We got some Tesla stuff for you this morning, Mazda, Suzuki and Yamaha in the doghouse, some money possibly being thrown at Lotus and more in The Morning Shift for Thursday, Aug. 9, 2018.
1st Gear: Where’s the Money, Elon?
In case you aren’t all caught up: On Tuesday, Tesla CEO Elon Musk tweeted, apparently with zero warning to anyone, that he might take Tesla private and that he has secured the funding to do so. Tesla would be valued at $420 a share, or an enterprise value of $82 billion.
It’s now been three days since he made the announcement, no money has materialized and investors are just as in the dark as everyone else is, reports Bloomberg. From the story:
No one has stepped forward publicly — or privately — to say they’re behind the plan. People with or close to 15 financial institutions and technology firms who spoke on the condition of anonymity said they weren’t aware of financing having been locked in before Musk’s tweet.
And because of the lack of any kind of follow-up, there is a high amount of speculation over what will happen with the company and its investors flying around.
Bloomberg has floated the idea that “Musk could persuade some large institutional and strategic investors to either newly become or remain shareholders in the private company, which could reduce his funding needs.”
Or maybe he has some “unconventional plan.”
At any rate, Dwight Scott, the president of asset management firm Blackstone Group LP’s credit division doesn’t think that buyouts will happen. He told Bloomberg in a separate story:
“It is very hard to put leverage on this company. [If funding is lined up], it’s likely to be lined up in the form of equity, and it’s going to probably be some sort of strategic or sovereign wealth-type investor. It’s not a bunch of people like me on the debt side providing capital to pay off the equity.”
“It’s very hard to lend much more money to a company that — not only is it negative cash flow — but there are still operational issues that the company is working through.”
(Scott also noted that Blackstone Group wasn’t involved in Tesla discussions.)
The New York Times thinks that Tesla could “go dark.”
Basically, when a company does that, it cuts down on the number of shareholding investors (through getting smaller shareholders to sell their stock) so that the company’s share won’t be listed on the Nasdaq anymore. Larger shareholders in the company wouldn’t need to sell their stakes and other investors can “buy or sell them on loosely regulated, over-the-counter markets that are typically the domain of small companies.”
It wouldn’t be a cheap move, but it’d still be cheaper than a leveraged buyout. Yet, the Times also highlights a few potential problems with Tesla going dark:
For example, institutional and individual investors are likely to object to holding Tesla shares that do not trade on mainstream national exchanges. In addition, index funds that own Tesla stock could probably not hold the shares if they were not part of benchmarks like the Standard & Poor’s 500-stock index.
Going-dark transactions traditionally have been the province of tiny companies, said Gilbert J. Bradshaw, a New York lawyer who works with small companies and has written about companies going dark.
“I don’t know of any large company that has done a voluntary deal like this,” he said.
We’ll see how the rest of this shakes out.
2nd Gear: Cheatin’ Mazda, Suzuki and Yamaha
Last year, Subaru was found to change fuel economy and emissions data during new-car inspections in Japan. Nissan, too, was found to give its cars bad inspections to pass regulation more easily. And it’s not just them, either.
Mazda, Suzuki and Yamaha were discovered to cheat on testing in Japan as well, reports Reuters.
U.S. market Mazda vehicles are not affected.
From the story:
Suzuki, Japan’s fourth-largest automaker, said that of 12,819 sample cars tested for fuel economy and emissions since June, 2012, around 50 percent had been inspected improperly.
“I deeply apologize and will lead efforts to prevent recurrence,” Chief Executive Toshihiro Suzuki told a news conference. The company, however, said it did not find any significant problems with actual emissions and fuel economy performance and therefore planned no recalls.
The ministry said it found irregularities in 4 percent of similar inspections on Mazda cars, and in 2 percent of inspections on Yamaha motorbikes.
Yamaha also confirmed it carried out inappropriate testing, and apologized. Mazda said it would hold a news conference later in the day.
The outlet notes that these falsifications are really bad for Japan’s reputation of high-quality and efficient production.
Update 1:05 p.m.: A Mazda spokesperson sent out the following statement:
Report on fuel economy and emission testing confirms no improper alteration or falsification of test data by Mazda
Following a request made by Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT), issued to Japanese automakers on July 9 2018 after the discovery of fraudulent testing practices at other companies, Mazda Motor Corporation submitted a report to MLIT on the results of an investigation into its sample testing of fuel economy and emissions during final vehicle inspections.
