|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||160.75 - 168.80|
|52 Week Range||155.66 - 204.99|
|Beta (5Y Monthly)||1.58|
|PE Ratio (TTM)||5.31|
|Forward Dividend & Yield||5.36 (3.19%)|
|Ex-Dividend Date||May 12, 2019|
|1y Target Est||N/A|
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world threatened by trade wars. Sign up here. Spain’s vicious start-and-stop cycle of bad jobs has become one of Europe’s most chronic economic dilemmas, a problem unresolved by its post-crisis boom.For Raquel Garcia, that means peak tourist season in the Spanish province of Cadiz is her one shot each year to find a full-time job. “When the summer comes, boom!” the 34-year-old says.But then the market goes bust, and thousands wait for the season to come around again. At the end of August, Garcia lost the full-time job she’d held for four months as a waitress, leaving her and her son to live off the couple hundred euros in unemployment insurance and subsidies they receive each month. The unemployment rate in the southern province is 25%, among the highest in the developed world.The situation remains critical despite years of robust economic expansion in Spain and successive interest-rate cuts that have propped up the broader European economy. It’s been masked by a steady decline in the overall euro-area unemployment rate, which has fallen to the lowest level since 2008.Much of the blame lies in deep-seated domestic problems. The country has the European Union’s highest rate of precarious temporary contracts; the highest rate of high school drop outs and among the highest portions of low-skilled workers. It has one of the lowest rates of mobility, which means Spaniards often stay in cities with few job opportunities.There are some signs that those structural issues have become more entrenched. Job growth has begun to stagnate and economists say the unemployment rate probably won’t fall much below 12% or so in the coming years.“It is a dysfunctional labor market,” said Marcel Jansen, a professor at the Autonomous University in Madrid. “We need to bring structural unemployment back to reasonable levels.”Successive governments have failed to tackle the over-reliance on temporary contracts. The only major, recent attempt to improve labor laws was in 2012, a post-crisis revamp credited with spurring the economic expansion.Spain’s new left-wing government has put the issue back in the spotlight with plans to reverse some of those changes. Economists warn it would be better to improve the previous reforms rather than undo them, which could be damaging at a time of slower economic growth.Spain’s system makes it easier and cheaper to fire a worker on a temporary contract. Around 90% of the jobs created in recent years have been temporary -- one quarter last for less than a week.The market discourages companies from investing in training, which makes it hard for workers to build up the skills they need to escape the trap of sporadic unemployment.Some never make it out.Rosario Rodriguez, 49, has spent her adult life working on short-term contracts, most recently as an assistant in the kitchen and laundry room of a nursing home. Still, she’s never considered leaving her home city of Cadiz.“When I think about the future, it’s very bleak,” she said, walking out of an unemployment office in central Cadiz city recently. “In cities where there are more opportunities, the rent is a lot more expensive.”In Cadiz, the problems date to before the 2008 crisis. The province’s once-powerful ship builders have been shedding jobs for decades and the production of Cadiz’s famed sherry wine has become more mechanized, requiring less manual labor.Some business executives in Cadiz and elsewhere say unemployment is lower than the data suggest because people are working small side jobs in the underground economy.That might be providing an escape valve for some, but economists say it’s not widespread -- and those people are still likely to be underemployed and not earning much.For many, the problem is they’re stuck with mortgages that make it hard to leave. Home ownership in Spain is the highest among large EU countries, while the rental market is short on apartments and long on complex and costly paperwork, making it hard for the unemployed to mull a move to a new city.“There’s not an extensive rental market to facilitate those kinds of moves -- it’s an important impediment to mobility,” said Miguel Cardoso, an economist at Spanish lender BBVA.Also, it can be difficult in some regional administrations to transfer benefits from one region to another, another disincentive to moving.Even for those who decide to take the financial risk, it can be hard to figure out the best positions available. Spain has a government-run website for job-seekers but economists say it’s not updated frequently and doesn’t include many of the available positions.Public employment agencies aren’t as widely used compared with other EU countries. Some Spanish offices, such as in the industrialized Basque Country, have had success training unemployed workers for in-demand jobs.But those in the less industrialized south -- where unemployment is the worst -- have struggled.Garcia, the waitress who was fired in August, recently found a job at a restaurant once a week, where she barely earns enough money to pay her bills.“Cadiz is so rich because it has the ocean, it has the mountains and the food is absolutely delicious,” she said. “But at the same time, it’s so poor.”To contact the reporter on this story: Jeannette Neumann in Madrid at email@example.comTo contact the editor responsible for this story: Fergal O'Brien at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
CATL, China's top electric vehicle battery maker, said it aims to raise up to 20 billion yuan ($2.85 billion) in a private placement of shares to fund its battery projects and boost working capital. The fundraising will help CATL to expand its battery-making capacity in Fujian, Jiangsu and Sichuan, as well as an energy storage research project, the company said in a filing to the Shenzhen stock exchange late Wednesday. In a separate filing on Wednesday, the battery maker said it plans to invest 10 billion yuan in a battery manufacturing base in Ningde, where it is headquartered.
(Bloomberg Opinion) -- The word that Peugeot SA boss Carlos Tavares comes back to time and again to describe the daunting challenges facing the auto industry is a deliberately frightening one. Carmakers face a “Darwinian” period, he reminded investors on Wednesday, implying that some of the French group’s less robust peers won’t survive the epochal shift from combustion to electric vehicles.That battle for survival has just been made even more difficult by the spread of coronavirus, which threatens to shutter plants and sap demand for new vehicles across the industry. The shares of auto companies — even very profitable ones like Peugeot — have been hammered this week. But if anyone can steer a safe path across this vertiginous chasm, surely Tavares can.For various reasons the big European carmakers have all changed their CEOs recently, but Peugeot has clung to its leader since 2014, and he’ll be in the driving seat when the company merges with Fiat Chrysler Automobiles NV. The strong full-year results that Tavares unveiled on Wednesday show why his services are in such demand; the contrast with struggling French rival Renault SA is telling. Peugeot’s car operations achieved an 8.5% adjusted operating margin in 2019, whereas Renault managed just 2.6%.(1)While Renault’s net cash is dwindling, forcing it to slash its dividend, Peugeot’s has swelled to more than 10 billion euros ($10.9 billion), allowing it to pay shareholders more.The cost-conscious Tavares has made a virtue of doing more with less and he’s been willing to make unpopular decisions to turn around under-performing businesses. Under General Motors Co.’s ownership, the European carmaker Opel/Vauxhall consistently lost money, but having joined the Peugeot stable it now boasts a 6.5% adjusted operating margin. That’s better than Mercedes-Benz.Wages costs as a percentage of sales have improved — a big achievement considering the workforce is heavily unionized — and Tavares has been ruthless about unlocking cash from inventories and invoices. Reassuringly, he thinks Peugeot could still break even if revenues fell by half.He’s achieved this without neglecting the urgent task of cutting vehicle emissions. Thanks to new electrified products, he’s confident Peugeot will meet the European Union’s tough pollution targets this year and thus avoid regulatory fines.Peugeot isn’t perfect. The company is struggling in inflation-hit Argentina and its performance in China has been poor. But its negligible China market share is an advantage right now. The company has less to lose from coronavirus shockwaves than many peers.What Peugeot lacks in economies of scale — its 3.5 million yearly car sales are one-third of what Volkswagen sells — it makes up for by being more agile. It’s almost a pity that Tavares is about to complicate the “small is beautiful” story by merging with Fiat. Peugeot’s shares have declined by almost 30% since the deal terms (highly favorable to Fiat and its Agnelli family owners) were announced in October. In fairness, Fiat is also performing well. Together, the two companies generated about 5 billion euros in free cash flow last year and the tie-up should bring substantial cost savings. Yet Peugeot’s shareholders aren’t willing to credit those benefits just yet. Antitrust official might raise objections and history shows there’s plenty else that can go wrong in complicated cross-border mergers.A generation of celebrated auto executives, such as Daimler’s Dieter Zetsche and Renault’s Carlos Ghosn, have departed the stage just as conditions became difficult. (Fiat’s Sergio Marchionne tragically died before he could complete the job). Tavares, who’s 61, isn’t the retiring type. He still has much to prove. (1) Peugeot's profit margins are adjusted for large restructuring costs.To contact the author of this story: Chris Bryant at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Everyone is wondering when China will return to work. While it may be tempting to consider past epidemics or labor strikes to gauge how quickly that could happen, the industrial shutdown from the coronavirus is looking more like a natural disaster than anything else. It may even get worse.Chinese industrial activity remains severely depressed. One tracker shows an even sharper, albeit shorter, drop than the global financial crisis in 2008. Coal consumption at six major power plants is well below normal operating levels this time of year. Already, global suppliers’ delivery times are getting longer, particularly in Germany and Japan, according to Goldman Sachs Group Inc. Companies that have come back online are struggling to return to full capacity. While some government controls have loosened in recent days, strict quarantines in key manufacturing hubs continue to take a toll.Most employees remain at home, and things, in theory, could return to normal when China’s 300 million migrant workers get back to their jobs. But that’s now looking distant. Just 20% to 30% will resume before March, according to Jefferies Financial Group Inc. By the second quarter, that proportion will only reach 60% to 