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+++ Following AMAZON ’s investment in startups Rivian and Aurora, chief executive Jeff Bezos has gathered employees to express his enthusiasm for developments in the automotive industry. “If you think about the auto industry right now, there’s so many things going on with Uber-ization, electrification, the connected car. So it’s a fascinating industry”, he said at the gathering. “It’s going to be something very interesting to watch and participate in, and I’m very excited about that whole industry”. The investments in prospective EV maker Rivian and autonomous tech developer Aurora are part of Amazon’s $1.4 billion ownership stakes in outside companies. +++ 

+++ BMW boss Harald Krüger’s job is hanging in the balance as the luxury carmaker steers through a fundamental shift toward electric and autonomous vehicles as well as weakening markets, people familiar with the discussions said. Some supervisory board members are raising questions over whether he’s the right choice to lead the company and will discuss the CEO’s second-term prospects in the coming weeks, the people said, asking not to be identified discussing confidential deliberations. Krüger’s current tenure ends next May, with an announcement on his future due in June or July. BMW, like other carmakers, is navigating a costly transition not only to electric cars but also new business models and deep-pocketed tech competitors encroaching via new mobility options such as ride hailing. After leading the luxury competition for a decade, BMW’s momentum petered out in 2016 and the carmaker has since struggled to regain the top spot with cautious model redesigns. Since last year, weaker global markets and trade tensions have shrunk profits. Any new CEO will be chosen from inside the Munich-based carmaker, and production head Oliver Zipse, 55, is considered a possible successor, one of the people said. “There are doubts about Krüger’s perspectives as CEO of BMW, internally and externally”, Jürgen Pieper, an analyst at Metzler Bank, said. “Results of the past 4 years are mixed, profitability is turning down quite substantially” and “there are no clear strategic signals”. Krüger, 53, has been at the helm since 2015, when he became the youngest leader of a major automaker with a brief to tackle the industry’s transition. He is struggling to stamp his authority on a divided management board that’s failing to unite on plans for partnerships and spending on new technology, said the people. While merging its car-sharing business with Daimler last year, BMW hasn’t so far aligned itself with new competitors. Daimler, Toyota and Volvo meanwhile have forged deals with Uber Technologies and Jaguar Land Rover will develop self-driving electric cars with Google affiliate Waymo. Efforts to deepen ties with Daimler have met resistance from some board members who are wary of new partnerships, the people said. The last BMW boss to leave after just a single term was Helmut Panke, who vacated the top position at BMW in 2006, a day before turning 60, at the time the proclaimed age limit for executives at the company. BMW’s largest shareholder are the Klatten-Quandt siblings, which together hold about 45 % of the shares. Krüger has struggled to emancipate himself from predecessor and now Chairman Norbert Reithofer, who is credited with taking some bold steps, like adding a range of crossovers at a time when other luxury carmakers skipped the segment. Reithofer also moved early with BMW’s first electric car and a push into mass-producing lightweight carbon fiber. Krüger’s early tenure was overshadowed by him fainting on stage during his first major presentation as CEO at the 2015 Frankfurt motor show and obvious discomfort speaking publicly in the weeks and months that followed. BMW squandered its early lead in electric cars after pausing new battery models since unveiling the slow-selling i3 in 2013. It now trails the electric SUVs of Jaguar, Audi and Mercedes already on sale. +++ 

+++ General Motors (GM) has expanded its range of teen-driver safety technologies, adding a new ‘ BUCKLE TO DRIVE ‘ feature. The seemingly simple system prevents the driver from shifting out of park for 20 seconds if their seatbelt is not secured, providing a more strict enforcement method than an annoying chime and reminder lights. “Tragically, teens have among the lowest rates of seat belt use”, GM says. “In fact, according to the Centers for Disease Control and Prevention, the majority of teenagers involved in fatal crashes are unbuckled”. The technology is initially available on the Chevrolet Traverse and must be enabled via the vehicle’s Teen Driver mode. The feature will also roll out to the Malibu and Colorado this summer. +++ 

