Everything is falling apart for Renault-Nissan, more tariff threats, more Brexit fallout, more alleged corruption in the Trump administration, and bad reviews for Elon Musk as a boss. All this and more in The Morning Shift for Friday, June 10, 2019.
As you may be aware, Nissan’s former chairman and CEO Carlos Ghosn is currently awaiting trial in Tokyo for a slew of corruption-related charges. One of the major issues brought to light by Ghosn’s arrest has been how Nissan’s corporate structure enabled his alleged malfeasance. At the very least, it’s clear there are, ahem, problems with Nissan’s corporate structure that allowed one person to wield so much power.
Which brings us to this weekend, when Renault, which had previously been supportive of Nissan’s internal reform efforts, notified the Japanese automaker that they will not, in fact, be voting for the governance reforms on the table, both Bloomberg and Reuters reported. This is a very big problem for Nissan, because such a move requires two-thirds of shareholders to vote in favor, and Renault owns 43 percent of Nissan. Without Renault’s support, the measure cannot pass.
What is Renault’s problem? They don’t think they have enough influence in the new governance structure, of course. From Reuters:
A Renault source said Senard’s letter was motivated by concern about Renault’s under-representation on the new Nissan board committees being introduced following the arrest of Ghosn, who is now awaiting trial and denies the financial misconduct charges against him.
“It’s not a final abstention, and Renault’s position can still change,” the source said. “As things stand, Renault has not been assured of appropriate committee representation as Nissan’s main shareholder.”
Renault had yet to receive specific details on the proposed composition of each of the committees, another source with knowledge of the issue told Reuters.
This is a lot of boring corporate governance stuff that will, if I had to guess, get sorted in the coming days and weeks. But the bigger picture here is Nissan was at the very least neutral and at the very worst did not support Renault’s proposed merger with FCA. Both Renault and FCA officially blamed the French government, which owns 15 percent of Renault, for the merger falling apart, but Nissan didn’t exactly help.
Bloomberg summarized the rift as such:
Nissan has long complained that the partnership with Renault is unbalanced, and that the French government’s outsize role at Renault, with board representation and extra voting rights, gives the state undue influence over the Japanese carmaker. Nissan owns a 15% stake in Renault, but with no voting rights, and has been seeking more power in the partnership rather than the “closer ties” sought openly by the French state and pursued first by Ghosn and later by Senard.
In short, even though their fates are all largely intertwined, nobody in this alliance thinks they have enough influence over anyone else.
I’m starting to think our Big Boy President only has one card to play:
President Donald Trump said on Monday the United States had signed another portion of an immigration and security deal with Mexico that would need to be ratified by Mexican lawmakers.
He did not provide details but threatened tariffs if Mexico’s Congress did not approve the plan.
This threat comes hours after the New York Times reported this deal has actually been in place for months, long before Trump first floated the idea of highly punitive tariffs with Mexico that would have severely impacted nearly every aspect of American commerce, very much including automakers and car-buyers.
As we wrote regarding fuel efficiency standards, big businesses care not so much about what regulations are, but that they are consistent. Especially in the context of multinational automakers with manufacturing plans extending years into the future, predictability is paramount. Whatever you think of Trump’s tariff threats and massive swings in federal regulatory standards, it is not predictable, and that’s bad for automakers.
Earlier in the year, several automakers, including Mini, Rolls Royce, Vauxhall, and Land Rover, announced plans to temporarily shut down plants in Britain in anticipation of trade disruptions due to the country leaving the E.U. by March. That “British Exit,” if you will, got pushed back to October, but the plant closures were already in motion. Which resulted in this:
Car production in April fell 24% on the month, the biggest drop since records began in 1995, and the broader category of “transport equipment” showed its largest drop since 1974.
Is that bad?
The U.S. Department of Transportation head, Elaine Chao, is married to Senate majority leader Mitch McConnell. As it happens, Chao has created a “special path” for DOT projects in McConnell’s state of Kentucky to get funding, according to a POLITICO investigation:
The Transportation Department under Secretary Elaine Chao designated a special liaison to help with grant applications and other priorities from her husband Mitch McConnell’s state of Kentucky, paving the way for grants totaling at least $78 million for favored projects as McConnell prepared to campaign for reelection.
Chao’s aide Todd Inman, who stated in an email to McConnell’s Senate office that Chao had personally asked him to serve as an intermediary, helped advise the senator and local Kentucky officials on grants with special significance for McConnell — including a highway-improvement project in a McConnell political stronghold that had been twice rejected for previous grant applications.
This comes a week after the New York Times investigation detailed how Chao has used her cabinet position to elevate the standing of her family’s shipping company, which has donated millions of dollars to her husband’s campaign.
Surely there is someone else more qualified to run the country’s Department of Transportation who isn’t married to the Senate majority leader or the heiress to a massive shipping company, which is of course regulated by said Department of Transportation. Perhaps the better question: is there anyone less qualified?
Would I rely on a website like Glassdoor when considering a new employer? Probably not; its ratings are entirely anonymous and the site takes no measures to ensure the reviewer actually worked for—or indeed has any familiarity with—that company.
That being said, this Reuters article is still funny, because they found a new angle rather than the usual bearish market analysts or automotive safety experts to pile on Tesla:
At jobs site Glassdoor, Tesla’s overall company rating fell to 3.2 out of 5.0 stars based on reviews written in the first quarter from a high of 3.6 in 2017, according to historical data compiled by Glassdoor at Reuters’ request. The average rating of the nearly 1 million employers reviewed on the site is 3.4.
Like I said, I wouldn’t take any of this too seriously, at least out of the context of what we already know about working for Tesla, which is that it’s a highly volatile but potentially fulfilling work environment with a healthy dose of hero worship and cult-like atmosphere baked in.
Although, about that hero worship:
In the first quarter, Elon Musk’s CEO approval rating dropped to 52% from 90% in 2017.
Does the latest news alter how you see this quarrel unfolding?