Where There’s Smoke, There’s Fire - Elon Blows Up the Internet

If you’ve been on the internet this week, or maybe listened to the news, or just caught the end of your Victorian village’s town crier’s update, you’ll know that a certain executive from an automotive company smoked a joint this week. And I’m sure you don’t have to guess which one. And I’ll spare you the incrimination of someone smoking weed because, let’s be honest, it shouldn’t be that big a deal. It’s decriminalized in California just like it should be everywhere despite the fact that it’s still illegal officially nationwide.

But when your company is on the ropes trying to break into a notoriously difficult industry, when you hold interviews with the New York times where you complain about working so hard and not having time with your kids, where you also offer to give up the keys to the office to anyone who thinks they can do better, and when you bitch about how fickle investors are for short-selling your stock, just about the last thing you should be doing as a CEO is going on a live web show and toking a big old joint while sipping on some whiskey. Yet that’s exactly what Elon Musk did this week.

The same week when the company’s “chief people guy” decided he isn’t returning to the company and when the chief accountant decided to quit after less than a month on the job. The same week when Tesla bonds hit a record low and when the stock had officially lost a quarter of its value since Musk himself tweeted about taking the company private. And the same week that Musk engaged in an expletive-filled email battle with a BuzzFeed writer whom the CEO called a “fucking asshole” after reaffirming his claims that the Thai cave rescue hero was a child rapist while refusing to cite any actual facts or sources.

What you probably didn’t hear about this week was that Jerome Guillen, who has been with Tesla for eight years, was promoted to the head of automotive operations, where he would handle all production, program and supply chain management. Leaving aside that that’s almost certainly all too much for one man to master, it shows that the company is rewarding people for doing well and potentially taking work off Elon’s plate even though Jerome will report to Musk, rather than the Board of Directors.

Also overshadowed this week was the fact that the Model 3 outsold all passenger sedans in BMW’s lineup - combined! If you factor in the SUVs and crossovers, it’s a different story, but the Model 3 is actually crushing it with sales right now and the production is humming right along. Plus a near production-ready second generation Tesla Roadster popped up at the Grand Basel looking amazing.

Instead of those beacons of hope for a fledgling automotive company, we are hearing very little about the actual cars, and very much about their problem-riddled CEO. In the absence of new hype to distract from the company’s problems, Elon has himself become the distraction despite the fact that that the company doesn’t need distractions since it’s not doing super super poorly right now. The morning after the weed smoking, Tesla’s stock dropped ten percent, recovering to close down about five percent from the previous day. Recall that Elon’s compensation is tied to the company reaching specific stock price goals, so he is in fact shooting himself in the wallet and through that wallet into his ass with every misstep. And it just seems like he can’t help himself. For his sake and for the company’s sake, I hope Elon either grows up or gets out, because having a glorified frat boy at the helm of a company is not a recipe for sustained success.

Authored by
Devlin Riggs

Ford Finding it Hard to Figure it All Out

I’ve been talking about the stock market in my podcast recently, and it’s not because I’m some obnoxious MBA who loves illustrating the fact that I know what financial terms mean, in fact I don’t even own any stock outside of my 401k. But when car companies are publicly-owned, the products they make - the vehicles we get - are often a consequence of profit seeking for the sake of shareholder satisfaction. Now I’m going to try to not get too far into the weeds, but Moody’s, a service for investors, downgraded Ford from Baa2 to Baa3, which actually means like it sounds - baaaaaad. It’s a step above junk bond status, which may be a term you’ve heard that basically means if you invest in this stock, you are investing in junk and you should not expect to see a return.

So why, you’re saying, is this happening now, mere months after Ford made the decision to kill off all its cars and focus on more profitable vehicle segments in a transparent attempt to appease shareholders? Well, according to Moody’s, because of an “erosion in the company’s global business position and the challenges it will face implementing its Fitness Redesign program,” which is a nicer, fancier way of saying that Moody’s doesn’t believe Ford knows what they’re doing to right the ship. And there’s been a lot of news this week that might lead you to believe that Moody’s is exactly right.

If you’ll recall, when Ford announced that the U.S. would no longer receive any cars, they did qualify that by promising us a new Focus Active, which would be a jacked up hatchback similar to the Subaru XV Crosstrek. Well, what Ford didn’t count on when they made that announcement, was that Donald Trump was going to come in and slap a 25% tariff on cars made in China, which the Focus Active is. So guess what, America, no Focus Active for you, leaving the EcoSport as the most entry-level vehicles for U.S. consumers. The company says that it doesn’t think it’s going to be a huge deal because they were only likely to sell about 50,000 of them a year, which is still a lot. Considering that, through July, Ford has already sold more than 114,000 Focuses and Fiestas this year, I think maybe their target was a little low and that Ford may be seriously shooting themselves in the foot by giving up that many sales to GM, Honda, Toyota, Kia, Hyundai and basically every other car maker that has a vehicle in the compact and sub-compact segment.

Then the company came out and said they’ve reversed course on the Mondeo, which is the same car as the Fusion here in the U.S., saying they are not going to kill it off, but rather revamp it later this year because it’s a “core part” of their lineup. Uh, it wasn’t so core that just a few months ago you were ready to scrap it and move on to baby Broncos and Ranger Raptors! And if it’s important enough to get new powertrains, interior and exterior upgrades and enhancements to the hybrid range in Europe, why the hell would it not be worth trying that here, especially if they’re using the same basic car with the same basic safety features?! As of Monday, Ford has sold 97,800 Fusions in the U.S. this year, and I refuse to accept that there isn’t a way for the company to make more money with a mid-sized sedan that sells that many copies.

And then there’s the Mustang. Poor, sweet, simple Mustang. You’re the best ever version of yourself right now and, if the rumors are true, this is how I want to remember you. That’s because the rumors say that, in order to cull the number of platforms to just five, the next Mustang might share the same chassis as the Ford Explorer and Lincoln Aviator mid-sized crossovers. You know what other sports cars share their platform with crossovers? None! Ford, while not going far enough to confirm the rumors, did say that they would not “bastardize” the Mustang and that the next generation car would be just as Mustang-y as all previous generations, but let’s be clear: when you compromise on a vehicle’s platform for cost-cutting, you change the inherent character of the vehicle. No matter how much additional bracing you add, no matter what suspension bits you tack on, you’re still driving an Explorer that has been modified to become a Mustang. Add to that the fact that the next Shelby GT500 is allegedly not going to be available in a manual transmission and you can probably hear, if you listen closely enough, Mustang purists crying tears of pure 10W-30.

Finally, Ford announced, with much fanfare this week, the creation of the Enterprise Product Line Management group, a special committee that has been tasked with studying what customers want and then turning that information into creating more profitable, competitive vehicles. Uh, correct me if I’m wrong, but isn’t that just what the entire freaking company should be doing? What is the purpose of a company if not to be making products that people want and then making money from that? Like what have you people been doing until this group was created? Was there an actual plan behind the killing off of all the passenger cars, and will this group have the ability to resurrect those vehicles if their market research indicates there’s a market for them? This team is apparently split into ten divisions: family utilities, urban utilities, rugged utilities, performance vehicles, luxury vehicles, compact trucks, F-Series, commercial vehicles, electric vehicles, and emerging market vehicles. You’ll notice that none of those categories is “passenger vehicles,” which leads me to believe that, no matter what these guys decide, we’re not getting the Focus, Fiesta or Fusion back.

But the pressure on these groups is going to be crazy. They are not only supposed to be in charge of creating new vehicles and bringing them to the market and achieving a specific level of profitability, but they’re meant to ensure consumers are “engaged” with Ford offerings, whatever that means. I like a good challenge in my work, but I don’t like no-win scenarios, and this sort of sounds like a game of automotive survivor, where the last remaining head of one of these divisions gets to be the next CEO and face scrutiny on investor calls for why their profit margins still suck.

And they really, really suck right now. Ford’s global profit margin is just 3% and in North America, it’s down to 7.4%. Which again points to why Moody’s has a pretty negative outlook on Ford’s future. Yet Ford has come out and said it plans to spend $740 million on revamping Michigan Central Station, the old train station in Corktown in Detroit that it recently bought. One really has to wonder where the company’s priorities are.

The overwhelming sense I get from this collection of stories is that Ford lacks a strategic direction and doesn’t really have any idea what customers want. They hear analysts say “well SUVs are the big hot thing right now” and decide “okay, we’re all in on SUVs!” without ever giving much thought to what that means for their overall product line or to what the customer journey might be. I said this after they first announced they were killing off cars, but by completely lacking an entry-level car, Ford is essentially telling first-time buyers or customers without much money to spend that they don’t care about them. And for a non-luxury car company, that’s a mistake, because it’s not like kids grow up with big posters of a Ford Edge on their walls as something to aspire to. Instead they’ll get a Hyundai, and stick with a Hyundai because it’s what they know and are comfortable with.

For so long, Ford looked like they had it figured out by avoiding bankruptcy during the big recession bailout and by hitting home runs with the Mustang, Focus and others. But the more news that comes out, the less it seems like they are going to be able to keep up with GM, who has repeatedly affirmed its commitment to sedans, or with any number of foreign manufacturers. Maybe this Enterprise Product Line Management group will figure it out and become what the company should have been all along - listeners to the consumers they serve rather than the shareholders.

Authored by
Devlin Riggs

Last Week at The Quail

This week was Monterey Car Week and the Concours d’Elegance in California, where the weather is beautiful except for when it’s on fire, which part of it is, but fortunately not along the central coast where there were hundreds of immaculate cars showcased. I’m going to have to make it out there sometime, but since I haven’t, go check out Autoblog or any other number of sites with massive galleries of all the amazing old cars on display this week. One of which was the 1970 Ferrari 512S Modulo Concept which looks just about as close to a space ship as a car ever has. In addition to the classics, several automakers brought along some new cars or concepts which I thought deserved their own special feature this week.

First was Infiniti’s Prototype 10, which follows the more classically styled Prototype 9 that the company brought to Pebble Beach last year. This one is also a single seat racer in the style of 1950s-era race cars, but with Infiniti’s current styling language applied. Not only that, it’s apparently sat upon the new rigid, adaptable electric vehicle chassis that may underpin future Infiniti EVs, giving it much greater relevance than your run-of-the-mill concept. Of course this will never see production, and we don’t know exactly what drives it anyway, but man is it pretty to look at.

Another pretty silver single-seat electric racing vehicle showed off was the Mercedes-Benz EQ Silver Arrow, which, like the Infiniti, is a modern take on a classic race car. Unlike the Infiniti, it’s a modern take on a specific race car, the 80 year-old Silver Arrow, a Mercedes that set a public road speed record of 269 miles per hour in Germany way back in 1938. Also unlike the Infiniti, we have performance figures for the EQ Silver Arrow, which lays down 738 horsepower, 80 kilowatt-hour battery that gives the car a respectable range of 249 miles. But I doubt you’d get that far with instant torque and more than 700 horsepower on tap. While the Infiniti will never see the light of day through a dealership’s windows, the drivetrain in this car could very easily slot into an AMG performance car like in the EQ range. Sort of like a rival to the Porsche Taycan or forthcoming Tesla Roadster.