+++ DAIMLER ’s outgoing chief executive said that all of the luxury carmaker’s costs were under review as he expressed dissatisfaction with the group’s profitability as it invests heavily in electric cars. “Everything is under scrutiny: fixed and variable costs, material and personnel costs, investment projects, vertical integration and the product range,” Dieter Zetsche said in a statement ahead of Daimler’s annual general meeting in Berlin. “Along with external factors, we are now also feeling the financial effects of the company’s transformation”, said Zetsche, who is set to hand control to 49-year-old Swede Ola Källenius. Källenius said earlier this month that Daimler will cut development costs for new Mercedes-Benz cars by a significant amount by 2025 and will intensify alliances with rivals as a way to improve margins. Källenius is working out details of the cost savings program. Daimler is pushing to develop a raft of electric and hybrid cars so it can boast a carbon neutral car fleet by 2039. The Stuttgart-based group said that it was aiming to limit the price of new car technologies for customers. “To do so, we have to cut costs and increase efficiency throughout the company”, Zetsche said. He said Daimler, which confirmed its full-year targets, had a moderate start to the year. “This was expected, but it doesn’t make it any better. In particular, we cannot and will not be satisfied with the current level of profitability”. Zetsche, an engineer nicknamed “Dr. Z” who joined the company in 1976, is due to become chairman of the supervisory board in 2021, following a standard 2-year cooling off period. Daimler’s shareholders are also set to approve a new corporate structure to combine the car and van businesses as well as the truck and bus businesses in two independent entities. The new corporate structure would allow the carmaker greater flexibility to list individual divisions. +++

+++ The new Renault Clio, Mazda 3 and electric Audi e-Tron are among the 7 cars to secure 5-star EURO-NCAP crash test scores in the latest round of testing. The Mazda 3 became just the 4th car ever tested to score 98 % for adult occupant protection (AOP), alongside the Volvo V40 and XC60, and the Alfa Romeo Giulia. The latest Clio achieved an AOP score of 96 %, and also scored 89 % for child occupant safety. The new Volkswagen T-Cross scored 97 % for AOP. The other cars to receive 5-star scores in the last month are the Lexus UX, Toyota Corolla and RAV4. Thatcham Research, the only UK safety research centre that conducts Euro NCAP tests, noted the high level of driver assistance systems fitted as standard to many of the cars tested. Matthew Avery, Thatcham’s director of research, said: “Achieving a 5-star rating has never been so demanding, so it is pleasing to see carmakers continuing to rise to the challenge. Consumers have never had it so good and can expect nothing less than top level safety from these vehicles”. +++

+++ FERRARI will introduce a 1,000 hp model during an event held on May 31 in Maranello, Italy. The company is keeping full details about the car under wraps (I don’t even know what it will be called yet) but a new report sheds a little bit of insight into how the Prancing Horse will deliver a 4-digit horsepower rating. The company’s next model will arrive with a gasoline-electric hybrid powertrain. The drivetrain will be built around a twin-turbocharged, 3.9-liter V8 engine mounted directly behind the passenger compartment. It will work with a trio of electric motors; two will be positioned up front, presumably to drive the front wheels, and the third will be integrated into the transmission. The 3 power sources will deliver 1,000 hp and they’ll allow the model to hit 100 km/h from a stop in 2 seconds flat. I’m assuming the car will be a plug-in hybrid instead of a standard or mild hybrid, and that it will be capable of driving on electricity alone for at least short distances, but that’s purely speculation. Regardless, a gasoline-electric powertrain adds a tremendous amount of weight, so it will be interesting to see how Ferrari managed to overcome it. The lessons the company learned from building the LaFerrari (which used a Formula One-like KERS system) undoubtedly steered the project in the right direction, but the 3-motor setup will likely be heavier. Ferrari will present its next car on May 31. Pricing will start at approximately €600,000 and it’s not unreasonable to assume it will arrive as a limited-edition model. With that said, loyal clients have already been shown the car behind closed doors, and a good chunk of the production run will be spoken for by the time Ferrari shows the car to the public and the press. +++ 

