Japan’s largest steelmaker is suing Toyota, some Teslas cost more now, Ram has a big recall, and Elon Musk. All that and more in The Morning Shift for October 26, 2021.
1st Gear: Elon Is Wealthier
Tesla hit a valuation of $1 trillion yesterday, which is great for Tesla but even better for CEO Elon Musk, who, Reuters reports, stands to benefit, of course.
With Tesla’s stock at a record high close of $1,024.86, Musk’s 23% stake in the newly minted trillion-dollar company is now worth about $230 billion, according to Refinitiv.
That stake includes options worth over $50 billion that have vested under Musk’s 2018 compensation package.
Musk receives no salary at Tesla: his pay package provides 12 options tranches that vest when Tesla’s market capitalization and financial growth hit a series of rising milestones. The options let Musk buy Tesla shares at $70 each, a discount of more than 90% from their current price.
Last week, Tesla reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $3.2 billion, up 77% from the year before. That was enough to vest his seventh options tranche, worth over $8 billion as of Monday.
Tesla’s six-month average stock market valuation is over $650 billion, clearing the way for all 12 of the options tranches in Musk’s pay package, should the company reach increasingly higher targets related to revenue and adjusted EBITDA for the remaining five tranches.
I still think Elon’s wealth almost exclusively exists on paper, so I don’t know how useful it is to talk about how wealthy he is. It’s probably enough to say that he’s a rich guy, and leave it at that. It will also never happen, but I would love, one day, to sit down and talk to his financial advisors. Not, like, the ones having to do with Tesla the company, I mean the ones tasked with overseeing Elon’s personal finances. I bet they have some incredible stories.
2nd Gear: (Mostly) Unrelated: Some Teslas Are A Bit More Expensive Now
There is strong demand at the moment for Teslas, or at least more demand than there is production capacity. This means, now, it will cost you $5,000 more than before to buy a Model S Long Range or Model X Long Range, according to Electrek.
The price went from $89,990 to $94,990 for the cheapest version of Tesla’s flagship sedan.
When Tesla first introduced the new Model S in January, the vehicle was listed for just $80,000.
The Model S Plaid has stayed the same at $129,990 today.
New Model S Long Range orders are not expected to be delivered in the US until June 2022.
Tesla just started delivering the new Model X, but it already receives a price increase.
The Model X Long Range went from $99,990 to $104,990 in an overnight update to the online configurator.
The Model X Plaid stayed the same price at $119,990, which as we previously noted, is cheaper than the Model S Plaid.
I’m not sure until this moment in history that I was aware there is a Model X Plaid, in addition to the Model S Plaid. The Model X Plaid was apparently announced in January. That is a car that I have almost zero chance of ever encountering or driving.
3rd Gear: Ram Will Recall 131,777 Trucks Because Potential Fire
This includes 2500, 3500, 4500, and 5500 trucks from model years 2021-2022. As in, brand new ones. Autoblog explains the situation:
For some reason, even when the engine is off, the solid-state intake heater relay in Ram trucks fitted with the 6.7-liter Cummins turbodiesel can suffer a short and catch fire. In March of this year, the company planned to recall about 20,000 vehicles in the U.S. and Canada when it thought the problem was limited to trucks with unprotected relays. In May, Ram discovered the issue occurring even in trucks with protected relays. Now Ram is preparing to recall 131,177 trucks from the 2021 and 2022 model years.
The models in question are:
2021-2022 Ram 2500 (DJ) pickups built between August 3, 2020 and October 8, 2021 (67,597 units)
2021-2022 Ram 3500 (D2) pickups built between August 5, 2020 and October 8, 2021 (39,324 units)
2021-2022 Ram 3500 Chassis Cabs (DD) built between August 12, 2020 and October 7, 2021 (7,317 units)
2021-2022 Ram 4500/5500 (DP) Chassis Cabs built between November 13, 2020 and October 8, 2021 (16,939 units)
Ram says it is aware of about 10 engine bay fires, but no accidents nor injuries due to the fires.
The worrying thing here is that Ram is still unsure why the fires are occurring, and doesn’t have a fix just yet. It says to park your truck outside in the meantime. As always, you can see if your Ram is affected on the website of the National Highway Traffic Safety Administration.