Audi was like Electric Vehicles? Oh ja, we do that too, so they brought out their PB 18 e-tron concept which, while having the worst name of the three electric concepts, also had the worst looking style. Not to say it’s bad, but the Peanut Butter 18 just didn’t quite reach the high bar set by the Infiniti and Mercedes. It’s not a single seat racer, but rather a shooting-brake style two seat wagon-y hatchback thing that still features Audi’s recent trend of the front of their cars being 100% grill despite the fact that electric cars do not need grills. It also beats the Infiniti by having a real powertrain, with a 95 kilowatt-hour battery powering three electric motors putting out a combined 671 horsepower and 612 pound-feet of torque, accelerating the car to sixty in just over two seconds. It’s apparently good for a range of 310 miles on a single charge. This thing looks like it’s straight out of Blade Runner of Minority Report. It’s very, very futuristic and I think we’re in for a very exciting time in car design if these new looks are actually implemented in future production cars.

It wasn’t all electric cars though, as Lamborghini, who haven’t found an electric motor violent enough to put in their cars yet, unveiled the Aventador Superveloce Jota or SVJ. While only 30 horsepower more powerful than the Aventador S, how much more power do you need than the SVJ’s 759 and 531 foot-pounds of torque. It comes from a no-doubt throaty 6.5-litre V12 and drives all four wheels, which also feature four-wheel steering, combining with active aerodynamics to make the car especially agile. Of course it has set a Nurburgring record at some time faster than other people that is totally meaningless. It’s lower, it’s stiffer, it has more downforce and it’s faster than the Aventador S, which means it will be absolute hell to drive around anywhere that isn’t an immaculate race track, but I’m sure that isn’t going to stop some pharma bro or tech entrepreneur from trying. After all, they can afford the chiropractic work this car would create the need for.

Not to be outdone, Ferrari brought along a new car, or rather, a convertible version of a car we’ve previously seen, the 488 Pista. It’s the same as the coupe, with a twin-turbo 3.9-litre V8 engine churning out 711 horsepower and 568 foot-pounds of torque. But with the top down, the car is 0.4 seconds slower to 124 miles per hour than the coupe, taking a whole eight seconds, which I know will probably be a deal breaker for so many people.

On the more affordable end of the spectrum, the new BMW Z4 M40i was unveiled with a sharp “frozen orange metallic” paint job and it’s quite a dashing looking vehicle. Of course we’ve seen virtually every part of this car by now, so the complete package isn’t really a surprise, but what will be a surprise are performance figures, because they have embargoed those until September 2018, which is obnoxious. It’s apparently quick though, getting to sixty in less than four seconds, so draw your own conclusions about the car and its Toyota Supra sibling from there.

Back to the extreme end of the spectrum, Shelby Supercar, one time makers of the fastest car in the world, surprised everyone by bringing a new car to Pebble Beach this year. Called the Tuatara, SSC has worked with Nelson Racing Engines to build a 5.9-litre flat-plane crank twin-turbo V8 flex fuel engine, and this is where it gets a little special. If you run this car on E85 gasoline, it will make 1,750 horsepower. If you only have access to 91-octane dino juice, it will “only” make 1,350 horsepower. While we have no idea how fast it will actually go when those ponies kick in, it does apparently have a super low drag coefficient of just 0.279, which slightly worries me that it doesn’t have enough downforce, which you might want when your car is approaching 2,000 horsepower. The car is not desperately pretty and it is painted in a sort of matte primer color, but the point of this car is that number. The reason you would buy one of the 100 they are supposedly going to make, and have been saying they are going to make for seven years now, is that number. And the reason the police report will cite when it finds your body in three different locations in two different counties will also be that number.

Finally debuting this week was the Bugatti Divo, for which we’ve been getting so many teasers, it just seemed like Bugatti wanted to whip a dead horse, and they whipped it real good. But for good reason, the Divo, based on the Chiron, is a beautiful car and was shown with very fetching teal color accents. It’s 77 pounds lighter than the Chiron, generates almost 200 more pounds of downforce and will touch 236 miles per hour if you have a place where doing that is possible. Instead of just raw speed, this car was built with cornering in mind and was named after French racing driver Albert Divo, who raced a Bugatti to two Targa Florio wins back in the 1920s. It’s much more attractive than the Chiron, which is saying something, and probably worth all of the $5.8 million it would take to buy one because it’s only going to appreciate in value. Oh and if you’re thinking of saving up for one, don’t bother because they’re all already sold because there are way too many rich people in the world and I’m not one of them.

Which brings us to the auctions. No Monterey Car Week is complete without a few ridiculous vehicle sales, and this year was no different. One of the special cars that went up for sale was a 1987 Porsche 959 Komfort, which is one of those “homologation specials” we talk about; basically a car that was produced in road-going form just so the company could make a race car version of it and dominate, which Porsche did in Group B racing. There were only 249,959 Komforts ever made, so this was always going to bring a lot of money. Unfortunately for the owner of this vehicle, the trailer carrying it disconnected from the car towing it and the 959 plowed straight into a tree, and the owner just decided to sell it that way. So yeah, there was a very, very totalled-looking Porsche 959 auctioned off, and you know how much it sold for? $467,500. Amazing. I’m sure the buyer has some plans for it that don’t include leaving the tree-shaped damage to the front end.

But the real star of the auctions was a 1962 Ferrari 250 GTO being sold by Greg Whitten, an early Microsoft employee who invested very, very wisely. Only 36 of this vehicle were ever made and this particular 250 GTO, one of four upgraded by Scaglietti and one of only seven to have a more aggressive coachbuilt body designed by Pininfarina, making it lower, wider and shorter than other 250s. So you can imagine that this sold for a bit more than the $467k the crashed Porsche fetched. And yeah, it did okay. $48.8 million worth of okay, making it the most expensive car ever to sell at auction. Amazingly, that’s not even the most expensive Ferrari 250 GTO ever sold, as last year, a 1963 model sold in a private sale for $70 million, with another one going in 2013 for $52 million. So it just goes to show, you can get a better deal at an auto auction. You just may have to widen your definition of “deal.”

Authored by
Devlin Riggs

Tesla’s Troubling Twitterer-In-Chief

Photo by The New York Times

Our top story last week concerned Tesla CEO Elon Musk’s tweet about taking the company private and my assessment was that it would solve all the company’s problems. I should have qualified that a little bit in that it would solve all the problems except the one sitting in the company’s fanciest chair - Elon himself. While it’s a great move for him to continue to exert more control over the company he founded, his control is pretty much the last thing the company needs to be successful. Which makes it all the more strange that he gave a long, winding interview to the New York Times this week where he was described as both laughing and crying and where he invited anyone to take over the company if they thought they were better suited to do the job. Let’s review the qualifications for how some other CEO might do something different then.

First, another CEO probably wouldn’t work 120 hours a week, neglecting his kids and setting an unhealthy and unreasonable example for the working environment for his colleagues. They probably shouldn’t take Ambien in order to fall asleep or go on drug-induced social media rants as some investors suspect he’s doing instead of sleeping. 

Second, a replacement CEO might consider consulting board members, attorneys, accountants or any other department before casually tweeting out a threat to buy out the company, which Musk did to the shock of his Board of Directors and to the displeasure of shareholders and the SEC. Not only has the company been subpoenaed for information related to the claims made in the tweet, there have also now been four lawsuits seeking class action status against Musk and Tesla because of the instability rocking the company’s stock price in the wake of the tweet. As it turns out, when you tweet out financially relevant information saying “funding secured,” you actually really must have your funding secured instead of only having some vague interest from a shady Saudi fund that, according to multiple reports, is not capable of financing the funding that you are meant to have secured. 

Finally, another CEO might focus less on investors short selling stock and more on the actual vehicles being produced to ensure that company is succeeding and fulfilling the promises the CEO sets for it. CNBC reports that Model 3 production is humming along at more than 5,000 units a week, which is the benchmark Musk set for the company, but Carscoops also reported that a $78,000 Model 3 was sent to a buyer kitted with three white door trim panels and one brown one. It seems unlikely that the buyer would’ve specified something like that and for nearly $80,000, you might hope that a company could look at its finished product to ensure that all the boxes were ticked before shipping it off to a buyer. There were multiple occasions during the production and shipment process where this problem might’ve been spotted but wasn’t, and a CEO should make it a priority to ensure that quality control on luxury vehicles is a little tighter than that.

So the invitation stands, if you think you can do a better job than Elon Musk, he’ll hand you the keys himself. Unless, of course, it turns out this is another one of those promises he come up just a bit short on.
 

Authored by
Devlin Riggs

TariffWatch Continues: Harley Woes Edition

As TariffWatch continues, I had 16 browser tabs opened to different reports about the effects of proposed tariffs on companies just from this past week! On Tuesday, Donald Trump tweeted, "We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out - and it won’t take very long!" What exactly “even out” means is very much under debate, but what isn’t being debated is the fact that nobody outside the Oval Office wants any sort of tariffs to happen, and that all projections suggest a really bad outcome for everyone.

Having previously threatened as much as a 25% tariff on vehicles assembled outside the United States, Trump changed his mind a bit again last Monday, saying maybe just 20% will do. What it will actually do is raise prices, by quite a lot. Assuming the 25% tariff, consumers, to whom the additional cost would be passed, would face an average of $5,800 added to every car, totaling about $45 billion in extra taxes paid every year. This is applied to all vehicles considering the steel and aluminum tariffs and anticipated tariffs applied to auto parts used to assemble cars within the U.S.

German luxury vehicles would be the models hit the hardest, since their high prices mean the tariffs would drive their costs to consumers to truly untenable levels. This not only means fewer sales, it means we could start seeing manufacturers start withholding their cars from the American market. According to Reuters, the tariffs would destroy the business case for niche market vehicles like convertibles and sports cars, which are sold in low volumes and for high prices. If companies can’t sell them and can’t make money on them, why produce them? Or at least why send them to America? Hell, even the very American Toyota Camry, the best selling car in the country, would see its price increase $1,800.

Ostensibly, these tariffs are meant to harm German manufacturers, which they would, to the tune of around $5.24 billion, according to analysts at Evercore ISI. But it’ll hurt other manufacturers, including American ones, especially FiatChrysler, whose profits would take an $886 million hit if the 25% tariff is enacted.

But it’ll create jobs, right? Well, the Council on Foreign Relations estimates that the 25% tariff will actually cost the country between 18,000 and 40,000 auto industry jobs just by the end of next year as companies look for ways to lose less money. And that’s the most conservative study! The American Action Forum estimates a net decrease of 157,000 jobs while the Peterson Institute for International Economics is even more dire, suggesting 195,000 industry jobs will be cut. And that study goes on to suggest if other nations retaliate with tariffs, as is expected, the total industry loss would be around 624,000 jobs.

While this tariff isn’t yet in place and may not be enacted if anyone can talk any sense into Trump and his advisers, the tariffs placed on aluminum and steel are already wreaking havoc on American companies. After their metals were taxed, the European Union responded with tariffs of their own on blue jeans and Harley-Davidson motorcycles. They probably would’ve taxed apple pie too, if that were feasible.

Unfortunately, Europe is Harley’s second biggest market, where they sold more than 40,000 bikes last year, and an increase of between 6 and 31 percent in Europe means their bikes are going to run on average $2,200 more expensive, which is a tough sell. They were already hurting from the steel and aluminum tariffs, which caused costs to rise $15-20 million and the tariff is added an additional $35-40 million to that just this year. Next year they expect to lose more like $80-100 million.

