Another boss at Nissan is out, German automakers wonder about their place in this world, and Bugatti might make a car that seats four humans. All this and more in The Morning Shift for Monday, September 9, 2019.
1st Gear: Nissan’s CEO Has Resigned
Nissan CEO Hiroto Saikawa will be out after September 16, the company said Monday, per The Wall Street Journal. Saikawa has been the CEO since 2017, but has not been untainted by the whacking of former company chairman Carlos Ghosn.
Ghosn, you’ll recall, was ousted over some alleged financial irregularities. And Saikawa’s own alleged financial irregularities were revealed last week.
He acknowledged that a change to his stock-based performance compensation, which he called an error, resulted in his receiving excess pay. He said he would return the excess amount, which people involved said was more than $400,000, but he said he hadn’t been aware of the error and didn’t do anything wrong.
I, too, was accidentally overpaid by more than $400,000 recently. I will not be returning the money.
Saikawa, it’s worth noting, was once a top protege of Ghosn who later led the charge to ouster his former mentor from the company. As France24 puts it, “ironically, it was an audit Saikawa set up himself to improve governance in the wake of the Ghosn scandal that revealed the alleged irregularities that led to his own fall.” A brutal self-own, if true.
In any case, as the Financial Times notes, this could mean that closer ties with Renault are back on, after Nissan and Renault’s failed merger earlier this year. It also seems like a lot of people at the top—and not just Ghosn, allegedly—had their hands in the cookie jar.
The investigation has found that several of its senior executives, including Mr Saikawa, received excess payments as part of an incentive scheme that paid out cash depending on Nissan’s share-price performance.
Although the excess payments were not illegal and Mr Saikawa is not accused of any wrongdoing, the operation of the incentive scheme was described by Mr Saikawa as “different to what it should have been”.
Removing Mr Saikawa from his position clears one of the big barriers to closer co-operation between Nissan and Renault, as relations between him and Renault chief executive Thierry Bolloré have soured.
A change at the top of Nissan may potentially open the door to further talks between Renault and Fiat Chrysler about a future combination, months after the pair called off negotiations over a €33bn merger.
Best of luck to whoever runs Nissan next. They’ll need it.
2nd Gear: The Germans Are Getting Nervous
The 2019 Frankfurt Motor Show is this week, which means you will be seeing a lot of new car news, as well as a lot of navel-gazing about whether the big German automakers might, in fact, be past their prime. This seems to be a tradition, following Dieselgate.
Do the young people even care about BMW or Mercedes or Porsche? Bloomberg is contemplating:
Despite sleek new electric models like the Porsche Taycan, the traditional showcase of German automotive excellence risks becoming a platform for protest rather than preening, drawing attention to a generation of young consumers more likely to demonstrate against the car’s role in global warming than shop for a new VW, BMW or Mercedes-Benz.
The end of the combustion-engine era and car buyers more interested in data connectivity than horsepower threaten Germany’s spot at the top of the automotive pecking order. Signs of trouble abound. In addition to numerous profit warnings this year, Mercedes maker Daimler AG delayed a plan to expand capacity at a Hungarian factory, parts giant Continental AG has started talks to cut jobs, and automotive supplier Eisenmann filed for insolvency.
The car’s fragile standing was evident in the reaction to a deadly accident in Berlin on Friday evening when a Porsche SUV crashed into a group of pedestrians. Stephan von Dassel, the mayor of the district where the incident took place, said on Twitter that “such tank-like vehicles” should be banned in the city.
Mostly, though, the theme of the story is how useless and antiquated auto shows have become. As Bloomberg notes, Ferrari and Volvo and dozens of other automakers aren’t showing up at Frankfurt this year. And the show itself has been a target of protests.
Where German brands once tried to outdo one another with outlandish displays like indoor tracks and multistory exhibition spaces, the main drama may take place outside Frankfurt’s sprawling fairgrounds. Greenpeace and Germany’s BUND have called for a mass march on the site on Saturday, joined by groups of cyclists setting off from around Frankfurt to underscore their call for the end of the combustion engine. Organizers are expecting at least 10,000 people.
“We’re in the middle of a climate crisis,” said Marion Thiemann, transport-policy expert at Greenpeace. “The biggest problem is the automobile industry.”
3rd Gear: Bugatti Needs ‘Sexy Financing’
It’s now looking for funding. Bugatti sold nearly 30 special-edition Chirons for $3.9 million at a dinner recently at Bugatti headquarters in France, per Bloomberg. Bugatti President Stephan Winkelmann said that it was looking into building a four-seater as its next car.
The key is financing. Sexy financing, as it were. Emphasis mine:
Unlike the limited-run Chiron — a version of the car that set a 304 miles-per-hour record earlier this month — the new vehicle may take the shape of a four-seater, Bugatti President Stephan Winkelmann said in an interview. It could also leave the world’s racetracks for some off-road driving, he said, a departure for a brand honed on producing race cars going at incredible speeds.
