There's Some Drama At The Very Top Of Volkswagen

The CEO of the world's biggest carmaker is sorry; travel dropped during the lockdown, but not as much as you might think; and a truckmaker with no revenue is valued in the billions. All that and more in The Morning Shift for June 9, 2020.

Herbert Diess has been the top boss at Volkswagen since 2018, overseeing its 12 marques in addition to the Volkswagen brand itself. But last night he was stripped of that latter role, apparently over some internal drama.

From the Financial Times:

The German group announced a series of sudden management changes late on Monday, after workers' representatives criticised executives for technical problems that delayed deliveries of the new Golf 8 model, and hampered the production of VW's flagship electric vehicle, the ID.3.

The Wolfsburg-based company said Ralf Brandstätter, previously chief operating officer at Volkswagen brand, would take over from Mr Diess at the marque, while group procurement executive Stefan Sommer would leave at the end of the month.

Last week, Mr Diess told thousands of managers that confidential information about the group's software failings had leaked from the supervisory board, which includes members of the works council, as well as representatives of shareholders Porsche SE and the state of Lower Saxony.

The accusation angered several supervisory board members, and at a meeting on Monday, the 61-year-old apologised in person and in writing, according to a person familiar with the matter.

The FT story makes it sound like the real reason Diess is out at VW is because the brand wants to focus on shifting to electric cars, but it's all a bit nebulous. (You can't really disentangle VW's EV push from Dieselgate, it's worth noting. All the company's new EV seriousness comes as a kind of cleanup from the failure of "clean diesel.") And then there's also this:

Later on Tuesday, VW's executive board will discuss the initial findings of an internal investigation into the publication of an Instagram advertisement that the company admitted was racist for its depiction of a dark-skinned man being manipulated by a large white hand.

The truck maker has been around since 2016, but is now making moves in the stock market for reasons—like almost everything involved with stock prices—that are mysterious. The company said earlier this year it would have a pre-production model of its Badger battery-electric and hydrogen fuel-cell pickup truck in September. The company had previously announced a semi. It also says it will have no revenue this year.

None of that really explains what happened on the stock market this week.

From Bloomberg:

The aspiring battery-electric and hydrogen fuel-cell truck maker debuted on the Nasdaq last week following a reverse merger with a blank-check company headed by a former General Motors Co. executive and board director. It's forecasting zero revenue for 2020 and its first $1 billion year won't be until 2023.

Ford Motor Co., by comparison, is expected to report about $115 billion of revenue for this year. And yet Nikola, whose stock more than doubled Monday, traded up another 24% to as high as $90.71 in early trading Tuesday, giving the company a richer market capitalization than the almost 117-year-old maker of the F-150.

Skeptics have long questioned the market's valuation of Tesla, which has yet to post an annual profit. But by pushing Nikola's market cap to $26 billion at Monday's close, investors have taken appraisals of zero-emission vehicle manufacturers named after a celebrated Serbian-American inventor to another stratosphere.

The Badger, for now, remains mostly a hypothetical, as the company seems to be focussing on its semi. The Badger might not even happen at all.

The Badger model that Milton said may have gotten the market excited on Monday might not actually make it into production. In Nikola's public-offering filing, the company said it is focused on making Class 8 heavy-duty vehicles and doesn't expect to build the Badger unless it finds an established manufacturer to partner with.

A spokesperson for the company said Nikola will announce a partner in the near future, without giving more specifics.

All of this seems like a case study in the stock market making exactly zero sense.

But only by 39.8 percent. That's according to the Department of Transportation, which measures these things. I would've expected more, but a lot of states never went into full lockdown, and even in states that did, travel still happened. Still, it was the lowest since 2001.

From Reuters:

The U.S. Transportation Department said U.S. motorists drove 112 billion fewer miles compared with April 2019, for a total of 169.6 billion vehicle miles. In the first four months of 2020, U.S. motorists drove fewer miles than in any year since 2001, traversing 875.9 billion miles, down 14.8%.

The biggest decline in April was in the Northeast, where traffic fell by 47%. Among individual states, driving fell 50.5% in Connecticut, 50.4% in Hawaii, 49.3% in New Jersey and 47.2% in Maryland.

The company sells used cars online, and you can probably see why that might be a smart thing to invest in the pandemic age. The company's initial public offering was Monday, when it sold 21 million shares for $22 each. The company is valued at around $2.5 billion. That is all, in large part, a bet on car buying behaviors changing, not Vroom's profits.

From Bloomberg:

Vroom had a net loss of $41 million on revenue of $376 million for the three months ended March 31, compared with a loss of $27 million on $235 million in revenue for the same period last year.

The COVID-19 pandemic might spur more car buyers to shop online, Vroom said in its filing. According to a CarGurus survey in April, 61 percent of respondents were open to buying a vehicle online, compared with 32 percent before the pandemic, Vroom said.

Britain is exiting the European Union, which means that it needs to strike new trade deals with other countries since it will no longer be a part of the deals the EU made. This is a big deal for pretty much every industry in the United Kingdom, but also, of course, cars.

Reuters reports that Japan and Britain are making quick work of their deal. With the EU itself? Not so much.

Britain hopes ultimately to join the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership and sees trade talks with Japan as a step towards that end.

Japan's trade minister earlier said that Japan would call for an early elimination of automobile and auto parts tariffs in negotiations and adopt high-level rules on digital trade in a post-Brexit trade agreement with Britain.

EU and British negotiators said on Friday they had made very little progress in their latest round of talks about a post-Brexit trade agreement, with just weeks left to extend a year-end deadline to reach a deal.

It's Tuesday, I wish I knew what that meant. New York City is now partially reopened; we'll see how this goes!