To counteract this, Harley announced that they would move some manufacturing to Europe to avoid the tariffs, which is sort of the exact opposite effect I think Trump was hoping these taxes would have. Previously having called Harley a true American icon, Trump engaged in one of his wildly incoherent tweetstorms, ending with a threat that the company would lose their aura and be hit with taxes like never before. Well, they already are, and it’s your fault, buddy.

Honestly the most terrifying part of all of this is the fact that, while we’re over here slamming doors and storming off to build walls, China announced this week that after July 28th, they will roll back foreign ownership restrictions on joint ventures in the country. After decades of requiring companies from other countries to find a Chinese company to take the lead when they wanted to sell their cars in China, the country is saying, “Hey Tesla, BMW, everyone else! I know you’re getting a raw deal over there in America, why don’t you have a seat over here. We’re keeping it nice and warm for you.”

When even Toyota has to issue a public comment stating that its 137,000 employees in the U.S. don’t pose a national security risk, you know something is backwards, and what that is, is progress. What, I think in many people’s mind, made America great was its role as the guiding force in international commerce, politics, and trade. Now we’re seeing China step up and challenge us for that role and instead of forging forward as we have, we’re stepping back and saying, “Hey, do whatever you want, we’re fine on our own.” The problem is, in this situation, we're not fine on our own and it’s we the people who pay the price, whether through increased costs or restricted choices. Trade wars are the true enemies of automotive enthusiasts and consumers in general.

Authored by
Devlin Riggs

24 Heurs du Mans Round-Up

The annual 24 Hours of Le Mans race occurred last weekend and, after years of trying and failing, through breakdowns and superior competition, Toyota finally won the thing, becoming only the second Japanese manufacturer in history to win, the other being Mazda, who used to have freaking awesome race cars. It certainly helped Toyota this year that Porsche and Audi no longer competed in the LMP1 class, leaving them as the only factory team in the World Endurance Championship. It’s awfully easy to come in first when you have the fastest car in the fastest class without any other competitors. Regardless, they didn’t breakdown, which itself is a feat in endurance racing. Porsche meanwhile dominated the LMGTE Pro and Amateur classes with its 911 RSRs, with the number 92 Pink Pig Porsche winning the pro class. You can clearly see why it was called the pink pig, and appreciate that fans were calling the car’s pit stops “pigstops.”

Overall, the race was pretty uneventful, which makes for pretty boring watching. Part of that comes from the fact that new rules meant that no team was allowed to run more than 14 laps per stint and that there was a per-stint fuel limit that was, in many cases, less fuel than the cars were capable of holding, making for some headaches in the pits and a few mistakes that cost drivers time. Another part is because the rules have stifled competition so much that racing has become too expensive for many manufacturers to take part. Thus, Porsche and Audi’s departure for Formula E.

Fortunately, things will be changing in a couple years, as the FIA announced shortly before the race some exciting changes that are coming to the World Endurance Championship. The LMP1 class which currently consists only of Toyota, will be scrapped entirely, being replaced instead with a hypercar-type class that will impose limits on car power, weight, weight distribution, aerodynamics and downforce, but with more freedom to design the cars more closely to road-going hypercars and supercars. This not only gives the race a bit more relevance to real-world drivers, it gives companies a chance to test technology they may be actually able to use on the roads in their hypercars. The class will still mandate a hybrid drivetrain, but internal combustion engines can be up to the manufacturer, so long as they’re limited to 697 horsepower, which is still a lot, especially when paired with a standard 268 horsepower hybrid electric motor. Race commissioners say they want to move the series to the point where “manufacturers can win at Le Mans on a limited budget,” and I’m sure that’s relative, but still a good sign that may invite more competition moving forward. The new rules will be introduced in 2020 and we’ll apparently get to vote on the name of the class, so I look forward to watching the hypercars compete in the racy mcrace-face class in the not-too-distant future.

Authored by
Devlin Riggs

Why Can’t We Be Friends: Automotive Partnerships Pick Up

The automotive landscape is in a pretty significant state of flux right now, with sales down, tariffs up, and a trade war looming around the corner. But, driven by the ever-increasing pressure to generate value for their shareholders, automakers can’t just sit back, shrug and say, “hey, shit happens, guys.” So what we’re seeing is a dramatic uptick in the number of partnerships between automakers and investment by automakers in technology companies. The largest of these is undoubtedly Nissan-Renault-Mitsubishi partnership, heralded by Carlos Ghosn, which is an alliance, but not a single company like the Volkswagen Automotive Group, which holds Audi, Porsche, Bugatti, Skoda and others. Just by cooperating, Nissan-Renault-Mitsubishi saved a collective $6.6 billion last year alone. This is by sharing development costs of new platforms, technologies, parts, components and by their increased purchasing power, being able to buy more in bulk at a cheaper price. The alliance is basically like a membership to automotive Costco. There's been talk about this alliance becoming a merger, but Ghosn squashed those rumours this week.

And when someone says their alliance saved them almost $7 billion in a year, people start paying attention, specifically that same Volkswagen Automotive Group announced a strategic alliance this week with Ford. The details of the Memorandum of Understanding signed are pretty vague, but it sounds from the statements made like it’s an awful lot like Nissan-Renault-Mitsubishi, where they will share development costs and technology, apparently primarily for commercial vehicles. I’d say this is a win for both companies since Ford has been ahead in the hybrid game for a while and Volkswagen’s infotainment system is one of the best I’ve used in a long time, but how necessary those are for commercial vehicles is another question. I’ll go ahead and take credit for the partnership since my household has been a Ford-VW garage since February.

Volkswagen isn’t stopping with Ford though. Through their Audi brand, they are partnering with Hyundai to co-develop fuel cell vehicles. Audi has apparently been tasked with developing fuel cells for the rest of the Volkswagen Automotive Group while VW works on battery cars. Audi will start working with Hyundai’s ix35 fuel cell SUV and the forthcoming Nexo and leverage collective R&D to take their fuel cell tech to the next level. The next level, of course, being a level at which someone might want to purchase a fuel cell vehicle, which I think is probably more a matter of fueling infrastructure than car quality or availability at this point. Regardless, the partnership should save both companies a lot.

But speaking of Volkswagen running the battery game, they announced this week that they have increased their stake in QuantumScape Corporation, forming a joint venture for the purpose of producing viable solid state batteries. The goal here is to put them in production vehicles by 2025. If that sounds familiar, it’s because Toyota is doing pretty much the same thing, but on their own. Future partnership incoming? As a refresher, solid state batteries, basically pack more power and energy storage capacity into smaller packages. They said that a solid state battery could increase the range of VW’s E-Golf from its current 186 miles on lithium ion batteries to a whopping 466 miles, which would beat basically every other car out there right now. Hell, that’s more range than my GTI gets on premium gas. I may be looking at the Golf GTE come 2026 or so!

Also in the Volkswagen Automotive Group, Porsche has bought a minority stake in Rimac, makers of two electric super car models, one of which was crashed by Richard Hammond on a hill climb attempt last year. As is the case with most partnerships entered into voluntarily, both companies stand to benefit, with Porsche tapping into Rimac’s experience with electric super cars for their upcoming Taycan and future electric cars, and Rimac getting access to Porsche’s suppliers and potentially greater savings on parts from increased purchasing power.

And you know what stands out to me about these partnerships? They’re all international. Every single one. To me they show the great potential for progress when companies work together, share technology and help one another out, rather than operating in silos, shutting out the competition. The market is tough right now, and if companies are going to survive, they have to work together. And the result for us petrolheads? More choices, lower costs and better, more developed options. If only more people believed in tearing down walls, huh?

Authored by
Devlin Riggs

Headlines for the Week of June 11th, 2018

Daimler Defeat Devices Doom Diesels

In Germany this week, Transport Minister Andreas Scheuer made like a middle school principal and called Daimler CEO Dieter Zietsche to his office. On Monday, he asked a sheepish Zietsche if he know how exactly five cheating devices were found in new Mercedes diesel engines. Of course Dieter claimed he had no knowledge of such a thing and that it was his classmate Martin Winterkorn over at Volkswagen who was the cheater! Well, said Principal Scheuer, he didn’t believe that, but he did believe that Daimler had put defeat devices in as many as one million recent Mercedes cars to try to skirt the Euro 6 emissions standards and that, to make things right, Dieter would have to do the equivalent of resubmitting his homework. Which in automotive terms is recalling 774,000 of their latest model diesels. All joking aside, these cars were probably designed after Volkswagen’s dieselgate scandal came to light, so just how was it Daimler thought they were going to get away with this? And how far does this dieselgate rabbit hole go? The more they cheat, the more it seems like diesel cannot be made clean and really has no future.

Tesla Drops Employees, Props Autopilot

Just one week, I’d love to go through Feedly, which is an RSS reader I use to aggregate my news and think, “oh wow, not a single notable thing about Tesla this week, I guess their 5,000 vehicle production rate is humming along smoothly.” Sadly, that was not this week and they remain the brand mentioned more than any other on my and most websites.

First, some lawsuits; one from an employee who alleges he was fired after he expressed concerns about workplace safety, and another who claims he was ousted after expressing interest in joining a union. Both are crimes, both will probably be settled to nobody’s satisfaction, and both have been denied by the company. Why cover this? Because such rumors have been floating around for a long time and the more we hear about them, the more it seems Tesla has a toxic culture of secrecy, cover-ups and anti-union sentiment, which is a problem when it comes to protecting workers’ rights and well being. Also because no other company is having this sort of problem, at least not visibly.

Then came the news that Tesla is laying off nine percent of their workforce in an effort to streamline efficiency and gain better profitability, which is to say “any profitability at all.” It sounds like the cuts will come primarily from salaried positions because they need all hands on deck for the production of their vehicles. Despite planning factories in Shanghai and Europe, Musk still claims he won’t have to raise any new capital and that the company will be profitable by the third or fourth quarter of this year, so this culling is probably critical to getting there or close.

Finally, hot on the heels of a report from the Association of British Insurers and Thatcham Research indicated that calling vehicles “autonomous” led to dangerous grey areas and driver over-reliance on technology, Tesla announced that they will begin rolling out full self-driving features this August. Details are scarce (as they are on the fact that the next Roadster will apparently have rocket thrusters), but if there’s one thing that’s certain, it’s that people are too dumb for this technology. If you hear the word “autonomous” and you immediately stop listening to anything else and immediately start thinking that cars are going to do everything for you, you should not be allowed as a passenger in a car, let alone driving. Seriously, hop on a train.

Toyota Drops Cool Bill on Grab

Any time a car maker spends a billion dollars, it’s going to get some attention, and that’s just what Toyota did this week when it took a stake in Singapore’s Grab Holdings, which is Southeast Asia’s largest car hailing service, a company that drove Uber out of their home markets. That Toyota had to spend so much to buy in indicates not only the growing value of ride sharing, but the view among car companies that they think that traditional vehicle ownership is going to be majorly disrupted by car sharing and autonomous ride hailing services. Toyota’s big cash drop means they’ll get a seat on Grab’s board of directors, which analysts say almost guarantees that Grab will start buying Toyota cars for its service. As they say, you gotta spend money to make money, and with $54 billion in cash laying around, I’d say Toyota has some they can spend! Toyota has increased partnerships and investments in a bunch of automotive disruption companies that focus on ride hailing, ride sharing, electric vehicles and autonomous cars, so they are hedging their bets that one or more of those is going to take off and they’ll be well-positioned to take advantage. Once more, Ford should be taking note of how Toyota does business before they have to kill off their entire passenger car production because they didn’t plan well enough.