80%.Interruptions from labor strikes, for example, will hit the bottom line and delay shipments for a few weeks, while the economic hit from severe acute respiratory syndrome in 2003 was relatively short-lived. By contrast, events like hurricanes, fires and floods, have a longer-term effect. Factories get destroyed, roads become difficult to traverse and logistics routes are upended by the destruction. Firms eventually run out of inventories. Until reconstruction work is well on its way, it’s hard to get the industrial cogs turning.Hundreds of natural disasters occur globally each year that threaten lives and livelihoods. In the U.S., around 40% to 60% of small businesses never reopen their doors as a result, according to the Federal Emergency Management Agency. The ripple effects can be severe and cascade globally. A study of 41 major U.S. disasters showed that $1 of lost sales for suppliers led to a $2.4 loss for their downstream customers.Consider Japan’s earthquake in March 2011, the fourth-largest ever recorded. Manufacturing output fell 15 percentage points that month and didn’t recover until August. Industrial production of transport equipment tanked, flowing through to exports. Japanese automakers including Toyota Motor Corp. and Honda Motor Co. saw their domestic production slump 63% in March.American companies with a big dependence on Japanese parts suffered, too. It took the better part of a year to get production levels back to where they were before the earthquake; U.S. manufacturing output fell by 1% in April and stayed low for almost six months. The coronavirus’s spread will be even more disruptive. From its large network of ports and industrial parks to the billions of yuan in subsidies, China is the nerve center of global manufacturing. In 2015, the country made up nearly a quarter of the value-added share in global imports. There simply aren’t enough alternative suppliers for the crucial, if basic, parts manufactured by China's thousands of small and medium companies. Even if Beijing provides the cash, businesses are hamstrung with the regulatory burden of reopenings and labor shortages. The network effect will be amplified and prolonged, studies have shown.The trouble is, China Inc. won’t get back to work until these small and medium enterprises do. While the rate of return varies across sectors, manufacturers of so-called intermediate inputs, which are shipped globally, are having the hardest time. A survey of 2,240 such companies showed that more than 90% of respondents had delayed business resumption. A large portion haven’t decided when they will reopen.Even companies like Toyota and Honda are struggling to get fully back online in China, given their dependence on local parts makers. The companies partially restarted operations at some plants as of last week. The longer businesses are closed the higher the likelihood that supply chains start breaking down, as firms run out of inventories and stockpiles. And even when they do return, factories won’t be picking up where they left off. Volkswagen AG’s joint venture with China FAW Group Co., for instance, resumed at four plants last week, but won’t be at full steam until May. It will try to recoup losses by November, according to a production manager cited in state-run China Daily. That looks optimistic.Meanwhile, manufacturers have few choices. Beaten by costs and pricing, companies now depend on lean supply chains. All the advances in manufacturing — such as Toyota’s famed “just-in-time manufacturing” — are premised on minimal inventory and short lead times. That looks like it could backfire. As Toyota’s president Akio Toyoda said last week, “Automobiles have a broad base, and there are various things like the status of parts supplies that you don't know until you put everything in motion again.”It’s only natural to look for comparisons that put a bookend on this crisis. Knowing that SARS cases dwindled after a few months and the economy eventually rebounded can be comforting, to a certain degree. Yet we’re starting to see that the coronavirus outbreak has few precedents. It may only be a matter of time before this episode becomes the benchmark for future disruptions.To contact the author of this story: Anjani Trivedi at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Tesla Inc. has been a trailblazer for direct-to-consumer sales, but the path for other electric-vehicle startups is still pretty thorny.Plug-in truck maker Rivian Automotive Inc., which aims to begin selling its R1T pickup and R1S SUV late this year without a franchised dealer network, had hoped to build its first store in Colorado, where Tesla has three. But almost a year after raising the idea with state legislators, it’s still lobbying them -- with EV enthusiasts and car dealers lining up to testify for and against.Rivian will instead open its first showrooms in California, which makes it easier for newcomers than most other states that have tough, decades-old franchise laws designed to protect car dealers.Tesla has spent years lobbying states to loosen these laws, which ban car manufacturers from owning or operating their own stores. Tesla, which sells cars at fixed prices online, now has showrooms or galleries –- spaces to display vehicles without technically selling them -- in 28 states. It did that largely by finding loopholes and negotiating deals limited to its own business.The Model 3 maker reached a settlement last month in the home state of General Motors Co. and Ford Motor Co. when a Michigan court effectively allowed Tesla to bypass laws preventing most auto manufacturers from selling directly to consumers.To pry open the door further, Rivian is waging a state-by-state campaign on behalf of its operations and those of others to come. The effort is led by Jim Chen, a former Tesla lobbyist who’s now vice president of public policy at the Michigan-based startup.“These laws were never intended to shut out competition between different brands,” Chen said by phone last month. “A manufacturer should freely be able to choose whether it wants to enter the franchise system or sell directly.”Dealers, of course, feel differently. They say cars aren’t suited for online-only sales and that franchise laws protect consumers. Tim Jackson, president of the Colorado Automobile Dealers Association and a vocal Tesla critic, helped kill Rivian’s proposal last year, which would have allowed any company solely making EVs to sell them in Colorado without dealers.“We don’t want to further broaden, or further make accessible the factory-to-consumer direct sales model,” Jackson said in an interview last month. “We prefer, of course, the franchise model.”Jackson was back at the legislature in Denver on Feb. 18 with a posse of dealers to thwart Rivian’s latest proposal, which would expand the carve-out to any car manufacturer with EVs to sell. The bill has survived in the state senate so far, in part with new language that addresses dealers’ fears by reiterating their exclusive rights to sell existing brands in specific geographic areas.One might think Colorado, which became the 10th state to adopt California’s electric-vehicle mandate last September, would be relatively friendly territory for Rivian. But even with bipartisan sponsorship and the backing of newly elected Democratic Governor Jared Polis, passage seems far from assured.With an onslaught of new electric models coming from automakers like Ford and Volkswagen AG, dealers worry that such exceptions could give all manufacturers free rein to compete directly against them.Traditional carmakers are already beginning to shake up their retail models to sell EVs. Volkswagen announced Feb. 19 it’s using a new approach in Germany for its ID family of electric cars. Dealers will receive a commission and bonus but will no longer negotiate price or arrange financing or insurance -- an important profit source.Other startups intend to follow Tesla’s lead. California-based Lucid Motors Inc. wants to sell its luxury electric sedan, the Air, through its own network of stores.Rivian, which raised nearly $3 billion last year from investors including Amazon.com Inc. and Ford, has also introduced bills in Washington, New York and Pennsylvania. At the same time, it plans to open stores in friendlier states including California, Florida, Massachusetts and Utah, Chen said. The first ones will open around Los Angeles and San Francisco in the next year.Like Tesla, Rivian will allow people to set up a test drive, configure, order online and take home delivery.It’s also planning a subscription service that will include finance and insurance, following the lead of Porsche and Volvo Cars, Chief Executive Officer R.J. Scaringe said in an interview last month. Volvo dealers in California last year petitioned state regulators to investigate the company’s Care by Volvo program, arguing it violates franchise laws.The plan to service cars is still a bit opaque, leaving Rivian open to criticism that it can’t provide adequate maintenance for its vehicles. But Chen told legislators at the hearing in Denver this month that Rivian plans to establish service centers and mobile service teams -- like Tesla does -- and that it may rely on its strategic investors for help with infrastructure to distribute auto parts.The automotive arm of privately held Cox Enterprises Inc., which owns a stable of auto businesses including Kelley Blue Book and Manheim auction services, put $350 million into Rivian in September. That’s raised the hackles of some dealers, who share data and buy ads and used cars from Cox.“We do business with Cox Automotive,” said Thom Buckley, a Colorado dealer who testified at the hearing. “I’m very concerned about doing business with a vendor who will compete with us.”\--With assistance from Ed Ludlow.To contact the reporter on this story: Gabrielle Coppola in New York at email@example.comTo contact the editors responsible for this story: Craig Trudell at firstname.lastname@example.org, Chester DawsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The National Transportation Safety Board on Tuesday will convene its second hearing on a fatal crash involving Tesla Inc.’s automated driver-assist technology even though the pioneering automaker hasn’t filed formal responses to recommendations stemming from the first one more than two years ago.The NTSB in 2017 recommended that automakers including Tesla make their driver-assist systems more resilient to misuse by inattentive drivers, and limit the operation of those systems to only the driving for which they were designed.Automakers including Volkswagen AG, Nissan Motor Co. and BMW AG have told NTSB how their systems ensured driver engagement, which agency deemed acceptable responses. Tesla has had no formal correspondence with NTSB officials responsible for monitoring how safety recommendations are implemented, NTSB spokesman Chris O’Neil said.