The investigation covered JC081 and WLTC2 testing modes and the key findings of the report are:
1. No improper alteration or falsification of test data in either mode.
2. Test data containing speed trace errors* was found in 72 cases out of 1,472 vehicles tested under the JC08 mode. The company has identified two reasons for these errors. Firstly, the system was not set up to automatically invalidate results when a speed trace error occurred. Secondly, test procedures left the determination of speed trace errors up to each individual inspector.
3. All test data has been re-examined and the results show there was no effect on specification fuel economy and emission figures. No such cases were found in WLTC mode testing.
Mazda has decided to take the following steps to prevent a reoccurrence:
• The system will be updated to automatically treat test results as invalid in the event of a speed trace error.
• Mazda has increased the number of employees who check inspection data, including speed trace errors.
Mazda accepts that errors were made on a small number of tests and the situation was identified quickly and steps have been put in place to avoid it happening in the future.
I suspect things will be like they were with Volkswagen: The deeper you dig, the more shit you’ll find. There will probably be more cases like this. What, you thought corporations were honest and law-abiding? Heh.
3rd Gear: Please Give All the Money to Lotus
Last year, we rejoiced because LOTUS WAS SAVED (see also: Bought) by Geely, the Chinese company that also owns Volvo. The Swedish automaker has flourished under its new Chinese rulers, who seem happy to throw money at it and sit back and let Volvo do its thing, and the greatest hope for many of us was that the same treatment would be bestowed upon Lotus.
That might actually start to happen, as Geely is apparently mulling over a $1.9 billion investment to revive Lotus, according to Bloomberg. From the story:
Under Geely’s proposal, the first phase would involve an expansion of Lotus’s Hethel plant with the hiring of 200 engineers, according to one of the people. Later, it plans to set up a second factory in the U.K., potentially in the West Midlands region, and add a new design and innovation center possibly in Coventry, the person said. Two months ago, Geely had committed to a new U.K. design studio in Coventry, Geely said in its email.
The Chinese carmaker is hoping to build Lotus as a luxury nameplate that competes with Porsche and Ferrari.
Yes! Yes! Yes! Yes! Yes! Yes! Yes! Yes! Where can I vote yes on this?
Geely chairman Li Shufu has also toyed with the idea of Lotus cars being built in China. I don’t care where the car is built, just give me a new Lotus that isn’t another variation of the Evora.
4th Gear: At Least We Won’t Feel Those Tariffs... Yet
After President Trump placed tariffs on steel and aluminum, automakers saw a spike in material cost. Jim Farley, Ford’s president of global markets, called the escalation of prices “a significant headwind,” according to Bloomberg. But the company has said that we, the customers, won’t have those higher costs passed onto us.
From the story:
Farley said the company isn’t passing along the higher costs to its customers in the form of higher prices for its cars and trucks.
“This is something that we have to deal with and absorb as a company,” Farley told reporters. “It’s not something we’ll be passing on.”
As it currently stands, Ford has lowered its profit projection for 2018 because of those tariffs. We won’t feel those expensive commodities for now, but there’s no guarantee that we won’t later and in other applications.
5th Gear: France Really Wants Automation
While our own transportation secretary is apparently woefully uninformed about autonomous vehicles, the French government seems like it’s aggressively pushing for autonomous innovation for its public roads.
France wants to deploy “highly automated” cars on its roads between 2020 and 2022, according to Automotive News Europe. From the story:
France’s technology-minded president, Emmanuel Macron, appointed a senior official, Anne-Marie Idrac, to develop a national strategy for driverless mobility – including new laws, regulations for experiments and pilot projects, and cybersecurity and privacy issues.
The first legal proposals are expected by the end of this year and once approved will allow Level 3 and Level 4 passenger vehicles, driverless mass transit such as robotaxis, and automated delivery vehicles.
Part of the struggle that comes with autonomous technology is that the legislation hasn’t evolved to adequately deal with it. Developing new technology will almost certainly outpace drafting new laws, which take a lot of time. Hiring a specialized official to create a national strategy is a smart move.
Reverse: That Big Tire Recall
Neutral: Have You Felt The Tariffs Yet?
Have you noticed any of the prices of the stuff you buy regularly increase because of the tariffs?