The Morning ShiftAll your daily car news in one convenient place. Isn’t your time more important? Ford’s looming layoffs, a Chinese electric car company is actually selling cars, and Sears is nearly dead. This is The Morning Shift for October 15, 2018.
1st Gear: Ford In Trouble
Layoffs suck, obviously, but there’s usually a standard methodology to it. The basic playbook, especially for non-unionized workers, is:
- Say Nothing
- Announce it all in one go
- Rip the band-aid off
There’s a whole slew of reasons for both for and against that operating procedure, but a lot of it boils down to preserving morale. Nobody gets spooked, everyone gets to go about their day-to-day lives without it affecting too much, and if you’re not getting laid off it lets you not worry about it until after the fact.
(The counterargument is that you should tell everyone as much specifics as you can as soon as you have an idea of what the strategy is. A lot of that is about basic transparency, but there’s also a decency thing here as it lets people know who’s safe and who’s not, and allows those about to get laid off the barest modicum of planning ability.)
And then there’s the methodology Ford CEO Jim Hackett appears to be using, which is reportedly freaking everybody the hell out as Ford’s share price drops below $9, which is right where it was in late 2009 during the throes of the last recession. From Automotive News:
“There’s been a lot less exposure to senior management,” said Jack Madden, owner of Jack Madden Ford in Norwood, Mass. “There’s just not enough information flowing down to dealers about where the company’s headed.”
Meanwhile, more turmoil is creeping into the company’s ranks after Hackett told Ford’s 70,000 salaried workers around the world that the $11 billion restructuring will include job cuts, while giving no specifics on numbers and only a vague idea of how or when. Ford is calling changes to its employment structure an “organizational redesign” and says it could take months to complete.
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So instead of saying nothing, or telling some people they are safe and others to start job hunting, Hackett is going for the queasy middle route of being vague about layoffs and generally telling everyone not to worry about it unless they really have to worry about it but he won’t tell those people who they are until it’s too late.
You can imagine the sales of Tums are spiking in Dearborn right now.
But fear (?) not (????) Ford employees, as AN reports that when layoffs eventually do come, Hackett will be brutal and merciless (emphasis mine):
Hackett is no stranger to layoffs — he axed thousands of employees at his former company, Steelcase, including the best man from his wedding — but stretching out the process, instead of announcing the cuts all at once, threatens to sink morale and create an uneasy, disillusioned work force, experts say.
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A little over a month ago we said that Ford is blowing it. We desperately want to be proven wrong, but we’re still waiting.
2nd Gear: NIO Is Actually Selling Stuff
When we say “electric car company” most people think of Tesla, but another electric car super-powered startup (Tesla is not a startup, but just go with me here) is bubbling up in China. NIO has not only had an American IPO already, it’s got backing from some of Tesla’s very own investors, and now it’s actually selling cars in not-insignificant numbers, Reuters reports:
Chinese electric carmaker NIO Inc (NIO.N) said on Monday it delivered 3,268 electric SUVs in the third quarter, exceeding its own target of 2,900-3,000 vehicles.
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That might not sound like a lot compared to, say, Volkswagen, but NIO’s numbers are now in the thousands. Okay, so you can’t walk into your nearest NIO dealership and get an electric SUV today, but! Maybe! One day!
3rd Gear: Prosecutors Are Now Raiding Opel
Dieselgate: it never ends. At this point everyone seems to have gotten a visit from German prosecutors, and now it’s Opel’s turn, Reuters says:
“Opel confirms that the public prosecutor’s office of Frankfurt is conducting investigations in the course of preliminary proceedings on emissions at the sites in Ruesselsheim and Kaiserslautern,” the carmaker said.
“We cannot comment on details concerning the ongoing investigation at this moment in time. The company is fully cooperating with the authorities. Opel reaffirms that its vehicles comply with the applicable regulations.”
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Opel, which is now owned by PSA Peugeot Citroën after being a part of General Motors for decades, admitted in 2016 that its Opel Zafira minivan/crossover/wagon-y thing cheated on diesel emissions, but it looks like it’s going to get worse for Opel before it gets better.
