Aston Martin has good news, GM is in “build-shy” mode, and Volkswagen. All that and more in The Morning Shift for May 6, 2021.
1st Gear: Aston Is Bullish
Aston Martin very desperately needed the DBX to be a hit and it looks like that strategy is beginning to pay off, according to Bloomberg. Aston had a pretty turbulent 2020, though not really by Aston standards. This is an automaker that has gone bankrupt seven times in its 108-year history.
Revenue soared 153% to 244.4 million pounds ($340 million), beating analysts’ average estimate for 196.7 million pounds. The DBX sport utility vehicle accounted for 55% of the vehicles sold to dealers in the first three months of the year.
Aston Martin racked up significant losses after going public in 2018 and has spent the last year restructuring itself after a rescue by Canadian billionaire Lawrence Stroll. The 61-year-old fashion mogul has injected much-needed cash and forged closer ties with Daimler AG’s Mercedes-Benz to ensure the company survives tumultuous times for the auto industry.
Soon after taking over as chairman last year, Stroll shook up Aston Martin’s management and brought in Tobias Moers, who previously led Daimler AG’s Mercedes-AMG performance division, as chief executive officer. He also set a target to earn 500 million pounds on 2 billion pounds of revenue by 2025.
“On both our short and medium targets, we remain more confident every day,” Stroll said in a phone interview Thursday. “It’s the first true, clean quarter that we have had as the new management team running the business and very indicative of what’s to come.”
Being a company that makes expensive cars in 2021 is a good position to be in. So is making an overpriced SUV, given how popular expensive SUVs are and given how the rich have done pretty all right during the pandemic. If only Aston could get its Formula 1 team in shape.
2nd Gear: VW Is Down For Stricter Emissions Regulations
That is in Europe, at least, according to Reuters. I would assume this is in part because of some lingering guilt over the mess that was and is Dieselgate, but automakers are also always playing an angle. VW’s angle is that it’s bet billions of dollars on electric vehicles and needs that to work out.
Three sources told Reuters that Volkswagen, which owns car brands including Porsche, Audi, VW, Seat and Skoda, is quietly letting policymakers in Brussels know that it would support more ambitious cuts in emissions than other car manufacturers.
While the sources did not say what specific targets Volkswagen would be comfortable with, the move by Europe’s biggest carmaker is both undermining and upsetting smaller rivals that want Brussels to give them more leeway.
“This has become a quest for survival,” one person familiar with the carmaker said. “You can’t wait for others to eventually catch up.”
Asked about its stance on CO2 emissions, Volkswagen said it had already signalled its support for ambitious CO2 cuts in the past, adding this would require an expansion of electric vehicle charging infrastructure and renewable energy.
The company said it expected the European Commission to recommend a 50% cut in fleet-wide CO2 emissions for passenger cars by 2030, adding this was the level it had prepared for.
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VW’s short-term ambition is to sell more EVs than Tesla, which is not all too unrealistic. Tesla delivered about 500,000 cars worldwide last year, while VW delivered 231,600 EVs globally, and over nine million cars in total. Plenty of room for growth.
3rd Gear: VW Is Also In ‘Crisis Mode’ Over The Chip Shortage
VW contains multitudes. The company released its first-quarter earnings on Thursday, and, on paper, it did pretty well, with a $5.8 billion operating profit, according to Reuters. But, like almost every other automaker in the world, the chip shortage is portending dark things.
Volkswagen boss Herbert Diess said Europe’s top carmaker was in “crisis mode” over an ongoing lack of badly needed automotive chips, adding the impact of the shortage would intensify and hit profits in the second quarter.
Speaking after bumper results for the first three months of the year, during which operating profits increased more than five fold, Diess said the bottleneck would “substantially burden earnings” in the quarter to June.
“We will do everything to offset a significant amount of the lost cars in the second half of the year,” Diess told journalists. “But the incidents in the U.S. and in Japan will hurt us definitely.”
Diess said while the problem had cut production by around 100,000 cars in the first quarter, there was more to come.
“We’re still tasking our supply chain people to recover the losses of quarter two, which we expect,” he said.