“It’s not the norm,” O’Neil said. “Most recommendation recipients respond in the prescribed 90-day window.”Tesla didn’t respond to a request for comment but has said it’s updated Autopilot in part to issue more frequent warnings to inattentive drivers.The role of Tesla’s automated driver-assist features known as Autopilot, along with other factors including driver distraction and highway infrastructure, will be examined at an NTSB meeting on Tuesday regarding a March 2018 crash in Mountain View, California, that killed 38-year-old Apple Inc. engineer Walter Huang after his Tesla SUV slammed into a highway barrier while using Autopilot.The probe was marked by an unusually public display of tensions between the agency and Tesla Chief Executive Officer Elon Musk that peaked when the agency kicked Tesla off the probe after the CEO released information about the crash despite prohibitions against such disclosures during an investigation.The hearing could hold lessons for the auto industry as automated driving features are becoming increasingly common on new vehicles. Several other automakers have also equipped their vehicles with technologies that can provide automated steering, accelerating and braking, and some have installed systems to ensure drivers pay attention. General Motors Co. and Subaru Corp. use infrared cameras to track head and eye movement, and Nissan last year said it would include a similar driver-monitoring in a system designed to offer hands-free driving on the highway.Tesla has said Autopilot makes drivers safer, pointing to internal data it releases quarterly that it says demonstrates that drivers crash less frequently while using it than while driving manually. The company says drivers must remain attentive with their hands on the wheel while using Autopilot, which monitors by sensing steering wheel inputs by the driver.The company has said it has adjusted the the warnings drivers receive if their hands are off the wheel for too long, which federal investigators have faulted for being easy to sidestep.In 2017, the NTSB closed its first probe of a fatal crash linked to Autopilot by calling on companies to develop ways to better ensure drivers pay attention while using automated driving features that require human supervision. It also called on automakers to take steps to limit the use of automated driver-assist features to only the driving scenarios for which they’re designed.The recommendations stemmed from the agency’s probe of a 2016 crash in which former Navy SEAL Joshua Brown died after his Tesla Model S crashed into a commercial truck crossing the road in front of him on a Florida highway while using Autopilot. The agency cited an over-reliance on the car’s automation by Brown and a lack of built-in safeguards to prevent inattention as key factors that contributed crash.Last fall, the NTSB again cited inattention and Autopilot’s design in a January 2018 crash in which a Tesla driver rear-ended a parked fire truck on a freeway near Los Angeles. The agency said Autopilot’s design allowed the driver, who was uninjured in the crash, to stop paying attention to the road.After that crash, Tesla said it has updated Autopilot in part to issue more frequent warnings to inattentive drivers. The company has also been in regular contact with NTSB investigators and provided information about its systems to the agency, O’Neil said.“That doesn’t replace the need for formal responses to safety recommendations,” he said. “It’s a process designed to help us understand what they’re doing to implement those safety recommendations and what their progress toward them are, which may inform whether we feel other recommendations are necessary.”Records from the Mountain View investigation hint at several factors the NTSB could highlight during the meeting Tuesday. With Autopilot engaged and set to cruise at 75 miles per hour, Huang’s 2017 Tesla Model X sped up and slammed into a concrete barrier. Vehicle data showed neither the driver nor the vehicle’s automatic systems applied the brakes prior to impact, the NTSB has said.Huang had complained that Autopilot had repeatedly veered his vehicle toward the same spot during earlier trips on that same stretch of highway, according to the agency. Data taken from his Tesla’s computer confirmed that the situation had occurred at the same location four days before the fatal crash and once more several weeks earlier, records released by the NTSB show.The tip of the concrete lane divider struck by Huang’s Tesla was supposed to have been protected by a crash attenuator, a device attached to highway infrastructure to absorb impact forces like a car’s crumple zone. It was damaged 11 days earlier and hadn’t been repaired by the California Department of Transportation before Huang’s crash.Records reviewed by NTSB found Huang was playing a game on his Apple-provided mobile device before the collision, the agency said, citing data transmission records. However, the data couldn’t show how engaged he was with the game or whether he was holding the device with both hands at the time of the crash, the NTSB said.Crash investigators at the National Highway Traffic Safety Administration have opened 14 inquiries into Tesla crashes believed to involve Autopilot, plus 11 more involving other manufacturers with partial-automation systems.\--With assistance from Alan Levin.To contact the reporter on this story: Ryan Beene in Washington at email@example.comTo contact the editors responsible for this story: Jon Morgan at firstname.lastname@example.org, Elizabeth WassermanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Anyone paying attention to finance, markets and the economy doesn't have to look very hard to find complaints that we are on the cusp of a bubble of one type or another.Perhaps the area most often targeted by the bubble believers is tech. I was curious about just how widespread this belief is: “Tech bubble” has doubled on Google Trends this year alone; Google News generates more than 3.6 million hits for the phrase.(1)Defining a bubble isn't too hard and one will do as good as another. “A market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset. Bubbles are often hard to detect in real time because there is disagreement over the fundamental value of the asset,” Nasdaq says. So let's turn to the pro-bubble argument: It has been a decade since the financial crisis and two decades since the dot-com implosion. That's enough time for people to have forgotten the trauma of that disaster. Since the Great Recession ended, there has been too much capital sloshing around, leading to excessive tech valuations. And not just in public equities, but in private markets, too. Unicorns and other SoftBank Vision Fund debacles have imploded, an early warning sign for publicly traded companies, the argument goes.Central banks have made the bubble worse, providing cheap capital that has artificially inflated profits. The bubble advocates also urge us not to overlook the impact of these low borrowing costs on the surge in share buybacks; reducing the total amount of a public company’s shares outstanding has the effect of making earnings per share look better.Then there are the anecdotes: Tesla’s stock has more than doubled in the past three months, and the company now has a market value of more than $165 billion -- higher than Volkswagen, General Motors and Ford combined. This is to say nothing of the companies valued at more than $1 trillion, such as Apple, Microsoft, Amazon and Google parent Alphabet. But let's also be generous and acknowledge that some things do look overvalued, whether it's Bitcoin (maybe), WeWork (obviously) or Tesla (I'm not getting in the middle of that one).But here's the thing: None of that is proof of a stock-market bubble. Let's look at some themes and issues to demonstrate why this is so:Business models: In the 1990s, the internet captivated the collective imagination of investors, too many of whom indiscriminately threw cash at anything with dot-com attached to it. The 2000 collapse taught investors that it took more than a high-concept idea to make a stock worth buying: growth and future cash flow matter a lot, too. The collapse of WeWork’s initial public offering last year brought this home once again. Investors realized that renting out office space short term while locking the company into long-term, expensive real-estate leases was a terrible business model. Public investors grasped this flaw -- something private investors seemingly failed to understand -- and the market worked the way it's supposed to. Revenue and earnings: Unlike the dot-coms of the '90, today's tech businesses are gigantic cash machines. Apple posted fourth-quarter revenue of $91.8 billion and net income of $22.2 billion. Without much fanfare, Microsoft's revenue grew 14% in the latest quarter, to $36.9 billion, while net income surged 38% to $11.6 billion. Alphabet, Amazon, Facebook all continue to mint revenues and profits. These companies also have accumulated hundreds of billions of dollars in cash. This is not the profitless tech boom of the 1990s.Sentiment: Maybe there is some excessive optimism. But that isn't the same as the full-blown delusion that bubbles produce. Talk of bubbles is offset by chatter about recession: Remember that less a year ago investors were anticipating a downturn and in the fourth quarter of 2018 major market indexes fell 20%, meeting the normal definition of a bear market, however brief. Meanwhile, the American Association of Individual Investors Bullish Readings index is 40.6, which is just a hair above the average reading of 39.5 for the past 25 years.Performance: Broad market performance is robust, but not crazy. Last’s year's 31% gain in the S&P 500 is misleading: most of that simply reflected the rebound from the 2018 fourth-quarter tumble cited above.So let's take a step back and consider the S&P 500 since 2015: It has had annual gains of 11.8%, for a total cumulative five-year return of 75%. Before fintwits howl “Now do the Nasdaq,” here it is: 17.6% annually and cumulative total returns of 125%. Fine, good, but not bubble material.Now compare those figures with the five years before the market peaked in March 2000: The Nasdaq generated annual returns of 60% and a five-year total return of 946% during that period, while the S&P 500 gained 25% annually and 211% for the five years. This is obvious, right?Sure, there are pockets of excessive optimism and foolishness in markets. There always are. But there also are lots of companies that are not participating in this bull-market rally. Those who were around in the 1990s know what a real bubble looks like: This isn't it.(1) Some recent examples:Barron’s:"Tesla’s Manic Rally Isn’t the Only Sign of a Market Bubble. What You Need to Know"CCN:"An Epic Stock Market Crash Is Looming, Analysts Warn"Yahoo:"The stock market is on steroids and it could end up like the dot com bubble"Barron’s (again): "Is the Fed Building Another Stock Bubble?"Bloomberg: “Mom and Pop Are On Epic Stock Buying Spree Fueled by Free Trades”To contact the author of this story: Barry Ritholtz at email@example.comTo contact the editor responsible for this story: James Greiff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Volkswagen and the German consumer protection organisation have agreed to resume talks aimed at reaching a deal in a class action lawsuit over the carmaker's rigging of diesel emissions tests. VW admitted using illegal software to cheat U.S. diesel engine tests in 2015, a scandal which has cost it more than $30 billion in vehicle refits, fines and provisions. Nearly all U.S. owners of affected cars agreed to take part in a $25 billion settlement in 2016 in the United States, but VW has said there was no legal basis for consumers in Germany to seek compensation due to differences in law.
