All posts by lexofdex

The Untold Story of Ferdinand Piech And His Shady Quest To Build An Empire

Courtesy of Clean Technica

While I have no credibility to remotely be considered a journalist, there is one story that somehow was never really brought to the attention of more than a few industry insiders, and certainly no eyebrows were peaked by any type of law enforcement. This is the story of how one man, the grandson of the acclaimed original Piech of the Porsche – VW families set out to re-glue the separated companies back together and succeeded, until he didn’t.

Let’s go back to 2007 when all was well in the world. As leading patriarch of the Piech family, he was the Chairman of both VW and Porsche, at the time two separate companies. Piech’s dream was always to bring the companies together under one roof, no matter the cost. Here’s the series of events as they unfolded:

  • Porsche attempts a hostile takeover bid for VW (Piech is Chairman of both companies)
  • The financial crisis hits hard, prohibiting Porsche’s ability to service the debt they took out to overtake VW
  • VW ends up taking over Porsche as a result of the debt overhang (green-lit by Piech’s Porsche board) and Piech gets paid out of his Porsche shares
  • Porsche ends up in the VW umbrella after all

So to recap: Piech tried to takeover VW via a proxy fight that he was on both sides of, and when unforeseen circumstances (the economic crash) occurred, he somehow spun gold and still ended up with a generous payout from the Porsche deal and got to keep his seat on the throne of the larger VW-Porsche empire.

I’m no expert in fiduciary duty, but I think it’d be safe to say it’s at least a tad strange to see a chairman of the board of two companies engage in a proxy fight in which both sides have vested interests by the man setting up the war. It seems a little like the plot of Westworld.

Fast forward to today, and Piech has since left the company in spectacularly dramatic fashion, after he attempted a coup to oust the CEO, his prodigé Martin Winterkorn, only to see his subjects (board members) turn against him and towards Winterkorn – the ultimate betrayal and arguably a fantastic series end for Westworld.

And to top it all off, Winterkorn ended up leaving the next year as a result of the diesel scandal that has yet to stop embroiling the company since it was discovered in 2016. VW, now a sworn enemy of Piech, is seeking action against the former chairman for his supposed role in the diesel scandal alongside Winterkorn’s and other executives who’ve already been charged or sued.

Safe to say we may never quite know how far Ferdinand Piech went to secure his empire, but safe to say that he did so at great cost. While his legacy will remain that he ruled with an iron fist and reunited the acclaimed automakers VW and Porsche, history will likely remember him as more of a shady conman who was extremely talented at getting his way, until he wasn’t.

 

Advertisements

Uber Freight Could Take Both Hardware and Software Crowns in Future Transport

 

Image result for uber freight
Courtesy of Seeking Alpha

I think we’re at the point where even someone mentioning the term ‘autonomous’ in the context of transportation instinctively induces physical convulsions, and in rare cases, actual vomiting in their audience. The reason for this is equally debilitating – any string of dependent and/or independent clauses that follow the word ‘autonomous’ are likely blasé predictions about the future in which the people spewing them like the plague give no actual insight into anything.

To me, the only thing interesting in a*******mous vehicles right now is who is actually going to make money off of them, how, and who’s best positioned to win. The pundits will interrupt this question as they burst forth into a monologue about how ‘ride sharing’ and ‘shared mobility’ and ‘intermodal transportation’ will pioneer the future and ‘no one will own a car’ and ‘everything will be within reach.’ Alright, well let’s just calm down.

Let’s look at who cares the most about autonomous vehicles (read: who stands the most to gain from them?) Consumers like you and me? Nope. At the aggregate level, maybe, but at the individual level, single businesses stand to gain far more financially than individual people, and as such will be willing to pay much more for it and be inclined to purchase it earlier. It’s businesses that produce physical stuff that needs transporting. And it’s not just the businesses doing the actual transporting – any business with a cost base that includes some type of transportation and shipping will be affected.

