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Tesla Didn't Tell Its Employees It Was Going to Start Closing Stores

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Surprising Tesla cuts, Carlos Ghosn is one step closer to fresh air, mobility might suck, Brexit could push Mini out of the UK, and more in The Morning Shift for Tuesday, March 5, 2019.

1st Gear: Tesla Announced the Layoffs Publicly Before Telling Its Employees

On Thursday, Tesla announced it would finally produce the long-promised Tesla Model 3 trim priced at $35,000, as well as news that it was shifting its sales to an online-only system. The shift is meant to save the company money, but it also means a reduction in headcount for the Tesla sales staff—most of which reportedly didn’t see this coming.


Here’s more from Automotive News:

Many sales personnel found out about the decision when Tesla published a public blog post Thursday afternoon, said the people, who asked not to be identified discussing sensitive matters.


The stock has dropped about 11 percent since Thursday, shaving almost $6 billion from Tesla’s market value. The shares finished Monday at $285.36, the lowest since Oct. 22.

Until last week, Tesla’s store strategy seemed to be one of expansion. The company opened 27 new retail and service centers last quarter, resulting in 378 locations worldwide, according to its letter to shareholders. It was the most openings for a quarter since mid-2017.

Tesla also suggested a brick-and-mortar retail strategy was important in its annual report filed Feb. 19, just nine days before Musk announced the pivot to online sales.


It’s unclear if the Feb. 19 report was just misdirection to maintain a steady stock price ahead of the final decision, or if the choice to lay off employees and slowly scale down its physical stores was made in the nine days leading up to the online sales announcement.

Either way, it’s not the best way to found out you’re out of a job, and if Tesla really needs to cut its retail to turn a profit on its vehicles, it’s a red flag for other potential financial troubles within the company.

2nd Gear: Carlos Ghosn Granted Bail, Still Not Released

Carlos Ghosn, the former Chairman of Nissan and current Chairman of Renault, was finally granted bail on his third attempt earlier today, before prosecutors stepped in and prevented him from being released.


According to Reuters, bail was set at $9 million he agreed to be under constant heavy surveillance, but prosecutors are working to keep him jailed until his trial, which could negatively impact his ability to organize a defense.

Here’s more from Reuters:

A release would allow Ghosn to frequently meet his lawyers and build a defense ahead of his trial. He faces charges of aggravated breach of trust and under-reporting his compensation to the tune of $82 million at Nissan for nearly a decade.

If convicted on all the charges, he faces up to a decade in jail. The ex-chairman of Nissan, Renault and Mitsubishi Motors has denied wrongdoing.

As of Tuesday evening, Ghosn’s bail had not been paid and it is unlikely he will be released during the day, Japan’s Kyodo news agency reported.


The particularly long detainment of Ghosn has evidently played out negatively for the current Japanese criminal justice system, as Reuters reports public opinion has put pressure on reaching a bail agreement.

It’s unclear whether Ghosn will actually be able to be bailed out this week, but being granted bail is a big win for his recently reworked legal team.


3rd Gear: Mobility Ain’t Making Money

Are you tired of hearing automakers talk about “mobility” instead of cars? Well it sounds like automakers may soon be tired of it as well, as Bloomberg reports companies are struggling to make money on their projects that aren’t vehicles people can actually buy.


More from Bloomberg:

Many big carmakers that have outlined ambitious mobility goals, from ride-sharing to autonomous taxi services, that risk being held back by the demands of their primary business: making cars.

While General Motors Co. has been ramping up its manufacturing and electrification efforts, its driverless car subsidiary, Cruise, logged just a fraction of the 1 million miles per month on its autonomous test cars that had been promised investors. The effort to develop driverless technology for a forthcoming ride-hailing service built by Cruise will absorb about $1 billion a year from GM, with other investors putting in billions more.

The pressure of investing in new mobility initiatives has led to partnerships that help balance the costs. Daimler AG and BMW AG joined forces on their car-sharing ventures, Car2Go and DriveNow, after losing money on their respective services. “It takes a lot of money, so it makes a lot of sense to share that burden,” said Michelle Krebs, senior analyst at AutoTrader.


A big example of a mobility project being a dud is Ford’s Chariot commuter shuttle service, which was developed a few years back by Jim Hackett, who now runs the company as CEO.

Chariot failed to alleviate the hassles most commuters face, such as not being able to choose who you ride with or a specific route. “Maybe it was not quite revolutionary enough or affordable enough compared to mass transit,” said Jeremy Acevedo, an analyst at Edmunds.


“Out of all the different things that have been tried by these companies over the last several years, there’s one common thread, and that’s that nobody has actually figured out how to make money on this,” [Sam Abuelsamid, senior research analyst of mobility at Navigant] said. “Whether you’re talking about ride-hailing, micromobility, car-sharing—none of them are profitable.”


Please remember the billions of dollars invested in robo taxis and flying cars the next time any government is forced to consider financially supporting an automaker, should there be another economic crisis.

4th Gear: BMW Could Move Some Mini Out of the Brexit-Torn UK

Mini, the famous British moniker owned by German company BMW, may be forced to move some of its manufacturing and assembly outside of the UK due to concerns over profitability if the government can’t sort out an “orderly” Brexit. From Reuters:

One risk of a no-deal Brexit is that British-made engines will no longer be counted as EU content, pushing the total level in some cars below the threshold of around 55 to 60 percent required in many international trade agreements.

“We have some flexibility on the engine side with Steyr in Austria,” Peter Schwarzenbauer, the head of BMW’s Mini brand, told Reuters at the Geneva car show, referring to another BMW plant. “We would need to make some adjustments toward Steyr.”


Asked by Sky News if BMW could move Mini production out of its Oxford plant in southern England in the event of a chaotic Brexit, Schwarzenbauer said: “We at least have to consider it.”

Britain’s car industry, which employs around 850,000 people and is largely owned by foreign manufacturers, has been rushing through plans to cope with a potential no-deal Brexit, such as building up inventories and in some cases organizing plant closures around Brexit day.


The engine plant BMW is considering moving out of Britain produced over 375,000 engines in 2018, according to Reuters, and BMW produced about 15.6 percent of the cars built in the country last year. Losing that would have a massive impact on employment and the economy.

5th Gear: Peugeot Is Looking for Partners

PSA Group, which announced plans to reenter the North American market last week, is reportedly in preliminary considerations for a partnership with another automaker to make the transition easier. From Automotive News:

Tavares has met with advisers to consider potential collaborations or mergers, said the people, who asked not to be identified because the matter is private.

The deliberations are very preliminary and potential targets have not recently been approached, the people said. Fiat Chrysler Automobiles is attractive to PSA for its exposure to the U.S. and its Jeep brand, but Tavares also sees General Motors as a good fit and Jaguar Land Rover as a possibility, the people said, while cautioning that such deals would be difficult to reach.


The company, which makes the 308 compact and 3008 utility, plans to ship vehicles in from Europe or China from 2026. An alliance could pave the way for local production without a prohibitive investment.


As Jaguar Land Rover’s parent company Tata reportedly has started looking for partners, maybe the timing is right. I feel like FCA needs cars though, so I could also see that deal being struck. Either way, we’ve got seven years to see this play out.

Reverse: The Founder of Buick Died Today in 1929.


Neutral: What Would It Take For You To Buy a Peugeot?

PSA Group has already proved it’s better at keeping its brands profitable tan GM ever was when it had ownership a few years ago. The question now is, what does Peugeot have that Americans may want?