(Bloomberg Opinion) -- Who is Cathie Wood?She’s already in the pantheon of top money handlers over any period in the past five years, and has been the most persuasive — and so far prescient — champion of Tesla Inc.Her actively managed Ark Innovation ETF is the best performer among 584 funds with at least $1 billion of assets in the global equity market, crushing the likes of BlackRock with a return of 165% (income plus appreciation) the past three years, and she beat 99% of them since Ark Investment Management LLC became a registered investment adviser in January 2014, according to data compiled by Bloomberg.For all of her success picking winners, the 64-year-old Wood has received relatively little notice during the past three years, aside from being an occasional outlier among investors on CNBC. You won’t find her at the Barron’s Roundtable, which “gathers some of Wall Street’s best minds.” She was included in the Bloomberg 50: The People Who Defined Global Business in 2018. Her focus on innovation, “centered around genome sequencing, robotics, artificial intelligence, energy storage and blockchain technology,” enabled Ark Innovation ETF to increase 127 times, to $2.4 billion from its $15 million grubstake in 2017. In the process, the Ark ETF rewarded its shareholders with more than three times the return of the S&P 500 Index and more than twice the Nasdaq’s bounty. Since its inception, Ark has earned almost 2.4 times more than the S&P 500 and 1.7 times the Nasdaq, according to data compiled by Bloomberg.At a point when money management mostly is a passive, index-driven business, Wood is a discerning stock picker with about $11 billion of assets. Her selection of health-care juggernauts Juno Therapeutics Inc., based in Seattle, and Invitae Corp., in San Francisco, returned 286% and 173%, respectively, in the past three years. Choosing Palo Alto-based Tesla and Buenos Aires-based MercadoLibre Inc. among consumer discretionary companies netted 185% and 269% in her fund, according to data compiled by Bloomberg.“We’re all about finding the next big thing,” said Wood during an initial interview with David Westin on Bloomberg Wall Street Week earlier this month. “Anyone hewing to the benchmarks, which are backwards looking, they’re not about the future. They are about what has worked. We’re all about what is going to work.”Since she graduated summa cum laude in finance and economics from the University of Southern California in 1981, Wood has been assistant economist at the Capital Group; chief economist, analyst, portfolio manager and director at Jennison Associates; co-founder of the hedge fund Tupelo Capital Management, and chief investment officer of global thematic strategies at AllianceBernstein, where she managed more than $5 billion. Her favorite innovator is Copernicus, the Renaissance man who located the sun rather than the Earth at the center of the universe.Soon after launching Ark in 2014, Wood made Tesla her fifth-largest holding. In 2018, she increased it to No. 1, or 10% of the fund, as most analysts soured on the maker of zero-emission, battery-electric vehicles.In 2016, when Tesla plummeted 11%, and 75% of the analyst recommendations opposed any purchases, Wood almost tripled her Tesla position to 5,072 shares. The following year, after Tesla appreciated 46%, and 68% of the analysts remained bearish, she enlarged her stake more than 13 times to 67,653 shares, according to data compiled by Bloomberg. When Tesla rallied 26% last year amid tepid recommendations from 70% of the analysts, she almost doubled her stake to 471,594 shares.Tesla continued climbing this year — 91%, the best performer in the Nasdaq 100 index and No. 1 among the 500 most highly capitalized U.S. companies. Wood was a consistent seller during the rally — reducing her holding to 292,000 shares — solely to keep her Tesla stake at the designated maximum 10% of her fund.“If we hadn’t sold, Tesla would probably be well north of 20% in the portfolio,” she said during a phone interview last week. “Last year, we were buying aggressively when analysts were saying Tesla was going to run out of cash and go bankrupt.” Tesla still is “incredibly undervalued,” she said.That’s an opinion considered absurd by most analysts, who insist nothing justifies Tesla’s valuation at almost $150 billion, or 58% more than the market capitalization of global sales leader Volkswagen AG.On the contrary, says Wood, Tesla’s share of EV sales increased a percentage point to 18% when the so-called Tesla killers — from BYD Co. Ltd and BAIC Motor Corp. in China to Nissan Motor Co. in Japan and Volkswagen, Bayerische Motoren Werke AG and Daimler AG in Germany and General Motors Co. and Ford Motor Co. in the U.S — started selling their own battery-electric vehicles. Wood believes the legacy automakers will lose money on their EVs, while Tesla becomes increasingly profitable and remains years ahead of its rivals in battery and chip technology.The company also has 14 billion miles of real-world driving data. Its closest competitor, Waymo, has data on 20 million miles.The investors who have been Tesla naysayers have gotten far more attention than Wood. News articles about Tesla short sellers, including David Einhorn’s Greenlight Capital LLC and Jim Chanos of Kynikos Associates Ltd., are far more numerous on the Bloomberg system. More than 100 stories showcased Einhorn’s disdain for Tesla, and more than 40 similarly featured Chanos, while there were around 20 for Wood during the same period.Investors were similarly dubious about Amazon.com, which appreciated 1,029% during its first five years after the initial public offering in 1997 and 228% during its second five-year period. Tesla has gained 1,018% during the five years after its 2010 IPO and appreciated 206% since 2015, according to data compiled by Bloomberg. “It’s the same idea that analysts hated Amazon during that entire period – not on the bubble but after the tech and telecom bust,” Wood said.In her latest assessment last month, she wrote: “Based on our updated expectations for electric vehicle (EV) cost declines and demand, as well as our estimates for the potential profitability of robotaxis, our 2024 expected value per share for TSLA is $7,000.”That’s a far cry from the $340 in August 2018, when Chief Executive Officer Elon Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.”Musk subsequently received a letter from Wood urging him not to take the company private because she saw Tesla rallying to $4,000 in five years. Before the month ended, he said his plan to take Tesla private wasn’t “the better path.” Even Musk seemed impressed by Wood’s judgment. “The letter was to him and the board, and he did say that he and the board took the letter into consideration and it did influence them,” she said.Tesla said last week that it will sell about $2 billion of new shares and that Musk would purchase as much as $10 million of the offering.“I’m not going to tell you we were the reason,” Wood said. “We were a little peapod back then, and we’re still a little peapod in the scheme of the asset management world.” But, she said, “I think our research is the best in the world on Tesla.”So far at least, she’s been right on the money.\-- With assistance from Shin PeiTo contact the author of this story: Matthew A. Winkler at email@example.comTo contact the editor responsible for this story: Katy Roberts at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Matthew A. Winkler is Co-founder of Bloomberg News (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founder of Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, Overseas Press Club and Society of Professional Journalists and Editors (Sabew) awards.