So if businesses involved in physical shipping are probably the ones who most stand to gain, at least at first, from autonomous vehicle tech, then who’s best positioned to capitalize on it? Let’s take a short stroll through the on-road trucking industry, a fairly old-school market with a lot of legacy ‘ways we’ve always done things’. Despite the stereotypic gruffness, the online load boards (where shippers match with truckers) and tracking technology of existing players is fairly advanced, making it slightly less vulnerable to new entrants.

However, enter Uber Freight, Convoy, and other well-funded startups with roots in tech, and for Uber, expertise in matching demand and supply better than anyone else. So if half of the equation is the robustness of software offerings dedicated to matching supply with demand, and the other half is actually creating autonomous trucks, then who would be able to do both?

At the moment, the only convincing answer is Uber Freight. Companies like Convoy are simply apps that are the ‘Uber for trucking’, while companies like Tesla and Nikola are focused on the hardware required for selling autonomous trucks more so than leveraging the trucks to drive additional new revenue streams.

In conclusion, a simple, non-cliche opinion about autonomous vehicles: mass adoption will start with trucks, and the firm best positioned to capitalize on both the evolving freight market and the hardware required to enable AVs is likely Uber Freight.

For Geneva, All Eyes on Volvo Polestar and Jaguar I-Pace

While I’m certainly bummed I cancelled my annual pilgrimage to Geneva this year, I have no less enthusiasm for what is in store. CES is always getting the attention these days with all the fantastical yet-to-be-actually-built futures of transportation by the usual suspects and upstarts, but Geneva is where the talk becomes the walk.

This year, I expect we’ll see two breakouts that will become pivotal moments for two of my favorite and most closely watched brands.

2018-jaguar-ipace-concept
Courtesy of Motor1.com

The I-Pace, or the ‘Ian Callum and Friends Special’ as I would rather refer to it as, is as flamboyant and punch-in-the-mouth as is possible for the tight Brits, but it is undoubtedly the most convincing step any lux maker has taken to go head-to-head with Tesla. This car is in the sweet spot of the small SUV market and puts up convincing figures in terms of battery and performance. It also follows Jag’s sultry newish design language (thank God), which I could not be more happy about given the design amnesia that seems to plague every carmaker when they attempt to make an EV (see Leaf, Bolt, Volt, and pretty much everything else).

press_release_01
Courtesy of Volvo Polestar

Volvo, another post-Ford darling, is making huge gains across a number of areas as it achieves astounding growth in Europe, China, and America. Nowhere is this continued momentum more apparent than in the forthcoming Polestar 1 – Volvo’s first full EV with 600 hp and a battery to rival anyone’s. Besides taking the latest Volvo design style to the next level, moving Polestar from an unknown AMG/M badge wannabe to the full-fledge landmark of Volvo’s electric future is mind-blowingly shrewd. The only other company that attempted a similar step was BMW who made the i8 as its performance EV flagship, but then ruined it all with the i3.

As the real world gathers in Geneva this week, all eyes will and should be on Jaguar and Volvo as these two companies are pioneering the electric future that starts this year, not some distant year in the ‘mid to late 2020s’ that CES pundits gloss over. This is the real deal, and I expect this show to be a pivotal moment for both of these brands.

 

Other must-sees if you’re there include:

Aston Martin Vantage – the poor man’s Aston finally gets the upgrade it rightly deserves, and while it gracefully bows to the DB11, it in no way is a knock-off. This car is perhaps Andy Palmer’s most important creation since taking the helm of the company in somewhat-dire straits just a few years ago. This car only makes my mouth water even more for the new top-line Vanquish that I will hopefully see at next year’s show.

aston martin vantagetungsten silver08
Courtesy of Aston Martin Lagonda

Mercedes Maybach Vision 6 – this might be the most beautifully insane concept car I’ve ever seen, and bodes extremely well for Daimler if designs are going to start taking a nod to the likes of this. Unfortunately, most of what I see coming out of Stuttgart looks more like a Dodge Challenger than this beauty, but hopefully that doesn’t last long.