+++ FIAT CHRYSLER AUTOMOBILES (FCA) expects to restore profitability in Europe by the 4th quarter or earlier, boss Mike Manley says, despite starting the year by reporting a loss. Manley told analysts on FCA’s earnings call on May 5 that he expects “subsequent quarters will see a return to profitability, with the region recovering to around a 3 % margin by the 4th quarter”. FCA’s profit margin in Europe was 1.8 % in 2018 after reaching a high of 3.23 % in 2017 when Alfa Romeo production was running at full speed. For the first quarter, however, FCA posted a loss of €19 million before interest and taxes in the Europe, Middle East and Africa region, just its second quarterly loss since 2015. In the same quarter last year, FCA posted a €182 million profit. FCA revenue in the EMEA region fell 10 % because of lower volumes. Vehicle shipments were down 44,000 units or 12 % to 302,000, with the Alfa Romeo and Fiat brands accounting for nearly all the decline, Manley said. Among the big players in the region, only Ford also announced first-quarter results. The U.S. automaker reported a €50 million profit, more than halved from the first quarter of 2018 but still a 0.7 % margin. Sales of Alfa Romeo’s Giulietta dropped 42 % in Europe in the first quarter, while deliveries of the Giulia fell 45 % and the Stelvio was down 16 %. In the U.S., Giulia sales were down 34 % in the quarter, while Stelvio declined 16 %. All 3 Alfa Romeo models are produced in Cassino, Italy. FCA has cut production there to align it with declining demand. According to union sources, Cassino worked 10 days out of 21 in March and 9 days out of 20 in April, with workers temporarily laid off. FCA management said the decline in passenger car volume in the region primarily was a result of discontinued models and the decision to reduce dependence on low-margin channels, especially self-registrations. Dealer stock inventory was down 13,000 units from the end of the previous quarter. Among the headwinds in the EMEA region, Manley also cited negative market pricing, adverse exchange rates and higher compliance costs, including the incorporation of new powertrain technologies. “A number of factors” will drive the business to a better short-term performance, Manley said: 1) The reduction in sales through low-margin channels. 2) Jeep’s increase in sales. “A number of restructuring activities” that will kick in late in the second quarter, although the full effect will not be seen until 2020. The head count reduction will affect both white and blue collars, Manley said. This year, he said, it will yield “a benefit between €80 and €100 million by the 4th quarter”. The restructuring is being driven by the need to “streamline the commercial side of the business”, Manley said, and by a weakness, compared to European peers, in how much of its plant capacity is being used. FCA will try to fix the latter both through its investments in electrification and by “working with the unions, making appropriate head count reduction”, he said. Last December, FCA and the unions signed an agreement for up to 1,050 early retirements at the Mirafiori and Grugliasco plants, with 800 of those being blue-collar jobs. Company incentives for those retirements would be €4,000 to €38,000. Both plants currently work on Maserati models. The Maserati premium brand, which is reported separately from the EMEA region, also had a tough first quarter. Operating profit fell 87 % to €11 million with a 2.3 % margin. Shipments dropped 41 % to 5,500; the lowest quarterly figure since the third quarter of 2013. The 3 main EMEA-based brands of FCA (Fiat, Alfa Romeo and Maserati) have launched no new models since the Stelvio was unveiled at the Los Angeles Auto Show in November 2016. No launch is scheduled for this year, while a new electric Fiat 500 is expected to start production in 2020. As far as Alfa Romeo is concerned, FCA’s 2018-22 business plan, presented last June, envisioned the launch of 7 new or refreshed models. In Geneva, Alfa showed a concept version of a compact crossover, the Tonale. No schedule has been given for the possible launch of a production version. IHS Markit analyst Ian Fletcher expects Alfa Romeo sales in the countries that are members of the European Union and European Free Trade Association will drop 17 % to 68,900 vehicles this year, then slightly recover in 2020 to 74,500 on the back of the expected launch of the Tonale. “That model would be key”, Fletcher said. +++

+++ FORD is preparing to reveal its Mustang-inspired electric crossover later this year. Rumored to be labeled the Mach-E, the upcoming EV is being fast-tracked through the development process as Ford prepares to take on the Tesla Model Y. Initial reports pointed to a 2022 launch, while more recent speculation indicates a 2020 target. The company is ready to debut the EV in concept form this year. The Blue Oval has not divulged much information, aside from a 600 kilometre range target via the WLTP test cycle for the variant with the highest-capacity battery. Borrowing Mustang branding, at least one configuration will presumably have a performance focus. +++

+++ GENERAL MOTORS (GM) said most of its global models will be capable of over-the-air software upgrades by 2023, as the automaker rolls out new vehicle electrical systems designed to securely handle heavy data traffic and software downloads from the internet. GM and other established automakers have been slow to catch up with electric automaker Tesla Inc, which has for years used smartphone-style over-the-air upgrade technology to change the function and feel of its vehicles overnight. Earlier this month, for example, Tesla responded to reports about its vehicles catching on fire by pushing out an over-the-air update for battery management software. GM executives have said in the past that matching Tesla’s use of over-the-air updates would require new vehicle electrical systems, and robust cybersecurity to assure that vehicles could not be tampered with by hackers. GM did not specify what vehicle systems and features would be open to over-the-air updates, but said the new system “enables the adoption of functionality upgrades throughout the lifespan of the vehicle”. In 2016, GM President Mark Reuss, who at that time was head of global product development, said the company would not use over-the-air updates for safety-critical systems such as brakes. The new GM electronic systems will be capable of handling up to 4.5 terabytes of data processing power per hour, 5 times the capability of current GM vehicles. The new GM electrical systems will be launched on the Cadillac CT5 due to begin production later this year. +++ 