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- On one side of the Atlantic, Tesla Inc. is capitalizing on its soaring share price by selling $2 billion in stock so it can build more electric vehicles. On the other, French manufacturer Renault SA has been forced to cut its dividend by 70% and announce a big reduction in fixed costs so it can afford to do the same.Dwindling profits and Renault’s drastic remedies were mirrored this week by its Japanese alliance partner Nissan Motor Co., as well at Daimler AG. (Renault has an engineering partnership with Daimler and owns a small stake in the German car and truck maker.) Their problems aren’t identical but all three had expanded their workforces in anticipation of demand that hasn’t materialized and now they have to tighten their belts to pay for expensive electric vehicles, for which demand remains uncertain. Renault’s shares are near their lowest level in eight years, which means the company is capitalized at barely 10 billion euros ($11 billion), a sum that includes the 43% stake Renault owns in Nissan. Needless to say, that’s a sliver of what Tesla is worth, even though the U.S. company’s annual output is still almost a rounding error for the Renault-Nissan alliance. This juxtaposition sends a crystal clear message: Carmakers that grew fat and happy producing combustion engine vehicles won’t get any help from the stock market now that they’ve decided to embrace an electric future. Instead the gasoline gang are going to fund these changes themselves and it’s going to be painful, for both employees and shareholders.Long-established automakers have decided that their salvation is to be found in alliances and partnerships, which spread the cost of developing expensive technology over a greater number of car sales. It’s why Renault tried to merge with Fiat Chrysler Automobiles NV, before Peugeot-owner PSA Group beat them to it. But in Renault’s case its links to other manufactures are amplifying its problems right now, not solving them. Relations with Nissan fell apart when former alliance boss Carlos Ghosn was arrested and remain fragile now that he’s free to settle scores. Both sides have since hired new CEOs but their shareholders aren’t yet ready to buy the story that harmony has been restored.With its own profits slumping, Nissan can’t afford to pay big dividends to Renault and the French are also earning less from the Daimler partnership. The upshot is that Renault is a bit squeezed for cash — net cash at the automotive unit dwindled to just 1.7 billion euros at the end of December (though gross liquidity, including available credit lines, was a more respectable 16 billion euros). One way Renault could free up some money would be to sell part of its Nissan stake, which might have the added benefit of helping to re-balance the alliance in Nissan’s favor, something the Japanese have long sought. The trouble is Nissan’s shares have halved in value over the last two years so selling now wouldn’t provide Renault with nearly as much as it once would. Interim CEO Clotilde Delbos all but ruled out such a move on Friday.So it’s no wonder that Renault has opted to drastically scale back its own dividend and will try to cut costs by 2 billion euros in the next three years. Delbos, who’s also the chief financial officer, didn’t go into much detail about how those savings will be delivered but the company plans to review its “industrial footprint,” which suggests plant closures are a possibility. (Alliance partner Nissan has already announced 12,500 job cuts, while Daimler is targeting at least 10,000.)Lowering costs won’t be straight forward. New Renault CEO Luca de Meo, a former Volkswagen AG executive, doesn’t start until July and French unions aren’t known for championing efforts to slash jobs. In the near term, restructuring costs will also put further pressure on Renault’s cash flow and the coronavirus could yet create unexpected problems. But unlike at Tesla, Renault doesn’t have a queue of wealthy supporters clamoring to help fund this epochal clean-vehicle transition. One way or other, employees and existing shareholders will end up paying.To contact the author of this story: Chris Bryant at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Volkswagen said it will compensate owners of its heavily polluting diesel vehicles in Germany in a settlement that will cost the German carmaker 830 million euros (690 million pounds). In 2015 VW was caught by regulators using manipulated engine management software to mask excessive pollution levels in its diesel cars, sparking a raft of prosecutions and lawsuits. The offer comes despite a breakdown in talks with German consumer association VZBV, which had been in negotiations with VW about reaching a settlement deal .
Volkswagen is shutting down two coal-fired power stations at its main plant in Wolfsburg, Germany and has declined offers to sell them to cut down the company's carbon dioxide emissions, Chief Executive Herbert Diess said on Friday. "I have already declined offers from several interested parties who wanted to buy our old Wolfsburg coal plants and rebuild them elsewhere in the world," Diess said in a post https://bit.ly/38vkmsU on LinkedIn. Volkswagen said it is replacing the coal-fired power stations with gas turbine plants, a step which will help cut VW factory's carbon dioxide emissions by 60%, equivalent to the emissions of 870,000 cars.
China's auto market, the world's largest, is likely to see sales slide more than 10% in the first half of the year due to the coronavirus epidemic, the country's top auto industry body told Reuters on Friday. "We predict auto sales will drop by more than 10% in the first half of this year, and around 5% for the whole year if the epidemic is effectively contained before April," Fu Bingfeng, executive vice chairman of the China Association of Automobile Manufacturers (CAAM), told Reuters in a written interview. Auto executives say the coronavirus, which has killed more than 1,380 people and infected nearly 64,000 in mainland China, is taking a severe toll on the industry, sapping buyer demand and disrupting supply chains for car makers globally.
Volkswagen, one of the world's biggest carmakers, on Friday said deliveries in China declined by 11.3% in January as the auto sector feels the effects of the coronavirus outbreak. The German company said the group, which includes brands like Volkswagen and Audi, delivered 343,400 vehicles in China and Hong Kong. The country is VW's biggest market.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Germany and France set out a blueprint for a giant battery factory, advancing Europe’s 5 billion euro ($5.5 billion) bid to rival the capacity of Tesla Inc. China to supply the key part for electric vehicles.The announcement at Germany’s Economy and Energy Ministry units underscores determination by European Union nations to catch up with Asian competitors that dominate battery making. Battery cells and add-on electronic devices and software make up as much as half the value of EVs.The facility at Groupe PSA-Opel’s site in Kaiserslautern involves Total SA’s Saft Groupe in a plant that will be named the Automotive Cell Co. The plant will cost about 2 billion euros and will complement a French factory in the Hauts de France region.Germany and France “want to build the best and most sustainable batteries” in Europe, Economy and Energy Minister Peter Altmaier said in a statement from Berlin on Friday. “I’m convinced that battery cells made in Kaiserslautern will set new standards in their CO2 footprint.”Together, the factories will cost about 5 billion euros add production capacity to 48 gigawatt-hours of batteries.Backed by the European Commission, France and Germany dangled subsidies to win over sketics within the auto industry about investing in the technology. While German companies such as Volkswagen AG and BMW AG dominate car manufacturing in Europe, they’ve allowed Asian companies and Tesla to take the lead on making batteries.Contemporary Amperex Technology Co., or CATL, and BYD Co. Ltd. of China are among the leaders in making lithium-ion battery cells, while Tesla has invested in a string of “gigafactories” to supply its luxury electric cars.The European governments also aim to incorporate tighter emission standards in production and recycling stipulations, which may create hurdles for Asian products. European battery cells “won’t be comparable with cheap Chinese products,” Altmaier said last year.The Kaiserslautern factory will be up and running by 2024 and employ 2000 people, Opel’s management board head Michael Lohscheller said. The German and French cell production sites may serve 10% to 15% of demand in Europe, said Altmaier. Germany alone is targeting 7 million to 10 million electric cars on its roads by 2030.Some 13.8 million jobs representing 6.1% of the workforce may be linked to auto manufacturing in the EU. The market for battery cells may be worth as much as 250 billion euros by mid-decade, the EU Commission said.Still, the competition from Asia is likely to be tough.CATL has gained a foothold in Germany in a factory in Thueringia state with a plant with 16 gigawatt-hours of capacity. In 2018, the Chinese company said it aims to be close to the market for for production sites of BMW AG, Volkswagen AG and Daimler AG.LG Chem Ltd is building a battery cell gigafactory in Poland, close to Eastern German car production sites. Tesla Inc. said in November that it will open an electric car production site on the outskirts of Berlin, and Northvolt AB is building a plant in Sweden.