Jan 28, 2020
GM was set on divorcing Detroit — now it's renewing its vows in an electric way Read More Turn me on with your electric wheel... (or lack thereof). General Motors will build its new self-driving robotaxi ("Origin") in Detroit. Surprised? GM's Detroit-Hamtramck (not a typo) plant is the auto giant's last remaining Detroit factory. GM was actually going to close it down. Then, in October, it changed course after workers at its US factories went on a 40-day strike (remember?).
Time to invest in your hometown again... Here's GM's plan:
Cash: GM's dropping $2.2B on the Detroit factory site, and $800M on nearby projects.
Jobs: Since the plant is no longer closing, people won't lose their jobs. GM's new investment in Detroit combined with Fiat Chrysler's new factory there — which is currently being built — are expected to create 9K jobs. Ford is based in neighboring Dearborn, but is building a self-driving tech hub in Detroit's Corktown.
Potential: GM has chosen Detroit as the hub of its electric, driverless future. That's right — Detroit is where GM's robo-taxis, electric trucks, and potentially a rumored electric Hummer will be born.The Takeaway:Employees saved GM Detroit... Detroit (aka the "Motor City") is Earth's historic car-making hub. It's where Ford introduced moving assembly lines for car manufacturing in 1913. 100 years later, Detroit filed for bankruptcy with the highest unemployment rate of any major American city. GM's investment in its last Detroit plant is both a symbolic and economic win for the city, made possible by GM's unionized employees, who reversed GM's plans via strike.
Jan 22, 2020
GM unveils a self-driving robo-shuttle (and it's actually going to produce it) Read More It's a bird, it's a plane... it's a toaster-shaped robot taxi. General Motors unveiled its highly-anticipated autonomous robotaxi: "Origin." It was developed by GM's self-driving car unit, Cruise, which GM acquired in 2016. But unlike futuristic concept cars, Origin is a fully engineered vehicle that's actually on its way to production. Here's the deal:
Automated: No drivers seat, no steering wheel, and (wait for it)... no driver
Gondola: It looks kinda like a long ski gondola on wheels, with 6 seats facing each other and glass doors that open elevator-door style
Pennywise: GM says a trip on Origin will be cheaper than a human-driven Uber/Lyft/taxi trip, and even less costly than driving your own car.
Hands off the (non-existent) wheel... Cars without steering wheels aren't street legal on public roads today (still working on safety concerns). So we don't actually know when Origin will hit the roads, but Cruise's CEO says production plans will be released in a few days.The Takeaway:Ride-sharing gains a whole new dimension... Companies like GM and Alphabet are spending billions developing self-driving cars. The goal isn't to sell you a robo-vehicle — it's to offer a robo ride-hail fleet:
Uber is stressing about having to pay its drivers as employees.
But with companies like GM's Cruise and Google's Waymo hitting the streets, one day there might not even be drivers to pay.
That's why Uber's also working on its own robotaxis.
Jan 8, 2020
Tesla just became the most valuable US car company. Ever. Read More As you Musk know... Tesla shares hit full speed lately — they're up 38% in just the last month. Now Tesla's officially become the most valuable American car company in history. Here's how that value got calculated:
"Market Capitalization": A company's stock price multiplied by the total number of shares. It's the total value of a company based on its stock price.
Production just started at Tesla's new Chinese Gigafactory — and China bought nearly 3 times as many electric cars as the US did in 2018.
That's why Tesla's market cap has risen to $85B — beating Ford's $81B record from '99.
Today, GM and Ford's market cap is $87B — combined.
Here's the crazy thing... Tesla's 2019 profits and car deliveries pale in comparison to GM and Ford's:
Cars produced per year: GM and Ford produced a combined 39x as many cars as Tesla did in 2019 (14.3M vs. 367.5K).
Profits over the past year: Tesla's profit was -$827M (negative, AKA a big loss). GM and Ford's combined profit was over $10B (AKA actual money-making).
The Takeaway:Investors care less about today, more about tomorrow... Stocks can rise as shareholders believe a company's profits will grow in the years to come. Tesla's cars scream "future" (electric + cyber), while Ford and GM's preach the past (trucks/SUVs + gas). Investors think 17-year-old Tesla has better profit potential than 112-year-old GM and its even older Ford brother.
Dec 23, 2019
Rivian's massive 4th fundraise of 2019 could make electric trucks mainstream (with help from Amazon) Read More “Cute Tesla”... (new bumper sticker for Rivian drivers). The electric pickup truck startup snagged $1.3B in fresh money from T. Rowe Price and existing investors like Ford and Amazon. That cash will facelift an old Mitsubishi plant in Normal, Illinois (great name) to start mass-ish producing e-pickups in 2021. Here's America's State of the Car (and their value by market capitalization):
Detroit's Big 3: GM ($53B), Ford ($37B), Fiat-Chrysler ($29B — FYI, Chrysler merged with Fiat in 2009... and is mega-merging with Peugeot right now).
