The company that makes your iPhone is taking over Lordstown’s factory, Volkswagen is liking its chances of influencing Germany’s domestic policy, and we regret to inform you Saab is still having a rough go of it. All that and so much more in this happy Friday edition of The Morning Shift for October 1, 2021. Hey, it’s October!
1st Gear: Foxconn Buys Lordstown Factory To Build Lordstown Trucks In Lordstown
Yesterday we shared a report from Bloomberg that the sale of electric truck startup Lordstown’s eponymous Ohio factory to Foxconn was imminent. The deal was confirmed shortly thereafter for $280 million which, as Bloomberg notes, is a hell of a lot more than what Lordstown bought the facility from General Motors for.
Per the arrangement, Foxconn will receive equity in the EV brand, and it will also be able to use that factory to build EVs for other makes, like Fisker:
Under terms of the transaction, Lordstown Motors will sell the Lordstown factory to Foxconn for about $230 million after buying it from GM for just $20 million two years ago. The maker of Apple Inc.’s iPhone will buy $50 million worth of common stock in its new partner and will assemble the Lordstown Endurance electric pickup truck. The deal is contingent on the two sides reaching an agreement on manufacturing the vehicle. Foxconn plans to start mass production in April, according to a person familiar with its schedule.
Lordstown shares jumped as much as 12% in late New York trading Thursday. During regular trading hours, the stock rose 8.4%, closing at $7.98 after Bloomberg had earlier reported a deal was in the works. It’s still down 60% for the year.
The accord gives both companies something they badly need. Lordstown Motors gets a partner that will hasten the startup’s move into large-scale production, which will help lower the high costs required to make EVs. Foxconn gets a plant in North America where it can build its open-source electric vehicle platform and do contract manufacturing for partners like Fisker Inc.
“It’s less about a facility sale than a strategic partnership,” Lordstown Motors Chief Executive Officer Dan Ninivaggi said in an interview. “You have to find a way to get scale in the auto industry. Foxconn has a vision. They’ve got enormous capabilities in manufacturing and they will be able to fill that plant faster than we could.”
This is the kind of quick cash and production tie-up Lordstown could probably use in the short term, so as to not delay production any further. Hopefully it won’t come to regret it.
2nd Gear: BMW Found The Secret
Can’t make enough cars, or make them quickly enough? No worries! Just sell ’em each for a bigger pop. BMW, you see, has found the secret to success in 2021. From Bloomberg, via Automotive News:
The automaker sees earnings before interest and taxes on automaking of between 9.5 percent and 10.5 percent on sales, up from a previous view of 7 percent to 9 percent, according to a statement Thursday.
“Whilst the semiconductor supply restrictions are expected to further impact production and deliveries, the continuing positive pricing effects for both new- and pre-owned vehicles will overcompensate these negative sales volume effects,” the company said.
BMW’s earnings before tax are expected to rise “significantly,” it said, adding free cash flow is seen at around 6.5 billion euros ($7.5 billion).
What makes this news more surprising is that BMW didn’t think things were going to unfold this way earlier in the year:
BMW had also raised its profit forecast in August after strong quarterly results, but warned at the time that chip shortages could plague the second half of the year.
BMW’s strong relations with its suppliers have meant it was less affected by the shortages than other automakers, many of whom were forced to halt production at some of their plants.
BMW is reaping the benefits of tight supplies, further backing up the worrying claim that even after the chip shortage lifts, car companies may never resume pre-pandemic production capacity again. This is great for them and great for their dealers. It sucks and will continue to suck for you and I.
3rd Gear: It’s Lobby Time For Volkswagen
Olaf Scholz, whose Social Democratic Party won last weekend’s federal election in Germany and is likely to replace Angela Merkel as chancellor, has a relatively aggressive stance toward embracing EVs and retiring internal combustion engine production. You know who else is all about that? Volkswagen of course. VW CEO Herbert Diess figures to use this newfound shared ambition in Berlin to accelerate his company’s plans and smudge the stain of Dieselgate from everyone’s collective memory. From Bloomberg:
Just a few hours [after the election result], Volkswagen CEO Herbert Diess took to Twitter to sketch out the car giant’s vision for a new government. His 10-point wish list includes calls to expand renewables, curb coal, raise the price of CO2 and scrap subsidies for gasoline and diesel fuel.
VW’s CEO openly trying to speed up the demise of the internal combustion engine would have been unthinkable only a few years ago. Diess’s posts represented a “key transitional shift in communication and lobbying,” Matthias Schmidt, an independent auto analyst in Berlin, told me this week.
The bruising experience of dieselgate left VW with little choice but to chart an ambitious course toward an all-electric future, which has put the company a step ahead of the competition. It intends to cement that head-start in part through its politicking, Schmidt said. The company is plenty adept at shaping policy, in part because the German state of Lower Saxony is a major shareholder and occupies board seats.
