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Tesla is raising $2 billion despite Elon Musk saying it didn’t need to, declining sales and the Coronavirus are shutting down car production, and Nissan has slipped behind Subaru in the ranking of biggest Japanese automakers. That and more in The Morning Shift for Friday, Feb. 14, 2020.

1st Gear: Subaru Suffers No Fools, Takes Down Nissan As Fourth Most Valuable Japanese Automaker

Nissan has slipped behind Subaru in the ranking of most valuable Japanese automakers after an absolutely disastrous 2019 for the company, now ranking fifth behind Toyota, Honda, Suzuki, and Subaru

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From Automotive News:

Nissan shares fell to their lowest since 2009 in Tokyo on Friday, leaving the company with a market capitalization of 2.17 trillion yen ($19.8 billion), behind Subaru, Suzuki, Honda and Toyota.

Nissan’s stock is down 19 percent since the start of the year, after declining 28 percent in 2019 and 22 percent in 2018.

Dogged by falling sales in the U.S., Japan and Europe, as well as instability in its most senior management ranks following the arrest of former Chairman Carlos Ghosn, Nissan reduced its full-year operating profit forecast to 85 billion yen ($775 million), down from an earlier estimate of 150 billion yen ($1.4 billion).

Nissan has already announced up to 12,500 job cuts and cutting its dividend payments to help float investments in autonomous vehicle technology and new powertrains, something you would think could also be alleviated through its arrangement with Renault and Mitsubishi, but that alliance is also incredibly rocky right now amidst the fallout of the Carlos Ghosn scandal.

The dividend cut may not mean much to you and me, but its share value is now down to recession-level prices at a time when the economy is otherwise not in the throws of a recession, at least not yet.

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In the U.S., Nissan has an uphill battle turning around its dealership experience and getting away from the market-share-driven strategies of Ghosn that have reduced its profits. It’s going to be a tough few years.

2nd Gear: Elon Musk: Tesla Doesn’t Need To Raise Cash; Raises $2 Billion Anyway

Tesla has announced it anticipates raising up to $2.3 billion through sale of common stock as the automaker enjoys some of its highest stock valuations ever, despite CEO Elon Musk claiming the company didn’t need to raise cash just two weeks ago.

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From Automotive News:

Assuming underwriters exercise their option to purchase additional securities, the latest offering could bring in about $2.3 billion in proceeds, Tesla said in a statement. That will help fund as much as $3.5 billion in capital expenditures this year, a plan the company disclosed less than an hour earlier in a regulatory filing.

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And Auto News recaps what Musk was saying just a couple of weeks ago:

The offering is a sudden turnabout for Musk, who said during an earnings call two weeks ago that Tesla could fund itself without Wall Street’s help. The company had been spending sensibly and not holding back on expenditures in ways that would limit progress, he said.

“So in light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level,” Musk said on Jan. 29. Tesla will use proceeds from the offering to strengthen its balance sheet and for general corporate purposes. The expected trading date for the shares is said to be Friday.

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As is usually the case, the raise of capital is a good thing for the company as it continues to finance an expanding lineup and production growth, especially as the timeline for Model Y crossover production has moved up a few months earlier than anticipated.

Since the money is going straight into growth of capacity for the automaker, some industry analysts suggest Tesla should be raising even more money to help cushion itself.

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This is a company that has yet to ever have a profitable year, but then again, nobody else is doing what Tesla is doing right now with EVs.

3rd Gear: SEC On This

Speaking of going-ons at Tesla, the U.S. Securities and Exchange Commission (SEC) recently closed an investigation into the automaker’s public statements concerning Tesla Model 3 production rates. From Bloomberg:

The investigation the SEC closed in December related to projections and public statements regarding Model 3 production rates. Earlier in 2019, the agency went to court with Chief Executive Officer Elon Musk over tweets he sent about how many cars the company would build for the year. A judge forced the two sides to shore up a settlement reached in 2018 over claims Musk made during his short-lived efforts to take Tesla private.