+++ Senior car industry figures were in London last week for the annual two-day Financial Times Future of the Car Summit. It’s a chance for leading CEOs to get their company message across or, in the case of JAGUAR LAND ROVER boss Ralf Speth, an opportunity to deny rumours that his company could soon be bought by French giant PSA, which already owns Peugeot, Citroen, DS and Opel/Vauxhall. But when it came to the crunch question on whether he was aware that talks had taken place between PSA and JLR’s current owner Tata, Speth’s response was limp at best. “There are rumours”, he acknowledged, “but I cannot really confirm any of these discussions”. There is an increasing belief that JLR might well benefit from a switch of owner. Acquisition by PSA would lead to a brutal period of cost-cutting, for sure, but it could deliver profits for Jaguar and Land Rover just as quickly as the rapid turnaround delivered at Opel and Vauxhall during the past 18 months. A PSA deal (or, for that matter, a switch to ownership by a major Chinese manufacturer) would also open Jaguar and Land Rover to a wider pool of technologies than either brand presently gets from Tata. The sort of engineering nous that could have delivered plug-in electrification to the new Discovery Sport now, at launch, instead of in 6 or 9 months’ time. If anything, though, Speth’s attitude to partnerships with other brands was what drew the deepest gasps at the FT Summit. “You can talk about economies of scale and that’s correct”, he said, “but on the other hand, there’s the freedom we have to develop and do our own strategy in a fast way, a structured way. This gives us a lot of power”. His dedication to independence is admirable, in a way. But with car makers facing huge bills for developing EV technology, it’s hard to find anyone in the industry who thinks that JLR’s relative isolation makes any sense at all. +++ 

+++ Volkswagen truck brand SCANIA said it will invest $344.14 million to modernize its Brazilian factory in Sao Bernardo do Campo, an industrial city near Sao Paulo. The investment in the historic center of Brazil’s auto industry follows Ford’s decision to exit the heavy truck business in South America and shut down its plant in the same city, which could benefit the remaining players in the sector. During the first four months of 2019, sales of Scania heavy trucks increased 31 % compared to the same period a year ago, according to data compiled by local automakers association Anfavea. The investment comes at a time when the state of Sao Paulo, which long dominated the Brazilian auto industry, has seen auto companies set up factories elsewhere, lured by tax incentives. Earlier this year, General Motors threatened big cuts in its Sao Paulo factories. That prompted state governor Joao Doria to negotiate aggressively, ending in the launch of a new incentive package for auto makers in the state. GM then decided to invest $2.7 billion to take advantage of the tax program. The new Scania investment will start in 2021 and end in 2024, following its 2016 to 2020 investments, which total 2.6 billion reais, the company said in a joint statement with the Sao Paulo state government. Scania’s latest financial commitment is aimed at overhauling its assembly line, as well as introducing a new generation of trucks in Latin America. The Swedish company is among the largest truck firms in Brazil, behind Mercedes-Benz and Volvo. +++

+++ 3 Democratic U.S. senators question a decision by Volkswagen’s U.S. unit to delay a union election for workers at its TENNESSEE assembly plant. Earlier this month, the largest German automaker won its bid to put off a union vote for 1,700 workers at the Chattanooga plant until its challenge to a smaller United Auto Workers bargaining unit at the factory is settled. The National Labor Relations Board, in a 2-1 decision on May 3, granted Volkswagen’s motion to stay an election petition filed by some of its workers last month. Senators Gary Peters and Debbie Stabenow of Michigan and Sherrod Brown of Ohio wrote to Scott Keogh, president of Volkswagen Group of America, expressing “deep concern with delays” to the vote. “We urge you to immediately drop any efforts to oppose or postpone the election”, the said. UAW spokesman Brian Rothenberg urged VW to allow a vote of its workers: “Volkswagen should stop obstructing the rights of Chattanooga workers to vote and have a union. Enough is enough”. Volkswagen spokesman Mark Clothier confirmed the company had received the letter and would respond. “We respect the decision of our team and their right to decide on representation. We have taken a neutral position on the issue and will continue to do so”, Clothier said. In December 2015, 160 skilled trade maintenance workers voted to unionize and affiliate with the UAW, the union said. VW declined to bargain with the union, saying the unit needed to include both skilled trade maintenance workers and production workers. Volkswagen has stated it is neutral on workers joining a union but the senators said its “actions suggest otherwise”. VW began production in 2011 at the plant, which builds the Passat and the Atlas SUV. In January, VW said it was investing $800 million to build a new electric vehicle in Tennessee and add 1,000 jobs at the Chattanooga plant that will begin EV production in 2022. The senators “have heard that facility supervisors in Chattanooga are engaging in direct anti-union conversations with workers in the workplace, including pulling workers off the production line to ask if they support the union”, they said. In February 2014, workers at the plant narrowly voted against union representation, which had been seen as organized labor’s best chance to expand in the U.S. South. UAW membership has plummeted 75 % since 1979 and now stands at about 396,000. The UAW has failed for 2 decades to organize foreign automaker plants in the United States. +++ 

