1st Gear: Making Cars Still Hard
Elon Musk, a human calculator specifically designed to count his chickens before they hatch and also CEO of Tesla, is feeling the pressure to meet his own company’s projections of achieving around 90,000 to 100,000 deliveries in the second quarter of this year, after coming in far under expectations for the first quarter and taking a big hit for it.
Tesla skeptics have said that some of the company’s misfortunes lately revolve around declining demand; Musk has said it’s not that, but rather delivery issues that have been hard to work around.
Part of the crackdown involved Musk emailing delivery employees at the company, which Bloomberg reportedly got its hands on:
“While our demand is strong, we have a lot of vehicle deliveries to catch up to in order to have a successful quarter,” the chief executive officer wrote to staff Wednesday. Musk said that starting Thursday, he’ll hold calls with teams in America, Asia and Europe every two days to “understand what’s needed to accelerate” Tesla’s rate of deliveries.
Tesla shares have plunged 43% this year, with the sell-off accelerating since the company reported deliveries of just 63,000 cars in the first quarter. Musk has struggled to overcome the impact of shrinking U.S. federal tax credits and analysts have voiced concern about the hit the company could take from the trade war with China, its second-largest market.
Tesla has said it expects to deliver 90,000 to 100,000 vehicles in the second quarter. On a call with investors last week, Morgan Stanley analyst Adam Jonas said the “whisper number” on Wall Street was for deliveries to reach the mid to upper 70,000-unit range.
This “leaked” email comes just a week after Musk’s previous “leaked” email that claimed the company was building 900 Model 3 cars per day.
While any form of official public communication would have to be vetted, “leaked” internal emails are fair game. Maybe whoever is leaking these is just really excited about working harder to meet demand that shouldn’t be hard to meet by this point.
2nd Gear: Renault-FCA Merger Boss Promises “No Human Sacrifice”
As if the idea of the French and Italians making cars together wasn’t already terrifying enough, Jean-Dominique Senard, the Renault exec now in charge of making the proposed merger between Renault and Fiat Chrysler work, has promised that it wouldn’t require “human sacrifice.”
This is just an alarming way of saying the deal shouldn’t require job cuts, nor the blood of any first-borns.
Here’s more from Bloomberg:
After spending three days in Japan, Senard will return to Europe to work on bringing Fiat Chrysler and Renault together. He doesn’t anticipate any serious regulatory hurdles for the merger. Asked whether the joining of two European automakers would result in job cuts, Senard said the deal “doesn’t call for human sacrifice.”
The merger won’t involve any plant closures, according to Fiat, although it didn’t mention any potential job cuts when the deal was announced. The combination also has the blessing of the Italian and French governments, which are constantly on guard against the risk of labor unrest.
While this is good news ahead of the deal, the natural implications of merging multiple company resources is to cut down on costs, and if the next generation of vehicles under the merger share parts and platforms, theoretically production and many other processes across all of the companies involved could potentially be consolidated, which sounds like job cuts and plant closures eventually.
But maybe the deal will be a huge success and lead to growth, and that increase in demand will help prevent any major cuts to labor. We’re not even in a recession and General Motors is closing plants and Ford is laying off workers, though, so it’s only healthy to be suspicious of Renault and FCA’s cost-cutting plans.
Wall Street is already licking its chops at the prospect of savings from the major merger, so we’ll see!!
3rd Gear: Trump Administration Hanging the EU Out to Dry
It has been 10 months since President Trump and European Commission President Jean-Claude Juncker met to open trade negotiations between the two governments and they have nothing to show for it.
Bloomberg reports it’s because the Trump administration has been distracted by all of the U.S. governments other trade squabbles:
European officials have blamed a Trump administration that has had little time for dealing with a bureaucracy in Brussels already held in low regard by many in the U.S. president’s orbit. Distracting Trump has been a breakdown in talks with China and a need for a quick deal with Japan to assuage American agricultural interests.
“I don’t think the U.S. is ready to start on the tariff negotiations,” Cecilia Malmstrom, the EU’s trade commissioner, told reporters in Paris earlier this month after meeting with U.S. Trade Representative Robert Lighthizer.
While hashing through trade conditions with the EU isn’t exactly a priority for the U.S., the European Union has a growing stack of issues on hand with Brexit going into full-meltdown mode with the announced resignation of Prime Minister Teresa May, Russia possibly conducting nuclear tests it’s not supposed to be conducting, and major players like France and Germany seemingly going in different economic directions, as Bloomberg points out.
Earlier this month, President Trump set a deadline of 180 days for trade negotiations with the EU and Japan, and while the Japan deal may come through on time, the EU is getting nervous about the auto tariffs the President has threatened if they don’t meet the deadline. That’s not the only problem, again, from Bloomberg:
For Europe, though, the signs are more ominous. The auto deadline will hit just as a new European Commission, the bloc’s executive arm, is due to take over from the Juncker-led one that has governed for the past five years.
With the current European Commission entering a lame duck phase, the global auto sector facing falling sales in markets like the U.S. and China, and fears of a slowdown in the world economy looming large, muddling through may be the most likely option, said Conley, who oversaw relations with the EU at the State Department during the administration of George W. Bush.
We haven’t even finished the trade war with China and we’re already starting another with most of Europe. This isn’t going to end well.
4th Gear: China Leveraging Rare-Earth Materials In Trade Negotiations
Rare-earth minerals. China has them, everybody wants them. You need them for many modern consumer electronics, including a lot of the crap you find in a modern car, and for electric car batteries, among many other things.
China is willing to trade them, there’s just a few obvious conditions, Reuters reports:
China is willing to meet reasonable demand for rare earths from other countries, but it would be unacceptable that countries using Chinese rare earths to manufacture products would turn around and suppress China, its commerce ministry said.
President Xi Jinping’s visit to a rare earths plant last week had sparked speculation that China would use its dominant position as an exporter of rare earths to the United States as leverage in the trade war.
Rare-earth minerals also have a lot of military applications, and while China isn’t naming any names, it’s very clear they don’t want any trade deals coming back to bite them in the ass. That’s fair.
5th Gear: VW’s Chattanooga Plant to Vote on Unionization Again
The employees at Volkswagen’s Chattanooga, Tennessee assembly plant, which builds the Passat and Atlas, will vote on a unionization effort June 12, 13 and 14, Reuters reports. It’s the second United Auto Workers effort to unionize the plant after a failed attempt back in 2014.
The union would represent around 1,700 current workers, and Volkswagen has plans to expand production in Tennessee with an additional 1,000 jobs for electric vehicle production starting in 2022.
Autonews Europe reports the automaker has officially taken a neutral stance on the unionization effort. If successful, it’s a key victory for the UAW, which has struggled to unionize foreign automaker plants in the U.S.
Reverse: Got Milk?
Neutral: How Do We Feel About This Hot New Ferrari?
Tesla and trade stuff is kind of boring, but there’s the new Ferrari SF90 Stradale, an all-wheel drive 986 horsepower hybrid that’s the most powerful car the company has ever built.
It’s difficult to say with a straight face, but it feels a little regular Ferrari, you know? The LaFerrari was literally The Ferrari of the time, and it looked out of this world back in 2013.
This one doesn’t feel so special. How do you feel about it?