I cannot wait until this fall, when everyone overreacts and suddenly there is a chip surplus.
4th Gear: Speaking Of, GM Is In ‘Build-Shy’ Mode
This is not a term I was familiar with before this morning. It’s when automakers build cars that are complete except for certain components, like, now, chips, because of the semiconductor shortage. Thousands of such cars — many of them trucks and SUVs — are now sitting on parking lots in a sort of limbo.
The Detroit Free Press took a deep dive on the situation:
GM is running what the industry has called a build-shy strategy, where it builds as much of its vehicles as it can, less the parts that require the chips. It is storing tens of thousands of incompletely built pickups, SUVs and vans in Indiana, Illinois, Missouri, Texas and Mexico, several people familiar with GM’s production told the Free Press.
“We’ve been doing (build-shy) for a few months,” said UAW Local 2209 Shop Chairman Rich LeTourneau at Fort Wayne Assembly plant in Indiana, where besides in Mexico, GM also builds full-size light-duty Chevrolet Silverado and GMC Sierra pickups. “We have about 15,000 trucks parked now.”
GM declined to confirm figures, but said its build-shy strategy benefits customers, dealers and employees because it keeps the assembly lines humming, building its most in-demand and profitable vehicles.
But some, including dealers and Wall Street, worry about the impact of the chip crisis on business if it continues much longer.
The Freep also talked to some dealers, who are anxious.
Matick Chevrolet Vice President Paul Zimmermann said his sales, especially of pickups, are down because of the chip shortage. In April he sold 45 pickups when he’d typically sell 70.
Matick has only 446 total vehicles on its lot when it would normally have close to 1,000. In fact, when a hauler pulls up to Matick Chevrolet in Redford, nearly half the vehicles on it are already sold.
“It’s not dire, but the chip shortage is impacting our inventory levels,” Zimmermann said. “We’re trying to be as pro-active as possible in reaching out to customers. We don’t want a customer who, in the July timeframe, has a lease due and they say, ‘What do you mean there’s no trucks?’ So we are reaching out and saying ‘Here’s the situation.’”
It is fun to imagine the scenario this dealer describes, as I love to get on the horn with my dealer and say, “What do you mean there’s no trucks?”
5th Gear: Uber Lost A Lot Less Money In The First Quarter Compared To The Last Quarter Of 2020
This was in part because it dumped its self-driving unit in December, which made it $1.6 billion.
Overall, Uber’s net loss was $108 million, a tremendous improvement from a $968 million loss in its fourth quarter of 2020. But that was largely due to a $1.6 billion gain from the sale of its self-driving unit, ATG. Uber’s operating loss was still high for the quarter at more than $1.5 billion.
Here’s how Uber’s largest business segments performed in the first quarter of 2021:
Mobility (gross bookings): $6.77 billion, down 38% from a year ago
Delivery (gross bookings): $12.46 billion, up 166% from a year ago
Delivery revenue also outperformed its core ride-hailing business at $1.7 billion, compared with $853 million. The company has relied on its delivery services to make up for lost transit during the pandemic. Uber said the Eats segment revenue was up 28% quarter over quarter.
“We’re finally seeing the light at the end of the tunnel,” CEO Dara Khosrowshahi said on a call with investors. “Uber is starting to fire on all cylinders, as more consumers are riding with us again while continuing to use our expanding delivery offerings.”
Uber was supposed to make lots of money in a hypothetical future when it could get rid of its human drivers and run a vast fleet of robotaxis, though that seems out the window now that Uber is just a regular taxi company and app and food delivery service. Take in the innovation.
Reverse: Mr. September
Gant, of course, won all four NASCAR races in September 1991, his best year by a mile.
Neutral: How Are You?
I went to Jaguar Land Rover’s North America headquarters on Tuesday to drive some cars, specifically the XF and F-Pace and Defender. It was the first time I’ve gone anywhere for anything since March 2020, when I was in Vegas for the Mint 400, and at the poker tables everyone was looking up at TV screens and CNN was talking about something called coronavirus. I don’t even think they called it Covid back then. Anyway, a few days after I got back to New York the NBA shut down, and all of a sudden we were in the shit.