Let’s hear it for the new transportation ministry of Germany: Volkswagen.
4th Gear: Saab Ain’t Doing Too Well
That’s a headline that never seems to age out of relevancy, does it? Evergrande Group owns National Electric Vehicle Sweden, which, in turn, owns all of Saab’s assets and has marketed cars under that brand name. Evergrande just cut 300 jobs, hasn’t been paying NEVS employees, quit its free lunch perk and has basically rendered plant activity nonexistent. And NEVS leadership is acutely aware of all the writing on the wall. From Bloomberg:
“I’m acting as if things won’t be working out with Evergrande,” Stefan Tilk, the chief executive officer of National Electric Vehicle Sweden AB, said in an interview. “Therefore we have entered discussions with new intended owners or project financiers.”
Last month, the situation with Evergrande deteriorated to a point of seemingly no return:
NEVS, as the Swedish unit is know [sic], in August gave notice to almost half its 670 workers at the former Saab factory in Trollhattan. There’s “no major activity” in the plant, Tilk said.
“The Evergrande situation triggered the decision,” he said. “These are things I had wanted to do for some time, but now it became necessary, given that Evergrande no longer can finance us.”
Tilk said his unit still has money to pay its workers. “We still have money in the company. I can’t give an exact date, but we can still manage,” he said. “We are talking beyond a few months.”
If any of this surprises you, know that the nominally-real-estate-oriented Evergrande operated a healthcare business division before it started on the car thing, bottled water under the Evergrande Spring label (doesn’t that sound refreshing?) and has investments in tourism and theme parks, too. Personally, I will continue to pray for Saab during these trying times.
5th Gear: Junior Motorcycle Racing Has Reached Its Turning Point
Three teens have died in the last five months due to incidents in junior motorcycle racing categories: Jason Dupasquier in Moto3 in May, Hugo Millan in the 250cc-based European Talent Cup in July and, most recently, Dean Berta Viñales in World Supersport 300 just last weekend. Millan was 14, Viñales was 15 and Dupasquier was 19.
Increasingly more figures, particularly in the top MotoGP category, are speaking out about the need for something to change. According to Motorsport.com, Dorna Sports has arranged a “working group” to address these issues and hopefully prevent future tragedies. Motorcycle racing will always be among the most dangerous forms of motorsport there is, but that particular class and the bikes within it seem to generate all the wrong conditions for truly horrific accidents, Ducati’s Jack Miller recently said to the media. From Motorsport:
Ducati rider Miller – who knows one of the riders involved in the Vinales incident – says he’s “getting sick” of attending moments of silences during race weekends and feels the junior classes must change going forward to stop these tragedies.
“We’ve had this discussion in Moto3, but there even in Supersport [300], those bikes aren’t very fast and there’s so many of them, and those bikes are not light by any stretch of the imagination,” he said in response to a question from Motorsport.com about the situation concerning junior rider fatalities.
“For sure it’s a lot of weight and there’s so many of them on the grid that, when something does unfortunately go wrong, the chance of something bad happening is for sure doubled or tripled.
“The racing’s fantastic and I think the classes are fantastic.
“I think it’s so good to have a feeder class like World Supersport 300 to help these young kids who may not get a chance in Moto3 to come through that way.
“But there has to be a big step taken in looking at the safety, at the way these races go and this can’t continue on.
“This year’s been especially bad, but this can’t continue on. We can’t have three young kids in the space of not even nine months losing their lives.
Junior motorcycle is at an inflection point now; the organizers can either take these recommendations from experienced riders into consideration and enact changes, or continue to let the status quo play out. I sincerely hope the supposed “discussions” result in the former.
Reverse: It’s Turnpike Day!
On October 1, 1940, the Pennsylvania Turnpike opened for business as the country’s “first example of a toll superhighway,” according to 365 Days of Motoring. Exactly 15 years later, the Ohio Turnpike opened as well.
According to Wikipedia, the PA Turnpike cut travel time from Pittsburgh to Harrisburg from nearly six hours to two-and-a-half. That seemed a little off to me though, so I Google Maps’d it. Today, at least, it takes about 3 hours and 10 minutes to go from one to the other via I-76. Also, apparently someone once nicknamed the highway the “Grandaddy of the Pikes.” I wish personifying roads with nicknames was still a thing.
Neutral: Are You The Car Buying Advice Friend?
It hasn’t happened in a while, but last year my friend asked me to assist him and his fiancée with a new car recommendation. They were looking to replace their totaled Nissan Versa Note, were angling toward something similarly small and didn’t have a ton to spend. I recommended the Honda Fit, which they checked out but didn’t fall for. They also test drove an HR-V and later a Kia Soul and Rio. They ended up with a Rio, which sorta broke my heart a bit. But that’s the thing about being the car buying advice friend — you can’t be too pushy. Anyone have stories of success as a car matchmaker for their loved ones?