Autonomous Vehicles will be SO GREAT

Even though autonomous cars aren’t very good right now, they won’t always be glorified assisted driving systems. According to a report by Security America’s Future Energy, autonomous vehicles will be so great for everyone and will lead to an incredible $796 billion in total annual benefits by 2050. This comes from congestion mitigation and economic impact as well as the totally super easy to quantify “quality of life improvements.” It also means cost cutting for taxis and truckers since those hundreds of thousands or millions of jobs will be taken over by robots, and it’s like you always hear those people who lose their jobs to robots say, “but my quality of life is so much better now that I’m unemployed.” This report is full of bogus or at the very least dubious data and projections, including safety because, as we’ve been learning lately, safety isn’t exactly guaranteed by autonomous vehicles. Maybe by 2050 they’ll have it all figured out. That’s only 32 years or so from now.

Food in Fords Making Moves in Miami

Speaking of autonomous vehicles, when Ford isn’t buying old train stations in Detroit to slap their logo on, they’re building customized Ford Transit Connects to act as Postmates food delivery vehicles in Miami. The small vans will be equipped with curbside lockers to hold food, which will be placed in the car by the restaurant after a customer places an order through the app. The food will then be taken to the customer who will receive a locker number and code to unlock the locker. Car arrives, customer gets food, and we all move on with our lives without having to make polite small talk with the delivery person while you try to decide how generous you will be with the tip. In the wake of vacating sedan and small car sales, Ford may be jumping in with both feet on this “autonomous mobility” movement sector and this pilot project could help inform systems and layout for an entirely food delivery-focused vehicle sometime in the future. I look forward to the Domino’s Transit that will cook my pizza while it’s on the way to my house. I don’t mind having to cut it because it’s not like the people at the store actually do it worth a damn anyway.

China Proves U.S. IS Not so Bad

Starting on July 1st of this year, China will be rolling out a voluntary system by which all new cars will have RFID chips placed on the windshield of vehicles, thereby allowing the Chinese government to use its dense network of surveillance technology to track you wherever you go. If you’re thinking, “well at least it’s voluntary,” starting in 2019, it won’t be anymore, and all of those 30 million or so new cars sold in the world’s largest car market every year will be equipped with these chips. China already has a number of surveillance systems, including incredible facial recognition technology, in place that use artificial intelligence to track criminals and shame people with high debts or for petty shit like jaywalking, so this is just another way of maintaining social control, and probably another way in which China can expand its incredibly creepy social rating system. While it sounds like this is yet another step on China’s journey into a dystopian nightmare, bear in mind that we all carry around cell phones equipped with RFIDs, so this could already be happening in the U.S. without your knowledge.

Dieselgate Can’t Stop Won’t Stop

Despite beginning in 2015, here we are three years later and Volkswagen is still dealing with the consequences of their diesel cheating scandal or “dieselgate.” They set aside 28.5 billion Euro to cover the sprawling fines and lawsuits stemming from their inability to make clean diesels that won’t kill us with excess carbon pollution, but just this week they were hit with another one billion euro fine from the German government for the same scandal. The Germans’ investigation was apparently much more exhaustive than the one we had here in the U.S. because it took way longer, but also resulted in lower fines. Add to this the fact that former owners of cheating diesel cars in Vermont and Arizona will receive $1,000 for the hassle of having to turn their cars back in and this thing only gets more expensive for Volkswagen.  In any case, they have to be getting close to putting this whole thing behind them. Just too bad the millions of people in Europe who will likely die early from inhaling those diesel fumes won’t be able to. SAD!

Fishy Filings Could Trouble Toyota

For the last…ever, people and politicians have been saying “where are the jobs?” and this year, Toyota and Mazda came through, committing to spend $1.6 billion on a new plant in Alabama, where everyone was super happy to greet them. Well, almost everyone, because the Center for Biological Diversity has been saying for years, “what about the fish?” Specifically, the Spring Pygmy Sunfish, which is a rare species and could theoretically be driven to extinction by the construction of the factory and the various infrastructure and activities around it. In a lawsuit filed this week, the Center alleges there hasn’t been enough legal protection for the fish’s only known habitat near the factory location, and they’re hoping to get the Fish and Wildlife Service to make some special efforts to protect the important characteristics of the apparently critical habitat. All this for a small striped fish that rarely exceeds an inch in length and has already been presumed extinct twice before someone found one living somewhere. But being the relative conservationist that I am, it strikes me that it can’t be that hard to accommodate some small fish, plus what if there’s like a butterfly effect where if this fish dies, Elon Musk never colonizes mars? Talk about a disaster.

Fuel Economy Matters, but Does it Really?

A new study released this week by Consumers Union and sent to me by AllWaysDrive Blog minion Jordan revealed that, among 19 popular vehicle features, almost 1,900 drivers chose purchase cost, reliability, safety and fuel economy as their top four most important, in that order. The researchers also asked study participants which vehicle they would prefer and participants generally chose options that cost 25% more but increased reliability, safety, and fuel economy. Less important were acceleration and performance, which surely indicates that this study polled the wrong people. Setting aside the fact that the study’s sample size was relatively small compared with the total car buying public, this isn’t really reflective of reality, with the average cost of cars climbing and the average fuel economy of new cars sold actually decreasing since mid-2014 with the booming sales of SUVs and crossovers. So there’s obviously a disconnect between what consumers say they want in an ideal car and what they actually end up buying. Go figure that people can’t be trusted to tell the truth!

Cars Drivers Drive the Least

If you’ve looked on the app Autolist for a car, which I highly recommend you do, you’ve probably seen a bunch of “online only” results from a company called Carvana, which will deliver vehicles to your door in a sort of backwards dealership kind of situation. Well, they also come up with lists, apparently, and after analyzing more than 1.6 million automotive sales from January through May of this year, they’ve come up with a list of vehicles they say get driven the least each year. In the top 15, you get your regular list of high class Mercedes and BMWs that are someone’s “treat yoself” vehicle when they’re not driving their ’94 Ford Ranger back and forth to work, and the same go with the Sunday cars like the Maserati Ghibli, Lexus RC, M4 and sure, even the Volkswagen Beetle. Also on the list are the Nissan Leaf and BMW i3, which people don’t drive because of range anxiety and the Smart ForTwo which people don’t drive because it’s crap. But there are cars on the list like the Mini Cooper, VW Golf Sportwagen and Buick Encore, which are just sort of normal cars. Why are you not driving your Buick Encores, people? Is it because you’re tired of people asking “oh, that’s a Buick?” But leading the list are the Porsche 911 and Chevy Corvette, which are driven just 4,700 and 4,500 miles per year on average, which is just a crying shame because they are both some of the best cars to drive. You stupid collectors are ruining everything!

Fifth Gear Returns this Fall

After the bummer news last week that Matt LeBlanc was leaving Top Gear after his third season, we got a boost this week with the news that competing show Fifth Gear would be returning this fall, with old hosts and top blokes Tiff Needell and Jason Plato once again hosting after a three year hiatus. Fifth Gear never had the budget of Top Gear, didn’t do the crazy stunts and always focused less on the antics of three weird oldies instead of the cars themselves, which was always attractive to the real car nerds out there, even if it was a bit tougher to get the significant others interested. As I mentioned when the old Top Gear crew left for the Grand Tour, more car shows will never be a bad thing and, even if Vicki Butler-Henderson doesn’t return, I’m going to try to find a way to tune in here in the States, and so should you.

Ford Files Patent for Existing Thing

When they’re not buying train stations, delivering Miami’s to-go-orders or killing off popular vehicle models, Ford is busy filing patent applications for silly things that have existed for decades. Recently, the company applied for a patent for a screen that drops from a car’s tailgate to provide a privacy curtain. One could imagine this being especially handy at the beach for changing out of a swimsuit before hopping back into the car or for doing your business while out in the woods or when overcome with a sudden case of bowel evacuation syndrome because you ate curry for lunch and you knew it was risky but decided dammit, Darryl, just go for it. In any case, these screens have been around for years and you can buy them on Amazon if you’re the type of person who chooses not to think about if someone could just look through the windshield and see you despite the privacy curtain. The difference here is that they will apparently be built into the tailgate instead of being an add-on you purchase separately. There’s also a variant that deploys into an awning, basically giving you a shady spot to sit behind your car on sunny days. Plus, with the fact that the Mustang will be the only Ford vehicle without a hatchback or tailgate, this means they could apply it to almost every single car in their U.S. lineup! Hooray for small victories? 

Infrastructure, Now with Stuffed Crust

After so many campaign promises by so many politicians to address the country’s crumbling infrastructure, we are finally starting to see some progress being made. Oh, wait, did you think the government was doing something? Oh, no, sorry. We can’t even get a coherent trade policy. The entity currently working on restoring our roads is actually Domino’s Pizza. Under the guise of creating a smoother ride for their delivery vehicles so our pizzas don’t arrive in a jumbled mess, Domino’s is fixing potholes from California to Texas to Delaware and, after paving over the road canyons, painting them with a very tasteful Domino’s logo and their tagline, “Oh yes we did.” Yes, this is a publicity stunt and yes it’s working but hell no, I don’t mind driving over Domino’s logos in the streets instead of feeling the jarring crash of a six-inch deep pothole and wondering if my wheel has bent so much I won’t make it home. Oh yes you did, Domino’s, because oh no, our elected officials can’t.

Authored by
Devlin Riggs

Why Canada is Family, Not Foe

Photo by Haskell Free Library & Opera House

Canada - in many ways, America’s younger brother who, despite getting a later start in life and remaining closer to the parents we rebelled so hard against, turned into a cooler, more progressive and not to mention nicer version of ourselves, without all the hangups of being everyone’s go-to guy when something is wrong in the world. We’re so similar in terms of culture, values, and economies, that free and open trade among the countries has been a huge success for both sides since 1987 when the catchy named Canada-United States trade agreement was signed. In fact, Canada is one of the few countries with which the U.S. actually has a trade surplus; a not inconsiderable $8.7 billion last year. On a more granular level, our two countries are so intertwined that almost 310,000 jobs in the state of Ohio alone depend on Canada, with that one state exporting $18.7 billion in goods to the Great White North every year. Across the nation, nearly 9,000,000 jobs depend on Canada, the country which buys more from America than it does from China, Japan and the United Kingdom combined. Guy Lawson has a fantastic read in the New York Times this week if you want to read more about our long and beneficial relationship with Canada, but the point I’m trying to make for this story is that things are going pretty well.