03-Mercedes-Benz-Design-Vision-Mercedes-Maybach-6-1280x436-1280x436
Courtesy of Daimler

 

 

Sergio’s Last Stand: Sell Chrysler To Google, Spin off Dodge-Jeep

I’ve written a few posts on our good Italian friend and leader of FCA, Sergio Marchionne, over the last few years. Most notably, I was incredibly critical of his view that combining FCA with any other carmaker was not the way forward. Since that post which he undoubtedly did not read, Mr. Marchionne has not had much luck in convincing any automaker of the argument.

In fact, he’s recently alluded that before his tenure as CEO is up in 2019, he may be changing his tune. Adam Jonas, a Morgan Stanley banker I wish I knew and who’s best known for his provocative bets on Tesla’s success, asked Marchionne if spinning off Jeep and Ram would be possible, to which he replied flatly “yes.”

Mr. Marchionne’s change in tone could signal that it’s more than just possible, but the suitors for who might buy the spun-off brands, or whether they’re just spun into their own public entities that Marchionne still runs is yet to be seen.

For me, FCA has some jewels and some not-so-jewels. The jewels are the red-hot Jeep and Dodge brands that are distinctly catering to unique customer segments very successfully, while Fiat and Chrysler have struggled to produce anything of substantive value. So here’s my thought:

  1. Spin off Jeep-Dodge into their own company. These brands are the most complementary brands in the game in both customers and technology, as can be seen by the now-famous Hellcat and HEMI engines that are advertised and found in both Jeep and Dodge brands. This is a specific example of a brand-transcendent product that is actually extremely hard to get right. Jaguar-Land Rover would look at this pair with extreme envy.
  2. Make Ram a sub-brand to Dodge again. It’s selling well right now in the latest SUV boom, but that’ll come to an end eventually, and I’d not want to be caught holding the bag when that music stops and you have only one product. The new Ram Raptor-fighter will benefit from the awesome engine tech that Dodge and Jeep share, and it’d give the brand back its performance edge on the ultra-hot F-150 and Silverado.
  3. Sell Chrysler to Google. It did not taste well coming out of my mouth, but given Google’s cash hoard, their current dominance in self-driving taxis, and existing partnership with Chrysler around making the Pacifica a self-driving taxi machine, it wouldn’t be a stretch to imagine why Google might want to make this work. Assuming it doesn’t lose money, it’d be like what Google and Apple and all the other tech players that have dominant products do – buy the supplier. In this case, Chrysler’s manufacturing footprint is established and has the processes in place to produce at least as many robo-taxis as Waymo requires. Also, imagine we’re in 2020 and carmakers are competing feverishly with Waymo, Uber, and Lyft for robo-taxi customers. Do you think the automakers are going to be willing to supply their competitors with an unending supply of quality cars? I wouldn’t bet on it. If Google already owned a carmaker, they could dominate this market (something they might do anyway).
  4. Add Alfa Romeo to Ferrari. Ferrari boosted its production when it IPO’d which made shareholders happy and the CEO angry enough to leave, but that won’t keep investors satisfied forever. To maintain the exclusivity of Ferrari while driving value as a company, tucking Alfa Romeo into Ferrari’s fold makes great sense. It also will bolster the reputation by association of Alfa Romeo, a brand that outside of Italy is virtually unknown, but that has strong roots and a distinctive character that could one day put it on the same course as Porsche (maybe). Either way, Alfa could be Ferrari’s growth plan, which would take the pressure off of Ferrari from diluting its brand while injecting some finer breeding into an emerging brand.

As Sergio contemplates his legacy, he’s definitely looking towards not just what to do with FCA, but where and how to leverage FCA’s brands and assets most efficiently. A combination of spin, sell, and move could be in the cards before he hangs his hat for good.

Why Volvo Is My New Favorite Automaker

volvo_c_carousel_1220x600
Courtesy of volvofinancialservices.com

As I sit here owning a much-beloved VW Touareg and have great respect for all of Bavaria’s expertise in constructing some of the most fantastic cars of all time, this damn company in Scandinavia keeps peaking my interest. It all started the moment I saw the new XC90, and ever since, I’ve been closely following what this company is up to because although they may not have the pomp and fanfare of Tesla, Audi, and others, these sheepish Swedes certainly have a lot going on behind the curtain.