(Fixes reference in third paragraph to show factory is at a site, not near headquarters.)To contact the reporter on this story: Brian Parkin in Berlin at email@example.comTo contact the editors responsible for this story: Reed Landberg at firstname.lastname@example.org, Lars PaulssonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Follow Bloomberg on Telegram for all the investment news and analysis you need.Within minutes of the stock market’s open on Tuesday, shares of Tesla Inc. shot up 17%. Which feels extraordinary, except for the fact that they gained more the previous day -- 20% -- and also surged 10% one day last week and 7% and 10% the week before that.By the time the market closed, the stock had gained 112% this year, giving the electric-vehicle maker a market value greater than that of General Motors Co., Fiat Chrysler Automobiles NV and Volkswagen AG combined. There is, not surprisingly, plenty of wonder and awe on Wall Street about the rally -- no other stock on the Nasdaq 100 is even up a quarter as much in 2020 -- but few concrete explanations as to what’s driving it.Theories abound, including many of the tried and true: It’s the result of CEO Elon Musk delivering record revenue and his fourth quarterly profit in six periods; or it’s a short squeeze; or it’s the opening of a key new factory in China; or it’s an extreme case of FOMO sweeping across the investor community. Or it’s a combination of all of the above.There is another school of thought emerging, though, that likely also helps explain the magnitude of the rally. The gist is that the long-held assumption that legacy automakers will catch up to Tesla in the electric-vehicle market is wrong. In fact, Musk may be adding to his lead, ensuring in the process that the company dominates one of the true growth markets in the world for years to come.“There’s a recognition that Tesla is in a preeminent position in terms of EV technology,” Peter Rawlinson, the chief executive officer of Lucid Motors Inc., said in an interview Monday at the BloombergNEF Summit in San Francisco. “They’re even further ahead than has been reported, and I think the gap is widening, not closing.”Tesla rose as much as 24% to $968.99 Tuesday before plunging suddenly in the last few minutes of trading, trimming share prices by more than $100 each, and bringing the stock’s one-day gain to 14%. Rawlinson’s praise echoed comments made recently by the CEO of Volkswagen, the world’s top-selling automaker. Tesla eclipsed the German manufacturing giant by market capitalization on Jan. 22. Not even two weeks later, its $159.9 billion value at Monday’s close exceeded VW’s by more than $66 billion.Cars will “become the most important mobile device,” VW’s Herbert Diess told top executives at an internal meeting last month. “If we see that, then we also understand why Tesla is so valuable from the view of analysts,” he added, lamenting that VW isn’t also looked at as tech-like.Mud SlingingRawlinson, who was chief engineer of the Model S before joining Lucid in 2013, wasn’t always this positive, even going so far as to talk down his former employer’s product.“I contend that Tesla is not truly luxury,” he told Bloomberg News in September 2018, when Lucid had just secured a $1 billion investment and Musk was less than a month removed from trying and failing to take Tesla private. Rawlinson said then that Teslas were “premium and high-tech, but not luxury.” On Monday, he reiterated his view that the interiors of Tesla’s cars fall short.But since that earlier interview, Musk has built a commanding lead in the still-fledgling U.S. EV market, and the Model 3 has risen to become one of the top-selling cars in Europe -- electric or otherwise. Tesla needed only a year to construct its first overseas assembly plant in China and last month started deliveries of locally built sedans. By March, it plans to begin handing over Model Ys to customers, months ahead of schedule.“We think they are pretty far ahead in battery and EV technology,” Adam Jonas, an analyst at Morgan Stanley, said in an interview. “Tesla has moved from being seen as an auto stock to being seen as a tech stock” that is “mentioned in the same breath as Amazon, Apple and Google.”‘Technological Gulf’Global carmakers from VW to General Motors Co. are pouring billions into electric vehicles, trying to capture some of Tesla’s stock-market mojo while also meeting tighter emissions standards around the world. But the inferior battery range of recent EV entrants including Audi’s e-tron crossover and Porsche’s Taycan sports car show how far legacy automakers are lagging behind, Rawlinson said.“I’m not being critical of the Germans -- it’s wonderful they’re creating these cars and coming in,” he said. “But it just shows much of this technological gulf remains.”Lucid’s debut model, the all-electric Air sedan, is scheduled to start production in December, and the company hopes to deliver 15,000 units in the first year. Pre-production versions are exceeding 400 miles of range in testing, Rawlinson said.Musk said during an earnings call last week that the Model Y crossover will have 315 miles of range, which would handily beat the Audi e-tron and Porsche Taycan’s U.S. Environmental Protection Agency-estimated ranges of just over 200 miles.Traditional automakers are at a disadvantage when it comes to building battery-electric vehicles because they have to keep spending money and resources on combustion-engine cars, which influences how they think about vehicle design and battery-pack efficiency, Rawlinson said.Head StartEven automakers such as VW and GM, whose pockets are deep enough to invest in dedicated EV platforms, are behind because they don’t put a high enough priority on developing EV technology in-house, he said. Traditional manufacturers and even some EV startups “are saying the electric powertrain is already commodified, that it’s not a differentiator.”Lucid will announce a contract with a major cell maker soon, but battery chemistry is only part of the battle. Pack architecture, software and thermal management are just some of the elements necessary to achieve superior range, Rawlinson said. The company is beginning to seek funding for a new electric SUV based off the same platform as the Air.In the meantime, Gene Munster, a reliable Tesla bull, says that while it’s premature for the electric-car maker to be valued like Apple Inc., the comparison will gain credibility as long as Musk keeps increasing revenue.“The thesis for Tesla’s business miracle is rooted in the handful of years that the company operated with effectively no competition,” Munster, managing partner of the venture capital firm Loup Ventures and long-time Apple analyst, wrote Monday in a research note. “Tesla has nearly a decade head start in EVs as other automakers under-invested in the space.”(Updates share price starting in the first paragraph.)To contact the reporters on this story: Gabrielle Coppola in New York at email@example.com;Ed Ludlow in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Craig Trudell at email@example.com, Courtney Dentch, Melinda GrenierFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Skoda is hoping government moves to drag regulations for cars sold in India up to developed market standards will help turn around its fortunes in a market where it has stalled. The Volkswagen-owned Czech carmaker has been tasked with helping its German parent achieve a 2025 target of a 5% market share in India, which is dominated by home-grown automakers including Maruti Suzuki, Tata Motors and Mahindra & Mahindra.