So why then, would it be beneficial to impose tariffs on Canadian steel and aluminum? The truth is, it’s not beneficial, and Canada has responded with their own tariffs on Kentucky bourbon and Wisconsin pickled cucumbers, specifically targeting the states of the Senate Majority Leader and House Speaker. The problem is NAFTA and Canada are merely caught in the crossfire of a looming trade war along our southern border despite being, well, on the opposite side. While the U.S. and Canada are very much alike, with the latter having even higher labor and environmental regulations than we do, neither country is much like Mexico, so wrapping them into a free trade agreement made little to no sense. Nevertheless it happened, and NAFTA does need an overhaul to square up some longstanding issues that have bred considerable resentment on our side of the fence. And Canada understands this, which is why they’re trying, always politely, to help renegotiate in a way that doesn’t result in the termination of the good thing we have going on with them.

But then there’s this whole threat of a 25% tariff on foreign-made cars. The once-booming Canadian auto industry has been declining recently but they still export a whopping 85% of the vehicles they make, with most of them coming to the United States. Since everyone with a brain knows that increased costs due to tariffs are passed along to consumers, most analysts see the market reacting to the tariffs in three ways:

1. People will not buy new cars, and instead look for used cars.
2. People will look for cheaper new cars or buy ones made in the U.S. (which, by the way, will still be more expensive thanks to the steel and aluminum tariffs already in place.)
3. Or, people will put off buying a car altogether, accepting that the tariffs are temporary and people will come to their senses eventually, which gives politicians an awful lot of credit.

In any case, under the best projections, LMC automotive is predicting sales drop by 1,000,000 vehicles within the first year, but it’ll probably be closer to 2,000,000, or more than 10% of the market. If consumers react by buying used or locally-made vehicles, it could potentially kill off production of vehicles in Canada completely, leading to hundreds of thousands of job losses in a country that actually pays us almost $9 billion every year for the privilege of trading with us freely.

And more than the monetary threat to a country that poses us no monetary threat, to do so under the guise of national security - to suggest that Canada may be nefariously plotting to destabilize our country by sending us their Ford Edges, Chevy Equinoxes and Cadillac XTSs - isn’t just flimsy logic, it’s downright offensive. Canada is the closest thing we have to a best friend in the world at a time when we’re romping around the playground putting gum in everyone’s hair and stomping on others’ toes. Christ, they fought with us in Afghanistan for 13 years after 9/11. When we need someone to have our backs, it’s Canada. The least we can do is not stab them in theirs and claim it’s their own fault.

Authored by
Devlin Riggs

Fiat Chrysler Details Future for Everything but Fiat & Chrysler

I generally try to steer clear of speculation and rumor in my podcast. One, because you can basically do that ad nauseam and face no consequences if things turn out to be false and two, because things do so often turn out to be false! So I went out on a limb last week when it was suggested that Fiat and Chrysler might both be pulled at least from the American market if not culled completely in the case of Chrysler and, well, the jury is still out, for Dodge as well. But Chrysler went into detail about virtually every other brand in their stable, so it’s worth taking a look at the future of the littlest of the big three.

First up, Jeep, the crowning jewel of the Fiat Chrysler portfolio and the one brand sort of keeping everything afloat. Forthcoming are the Wagoneer and Grand Wagoneer as well as Trackhawk, Trailhawk and Deserthawk variants of their existing vehicles. While we’re familiar with Trackhawk as being racing circuit-focused and Trailhawk being off-road focused, the Deserthawk trim will be focused on, well, deserts. As we saw with the Rolls Royce Cullinan, desert driving is very popular with Arab oil sheikhs and I guess Jeep thinks they can interest a prince or two in an amply-equipped Cherokee. By 2021, there will be an electrified (meaning hybrid or plug-in hybrid) version of each of its models and by 2022, we’ll finally see the Wrangler Scrambler pickup and two new three row SUVs. So for Jeep at least, they stay the course, just like George H.W. used to say.

For Ram, we’ll get a new mid-sized truck to replace the Dodge Dakota that everyone forgot existed at one point. There will also be new super duty trucks and they’re even making a Ram TRX, which is aimed squarely at Ford’s F-150 Raptor because if there’s one thing the world needs, it’s more obscenely off-road capable pickups that cost more than $60,000. Because when you’re rich, but want to show you’re humble, you spend more than most people’s annual salaries on a pickup that will rarely ever see its bed used. There will also be a new version of their ProMaster City Van, which I can tell you all are super jazzed about.

Moving on to the fun stuff! Alfa Romeo is apparently planning on bringing back the 8C Competizione, but rather than as a grand tourer, as a mid-engined supercar, which, yes please. We only ever got 90 whole 8Cs when they were first made on the Maserati GranTurismo platform but since supercars are selling like IHOP pancakes these days, I’d hope they could spare a few more for our shores. Also coming back is the GTV, which is a fairly historic nameplate, but the rendering looks an awful lot like a coupe version of the Giulia, which itself is not a bad thing. They say the GTV will have 600+ horsepower and the 8C will get 700 or so, which means you can expect to see both vehicles catching on fire shortly after they are released into the wild.

Maserati meanwhile is hoping to challenge both Porsche and Tesla for sales, which, wasn’t that what they were trying to do before? In any case, they’re gonna try to do it way better this time with the Alfieri supercar, a new SUV, and four electric vehicles. Maserati chief Tim Kuniskis said, “From a product standpoint, it may look as if Maserati is challenging Porsche and Tesla. We are. We’re going to accomplish this by bringing the market something no other player in the industry can match.” Except by that he really means they’re going to make pretty cars in segments where other cars already have market share and hope to get by on looks rather than engineering or merit.

As for Chrysler, Fiat and Dodge, they were more conspicuous by their absence than by any news about any of them, so we’ll just have to wait and see if the company is going to embrace the Ford theory of profitability or pivot to something completely different.

Authored by
Devlin Riggs

Electric Vehicles: In Demand & Bad for the Planet?

While vehicles that plug in for electric power comprise just more than 1 percent of vehicles sold in the United States, electric vehicles may not remain such niche products for much longer. According to a new survey from AAA, as many as 20 percent of consumers want their next car to be electric, which is up five percent from this time last year. The reasons why 80 percent remain disinterested are obvious and well covered – from range anxiety to lack of infrastructure to the fact that batteries are a new technology that haven’t yet been optimized – but those interested in EVs say that the benefit to the environment outweighs the concerns.

But is that even accurate? In China, the government has been offering huge subsidies to encourage automakers to build and sell electric vehicles and the country has the highest adoption rate of EVs of any in the world except Norway. The problem is, their smog problem isn’t going away. In China, 72 percent of the country’s electric power is generated from coal, which, regardless of what conservative talk radio may tell you, is not clean and cannot be made to be clean. You can merely capture and store the carbon byproduct of burning coal to create power. They’re not doing that in China though, and oil company CNPC found that electric vehicles emitted more than double the toxic PM2.5 particles that generate China’s smog than do standard internal combustion vehicles. And, if you like your statistics not brought to you by an oil company whose interests may be somewhat skewed, a University of Michigan Transportation Research Institute paper found that cars that achieved greater than 40 miles per gallon were actually more environmentally friendly than the electric vehicles being made in China. And that’s just when it comes to operating the vehicles.

Add to that a Harvard and Tsinghua Universities study that reported that China’s production of EVs, PHEVs and fuel-cell vehicles generated 50 percent more greenhouse gas emissions than production of internal combustion cars, it’s hard to make the case that electric cars are the more environmentally friendly solution.

Photo by Gwenn Dubourthoumieu

And speaking of production, that’s looking like it’s going to get harder before it gets easier. I’ve discussed this a bit before, but the situation is only worsening when it comes to the global supply of cobalt, which right now is a critical part of the lithium-ion batteries that power most electric vehicles. About 60 percent of the world’s cobalt supply is located in the Democratic Republic of Congo, a country with a humanitarian rap sheet as long as the receipt you get from CVS when you go in just to get some gum. High taxes, the use of child labor and an unstable government all contribute to huge volatility in the cobalt market, which has gotten analysts revising their figures about when they think a shortage is going to hit. The answer is sooner than later. Though the CEO of Cobalt 27 Capital, the owner of the world’s largest stockpile of cobalt, ensures that there won’t be any supply shortages, he does not go on to say just how much companies will have to pay for that supply – costs that would undoubtedly be passed on to consumers and therefore delay adoption of EVs because they’re too expensive. Non-cobalt-company-CEOs are less optimistic, with Bloomberg New Energy Finance and Darlton Commodities both predicting shortages as soon as 2021. Prices have already spiked 300 percent over where they were in 2016 and capacity is not expanding as quickly as demand, which is a recipe for higher prices.

Fortunately, several companies are getting off their asses and doing something about this. Panasonic announced this week that they are working towards lithium-ion batteries that achieve zero cobalt usage in the near future and have been already reducing its content in the batteries that they supply, primarily to Tesla.  Samsung too has been working to reduce cobalt content below the 5% of batteries it currently achieves, and they are hoping to expand recycling programs that will recover cobalt from used cell phone, computer and other lithium-ion battery sources. Currently recycling rates are somewhere between 25 and 50 percent, so there’s a lot of potential for improvement there. Chinese automaker BYD is also developing batteries with a nickel-manganese-cobalt ration that reduces the amount of cobalt, which, in addition to lowering prices, apparently extends the life of the battery, which is a win-win for companies and consumers.

For even more bad news, cars aren’t the only things using lithium-ion batteries. Companies and utilities are expanding the use of modular energy storage systems to better utilize distributed energy resources like solar and wind farms and even hydroelectric generation, so there’s another force working to increase demand for cobalt and other precious metals. Full disclosure- I work for a company that makes those big battery storage units and they are flying off the shelf, so companies will have to both ramp up cobalt production and R&D into technology that uses less of it if there’s any hope of averting a shortage or at least a price spike.

But back to the cars – what does all this mean for those of us who just want a Jeep Wrangler plug-in hybrid? The truth is somewhere in between everything. While 20 percent of people would love an electric vehicle as their next car, not that many will take up the technology, especially with 80 percent of such vehicles being leased right now. It shows that public trust isn’t there that we’ve really mastered electric cars yet and nobody wants to be locked into technology that’ll be obsolete in a couple years. Cobalt demand will cause prices to remain high but the price of gas was high and look what that did – it spurred investment into the research and development of electric vehicles, which have lowered demand and prices have eased up, if only just a bit. The market will adapt, companies will continue to innovate and while EVs aren’t optimized right now and the electrical grid (especially in China) isn’t well suited to provide clean energy for them, it won’t always stay that way. Nor does it mean that EVs are destroying the planet, it just means they’re maybe not as green as we want them to be yet. We’re on a good path right now and have unprecedented choice in vehicles. At least until companies start thinking like Ford, but I don’t think it’s going to become too widespread.

Authored by
Devlin Riggs

The People Fear the Autonomous Future

Waymo Autonomous Test Locations

If various tech billionaires are to be believed, the future of vehicles is electric and autonomous so none of us idiot humans can continue getting behind the wheel and killing one another. The problem is though, we idiot humans aren’t exactly totally on board with that whole giving up driving thing.

