Category Archives: Observations

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.

 

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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.

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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).

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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.

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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.

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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.

Better Together: A Case For Modular Transportation

Creativity without restraint is a hard concept to grasp because the restraints are generally self-imposed: “what will people think of my answer? Will they think I’m stupid? Or worse, naive?” When posed with a big question like “what should the future of transportation look like?” or “what’s the next big thing?”, most people, myself included, would immediately start mentally searching for the latest report or most dinner-party-friendly response; one that evokes the audience’s polite head tilt and petite frown, signaling they had considered your response in all its nuances and determined it suitable enough.

The obvious problem is that dinner parties are not generally the venues from which groundbreaking thinking flows. And while I’ve generally tried to write the dinner-party-friendly version of my ideas and observations over the last few years, I’m now thinking of, well, not doing that.

My self-posed question is “what does the future of transportation look like?” Here’s my immediate, uncensored thought process:  Connect them. Not in the dumb IoT type of way. When I was little, my grandfather made me my own custom train track to build, but I used it for driving cars on. Would that work? Can we make trains of cars utilize train tracks? What about a train of cars? Isn’t that essentially what a highway is?

Overall, as I try to reconcile nature-based design with the future transportation networks, I am left with the notion that whatever the ultimate answer may be, it has to revolve around the idea of “better together.” The individual modes of transport in the future need to be more efficient when there are lots of them than when they are individually operating. In today’s world, the situation is very much the opposite, as can be discovered quickly between the times of 7 and 9 am and 5 to 6 pm every week day.

The idea of “better together” actually comes from birds, bison, and a host of other herd-like animals that can achieve more efficiency or more safety together rather than apart. Juxtapose this: a bunch of birds in a V-shape all traveling to the same place more efficiently against a bunch of cars going to the same place at an equally slow speed due to congestion. Could we create a train of individual modules (or cars) that are all roughly going to the same place, and then allow individual cars to attach and detach to the train as needed? For longer trips, could we have a skeleton of a train that individual modules can fit into and then collectively power the whole unit? Scale that to planes, could we have a bare-bones, UPS-like plane that a bunch of individual modules power?

The amount of power that you provide to the unit directly affects the price that you have to pay – similar to how if you have solar panels on your roof you can sell the power back to the grid? As a nod to this sharing economy concept, if all of these individual modules are making up the backbone of a plane or a train or a highway-type train, can you “sell” other seats of your module to other people looking to go to that same place? Could we design cars so you still feel separated if you don’t want to necessarily converse with the other person who’s sharing your module on your flight to Miami?

 

Designing From Nature Yields The Biggest Breakthroughs

Diverting from the usual, I want to talk about design, and I want to talk about it outside of the context of high-priced consulting firms (for which I work) and Amazon Echo and the iPod. In fact, I quite literally want to talk about design outside. Nature’s design, besides being a popular buzzword among church clergy, has and will continue to shape what we consider beautiful like the Echo and iPod. Perhaps more importantly, design derived from plants and animals has and will continue to lay the groundwork for the most beautiful and innovative man-made creations in history.

This last statement seems dramatic, but over the last few months, I’ve run across a few examples that demonstrate the evidence that nature does not just inform the finer arts, but widely inspires groundbreaking technologies. For concision, I’m going to select just a few examples of how nature can change the course of human progress, past and ongoing, to prime a further discussion.

Wilbur Wright was inspired by birds in flight. This is a fairly well-known piece of history, but until reading the brothers’ biography by David McCullough, I did not understand the depth of intense study that Wilbur conducted in order to comprehend the science of flight – why buzzards had a certain wing shape, why certain birds were able to fly without wind, and even why birds arched or flared their wings to remain at their preferred height. The design of different birds inspired part of the design of their initial Flyers, and Wilbur continued to leverage birds to test his theories and formulas of aeronautics.

Microsoft is storing data in the form of DNA. As a contemporary example, Microsoft teams are developing a revolutionary way to store data, using DNA as their template. Through the use of A,C,T, and G to store information instead of the standard binary 0 and 1, they’re able to store exponentially more data on the same amount of space. 

These are 2 examples of conscious design derived from nature. But plenty other inventions that have shaped human history were undoubtedly inspired by mimicking nature. The compass is a direct interaction with natural magnetic fields, and SONAR is used by dolphins for communication.

We’ve learned a lot from nature, and in many ways we have profoundly increased the velocity of human progress by listening to it. It’s hard to believe that there aren’t many more groundbreaking, history-altering natural designs staring us square in the face.

From a transportation perspective, can we learn from nature as to how to integrate forms of transportation in the most efficient and safe ways? How does the largest organism on earth, a quaking aspen tree network, deliver nutrients and information correctly and evenly in order to stay alive?

This is the type of question that I believe could provide some exciting answers.

The Valley Can Only Juggle So Many Auto Goliaths

Tech companies, especially those that self-identify as “disruptors”, tend to build their businesses around the idea of pushing the establishment out of their own industry, portraying them as inefficient and greedy dinosaurs that make customers worse off. In many cases this is true, but there may be ways to incentivize them to work with you rather than against you. 

Most trendy tech chooses the obstinate path – confronting the establishment head on. It’s never easy, but, as Netflix and HBO will attest for their respective industry, the results are almost infinitely positive. There’s a big difference, though, between taking on Big <insert industry> and confronting Big Auto. That’s because when you try to disrupt this particular industry in the way that Tesla, Google, and others want to, you don’t just get hunted by Big Auto – you get hunted by Big Oil, Big Gas Station, Big Insurance, and Big Auto Dealer. Any of these 5 groups would be a mammoth to take on, but all 5 is pretty much suicide. They collectively have enough money and lobbying power to probably ex-communicate Tim Cook from America if they tried hard enough.