Reason 1: They’re arguably as far if not farther along the path towards an actual autonomous vehicle. By ‘actual’, I mean they actually have a realistic strategy for testing rather than just buying a vacant airstrip and congratulating themselves when the car doesn’t fly off the 20-lane-wide piece of concrete. They’re piloting the cars with actual families around Sweden, which will show Volvo how the cars might actually be used by normal people. Smart.

Reason 2: Their slim but potent product portfolio is the dream of any established automaker, or really even Tesla for that matter. They started with the XC90, the same car that went through an almost-unheard-of 2 full product cycles and still managed to keep sales up. (2 product cycles equals around 14 years of production. The XC90 went into production in 2001 and went virtually unchanged until 2015.) That’s called good design, and if the XC90 and S90 flagships are any indications, Volvo still has an uncanny knack for designing cars so brilliantly that they rarely need updating. Also, because the cars are so tailored to what their customers want, they don’t need to make a huge array of products to satisfy them. Subaru is the poster child for this, and also the poster child for how to make money selling cars for double digit profits.

Reason 3: They accomplished all of this under some of the most outrageous corporate leadership of all time. As alluded to in a previous post, Ford singlehandedly drove a number of brands to the brink of collapse, Volvo included. (Jaguar-Land Rover and Aston Martin are both still recovering.) In 2010, when Ford mercifully handed the abused company over to Geely (a Chinese auto company), Volvo was living on the fumes of the XC90 and their station wagons that had long gone out of style. In comes Hakan Samuelsson, a Scania and MAN truck industry exec, and a powerful team backed by a powerful Geely has become a force to be reckoned with.

Reason 4: Due to their familial ties to China, this positions Volvo for an extremely lucrative future. Few carmakers are having luck tapping into that market, for both cultural and political reasons. On the cultural side, wealthier Chinese are not as flamboyant as they once were. This is good news for the stealthy luxury of Volvos. Politically, being owned (at the moment) by a Chinese-based firm provides huge advantages in being able to operate and sell cars profitably in the heavily-regulated country.

Finally, the real reason I finally dedicated a personal ode to Volvo is that there have been clear signs pointing to an impending IPO in the near future. The company has issued preference shares to institutional investors, has issued quarterly reports for several quarters, and is currently seeking to raise additional capital. This is fantastic news for a well-run company ahead of the game in terms of technology and design, and well positioned to be the Subaru of the mid-to-upper end market for years to come.

De-Clawed Digital Disruptors: Why Samsung’s Acquisition of Harman is a Relief to Carmakers

This article comes on the heels of Samsung’s disclosure of its acquisition of Harman International Industries, referenced here.

The automotive OEMs’ business model, at its core, revolves around simply selling physical cars to people every 7-10 years, and hasn’t changed (or needed to change) since the car was originally invented. Enter the smartphone in the late 2000s, and within a few years the most important features on every car shopper’s must-have list involved some type of smartphone connectivity, which was about the time when carmakers started getting nervous. If what people care most about in a car (besides the basic standard that it moves when told to) is no longer what the carmaker controls or owns the development of, then theoretically it should be fairly simple for an Apple or Google to produce their own smartphone-centered cars, or at least reduce Ford and GM to simple low-margin hardware suppliers.

So why hasn’t the sky fallen on the OEMs yet?  If the latest move by Samsung, another one of the big smartphone players, offers any indication, there’s hope for them yet. Even within the last year, there were rumors swirling of Apple developing a secretive Titan connected car project that was to spell doom for the mainstays, while Google’s autonomous teletubby cars garnered tons of media buzz as they spun around the streets of Palo Alto. Today, however, Google has decided to pursue a more modest partnership strategy with its autonomous driving software, project Titan has been shuttered indefinitely, and now Samsung is entering the fray with a more-muted strategy in line with that of its digital brothers.