(Bloomberg) -- Hyundai Motor Co. is halting production in South Korea this week because of a component shortage caused by the coronavirus, the first global automaker to suspend output outside China because of the outbreak.The carmaker has been hit by a shortage of a wiring component made at a South Korean supplier’s plant in China, which has been halted after a worker was infected by the virus, Hyundai Motor’s labor union said. Production may resume from Feb. 11 or 12, a union spokesman said by phone Tuesday. A company spokesman confirmed the suspension without giving details.The stoppage comes as Hyundai Motor is trying to ramp up production of new sport utility vehicles and a revamped version of its most popular Sonata sedan. The coronavirus has killed more than 400 people in China and the outbreak has led to the shutdowns of several plants in the world’s biggest car market.“The company is reviewing various measures to minimize the disruption of its operations, including seeking alternative suppliers in other regions,” Hyundai Motor said in an emailed statement. “Hyundai Motor will closely monitor developments in China and take all necessary measures to ensure the prompt normalization of its operations.”The production halt could also undermine output of Hyundai Motor’s first SUV under its luxury brand Genesis, which went on sale last month.Hyundai Motor shares gained 0.4% to close at 124,000 won in Seoul. That compares with a 1.8% gain for the benchmark Kospi index.The outbreak is expected to undermine a recovery in China’s car market this year. IHS Markit, which earlier predicted a 10% drop in first quarter production, now sees a scenario in which the coronavirus spreading rapidly across the country triggers a cascade of plant closings that lasts into mid March and reduces output by more than 1.7 million cars -- a decline of a furhter 32%.Though concrete estimates on the financial toll of the coronavirus outbreak are still scarce, it’s clear the final cost will far outweigh that of the 2003 SARS epidemic, when China’s auto market was one-sixth the size it is today and smaller than that of Japan. Companies from Tesla Inc. to Volkswagen AG and Toyota Motor Corp. have warned they anticipate disruptions.General Motors Co. and Honda Motor Co. are among the manufacturers with factories in the Wuhan region, where the outbreak started, while state-owned Dongfeng Motor Corp. is headquartered in the city of about 11 million people.The government extended the annual Lunar New Year holiday break -- with its workplace closures -- by several days to curb potential exposure. Tesla was among the companies saying they’re monitoring potential supply-chain interruptions for cars built outside China, as well.GM, Toyota and Volkswagen also closed their plants at least through Feb. 9, taking heed from several provinces that advised companies not to resume operations any sooner than the extended holiday break.(Uppdates with comment from Hyundai in fourth paragraph)To contact the reporter on this story: Kyunghee Park in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Young-Sam Cho at email@example.com, Ville Heiskanen, Will DaviesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- German tank crews have of late been practicing with Volkswagen minibuses because as many as three in four of their Puma tanks are in the repair shop — or rather, they’re waiting endlessly to be repaired, owing to Kafkaesque bureaucracy. Ordering backpacks, bullet-proof vests, helmets, visors and all sorts of other gear can take years in the German army. About 20,000 job openings can’t be filled because so few young people want to enlist. Officers complain that standards are being lowered, and that new recruits are “fatter, weaker and dumber.”This is all according to Hans-Peter Bartels, an ombudsman appointed by parliament to audit the country’s armed forces. Among his devastating conclusions this week was this simple observation: Germany’s army would currently be unable to contribute adequately to the collective defense of NATO, the Western alliance, if any member were attacked.Germany’s allies, from Poland in the east to the U.S. in the west, have long known and criticized this reality. President Donald Trump may be uniquely undiplomatic about it, but his predecessors going back at least to George W. Bush also harangued Berlin for the same reason. Germany, they’ve been saying, must stop free-riding, scrimping on its army and shirking its responsibilities in joint missions.The government of Chancellor Angela Merkel always politely listened and nodded. In 2014, as Russia was invading Crimea, several senior German officials gave speeches calling for their country to take more international responsibility. Later that year, at a NATO summit in Wales, Merkel joined her fellow leaders in pledging to raise military spending to at least 2% of GDP within a decade.Germany appears to have no intention of honoring that promise. “Nobody in Berlin is seriously planning a 2% army,” Bartels said. True, after drastic cuts in military spending following the end of the Cold War, Germany has started raising it again — from a low base. In absolute terms, it budgeted 43.2 billion euros ($47.6 billion) last year (though it didn’t spend all of that, owing to that red tape) and 45.1 billion euros this year. It’s hinted at more rises to come. But Bartels reckons that those won’t even get the country to its miserly stated goal of 1.5% of GDP by 2024.The deeper reasons are found in post-war German culture. I’ve been on domestic flights in the U.S. when the pilot announced that a soldier was on board and the whole cabin spontaneously applauded. Roughly the opposite atmosphere exists in Germany. For decades after West Germany in 1955 established a new army, soldiers often got spat at while going out in uniform. Traumatized by the guilt of having started two world wars, Germans sought a new identity in being anti-war and anti-military.Over time that understandable reaction to their own past morphed into a more off-putting smugness. Modern Germans don’t shoot, they trade, became the implicit mantra. In effect, Germany outsourced its defense, as well as the burdens of policing international order, to the U.S and, to a lesser extent, France and the U.K. Simultaneously, many Germans, especially on the political left, got on a high horse and moralized to their allies about being warmongers. All the while, Germany was exploiting the order thus preserved by becoming a mercantile superpower.Some in Germany’s policy elite knew this wasn’t sustainable. In 2010, Horst Koehler, the federal president, said Germany should participate in more foreign deployments to protect its own national interests, which include keeping trade routes open. The outraged response was instant, widespread and hysterical. Koehler had to resign. Most politicians concluded that calling for a stronger army is the third rail of German politics.It shouldn’t be. The world is a dangerous place, and NATO faces many perils, while a European Union army remains a pipe-dream. The biggest threat to Europe remains Russia. As researchers for the Swedish defense ministry have detailed, Russia has in the past decade made itself militarily much stronger, and could defeat (or blackmail) Europe by combining hybrid warfare, conventional military superiority and the threat of nuclear weapons deployed by new types of missiles.So who should make that case to the German public? One possibility is Defense Minister Annegret Kramp-Karrenbauer, who’s a rather hapless candidate to succeed Merkel as chancellor. She’s even broached the subject, by suggesting a German-led effort in Syria at one point and more cooperation with the French in fighting terrorists in Africa. But each time she raises the topic she seems to sink further in the polls.That leaves only Merkel. She’s already made herself a lame duck by declaring she won’t run again next year. But she remains popular and credible, having governed for more than 14 years and steered through many crises, including Russia’s aggression in Ukraine. She’s now trying to mediate in other conflicts, including the civil war in Libya. And she worries enormously about the U.S. under Trump withdrawing from its role as guarantor of Europe’s peace. She has less than two years left in office. She should use them to open a historic debate, by urging Germans to think differently about their army.To contact the author of this story: Andreas Kluth at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Andreas Kluth is a member of Bloomberg's editorial board. He was previously editor in chief of Handelsblatt Global and a writer for the Economist. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.Forget about clinging to hopes that China, the world’s largest car market, will recover from its unprecedented two-year slump anytime soon.Expectations were already bleak as the year began, with IHS Markit predicting a 10% drop in first quarter production. Now, the influential research firm sees a scenario in which the coronavirus spreading rapidly across the country triggers a cascade of plant closings that lasts into mid March and reduces output by more than 1.7 million cars -- a decline of another 32%.China’s car sales already were heading for the lowest in at least five years before the outbreak forced authorities to lock down the epicenter city of Wuhan. Now, it’s unclear when consumers will come back to showrooms as 14 provinces and cities that accounted for almost 70% of the country’s gross domestic product shut businesses and factories until at least the second week of February.“The risks are enormous because of the sheer weight of China in the global market and its importance to trade,” said Jean-Louis Sempe, a Paris-based analyst at Invest Securities. “Predicting the seriousness of the epidemic is very difficult, but there’s no doubt the impact could be huge on factories, supply chains and domestic car sales.”Though concrete estimates on the financial toll of the coronavirus outbreak are still scarce, it’s clear the final cost will far outweigh that of the 2003 SARS epidemic, when China’s auto market was one-sixth the size it is today and smaller than that of Japan. Companies from Tesla Inc. to Volkswagen AG and Toyota Motor Corp. have warned they anticipate disruptions.Should passenger-vehicle sales in China fall 20% from last year’s 21.4 million units, that would threaten to end the country’s run as the world’s largest auto market, a rank it’s held for more than a decade.Trauma AheadGeneral Motors Co. and Honda Motor Co. are among the manufacturers with factories in the Wuhan region, while state-owned Dongfeng Motor Corp. is headquartered in the city of about 11 million people.Nissan Motor Co. and Peugeot-maker PSA Group also have assembly plants in Wuhan or the broader Hubei province and are partners with Dongfeng. Robin Zhu, an analyst at Sanford C. Bernstein & Co., singled out Dongfeng PSA as “by far the most exposed” because of the high proportion of vehicles it makes in the area.“Investors will need to brace for a slowdown in broader activity levels in China,” Zhu said in a Jan. 27 note. “We expect the Chinese auto industry to endure a traumatic next few months.”Automakers probably will dial back production by 15% in China this quarter after extending holiday shutdowns because of the virus, supplier Aptiv Plc said Thursday. Aptiv, whose customers include GM and Volkswagen, expects its own production to be down 11% from a year ago.The government extended the annual Lunar New Year holiday break -- with its workplace closures -- by several days to curb potential exposure. Tesla was among the companies saying they’re monitoring potential supply-chain interruptions for cars built outside China, as well.