I actually love the David-and-Goliath mantra of Tesla and Google, but I also think that within this endless war between incomer and establishment, there’s an interesting and perhaps more lucrative proposition for a young auto tech company looking to try their hand.

What would happen if you came up with a solution that made at least some of the incumbents money? You would be the industry white knight that no one (or at least fewer people) was trying to constantly beat into submission.

What would it take? Well, let’s look at where the different incumbents feel cornered:

Big Oil is my number one spouse if I’m trying to get an incumbent to play ball. They’re petrified of lithium-ion batteries because they have no expertise or IP to leverage or commercialize. That’s why they’ve been enthusiastic in flooding Hyundai and Honda and Toyota with funding and R&D support in developing hydrogen fuel cells; this is still a new fuel that no one has cornered yet, and they can retrofit their existing gigantic network of pump stations (that outnumber supercharger networks by like 1000:1). What would happen if a young tech company tried to get a new type of battery funded by Big Oil that they could realistically profit from?

Big Auto is afraid that they will become simply hardware suppliers to Apple and Google like Foxconn is to the iPhone. This is probably an overblown worst scenario, but showing carmakers where they can own the driver experience above what their smartphone can do may perk some ears. 

Big Insurance is worried that their profitable auto insurance business will shrink into oblivion with the dawning of crash less vehicles. I honestly don’t have an good thought here other than people will likely not want their driving habits to be monitored 24/7 in order to determine their insurance rates. Because if everyone is like me, we enjoy getting away with semi-illegal “fuck it” U-turns when we blow past the Taco Bell going ten over on one of those laughable 25 mph main streets. 

Big Auto Dealer has a target on Mr. Musk’s back for challenging the dinosaurs of a pre-digital shopping era. Over the past several years, dealers, content with profiting mightily off of the carmakers’ actual work, failed to transition or react to consumer changes. As such, Mr. Musk takes one for the team, and the industry will be better off for it. 

Point being that perhaps a few incumbents deservedly need to be taken on, but the world of New Auto will undoubtedly still contain many of the same players in the world of Old Auto. Best to choose your battles wisely, and perhaps consider the fact that many incumbents maintain assets and capabilities that could advance new technologies faster and more efficiently than the cash-flush tech companies – gasp!

Connected Cars: Moving from gimmicky jargon to the bedrock of future cars

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Photo courtesy of litmusautomation.com

Quick pedestal rant: with anything new or trending, media outlets and business leaders love to name and then profusely overuse their bestowed name for a movement, new business trend, or scandal. They add “-gate” as a suffix to any trivial scandal that probably takes away from the severity of Watergate and they add the words “disruption” and “innovation” to situations and ideas that are probably not either in the hopes of garnering audience attention.

No doubt this type of jargon showboating is effective in bringing new ideas to the public. In the automotive industry, “autonomous”, “access over ownership”, “internet of things”, and “connected” sound cool enough to go viral, yet vague enough for leaders and the media to use them superfluously without ever actually having to explain what they mean or how we accomplish them.

The term “connected car”, above all other auto jargon, leaves a particularly unpleasant tang on my tongue – mostly because carmakers describe connected features more like cute gizmos that you’ll use as much as you use the cigarette lighter for it’s intended purpose rather than game-changing capabilities that enable the driver in unprecedented ways.

WiFi hotspots, a proprietary suite of apps, and using your car to pay for gas are the various touted features of connected vehicles. Groundbreaking. My iPhone does all the same things. There is no value to customers in these features, and there sure as hell isn’t a business case for them either. To be fair, things like WiFi hotspots will lay the groundwork for over-the-air updates which does add value, but carmakers seem very hesitant to say or do anything beyond these gimmicky features.

Ironically, the tables are turned on the autonomous front, technically also a connected technology. Every carmaker has checked the box for buying a very expensive “testing ground” for the technology, touting how fast they’re going to bring a fully-autonomous car to market while confusing customers through their lackadaisical distinctions between automated and autonomous driving, two starkly different concepts.

Another consequence of overusing jargon, terms like “connected” generally lose their meaning as stakeholders and journalists layer on their own definitions and point of view. Fundamentally, connected technology is based on leveraging the internal sensors, transmitters, software, and network connectivity to enable everything from autonomous cars to over-the-air updates to vehicle-to-vehicle communication and beyond.

Connected cars are truly the bedrock of the new automobile, centered around developing and honing the driver-car relationship beyond what we’ve ever been able to accomplish. We’ll create performance cars that respond viscerally to your fingertips on a screen, off-road SUVs that leverage on-board sensors to show the driver the most effective path to take through a HUD (heads-up display) windshield, and luxury vehicles that know your preferences and desires without you asking.

As mentioned, the basis of the connected car is the relationship with its driver. Cars have been probably the one product we purchase with which we genuinely bond. Connected cars will connect (sorry for the pun) people with their cars to forge deeper bonds than has ever been possible. In doing so, we’ll start alleviating some of the pain points with driving (namely traffic and crashes), create cheaper options and ownership methods to enable more people to access cars, and lay the groundwork for an even farther out vision of connecting multiple forms of transportation through the car (think of being able to jump in your car in San Francisco, take the high-speed train to LA, and drive to your office all without leaving your car.)

“The cars of the future will undoubtedly be amazingly connected,” but we’re passed the point at which it should be acceptable to end the sentence with that phrase. If we’re ever going to get there, we have to get beyond WiFi hotspots and proprietary app stores, beyond how fast fully autonomous cars will come to market, and focus on what is going to truly bring value to the driver. The question before any business decision is made with regard to new car tech should be: How does this strengthen the relationship between car and driver? Unconvincing answers should be scrapped.