In the wake of several high profile stories about people dying in cars driven by half-baked and implemented-too-early autonomous systems, public fear of autonomous vehicles has grown precipitously, up to 73% of a recent AAA survey. Demographic wise, the biggest jump was in people ages 20 to 37, going from 49% afraid to 64%, while still being the age group most inclined to ride in self-driving cars. Women in particular are scared, with 83% saying they don’t want to ride in autonomous vehicles and a whopping 70% saying they don’t even want to share the road with them. Elon Musk will blame this on negative coverage of fatal wrecks involving autonomous tech. Journalists and safety pundits will blame it on companies rushing out technology that isn’t ready for mass consumption. The truth is, they’re both right, but only the latter led to the former, and although autonomous vehicles may end up being safer than humans, they have to prove it first. As Uber suspends its autonomous testing in Arizona (costing 300 people their jobs, by the way) and others scale back plans to launch driverless cars on roadways, it looks like there’s a ways to go yet.

Source: Tim Stevens/Roadshow

And just this week they didn’t do such a great job proving it. On a drive with journalists in Jerusalem, a Ford Fusion run by LiDAR makers MobilEye, blew through a red light during a presentation of the technology, completely ignoring the signal. Fortunately, there were no collisions and everyone is okay, but it brings to mind Uber’s incident where their autonomous Volvo failed to react to a pedestrian. MobilEye claims their cameras saw the red light, but that the electromagnetic interference from the broadcasting equipment used by the TV crew in the car screwed with the signal from the traffic light transponder, and the transponder signals trumped the cameras, so the car cruised right on through. CEO Amnon Shashua said, “It was a very unique situation, we’d never anticipated something like this,” which is exactly the problem with autonomous technology. There’s no possible way to anticipate all eventualities, so these self driving cars will never be 100 percent safe. The company claims to have fixed the issue but wouldn’t go into just how.

Karen Kasler/Ohio Public Radio

Despite all of this, the morons in Ohio have stated publicly their desire to become the “wild, wild west for self driving car testing.” And in case you think I’m kidding, those were Governor John Kasich’s exact words. For those wanting some more words from the governor, he also said “Computers do not comb their hair. Computers do not text. Computers do not talk on cellphones, and this technology, which is going to be the 21st century technology, is going to save lives.” Yeah, right up until while not texting, combing hair or talking, a computer ignores a red light and t-bones someone to death. Not only is Ohio allowing self-driving cars while other states that have done so are reevaluating their programs, they’re allowing autonomous vehicles without humans in them! Though, a licensed driver does need to monitor the vehicle remotely and be able to avoid accidents in case of system failure. This, to me, smacks of a government that has no idea what it’s doing and is grasping at straws for a way to bring some sort of investment into the state. Sorry, Ohio, but this was really short-sighted, poorly planned and idiotic.

In neighboring Pennsylvania, Uber announced they would resume testing their autonomous vehicles on the streets of Pittsburgh despite the Arizona closure, which was I’m sure very fun for Pittsburgh’s Mayor William Peduto to find out about via Twitter. After the fatal crash in Tempe, Mayor Peduto suspended Uber’s right to test, pending the completion of a federal investigation and that they would discuss how to safely resume after that. The city has outlined several changes Uber must make to continue testing, including limiting speed to 25 miles per hour, which the company is apparently fine with, and they say they met with the city several weeks ago to discuss picking up where they left off. But when the one last thing on your to-do list is “call the mayor,” you may want to get that checked off before hyping yourself on social media.

Oh, and speaking of that federal investigation? There’s some news on that, with the National Transportation Safety Board stating that the self-driving Volvo Uber in Tempe recognized both the pedestrian and bicycle she was carrying and had a full six seconds to react, but instead the system did nothing, not interpreting the woman as, you know, a human. Even at 1.3 seconds before impact, the Volvo safety systems determined emergency braking was needed to avoid hitting the woman, but Uber had disabled their systems so it didn’t interfere with theirs. The NTSB study hasn’t been concluded yet though, and they haven’t settled on a probable cause, so I’m not sure why Uber thinks this meets with Pittsburgh’s Mayor’s “completed federal investigation” ultimatum.

Meanwhile in Norway, the land of my ancestors, a company called Kolumbus has decided the future of buses is now and they will begin rolling out completely autonomous EasyMile EZ10 buses, which accommodate 15 passengers and can reach a blistering 28 miles per hour. Except they won’t be completely autonomous because Norway doesn’t permit fully autonomous vehicles on the road, so each bus will also feature a safety driver. Oh and also the buses won’t be hitting that 28 mile per hour max speed because Norway will require the bus to be limited to just 7.5 miles per hour. Oh and the buses won’t be filled to the brim with 15 passengers because Norway will require the company to haul only six people at a time. But starting in June, those six riders per bus will I’m sure have a great time speaking to their driver and watching casual runners fly by them along their route.

Authored by
Devlin Riggs

Trade War Update

Donald Trump this week celebrated a small victory in a preamble battle to the Trade War he wants to start and insists will be easy to win. China announced that they will cut import tariffs for cars from 25% to just 15% starting on January 1. Car parts will be cut from 10% to 6%, which will help lower the cost to build new cars in the country as well. In exchange, the United States has lifted a ban on products from Chinese telecom company ZTE Corporation, which had apparently crippled the company. Set to benefit most from the relaxed tariffs are Volkswagen and luxury car makers like BMW and Mercedes-Benz, who don’t produce cars in China. Tesla also benefits, as do some premium Japanese brands, which will now be able to compete cost-wise on a more level playing field with vehicles produced in China.

This doesn’t particularly help Ford or GM, who have already established extensive production in China specifically to avoid high tariffs, and with the 15% tariff still in place, there isn’t much likelihood brands will magically decide to start producing cars in the States again and ship them over. There’s also some rich irony that the Germans seem to benefit most from the actions of the U.S. President.

Photo by Dilworth Police Department

And while China cuts their import tariffs, Trump heard only the phrase “import tariff” and decided “yeah, that’s a great idea, let’s look into that” and assigned the U.S. Secretary of Commerce some homework. Specifically, Trump wants him to initiate a Section 232 investigation into the import of automobiles, trucks and auto parts to determine their effects on America’s national security. And right now you’re thinking “oh, this is supremely stupid,” but remember, it has happened twice that Ford Fusions from a plant in Mexico were caught in the U.S. loaded down with a bunch of weed that some drug mules north of the border failed to offload, so it’s entirely possible that cars are the single greatest source of drug trafficking in the United States. Or maybe it could be that pot should be legalized and regulated and we wouldn’t have people smuggling it in and that two examples of some incompetent drug cartel don’t exactly signify a trend. In any case, the Commerce Secretary will decide.

But Trump’s call for the investigation itself has been met with widespread condemnation from, well, kind of everyone. It’s being regarded as a waste of time and resources that could end up not only harming our relationship with other countries, but harming American consumers through generating higher prices for goods, much like the tariffs on steel and aluminum have done. Moreover, most consider it a stretch to think that an import tariff has anything to do with national security, with Canadian Prime Minister Justin Trudeau going so far as to say it rests on “even flimsier logical grounds.” Automotive News has a great roundup of all the quotes lambasting the move but the best and most concise probably comes from John Bozzella, CEO of the Association of Global Automakers, who said “The U.S. auto industry is thriving and growing. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America.” So who’s going to win this Trade War again?

Authored by
Devlin Riggs

Re-Reflecting on Ford’s Future Product Plans

A week removed from the breaking news that Ford was cutting all of their passenger vehicles with the exception of the Mustang, Focus Active and SUVs or crossovers, I’ve had some more time to think on and read about the decision, and the more I reflect on it, the worse the decision seems to sound.

Clearly needs a truck.

First, a reminder of why this happened. Cars and sedans are about as popular as getting kicked in the nuts. Sure, some sickos out there still like it, but, just like getting kicked in the nuts, owning a sedan makes you feel like less of a man because you could’ve just paid $10,000 more and bought a real man’s car. And by man’s car I mean a truck. In any case, cars and sedans are not selling well, and even when they do, they are low margin vehicles, meaning there’s not a lot of profit to be had for companies selling them. For publicly traded companies like Ford, continuing to sell unprofitable things that you have to continuously sink money into in order to remain competitive means it’s a profit suck, which affects your all-important balance sheet and is reflected in the stock market’s valuation of your company. The more profit you earn, the higher your valuation, the more satisfied your investors are that they made the right choice in buying your stock.

And there’s some old business wisdom to back up axing the sedans. It’s called “core competencies” and is the reason I pay someone to do my taxes and spread mulch around my front yard. It’s just easier, faster and more efficient if I pay someone who does those sorts of things all the time to do them than to try to do them myself. Those are not among my core competencies. And I pay different people for those things because my tax guy’s core competencies don’t include spreading mulch either. At least, not as far as I know. So what Ford is basically saying here is that, “we understand that the car market in the U.S. is not really growing and that we do not make cars and sedans that are compelling enough to compete well against such cars from Toyota, Honda, Hyundai or even General Motors. Therefore, we are willing to sacrifice a larger market share in favor of a smaller share that is more profitable by focusing on our core competency - producing SUVs, crossovers and the Mustang. And we’re going to save $26 billion by doing so.”

In fact, other companies have thrived on this sort of business model, including Porsche, Lamborghini or Ferrari, all of whom focus on sports cars, or Land Rover or Jeep who focus exclusively on SUVs.

Right now you’re thinking, “oh well that does sound pretty logical and I guess they made the right decision so that’s the end of the top stories, right?” Wrong, and sorry, it’s not the end. Porsche and Lamborghini have both hopped on the SUV bandwagon and Ferrari is about to because Porsche’s Cayenne became the company’s best selling vehicle when they first produced it in 2002. And no, that does not mean that Ford is right for sticking with SUVs, it means that those companies understood that they needed a diverse product offering to withstand economic fluctuations. Land Rover can produce only SUVs because they are owned by Tata, who also owns Jaguar, so they have all the product diversity there, it’s just across different brands but under the same umbrella. Jeep is just a freak and is literally the only good thing Fiat Chrysler makes.

And paring down their products doesn’t mean Ford instantly becomes a lean, mean healthy profit machine. It means they have all their eggs in a single basket that is far from immune to market volatility. Healthy companies like Toyota and Honda are constantly evaluating their products and if they deem a certain model isn’t as competitive as it should be, they invest in improvements and get better, more competitive models out there. Think back to Honda’s newly redesigned 2012 Civic, which was universally panned by critics for being noncompetitive. Honda didn’t say, “Oh well, we tried, might as well kill off the civic, it never made much anyway.” They dumped money on redeveloping the car and came out with a completely redesigned model the very next year! Because Honda knows about a thing called owner loyalty, and while the Civic may not make much money, it’s a great first car for kids or young professionals who need an appliance and not a race car. After the Civic, maybe the owner will graduate to an Accord or Pilot or even CR-V. It’s like Black Friday Sales. Those deep discounts exist not because companies want to not make money, but because they want to get you into the door so you’ll spend more money with them, either now or later.

Toyota knows this too. It’s why, this week, they announced that they’re investing $170 million and hiring 400 new people to produce the next generation Corolla in Mississippi. Toyota sold more than 300,000 Corollas last year, so even though the sedan market is tanking, you cannot say with conviction that there isn’t money to be had by selling them, and if buyers aren’t cross-shopping the Corolla with the Focus, that’s a failing on Ford’s part, either in marketing or in product development, not a sign from the market that they should just quit.