Electric's Big 2: Tesla ($72B) and Rivian (somewhere between $5B-$7B — it's still private, so we don't know its valuation for sure).
Cars cost more than coders... App-based tech startups raise tens or hundreds of millions of dollars to hire programers and install kombucha taps. But Rivian raises money in the billions to build factories, fill them with high-tech robots, and hire engineers. All those costs are why fundraising for hardware cars is bigger than for software tech.The Takeaway:You want traction? I’ll show you truction... Venture capitalists, Ford, and Amazon had invested a huge $2.2B in Rivian already. To get this extra $1.3B, Rivian probably had to show them some traction — evidence that it's worth investing more into. How about this truction:
Amazon announced an order in September for 100K Rivian electric delivery vans — Bezos needs them to achieve Amazon’s “Climate Pledge.”
Those will be delivered from 2021-2030 — they'll become both steady revenues and rolling billboards for Rivian as Amazon delivers packages nationwide.
Dec 5, 2019
General Motors forms a $2B joint venture with LG to build electric car batteries Read More Power Couple... General Motors' new partnership with LG isn't about sticking LG phones into GM sedans. We're talking batteries. The South Korean tech icon makes batteries too, and GM needs hundreds of thousands of them for its electric car fleet. This partnership is a win for the Midwest:
Lordstown, OH: GM and LG will invest $1B each into a new battery factory that'll employ 1,100 workers.
Detroit, MI: GM is building its electric pickup there (Silverado and/or Sierra), and their batteries will come straight outta the Buckeye state.
Batteries are what make electric cars expensive... Without gas, the horses need to be powered by batteries. Big ones. Thousands of times bigger than the battery in your iPhone. The price of those batteries is the main reason electric cars are about 50% more expensive than gas ones.
In 2010, electric cars were so new that an average battery cost $110K.
Today, the price of batteries for electric vehicles has come way down, but is still $15K (and still the most expensive part of the car, by far).
GM wants to lock down its own battery source for the 20 electric cars it plans to introduce by 2023.
The Takeaway:Joint ventures are like workout buddies... They help you train better, keep you accountable, and push you to lift more (always have a spotter). GM brings the car expertise while LG owns the battery mastery — together, they each own 50% of the new company. JVs can help do more at lower costs, but only if the 2 companies overcome trust issues:
You lose control within a JV - both companies own half the new one, so decisions gotta be made (peacefully) together.
You need trust with your JV partner — you're now sharing biz secrets.
Oct 17, 2019
GM's longest strike in 49 years is about to end — and markets reacted rationally Read More You're gonna have to fix that carburetor solo... 48K car-crafting General Motors employees spent the last 30 days on strike — GM's longest walkout since 1970. The union and the car giant reached a tentative labor contract after CEO Mary Barra finally intervened last weekend. But here are the key $$$ numbers:
$2B: That's the estimated hit GM's business suffered while employees picketed.
$800M: That's the size of the United Automobile Workers union's “strike and defense fund” — it's been paying out-of-work union humans $275/week during the strike.
So what's in the trunk?... Details aren't public yet (and Union members still have to vote in favor of the deal). But early reports show the month-long strike got the union 3%-4% annual raises/bonuses for workers, a $9B investment by GM in American factories, and thousands of new jobs. And temp workers will have a path to become full-time ones.The Takeaway:GM’s stock price during the strike shows that markets are rational... Investors punished GM shares by almost the perfect amount — the same amount as the lost profits caused by the strike. Here's how the numbers break down:
Losses to GM: $2B. We mentioned that the strike cost the company an estimated $2B in losses while cars weren't being produced.
Losses to GM's stock: $2.5B. GM's stock price dipped 5% during the strike, meaning the company lost $2.5B in market value (5% of GM's $52B market cap = $2.5B)
Stock markets often seem emotional and erratic, but they can be rational, too.
Sep 26, 2019
Amazon challenges rivals with Alexa-infused everything (and a 1-mile-radius tech cloud) Read More So. Many. Connected. Gadgets... Another Alexa-palooza arrived yesterday from Amazon HQ in Seattle. Bezos & Co. whipped up 15 Alexa-fluent devices. Some totally new, some just improved:
Echo Studio: A $199 smart speaker, challenging Apple HomePod and Sonos (the speaker icon's stock fell 5%).
Amazon Sidewalk: Basically extends your wifi signal 1-mile for low connectivity devices, like a dog tag (aka "Echo Fetch").
New voices: Samuel L. Jackson is voicing over Alexa, with more celebs to fill the airwaves (each costs $0.99).