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But the company isn’t in the clear with the Feds just yet, as the SEC has already opened another investigation concerning the company’s financing. Again, from Bloomberg:

On Dec. 4, the same day the agency closed its second investigation into the electric-car maker in as many years, the SEC sent a subpoena seeking information on a fresh set of matters, Tesla disclosed in a regulatory filing Thursday. The regulator is looking into “certain financial data and contracts including Tesla’s regular financing arrangements,” according to the company.

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There’s not much more clarity on what exact data the SEC is looking into, but thanks to the cash raise, Tesla stock was up despite the potentially alarming news. Coincidence and convenient or part of the plan?

4th Gear: Lagging Demand And Virus Leads To Shutdowns And Cuts

A lot of troubling news about automakers throttling down production across the board today, with Ford, Renault and FCA all having to scale back due to a lack of demand and concerns over the spread of the Coronavirus.

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People don’t want enough of the new Ford Fiesta, despite it being the best-selling car in the UK, via Automotive News Europe:

Ford will reduce Fiesta production to four days a week, down from five, at the plant in a move that will affect 2,200 workers. The reduced output is expected to last until year-end, with a review in May, a Ford spokesman told Automotive News Europe.

[...]

Overall sales of new cars in the UK fell 7.3 percent in January as consumers held back from big purchases due to factors including ongoing economic uncertainty following Brexit.

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Renault suffered its first reported loss in a decade, so it’s making big cuts, via Reuters:

Renault’s (RENA.PA) first loss in a decade triggered a no-taboos commitment to cut costs by 2 billion euros ($2.2 billion) over the next three years from the carmaker on Friday, as it tries to put the Carlos Ghosn affair behind it.

[...]

In a reflection of this sobering assessment of the market outlook, Renault set a lower operating margin target of between 3% and 4% for 2020, down from 4.8% in 2019, and cut its proposed dividend against 2019 by almost 70% from a year earlier.

While Renault faces high investment costs to produce cleaner car models and supply chain problems due to China’s coronavirus outbreak, a major challenge remains moving on from the scandal involving former boss-turned fugitive Ghosn, which strained its relations with Nissan and paralysed joint projects.

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Supply issues caused by the outbreak of the Coronavirus in China has also forced Fiat Chrysler to shut down European car production, from Bloomberg:

Fiat Chrysler Automobiles NV will halt operations at its assembly plant in Serbia due to a lack of parts from China, as the coronavirus continues to affect production around the world.

[...]

Fiat is in the process of securing future supply of those affected parts and production will be restarted later this month, the spokesman said.

The halt to works at the Turin, Italy-based automaker’s Kragujevac facility, which produces the Fiat 500L, is linked to a lack of audio-system and other electronic parts sourced from China, people familiar with the matter said earlier Friday.

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What a messy start to 2020.

5th Gear: Where’s The Dakota, The Goldilocks Ram?

Ram split from Dodge a decade ago to focus on one thing and one thing only: pickup trucks. Two years later it cut its mid-size pickup offering, the Dakota, and now it’s complaining that there’s a Dakota-sized hole in its lineup, according to Automotive News:

FCA CEO Mike Manley once said the lack of a midsize entry is a “clear hole” in the company’s pickup portfolio that needs to be addressed.

[...]

The Tacoma was the top-selling midsize pickup last year with 248,801 units, more than doubling the second-place Colorado’s 122,304. The Ford Ranger came in third at 89,571.

FCA’s Jeep brand sold 40,047 Gladiators in its first year on the market, but the highly customizable off-roader isn’t aimed at the mainstream pickup buyers a midsize Ram would target.

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That’s about all Mr. Manley at Ram had to say about the matter, but I guess we can expect to see another new midsize pickup in the next few years!

Reverse: Orange Trains Leave LA, Spur Juicy Growth

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Neutral: Is There Room For A New Dakota?

Since side-stepping Dodge, the Ram brand has gone on to sell as many pickup trucks as all of Dodge used to sell cars when the two brands were combined. While that’s promising, it’s off the back of big, expensive full-size pickups where even the tiniest market margin means tens or hundreds of thousands of sales.

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The mid-size market is different, and with the new Ranger struggling to defeat the Tacoma and Colorado, does a new Dakota stand a chance? Would it be worth it, even in fourth place?

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