Plus, by exiting the small car market, Ford creates a bit of a vacuum there to help its competitors sell more cars, more entry-level vehicles that will generate future loyalty sales. Whether it’s for Toyota, Honda or Hyundai or if the hole is big enough, attracting some Chinese auto manufacturers to come sell their goods here on the cheap. And one of those Chinese companies, or even Hyundai or Mazda (who actually used to be part-owned by Ford) could have been someone Ford could have partnered with to develop a new small car platform that was both more competitive and more cost efficient. But they chose the lazy way and just said screw it, I’m out.

And for what? $26 billion back in their pocket that they’re going to spend somehow. And by the looks of things, not wisely. This week we learned about Ford’s Smart Window concept that utilizes a motor attached to the window to vibrate at different frequencies, allowing blind people to “feel the view” out the window of a car. We also learned about a patent Ford filed for a vehicle with an integrated electric motorcycle. What?! Ford, you can’t make a good Focus or Fiesta, but you’re going to make us a damn transformer? Or how about the fact that Ford is looking for buy-in from its board to purchase and refurbish Michigan Central Station, which as you might be able to tell from the title, is for trains.

Look Ford, honey, darling, I get it. Your shareholders are whiny babies who wanna be fed. But remember that their love is temporary. You can create all the value in the world for them, but you are far, far behind in autonomous tech and electrification. Yet here you are blowing cash in window vibrators and center consoles that become motorbikes. How long do you think the bump from cutting less profitable models is going to last? Probably right up until Toyota and Honda have compelling electric vehicles out there and you’re still trying to shill the new Bronco, which we all know is going to be a shadow of the original. Investor love comes and it goes. It’s a hell of a lot easier to log on to E-Trade and click “sell” when the going gets rough than it is to design and produce a compact, fuel-efficient vehicle if the minds of American consumers start to change again. I just can’t help but feel like you’re going to be sounding a whole lot like Gob Bluth here in a few years. 

Authored by

Devlin Riggs

Tesla Troubles

Tesla: the company that generates more headlines and top stories than actual motor vehicles despite claiming to be a car company. Last time I covered the company, major shareholders had just approved a super unbelievable compensation package for CEO Elon Musk tied to the company’s total market value, rather than to numbers of vehicles produced or Model 3 orders satisfied or JD Power scores or any number of other metrics by which a car company may actually be adjudged to be a success. Just like in Ford’s case earlier, Tesla’s sole focus is on pleasing shareholders, and it really shows.

The problem for Elon and Tesla is, the hype machine eventually runs out of gas and the company valued more highly than Ford, GM, Fiat Chrysler or any number of actual car companies, will have to face the music eventually for perpetually failing to meet the goals it outlines for itself. And that’s a problem when you consistently set outrageous goals that artificially inflate your stock price. That “face the music” time may be coming soon, because there have been several issues in the past few weeks that deserve mention.

Photo by Jesse Gary, KTVU

First, another fatality. This is Tesla’s third in which Autopilot was engaged when the death occurred, and the preliminary investigation by a law firm representing the deceased’s family has decided that Tesla’s Autopilot misread lanes in the road and drove the man straight into a median, where the car burst into flames and killed the driver. Tesla insists that the crash is the driver’s fault because its system isn’t perfect and requires drivers to pay attention to the road ahead and provide input when prompted, which the driver apparently was and ignored. The National Transportation Safety Board admonished Tesla for releasing details about the crash before its investigation was complete and kicked them out of their investigation process. And yes, this is the second story in a row that involves someone dying because a technology company deployed a system to the public before it was ready.

Simultaneously, Telsa was busy recalling 123,000 early Model Ss because of power steering bolt failures that would render the car still driveable, but requiring considerably more effort. While it’s hardly a rare thing for a car company to issue a recall, its coinciding with reports about the Model 3 needing considerable rework after coming off the assembly line paints a poor picture of the company’s quality control.

Speaking of the Model 3, production has been shut down twice so far this year to address bottlenecks preventing the factory from meeting production goals. In their Q1 investor call, Tesla reported 2,000 Model 3s rolling off the line in the last week before the earnings call, which represents a significant jump over the 1,200 observed in the weeks prior, but remains 20% short of the 2,500 goal Elon set for the company in January. In response to inquiries about the delays, Musk declared that there were no delays, but that deliveries were just experiencing a “Time Shift,” which is basically a way of invoking quantum leap doctor who bullshit to try to explain away your company’s failure. And remember, the 2,500 goal was the re-forecast of a re-forecasted forecast. In addition to the shutdowns to improve efficiencies, Tesla is adding a third shift to their Fremont factory, meaning cars will be produced 24/7 in order to start reaching production goals more effectively.

Of course, another shift means a greater potential for labor issues and Tesla has had plenty of those recently, with the Center for Investigative Reporting, uh, reporting that Tesla has been under reporting worker injuries on legally-mandated reports to make the company’s safety record appear better than it is. The center’s magazine, Reveal, interviewed more than three dozen current and former employees, including ex-safety personnel and have previously been nominated for Pulitzer Prizes for the quality and reliability of their reporting. Tesla’s response? Lies. All lies! In fact, the Center is an extremist organization and pawn being used by the United Auto Workers union to try to influence workers into joining, which Tesla is known to be against, having reportedly fired 700 workers for their pro-union sentiments last fall.

And this is only one salvo in the many Tesla or Musk have launched at news outlets for accurately reporting the news. A recent Economist article suggesting Tesla would need to raise $2.5 to $3 billion this year to meet production goals prompted a tweet from Musk calling the Economist boring and replying that the company would be profitable in the second half of this year, a claim viewed as dubious by many actual economists who sort of know what they’re doing unlike a certain someone.

As a result of all of these issues, Tesla’s stock value has been dropping. And although he claims that he’d forego a salary in order to see the company thrive, it’s not hard to see how a $52 billion carrot dangling in front of you might motivate you to work towards it. The problem is, when your success metric is as squishy as shareholder value, which is based on perception, rather than substance, your focus is not on safety, or fair worker representation or quality, or or even human life. It’s based on what people think of you and your future potential, and all the talking in the world isn’t going to matter if you can’t do the walking, and right now, Tesla is still at a crawl.

Authored by
Devlin Riggs

Self Driving Tests Slow, Uber Bows And Pays Out

Last you heard of Uber on this site was after the fatal crash that killed a woman in Arizona. Since that tragic story, there have been several developments for Uber and its autonomous tech program that are probably worth touching on.

First, the Arizona governor Douglas Ducey suddenly decided that his first priority is public safety and sent a letter to Uber suspending their license to test and operate autonomous vehicles in the state. One might argue that giving unregulated, unmonitored rights to a company hurtling three ton death machines around public roads with other drivers and unpredictable pedestrians was not placing public safety first, but hey, we all make mistakes, right? Just some of our mistakes don’t wind up with people dying. Uber voluntarily suspended its programs in California, Pittsburgh and Toronto as well, which is a good PR move since it probably wouldn’t be voluntary for too long.

Shortly after the incident, Uber’s partners and suppliers were quick to wash their hands of responsibility, promptly throwing the ride sharing business under the bus. First, MobilEye, the manufacturer of the LiDAR system insisted that its cameras would undoubtedly have seen the pedestrian, but that it was Uber’s software, responsible for interpreting what the camera sees and computing a corresponding input into the car’s drive, that was to blame. A representative for Aptiv PLC, the supplier who provides the radar technology systems for Volvo, chirped up that all of the XC90’s safety systems that it comes with from the factory had been turned off and that the emergency braking system might have enabled the car to stop or at least slow before impact.

Finally for Uber, what I expected to be a prolonged battle in the courts over liability and one that might set a precedent for how future cases was handled, turned out to be a very quick settlement. Terms of the settlement were not disclosed and the attorney for the family of the deceased insisted that her daughter would have no further public comment. That they settled the matter less than a month after the fatality really goes to show how aggressive Uber must have been in trying to sweep this matter under the rug. While the news cycle does tend to bounce from outrage to outrage, I think those of us with a deep interest in the automotive sector will have longer memories. The only good to come from this is that everyone is now taking a very serious look at just how safe it is to publicly test technology in its infancy.

Authored by
Devlin Riggs
 

Ford's Future Lineup: A Tremendous Gamble

Almost exactly one year ago, Ford fired CEO Mark Fields and replaced him with Jim Hackett amid dissatisfaction about the company’s stock price and fears that the company wasn’t evolving fast enough to meet the fickle, ever-changing demands of today’s consumers. As recently as January of this year, Automotive News published a story that Hackett hadn’t done enough to turn the company around and investors were still impatient to see their share prices increase.

It turns out, Hackett was pretty busy. As the former head of Ford’s innovation unit, he’s been analyzing America’s and the global car market for some time, but had been holding off on making any drastic moves. That is, until yesterday. But first, let’s take a trip back in time to an age when none of us was alive – 1908. This is the year that Ford introduced the Model T, which was a terrible car despite being the most influential car of the 20th century. The reason everyone knows of the Model T is because it was the first broadly reliable, easy-to-maintain car that was affordable by a growing middle class. It defined mainstream and opened up an entirely new era in transportation to the masses.

Alan Mulally
Ford's President & CEO, 2006

Fast forward a hundred years all the way to 2008, when the average price of gas climbed to $3.61 per gallon and looked to head even higher. We were in the depth of a recession and nobody was buying cars. Banks were being bailed out and, as a consequence of over reliance on gas-guzzling SUVs to generate profits, so were GM and Chrysler. Ford, however, had remortgaged its assets in 2006 and retooled its smaller, efficient vehicles, which buyers were snapping up to avoid hefty bills at the pump. Sure, they still took the government’s money, since it was being handed out like candy, but they didn’t need to because their excellent small cars and sedans sustained them through the financial crisis.

Just ten years later, those small cars and sedans, the life vests during the rising tide of the recession, have turned to an anchor, weighing down Ford’s stock price as consumers abandon rational thought and return to purchasing gigantic SUVs and crossovers they don’t need. Hackett’s answer to the investors’ pleas for greater share value? Abandon the exact kinds of vehicles that sustained Ford as one of the biggest auto manufacturers in the world. In other words, kill the sedans.

And he’s not the first. Chrysler has mostly done away with its sedans, leaving the ageing 300 and Charger out there just in case someone is interested in looking cool on the back of a flatbed on the way to the service department. But Ford’s is certainly the most extreme. They’re killing off the Fusion, the Taurus, the Fiesta, and the Focus, its bread-and-butter entry-level vehicle. In their place will be the EcoSport, a compact crossover, the Bronco, a baby Bronco to fight the Wrangler, and refreshed Escape, Explorer and Edge. The Focus will live on, but only as a jacked-up hatchback akin to the Subaru Crosstrek. In fact, the only way you will be able to buy a Ford that has a trunk, is with the Mustang. That, or live somewhere else in the world where Ford will continue to sell its low-margin vehicles.

Dealers worry this will mean they will stop seeing first-time car buyers shopping for Fords, and it’s a valid concern. Hackett says dealers will still have the Focus Active and the EcoSport, but those will command at least a 20% price premium over the outgoing Focus. In the age of the declining middle class, rapidly growing debt and deep subprime borrowing, as well as auto loan terms of seven years becoming more common, it’s absolutely clear to anyone paying attention that people are simply less able to afford cars than they have ever been. So abandoning those buyers to the used market and focusing on higher margin SUVs and crossovers is definitely a very risky move, and exactly what got Chrysler and GM in trouble in 2008. But maybe since Ford didn’t get bailed out the same way the others did, they didn’t learn the lesson of diversification.