4th Gear: Sears Files For Bankruptcy
Sears, the department store chain with a strong automotive section for decades, just filed for bankruptcy. If you’re wondering how the hell that happened, it can really be boiled down to “hedge fund rando thinks he can run a major corporation just because he has the money and power to put himself in charge,” but let’s look at some of the hits. There was the underinvestment, from the Wall Street Journal:
He was reluctant to commit capital to fresh ventures. Describing a plan to convert Kmart’s freestanding locations into Sears stores, he said “we will not simply throw money behind any concept, but instead will test, evaluate, refine and ‘prove the math’ so that the investment is justified.” Initiative after initiative met an equally tepid commitment, failing to attract the investment needed to gain traction.
There was the plan to convert Kmart into an e-tailing powerhouse with stores serving as pickup spots. (Today, a similar, multiyear push is helping Best Buy Inc. make a comeback.) But Sears’s technology spending was paltry compared to Walmart Inc., Target and Amazon. Walmart spent more than $2 billion on e-commerce in fiscal years 2015 through 2016, roughly equal to Sears’s capital expenditures for this entire decade.
Efforts to make apparel offerings trendier, such as the Kardashian Kollection, kollapsed kwickly.
“There was a lot of underinvestment,” Greg Melich, a retail analyst at research firm MoffettNathonson said.
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There was the paranoia when people pointed out the obvious, from Business Insider over a year ago:
The man in charge of Sears, Edward S. Lampert, has blamed the company’s decline on everything from shifts in consumer spending to the rise of e-commerce, and even — at times — the weather. More recently, he’s taken to attacking the media, saying reports speculating on a Sears bankruptcy are thwarting his efforts to turn the business around.
“Every time people use the word bankruptcy, somebody who reads that doesn’t get past that word,” he told the Chicago Tribune in a recent interview. “It makes it very unfair for us, and it’s a very uneven playing field for us.”
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Yes, everyone was very mean and unfair to the rich man destroying a major company that employed thousands!
And there was the absolutely bizarre strategy to essentially break the company up into 30 separate divisions and force them to compete against each other (again from Business Insider, this time way back in 2013, as that’s how long everyone’s been able to see this coming from a mile away):
In order for a division to get help from the IT or HR departments, it had to write up a formal agreement or use a contractor. Since each company had its own board of directors, some executives were on five or six of them and spent all day in meetings.
Executive bonuses were based on individual unit performance, so people tried to boost their own division’s profit at the expense of others.
Kenmore, a brand sold exclusively by Sears, is its own unit. Sears’s separate appliance unit found it could make more money selling other company’s products, however, and therefore it gave outside merchandise more prominent placement than one of the company’s signature products.
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But what about the Wealths, and Lampert’s hedge fund?
Don’t worry. Everyone else is suffering, but his hedge fund still got paid.
5th Gear: Ford Isn’t Attending A Saudi Investor Conference Anymore
The government of Saudi Arabia may have abducted and killed journalist Jamal Kashoggi after he walked into the Saudi consulate in Istanbul, Turkey, that smuggled his remains out in multiple diplomatic bags. That’s the sort of thing Saudi Arabia is well known for, but this time, because the country was blatantly caught doing it, people are officially Mad.
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Ford chairman Bill Ford is pulling out of a Saudi investor conference as a result, Reuters says:
JP Morgan & Chase Co (JPM.N) Chief Executive Jamie Dimon and Ford Motor Co (F.N) Chairman Bill Ford canceled plans to attend a Saudi investor conference, the companies said on Sunday, the latest such high-profile announcements after the disappearance of Saudi journalist Jamal Khashoggi.
These big companies had zero problems with Saudi Arabia when it was called out for forced amputations, flogging, and execution on children, but NOW it’s a problem.
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Reverse: A Car Breaks The Sound Barrier
On this date 21 years ago, Andy Green in the ThrustSSC broke the sound barrier in a car. Neat!
Neutral: What’s Your Sears Automotive Memory?
And how bleak is it?
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