4th Gear: Nippon Steel, A Customer Of Toyota, Is Suing Toyota
Nippon Steel is the biggest steelmaker in Japan, and, as such, also a supplier of Toyota, the world’s biggest automaker. Nippon is now suing Toyota over patent infringement, according to the Financial Times, in one of the lawsuits that could mean everything or nothing. A Chinese steelmaker is also involved.
To be sure, there are technical reasons why Nippon Steel had to sue Toyota. Its main target is Baosteel, but the patent under question is not filed in China so it had to bring the lawsuit in Japan, inevitably drawing Toyota vehicles using the technology under question into the case.
Toyota insists the dispute should have been resolved between the two companies. People close to the carmaker deny any link between tensions over pricing with Nippon Steel and the current lawsuit.
Whatever the outcome of the lawsuit, the implications are serious.
Fumio Kishida, Japan’s new prime minister, has declared the protection of intellectual property as a core part of his strategy to strengthen its economic security.
Japanese companies are gradually becoming more aggressive in hunting down stolen patents and technology leaks, as highlighted by Nippon Steel’s $1.2bn lawsuit against South Korean partner Posco for alleged theft of trade secrets in 2012. (The case was later settled with a $250m payment from Posco.)
Another factor driving the change may be the pressure companies are under to improve their corporate governance. If, in the past, executives were disinclined to upset clients or partners, companies must now also consider the risk of hurting shareholder interests by ignoring the cost of patent infringement. One former Nippon Steel executive says the logic that a company cannot sue its customer is outdated and out of line from global practice.
In the interest of chaos, I encourage more companies to sue their customers.
5th Gear: Europe Is Learning Its Lesson On Chips
The lesson is to not rely on overseas suppliers so much and build the damn chips themselves, according to the FT. Of course, America is in the middle of doing the same thing. This will all likely result in an overcorrection and a glut of chips, though maybe not for years. The chip shortage, of course, has forced nearly every automaker to cut back on production, European automakers like Volkswagen and BMW included.
Plans are in place to build more European chip factories, especially in Germany and France. Intel has announced it will spend €80bn to expand its semiconductor manufacturing capacity in Europe.
But such new plants will take several years to be ready for production, leaving the continent exposed given much of the production of semiconductors has shifted to countries with cheaper labour costs.
In a letter to the European Commission, seen by the Financial Times, [Oliver Zipse, chair of European carmakers’ lobby group ACEA and also chief executive of BMW] said a “concerted European initiative” is needed to establish sites in the region to rival the chip manufacturing strongholds in Asia.
“This unprecedented crisis reveals how unexpectedly vulnerable today’s semiconductor supply chain is, and how urgent it is to minimise our dependency on overseas markets, especially Asia, for these vital components,” he wrote.
Work began on the waterway in August 1823. Teams of oxen plowed the ground, but for the most part the work was done by Irish diggers who had to rely on primitive tools. They were paid $10 a month, and barrels of whisky were placed along the canal route as encouragement. West of Troy, 83 canal locks were built to accommodate the 500-foot rise in elevation. After more than two years of digging, the 425-mile Erie Canal was opened on October 26, 1825, by Governor Clinton.
The effect of the canal was immediate and dramatic. Settlers poured into western New York, Ohio, Michigan, Illinois and Wisconsin. Goods were transported at one-tenth the previous fee in less than half the time. Barges of farm produce and raw materials traveled east, as manufactured goods and supplies flowed west. In nine years, tolls had paid back the cost of construction. Later enlarged and deepened, the canal survived competition from the railroads in the latter part of the 19th century. Today, the Erie Canal is used mostly by pleasure boaters, but it is still capable of accommodating heavy barges.
The Erie Canal is likely responsible for my people ending up in what is called the Western Reserve, a plot of land in Northeastern Ohio that was originally supposed to be part of Connecticut. Well, I should know this for sure except I forgot all the genealogical research my mom and aunt conducted when I was in middle school. My takeaway from that was that white people in America are desperate to find any tenuous connection they have to the Mayflower.
Neutral: How Are You?
It seems that I will be spending December in Los Angeles, which means that I will probably be driving across the country again, which I’m a bit anxious about since the results last time were a bit mixed. One thing is certain: This time Nebraska will in no way be involved.