If you’re a Mary Barra or a Carlos Ghosn, this is at least a temporary sigh of relief. It’s another example of a so-called ‘digital disruptor’ finding it harder than anticipated to adapt its software/service business model to a hardware-heavy industry, opting instead for a less-risky, less-predatory entrance. It also confirms at least in the short-run that the creation of the automobile itself remains securely in automakers’ hands, while the connectivity and software aspects of the car will remain a hodgepodge effort of Detroit-Silicon Valley partnerships, internal development, and a plethora of tier 1 suppliers and startups.

At this point in the connected car race, both carmakers and external players find themselves sitting across from the same hairy dilemma: how do we leverage these new connectivity capabilities between the car and its surrounding devices to bring value to drivers? So far, they’ve come up with mainly three unsatisfying answers: car-sharing services, telematics/informatics services, and V2X (vehicle-to-something) communication. As all parties involved have found, not even a combination of these business models yields the fruit they had expected yet.

Perhaps the real meaty value of the connected car lies in its unique role as the central device that physically connects us to our world, much in the same way that our smartphones are the focal points of our digital lives.

Tesla and SolarCity Set Course for Common Energy Platform

tesla-motors-inc-batteries-to-be-first-available-for-solarcity-corp-custome
Photo from csddaily.wordpress.com

 

The Tesla and SolarCity merger is not just a smart business bundle of achieving one-time corporate synergies. It’s arguably the beginning of a future where regardless of how the energy is gathered or utilized, it can be shared.

 

This may seem obvious or like not a big deal, but when we start talking about the future of modular transportation where a group of “modules” (cars) together can power a train more efficiently and with less traffic, these cars need to be able to pool their energy repositories together to create one large pool for the train of cars to pull from.

Short side note: this is where fossil fuel vehicles hit a bigger roadblock than a herd of angry Greenpeace activists. Fossil fuels produce energy, but they have to be turned into electricity via combustion prior to being able to be shared. I can’t pour gas into my iPhone and expect it to work, ever again.

We take for granted all the things that we simply plug into the wall. This is how the future of transportation needs to work from the standpoint of universality of the energy being used, but we need to go a step further. Being able to charge your iPhone and iPad from your computer’s energy source is fantastically useful, but it doesn’t make the USE of that energy any more efficient – if anything it makes it less because my iPhone dies every fourth email whereas my computer can handle a few hundred before dying.

With transportation, though, there are real benefits from being able to allocate energy correctly, and only if the energy can be easily allocated in different ways can these tangible benefits materialize.

For example, say there are two 18-wheel trucks, one directly behind the other, driving on an interstate for several hundred miles. Both are carrying their own payloads, and both are using their own engine power to move their respective payloads across the country. However, the guy driving behind the first truck is expending much less energy than his friend in front because he doesn’t have to deal with as much headwind hitting the front of his truck. This is a fairly common occurrence among truckers, and it’s called drafting. The problem with drafting, is that someone is always having to take the brunt of the wind, while the others simply coast behind.

But what if there were a way in a line of interstate trucks for the trailing trucks to push energy from their engines forward to the trucks bearing the brunt of the headwind? Then you’d have the energy where it’s needed most and where the other trucks can simply coast along. It’s a similar thought process as a train on train tracks. Each car does not individually have its own power supply, but rather is attached to the power in the front.

Granted, trucks on a highway are not going to connect directly to reach other necessarily, but the value of having the front truck bear the brunt of the headwinds while everyone that’s trailing pushes some of their own energy forward makes everyone more efficient and channels energy directly to where it’s needed.
That same hallmark of directing energy where it’s most needed is apparent in the Tesla/SolarCity deal. The solar system stores the energy in the battery packs, which then can be used where it’s most needed. Whether that’s charging the person’s car to go somewhere or heating their home or profiting from selling the energy in excess back to the grid, the person’s energy ecosystem is allocating energy where it’s most needed and where it’s most efficient.

In developing a common energy platform where energy can be targeted to where it’s most needed and most efficient, the Tesla/SolarCity deal is way more than just good old fashioned corporate synergies.