“This will be horrendous in the supply chain, it’s going to be awful for companies and it will show in their quarterly reports and global strategy going forward,” said Rosemary Coates, a supply chain consultant and executive director of the Reshoring Institute, a non-profit focused on expanding manufacturing in the U.S. “It’s going to show and it’s going to hurt.”The epidemic comes at a delicate time for the car industry, which faces sales slumps beyond China, and pressure to make heavy investments in electric and self-driving cars. Compounding the danger for automakers is the overall economic slowdown, with the virus potentially shaving more than 1 percentage point off first-quarter growth in China’s gross domestic product.EV ImpactChina also is the world’s biggest market for electric vehicles. The demand for EVs and traditional premium models will suffer the most because sales of those vehicles are concentrated in the biggest cities, which happen to be the ones most affected by the epidemic, Zhu said.The effect is felt far beyond the Wuhan region. Tesla expects a potential 10-day delay in production ramp-up at its new Shanghai plant -- its first outside the U.S. -- because of the government-required shutdown. Chief Financial Officer Zach Kirkhorn said Jan. 29 the delay may also “slightly impact” the company’s profitability this quarter.GM, Toyota and Volkswagen also closed their plants at least through Feb. 9, taking heed from several provinces that advised companies not to resume operations any sooner than the extended holiday break.Of mainland China’s 31 provinces, 11 have extended the Chinese New Year holiday period for all nonessential business, including Shanghai, Guangdong, Chongqing and Zhejiang, according to IHS. The provinces are normally responsible for more than two thirds of the country’s vehicle production. If they’re only idled until Feb. 10, it will cost the industry about 350,000 units of lost production, the researcher projected Friday.Each month of lost production in China would erode operating profit by about 6.1% at Honda and 11% at Nissan, JPMorgan Chase & Co. estimates. The Chinese operations of Japan-based Aisin Seiki Co. and Koito Manufacturing Co. are among the most exposed to a production stoppage, JPMorgan said in a Jan. 30 note.Disruptions AbroadIn Germany, Wuhan’s links to the global industry were driven home this week when auto-parts supplier Webasto AG shut its headquarters in the Munich suburb of Stockdorf after at least four staff members became infected following the visit of a Chinese colleague.“If work stoppages are extended we could start to see production disruptions in other parts of the world,” said Sig Huber, a senior managing director at the consultancy Conway Mackenzie and former global director of purchasing at Fiat Chrysler Automobiles NV.Fears about the virus are pressuring foreign governments to repatriate their nationals, and many auto companies have helped with the effort. PSA, Honda and Nissan are evacuating expatriates and their families from the Wuhan area. Most also put limits on travel into China.While industries such as textiles are able to relocate production quickly, the heavy equipment required in carmaking means it could take auto manufacturers two or three years to move a plant, said Reshoring Institute’s Coates.“Moving an auto plant or any highly machined products or any sophisticated kind of products -- it’s just not gonna happen very fast,” she said. “Even a few days of shutting down a major industrial area like Wuhan is going to affect supply chains around the world.”\--With assistance from Keith Naughton, David Welch, Ed Ludlow and Reed Stevenson.To contact the reporters on this story: Tara Patel in Paris at firstname.lastname@example.org;Masatsugu Horie in Tokyo at email@example.com;Chester Dawson in Southfield at firstname.lastname@example.org;Gabrielle Coppola in New York at email@example.comTo contact the editors responsible for this story: Young-Sam Cho at firstname.lastname@example.org, Ville Heiskanen, Michael TigheFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Volkswagen AG offered to buy the rest of Navistar International Corp. in a $2.9 billion bid to secure a bridgehead in the U.S. heavy-truck market and step up its challenge to Daimler AG and Volvo AB.The expansion was somewhat offset by Volkswagen’s first major divestment since the German automaker skidded into the diesel-emissions scandal in 2015. An agreement to sell industrial machinery unit Renk AG, valued at 760 million euros ($840 million), indicates VW is more inclined to bulk up than slim down, even amid the costly shift to electric cars.The swoop for Navistar, which was first reported by Bloomberg, would reduce the reliance of VW’s heavy-truck unit Traton SE on Europe and South America.While the deal could help the company vie with Daimler and Volvo in North America, heavy-truck makers are preparing for a downturn after years of growth. Navistar, truck-engine maker Cummins Inc. and supplier Meritor Inc. announced thousands of job cuts late last year.VW’s heavy-truck division was created from acquisitions of Germany’s MAN and Sweden’s Scania. The unit had for years struggled to combine the operations before hiring former Daimler executive Andreas Renschler, who successfully spearheaded a partial listing of Traton last year.$35 a ShareTraton offered Navistar holders $35 a share in cash, 45% higher than its Thursday closing price. Lisle, Illinois-based Navistar -- which builds International-brand trucks, school buses, defense vehicles and engines -- said its board will review the proposal and there’s no assurance the deal will take place.Shares of Navistar, whose biggest holder is billionaire investor Carl Icahn, soared as much as 56% to $37.48 on Friday. VW, which already owns a stake of almost 17%, traded lower amid a broader market selloff, while Traton was little changed.What Bloomberg Intelligence SaysTraton’s much-anticipated bid to acquire the remainder of Navistar at $35 a share represents a modest 2020 Ebitda multiple of 7.3x, a discount to its larger peers. While Traton could face some pressure to sweeten the offer, we believe a competing bid is unlikely given antitrust scrutiny and a lack of potential suitors.\-- Christopher Ciolino, BI industry analystClick here for the researchVW purchased its stake in Navistar in September 2016, laying the groundwork for a footprint in North America, the truck industry’s largest source of profits. Daimler’s Freightliner and Volvo’s Mack divisions generate significant sales in the region.It’s unclear whether VW’s offer will satisfy Icahn, 83, and Mark Rachesky, the founder and chief investment officer of MHR Fund Management, which is Navistar’s third-largest shareholder with a 16% stake.Icahn, who first bought into Navistar in 2011, built his holding with an average cost per share of $33.62, and the stock has traded below that level for most of the last year. Rachesky’s average price paid was $27.80, according to data compiled by Bloomberg.Rare StreamliningIf a deal closes, VW will take over a company in the midst of a fix-it job. Navistar said in December it will reduce employment by 10% and cut its 2020 revenue forecast to a range of $9.25 billion to $9.75 billion, below analysts’ lowest estimate.Alongside the expansion, Wolfsburg, Germany-based VW agreed to sell Renk to private equity firm Triton Partners. The company was acquired as part of the automaker’s acquisition of MAN and represents a rare streamlining move by VW, which has been reviewing its non-core businesses for years with little progress.(Updates with Bloomberg Intelligence analyst’s quote after seventh paragraph)\--With assistance from Aaron Kirchfeld.To contact the reporters on this story: Christoph Rauwald in Frankfurt at email@example.com;Eyk Henning in Frankfurt at firstname.lastname@example.org;Ed Hammond in New York at email@example.com;David Welch in Southfield at firstname.lastname@example.orgTo contact the editors responsible for this story: Craig Trudell at email@example.com, ;Liana Baker at firstname.lastname@example.org, Chris Reiter, Iain RogersFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- No major commodity has felt the pain of the worsening coronavirus epidemic more deeply than copper.The metal has tumbled for 12 straight sessions in London, the longest retreat in more than three decades of data. Since Jan. 20 when the outbreak in China entered a new phase of severity, copper has tumbled 11%, making it the hardest-hit by the spreading pandemic among all the major commodities.Copper’s slide underscores just how crucial China’s manufacturing engine has become to global commodities markets. The economic hit to the Asian nation could exceed that seen during the SARS outbreak of 2003, according to Nomura Holdings Inc. The country’s share of global base metals demand has surged to 51% in the first 10 months of last year, from just 19% during the SARS pandemic, based on Bloomberg Intelligence estimates.Traders have been warning that the short-term outlook for commodities could be upended if manufacturers in China are forced to stay closed for longer while authorities fight to contain the spread of coronavirus. Now, with several major provinces extending public holidays, those fears look like they could be realized.“From a trading perspective, it makes sense to be cautious,” Xiao Fu, head of global commodities strategy at BOCI Global Commodities, said by phone from London. “There could be pent-up demand in the latter part of the year, but I wouldn’t be surprised to see prices moderately lower over the nearer term.”Still, there are a lot of uncertainties, and markets have a tendency to overreact.Chile, the biggest copper-producing nation, said investors may have overestimated the impact of the coronavirus on metal demand, echoing other comments that the outbreak won’t change the long-term growth picture. The nation’s currency weakened as much as 1.2% Thursday.The biggest question is what will happen in the short term. Brief disruptions in the spot market could weigh on sentiment, particularly if the extended closure of end-user businesses forces producers to unload stocks.“The delay in downstream consumers coming back to market in many provinces will likely lead to an extended build in inventory,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said in an emailed note. “Warehouse operations are also due to resume next week, though transport of material is still likely to be limited.”The impact on copper demand may start showing in the auto industry. BMW said it’s halting production at three China sites until Feb. 9, while Volkswagen’s joint venture in the country has taken a similar move.Copper for delivery in three months fell 0.9% to settle at $5,587.50 a metric ton 5:51p.m. on the London Metal Exchange. The metal is down almost 11% since Jan. 20, when reports broke that the disease that originated in central China was spreading from person-to-person and had sickened medical workers.\--With assistance from Philip Sanders.To contact the reporters on this story: Maria Elena Vizcaino in New York at email@example.com;Mark Burton in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Luzi Ann Javier at email@example.com, ;Lynn Thomasson at firstname.lastname@example.org, Joe RichterFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.