Of course, things are different now. The Ford Escape has virtually the same fuel mileage as the 2006 Ford Focus, so if gas prices continue to rise, as they are expected to, fewer buyers may be trading in their SUVs on fuel-sipping sedans because the gains are minimal. And the housing market isn’t a bubble ready to burst, sending everyone’s finances into a tailspin. However, one might argue that the auto lending market or higher education are two bubbles primed to burst in the near future, and that mass migration to cities could drive interest in more compact vehicles more well-suited to city dwelling. In either case, no investment portfolio manager has ever gotten rich by telling investors not to diversify and I think it’s foolish to do so with automotive lineups as well.

So what’s there to gain for Ford? While they forsake the entry level and low income buyers, despite not remotely being a premium brand, Ford will be satisfying their investors by cutting almost $26 billion in operating costs from producing lower margin vehicles and capitalizing on current sales trends. But let’s not forget that those same trends stem from the whims of consumers, who are fickle as hell, and with a possible trade war looming to increase costs of virtually everything, Ford better hope their investors aren’t as fickle if SUVs start going out of style again.

Authored by
Devlin Riggs

Autonomous Vehicles are Not for Safety

Even if you’re not a real automotive enthusiast, you probably heard this week about the incident in Tempe, Arizona where a pedestrian was killed while crossing the road at night. This in itself is not rare. Pedestrians die every day, and Arizona actually has the fourth highest pedestrian deaths of any state, so it’s unfortunately especially common there.  The difference this time it was a Volvo XC90, being driven by Uber’s autonomous technology that struck and killed the woman, and it has understandably led to new questions about how safe autonomous vehicles actually are. The reality though, is that safety is only an occasional byproduct of autonomous technology.

Photo by ABC-15, via Associated Press

But safety is absolutely paramount in testing unproven technologies, and it’s clear that Uber was not doing their due diligence in this regard. At the time of the accident, the Volvo was being chaperoned by one Uber employee who, according to video of the incident, spent his time looking down, either at a phone or at a monitor, not paying attention to the road ahead. Jalopnik called around and pretty much every automaker testing autonomous vehicles uses two in-car minders; one to watch the road and correct any issues with immediate human input, and another to monitor the technology and keep logs of the car’s activity. Uber uses only one, so does Waymo. And we have to remember that Uber isn’t a car company, they’re an app company bleeding funds and trying to come up with a technology as fast as they can to provide taxi service without having to pay human drivers to operate it. It’s not in their best interest to pay to have two people in a car, even if it makes the drive safer.

And there are some extenuating factors in this case. It was really dark and the forward-facing camera in the car shows that, until just about two seconds before impact, the woman was very difficult to see. But those cameras don’t exactly capture the full spectrum of what the human eye can see and it stands to reason that an alert driver might have seen and been able to react to the woman in time to at least avoid her death. What almost certainly did see the woman were the Velodyne LiDAR arrays on the top of the Volvo, for which it being dark or night is immaterial. Velodyne says that the problem probably wasn’t their system seeing the woman, but rather Uber’s software interpreting the shape the LiDAR was seeing as a woman and acting accordingly. Instead, the car didn’t slow down at all and hit the woman at 40 miles per hour as she walked her bike across the street.

And the hardware talking to the software is just one of many ways autonomous vehicles can go wrong. Just like my computer gives me the spinning wheel of death when I try to do to many tasks at once, machines encounter problems sometimes that can either render them unusable, unstable or unresponsive, which becomes a problem when the machines are propelling 4,000 pound death machines down motorways at dangerous speeds. And that’s just to mention factors inside the vehicle. Just this week, a representative from the National Center for Atmospheric Research voiced his concern over autonomous vehicles’ overreliance on GPS because the technology is so vulnerable to interruption due to solar flares, which could render vehicles without knowing how to get where they’re going. 

As for the other side of the equation, the truth is we’ll never achieve 100% safety on the roads because humans are both stupid and unpredictable. We don’t use crosswalks, we pop out from behind things, we generally do our best to confuse and bewilder technology, like wearing billowy clothing that doesn’t make us look like humans, or carrying bikes that make us look like vehicles. Advances in artificial intelligence have computers beating humans in games like chess, Go and Jeopardy, but there’s a long way to go before it can adequately anticipate what us crazy humans are going to do.

So that brings us back to this week, when a woman crossed the road in dark clothing at night and not in a crosswalk, which should not have been a death sentence. And it might not have if Arizona hadn’t made themselves the absolute wild west of motor vehicle testing. Or if Uber had bothered to put a second person in their cars like most other automakers do. There’s a reason most automakers have their own or use closed proving grounds and race tracks to test vehicles in a variety of situations. While nothing can fully compare to real-life testing in scenarios that are difficult to replicate in a closed environment, I would find it hard to believe that they couldn’t have tested a woman walking a bike across the road. 

Since most automakers are testing on roadways with other drivers and pedestrians and no shortage of obstacles, safety clearly isn’t the primary concern of automakers in their rush to get autonomous technology into their vehicles. And if you’ve listened to my podcast, you probably know what I’m about to say. Autonomous cars are not about enhancing safety and reducing pedestrian or driver deaths. They’re about enhancing convenience and making money for both automakers and taxi apps like Uber and Lyft. Autonomous systems are yet another optional add-on for which Tesla, Cadillac, Chevrolet, Nissan and others can feel free to charge us thousands of dollars, which we’re happy to pay because rush hour driving is brutal. The incentive for safety comes not from a sense of duty to improve society, but from a fear of liability when and if something occurs. And now that something has, and the daughter of the woman killed has lawyered up, we’re going to see just how accountable these companies are going to be held when safety is not their first priority.

Authored by
Devlin Riggs

Crooks Galore!

Dumb criminals are everywhere. How did they get everywhere? Mostly by driving, and apparently mostly by driving cars they’ve stolen! As I noted a few weeks ago, as the cost of car parts rises, so do the number of vehicle thefts. 

In Florida last week, three teens, two 17 and one 16, were apprehended after stealing a massive 46 vehicles over the course of a few weeks across three cities in the nation’s penis. They were finally caught after failing to steal a Jag SUV from someone’s garage while they were home. They quickly moved on to try to steal a Porsche Cayenne and BMW 5 series at two separate locations before fleeing police on foot, running, apparently, into the everglades, which seems like an invitation to be gator dinner. A police chopper found them and allowed officers to catch up on foot. Many of the nearly 50 cars they’re linked to have stolen were high end vehicles, so it seems they’re not without taste, just sense and good judgment.

A little further north in Hartford, Connecticut, 25 year-old Jonathan Rivera, who dutifully showed up for his court date to address charges of first-degree larceny and tampering with a motor vehicle. In laymen’s terms, he was arrested for stealing a car and was in court to face his crime. Unfortunately for Johnny here, police were wandering around the parking lot, scanning license plates and discovered that plates on one car came back as having been reported stolen. So police waited in the lot to see who came out to drive the vehicle away and guess who it was? Yes, dear Jonathan, who was arrested again for the same crime. Maybe he was counting on police figuring that nobody would be stupid enough to drive a stolen car to court. Well, police, Jonathan accepts your challenge.

Meanwhile back here in the Midwest, Detroit police are on the lookout for two white cargo vans that were stolen from a dry cleaner’s. Sitting in the parking lot of Perfect Cleaners, the vans were apparently too inviting for some crims to pass up. What they did choose to pass up though, were the contents of the vans, namely dozens of police and firefighter uniforms from Detroit municipalities. Authorities found the uniforms dumped elsewhere in the city. While I’m certain no surveillance footage of this exists, I just would’ve loved to see the expression on the face of the perps when they discovered that their super special score was actually one of the worst things they could be caught with, short of plutonium or a tiger.

Authored by
Devlin Riggs

In Trade Wars, Everyone Loses

Now, I try not to get to political because my podcast is about cars and not ideologies, but the truth is the automotive industry is heavily affected by the actions of politicians, so every once in a while, those actions are worth exploring if only to evaluate their impact on our favorite past times; cars and driving.

The policies in play this week are all about import tariffs, taxes placed on things made outside the United States for the simple fact that they were not made in the United States. Last week it was steel and aluminum, both of which are critical components in cars and which are rarely made in the United States anymore. China, specifically, is one of the world’s leading exporters of steel and and the theory is that, by imposing a tariff on Chinese steel, companies would rather purchase steel from US steel plants because it’s cheaper, thereby creating jobs in the steel manufacturing sector and leading us all to live happier, more fulfilling lives knowing that we provided people with some work.

The problem with that theory is, companies that use steel don’t exist to create jobs or give everyone a warm, fuzzy feeling inside. Unless that company is Chipotle, companies exist to make money and they will fight tooth and nail for every profit margin possible. That means that, when something costs more to make, they will charge consumers more to buy it, leading to price inflation and a lower quality of life because people have less money after spending it all on whatever they are buying with steel or aluminum in it. Like, for instance beer cans or my beloved Diet Coke.

This week, the conversation turned from raw materials to completed cars, when Trump proposed implementing a tariff on European vehicles, claiming that the US had been treated very unfairly by the European Union. The EU responded by saying they would tax Harley-Davidsons if such tariffs were applied to their vehicles. And let’s be honest, people are not going to go buy a Cadillac instead of a Mercedes just because a 10% import tariff has been applied, they’re just going to pay more for the Mercedes and hate the government.

The apparent issue at the core of this is that Trump thinks that, because the US has a trade deficit, that means that everything is all wrong and we’re losing and everyone else is winning and we need to be the ones winning, when that simply isn’t the case.

Here’s a quick explanation of the trade deficit; I go into Chipotle and I get steak tacos, I have a trade deficit with Chipotle and I have to pay them for the product I received. This is partially because it’s more expensive to go buy the ingredients myself, but also because I am lazy and by having Chipotle do the hard work for me, my quality of life is higher.

And that’s what it boils down to: quality of life. The primary argument for implementing tariffs and reversing the trade deficit is to create jobs, but that effort is doomed to fail because we have things like the minimum wage here, and health and safety rules that make the production of goods more expensive than they can be produced in China or most countries in southeast Asia, where there is little to no worker protection. And why have those regulations in place that guarantee a certain hourly wage and working conditions that aren’t likely to wind up in employees dying? Because we want a higher quality of life. Part of the price we pay for that is a trade deficit, where we consume more than we create, product-wise. What we also get are cheaper goods, access to more and varied items and low inflation.

And now we’re at a point when our chief executive is calling for a trade war that he insists is good and will be easy to win. What we’ll get with a trade war is more expensive raw materials, more expensive products, access to fewer items, higher inflation, higher debt from greater spending on more expensive items and the accompanying high inflation, which will likely increase personal bankruptcies and lead to actually fewer jobs than it will create because we can never truly compete with our trading partners in some sectors. Especially after we learned this week that Americans owe more than $1 trillion in car loans, and we’re borrowing record amounts of money to buy cars, often at deep subprime interest rates, we simply cannot contemplate policies that will only cause us to plunge deeper into personal debt. There’s no such thing as a good trade war, and there are no winners. In a trade war, everyone loses, including us petrol heads.

Authored by
Devlin Riggs