Apple & Google have 1 advantage in the voice assistant wars... Smartphones — you've probably got Siri (iPhone) or Google Assistant (Android) in your pocket. Now you can take Alexa to-go:
In the car: GM announced all models will support an Alexa app.
In your ears: Echo Buds — The AirPod knockoffs are cheaper ($129), but don't look as sharp.
On your face and on your finger: Echo Frames and Echo Loop let you ask Alexa questions and listen for her responses through glasses and a finger ring (these last two are so new they're available by invitation only).The Takeaway:Alexa's goal = make you 1% more Amazon... These devices might not make Amazon money at first. Long-term, Amazon's putting Alexa everywhere so you're that much more likely to be loyal to Amazon or even order through Alexa via voice (aka "v-commerce"). If the percent of your paycheck going to Amazon rises from 20% to 21% because of Alexa, that's a win.
Sep 17, 2019
Strike Day #3: General Motors is losing up to $100M/day Read More 30 US factories
46K workers
0 cars produced in 2 days
We haven't seen production that low since Tebow... General Motors' unionized workers are practicing their right to assembly with a nationwide strike. 14K vehicles could've been produced in its American plants Monday & Tuesday, but weren't — the United Auto Workers wants better pay, fewer factory closures, and more job protection first.
This goes back to the financial crisis... That's when GM went bankrupt. It was reborn thanks to a government bailout and workers agreeing to sacrifice pay and job guarantees for the greater good. 9 years later, GM issued a press release titled "GM Accelerates Transformation" in which it "unallocated" 5 plants.
Translation: GM's laying off 14K American workers.
Salt in the wound: GM also announced it'll produce its new Chevy Blazer in Mexico.
The Takeaway:Companies don't love organized labor... Negotiating a pay raise is tough 1:1 with your manager. It's easier when you're represented 46K-strong in awesome union T's. But we rarely see labor strikes in America because of the long, steady decline of unions. Here's how much the percentage of US workers who are union members has fallen:
30% in the 1950s
20% in the 1980s
10% from the 2000s through today
Sep 10, 2019
Ford's bonds reach a low blow: Junk status Read More An $11B makeover... Ford wants one. It's all part of the car company's aggressive turnaround plan to become more sexy, electric, and self-driving. So to pay for the new look, Ford issues billions in IOUs (bonds). Before you invest in bonds, a credit ratings agency jumps in:
Ratings agencies evaluate the likelihood a bond-issuer (like Ford) will pay you back.
Based on the company's financial health, the ratings agency sticks a rating on it.
AAA, AA, A, BBB — Anything BB or lower is considered "junk." Ford just got downgraded to that.
Ford was created in 1903... But this situation goes back to 2009. The Big 3 Detroit car companies needed a bailout — except Ford. It even gave its blue oval logo as collateral for a loan to stay bailout-free. Since surviving the car-pocalypse, Ford's bonds have been rated "investment grade." Then it fell behind rival GM's innovation and Ford is now worth less than Tesla. Junk happens.The Takeaway:"Junk" makes almost everything Ford does more expensive... Even though Ford's enjoying huge profits ($22B over the past four years), the credit ratings agencies are worried about where Ford will be 10 years from now. Because of this downgrade, investors will demand a higher interest rate from Ford because its debt is considered riskier.
Aug 13, 2019
The car industry begins going all-in on electric, phasing out hybrids Read More Can I borrow your car charger?... GM and Volkswagen are ditching the hybrid technology that Toyota made famous with the Prius back in the 90s. Here's a cheat sheet on conventional vs. hybrid vs. electric as they go long on plug-ins.
Conventional: An engine burns gasoline, which pumps pistons up and down, which spins your wheels (we skipped over some physics and engineering).
Electric: A battery powers a motor which vrooms you forward. The downside — pricey batteries make e-cars $6K-10K more expensive than conventional ones on average (but tax incentives and gas savings make up for some/all of that).
Hybrid: A little bit of both. Drivers want to help Mother Earth, but crave the warm-fuzzy feeling of an engine. Hybrid tech costs about $2K extra compared to a conventional car.
Hybrid upped America's MPG... but barely. According to the WSJ, the carmakers are realizing hybrid isn't cutting greenhouse gases enough for the future, especially with Europe and China's aggressive environmental plans. Ford, Volvo, and Toyota though are sticking to hybrid because some customers aren't ready to go cold turkey with regular unleaded.The Takeaway:Companies can only make so many bets... A car CEO has a ridiculous menu of expensive things she could invest in — autonomous driving, car sharing, pickup trucks, hybrids, and electric. Each buck spent on hybrid tech is a buck not spent on those other things. More car bosses believe hybrid's era is coming to a close soon. 
