst Andrew Baum said Pfizer’s non-COVID revenue missed expectations for the quarter.

The company is preparing to launch an RSV vaccine, an ulcerative colitis treatment and a hair loss drug by the end of this year, pending U.S. approval. 

COVID-19 vaccine sales plunged 77% to $3.06 billion in the quarter, but topped diminished estimates of $2.37 billion, according to Refinitiv data. 

Sales of antiviral Paxlovid nearly tripled to $4.07 billion, bolstered by demand in China. Analysts’ had estimated $3.13 billion for the quarter. 

Pfizer expects a 2023 profit of $3.25 to $3.45 per share and COVID products sales of about $21.5 billion.

Overall revenue for the first quarter fell 29% to $18.3 billion, but topped estimates of $16.59 billion.

Excluding items, the U.S. drugmaker’s profit of $1.23 per share topped Wall Street estimates by 25 cents.

Pfizer shares were down 0.9% – less than the broader market – at $38.84.

(Reporting by Bhanvi Satija and Raghav Mahobe in Bengaluru and Michael Erman in New York; Editing by Sriraj Kalluvila and Bill Berkrot)