Bugatti, one of a stable of super-premium Volkswagen AG-owned brands including Porsche, Lamborghini and Bentley, is looking at “sexy” financing for the new model, Winkelmann said. Porsche used a German promissory note called a Schuldschein to partially fund the development and production of the battery-powered Taycan.
Somewhat hilariously, Winkelmann is skeptical of electric power—with the Taycan set to dominate Frankfurt this year—but not overly skeptical.
A battery version of the Chiron wouldn’t work, he said — hypercars still need combustion fire power. But he could see a less-expensive daily driver at a lower price, say in the $1 million range, working in a hybrid-electric set-up.
Indeed, my daily drivers are all in the $1 million range.
4th Gear: NBA Player Russell Westbrook Owns Some Dealerships
Westbrook, who now plays for the Houston Rockets and was the 2016-2017 NBA MVP while with the Oklahoma City Thunder, has, like many a professional athlete before him, a growing network of car dealerships bearing his name, according to Automotive News. One of them even has a basketball court inside.
The 30-year-old has a burgeoning group of five stores with [Dealer Bob Nouri] in his native Southern California.
He acquired his first store, now called Russell Westbrook Chrysler-Dodge-Jeep-Ram of Van Nuys, in 2016 — a year after Nouri moved to California and sold his stake in his Oklahoma dealerships. Westbrook added three Hyundai stores in Orange County in 2017 before investing in an Alfa Romeo-Maserati dealership in Van Nuys this year. It has been one of Alfa Romeo’s volume leaders.
Westbrook’s original store has a unique feature befitting an NBA star: an indoor basketball court.
“The customer comes in while they’re sitting there dealing with managers and salespeople, [and] the kids are playing,” Nouri told Automotive News. “You’d be amazed how many customers, after they make their deals [and] while they’re waiting to finance, go there and start shooting basketball.”
Russ is as good a dealer to buy from as any.
5th Gear: AutoNation CEO Cheryl Miller Has Some Mild Takes
AutoNation is the biggest car retailer in America, and its CEO, a 47-year-old who has been in the top job since July, gave an interview to Bloomberg. Miller is not high on Nissan:
Think about it from a consumer lens: If I draw the lucky straw, and I get the incentive, my vehicle costs $5,000 less than my neighbor’s vehicle. How does that feel from a brand perspective? And people look at the dealer.
We have a smaller Nissan footprint today than we did two years ago, and five years ago.
This isn’t just specific to Nissan, but if you have brand damage, sometimes it takes time to sort it out.
And also skeptical of Tesla:
With Tesla not having retailers, I’m not sure how well that’s served them in their service model. They can’t handle trade-ins, for example. From a customer value proposition, there’s some benefits to having retailers.
Is their core competency retail? Is their core competency servicing vehicles?
Reverse: Government Regulation
National Traffic and Motor Vehicle Safety Act, U.S. legislation that required automobile manufacturers to institute safety standards to protect the public from unreasonable risk of accidents occurring as a result of the design, construction, or operation of automobiles. A closely related legislative act, the Highway Safety Act, included nonoperational safety factors, such as highway design, and it empowered a new agency—the National Highway Safety Bureau (NHSB), which was in 1970 succeeded by the National Highway Traffic Safety Administration (NHTSA)—to mandate uniform safety standards. Both acts were passed by Congress and signed by Pres. Lyndon Johnson in 1966.
By 1965, automobile accidents had become the leading cause of death of Americans under age 44. Both government and manufacturers had largely ignored the issue, though, until a series of events focused national attention on automobile safety and culminated in litigation and automobile recalls in the years following the establishment of the NHSB and NHTSA. A relatively obscure lawyer named Ralph Nader emphasized the issue of automobile safety in his 1965 book Unsafe at Any Speed, which focused on the alleged defects of the Chevrolet Corvair. Extensive congressional automobile safety hearings the following year, chaired by Senator Robert Kennedy, grabbed the spotlight when they revealed that General Motors, the manufacturer of the Corvair, secretly employed detectives in an unsuccessful attempt to find personal “dirt” on Nader. Those hearings created the necessary popular support to pass a federal law that made automobile manufacturers responsible for the safety of their products.
During the next decade, lifesaving shoulder-lap belts, collapsible steering columns, strengthened door latches, shatterproof windshields, and protective dashboards became the mandated standard. Those new legal requirements led to a record number of product safety lawsuits and many product recalls and, ultimately, to significantly lower traffic death rates. Additional regulation was added in 1975 with a 10-year schedule of improvements to the fuel efficiency standards of new cars. Critics from the automobile industry and many free market advocates decried such requirements as overly bureaucratic edicts that restricted consumer freedom and were far too costly for industry.
Neutral: Nissan Will Probably Be Fine When This Is All Over, Right?
It seems like established car companies are mostly unkillable, for the same reasons that startup car companies seem like an impossible proposition.