+++ One of TESLA ’s former biggest supporters on Wall Street said the electric carmaker’s shares could fall to $10 from nearly $200 now, if tensions with China escalate and sap demand for its cars. Shares of Tesla edged down, heading for their fifth straight session of losses, and bonds weakened, after Morgan Stanley analyst Adam Jonas outlined his worst case scenario. Jonas forecast the shares could be worth $10 to $391, with a price target of $230, a wide range that underscores the confusion and risks about Tesla’s future. The company is facing signs of dragging demand as rivals step up electric efforts, as well as issues related to cash flow and manufacturing, its outlook in China and its eccentric, charismatic boss, Elon Musk. “Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals”, wrote Jonas, rated a 5-star analyst by Refinitiv for the accuracy of his forecasting on the company. The company’s stock, which has almost halved in value since last August, was down another 3 % at $199. In the last 10 days, it has gained only once, when the company boosted prices of its Model 3 last week. It is building a factory in China to produce its Model 3 in the world’s largest auto market and to escape a rise in tariffs on cars imported from the United States. Another brokerage, Baird, cut its price target for the company to $340 from $400, saying concerns over demand, credibility and noise around the company have kept incremental buyers out of the market. “The departure of key executives, price discounting, and extraordinary cost-cutting efforts add to the narrative of a company facing real potential stress”, Morgan Stanley’s Jonas said. An early backer of Tesla, Jonas in 2011 set a price target of $70 on the stock when it was trading around $23, a year after its IPO at $17 apiece. In 2017, he said the Tesla Network alone, Musk’s plan for a robotaxi fleet, was worth $76 a share. His bear case doesn’t ascribe any value to robocabs but if the plan works, Jonas, who was once criticized in a New York Times article for being a cheerleader for Tesla, has a bull-case price target of $391. The market action follows hot on the heels of a $2.7 billion fundraising round by the company 2 weeks ago that was oversubscribed, but has done little to settle the nerves of holders of Tesla’s existing debt. Its $1.8 billion high-yield bond due in 2025 with a 5.3 % coupon weakened for a third straight day in European trading, with its price edging below 82 cents on the dollar and the yield up to 9.16 % after touching a record high 9.25 % overnight. The spread of its yield over Treasury securities, a gauge of the added compensation demanded by investors for holding Tesla rather than safer government debt, widened to nearly 693 basis points. By comparison, the average spread on corporate bonds rated “B” (roughly the same as “B-“ rated Tesla) is 442 basis points, according to ICE BofAML bond index data. It was also among Wall Street’s more heavily shorted stocks, with about a fifth of its float on the line. “FAANG stocks continue to dominate the list of most shorted U.S. equities, but Tesla continues to hold the number 1 or number 2 spot since 2016”, according to financial technology and analytics firm S3 Partners. Of 31 analysts who cover the stock, 10 now recommend buying Tesla shares, 9 are neutral and 12 recommend selling, according to Refinitiv Eikon data. The median price target is $250.19, a fifth above the current market. While cutting their price target, Baird analysts reiterated their outperform rating, saying Tesla was “positioned to outperform over the long run, as it increases profitability, generates free cash flow and ramps up production of innovating products”. +++ 

+++ TOYOTA believes the price of fuel cell cars will match those of hybrids “within 10 years”, the automaker’s European head of sales and marketing, Matt Harrison, said. “We believe fuel cell vehicles have a huge potential”. Toyota currently sells its first-generation fuel cell car, the Mirai. He said Toyota was “not so far” from selling the second-generation model, with the third-generation arriving within a decade. As with all automakers selling in Europe, Toyota needs to bring CO2 levels down progressively to meet tough new targets set to be mandated by the European Union by 2025 and 2030. “There’s no perfect technology to meet this task to succeed”, Harrison said. “We’re preparing various alternatives and let our customers decide which form of electrification suits them”. The executive said Toyota expects to hit the 2020 CO2 targets in Europe using hybrids alone. Toyota has the lowest average CO2 of any mainstream automaker. Toyota sold 480,000 hybrids in its wider European region last year, including Russia, with the technology accounting for 46 % of sales. Looking at just western Europe, that figure rose to 60 %. “It’s limited by supply for the second year running, not demand”, Harrison said. He said Toyota reduced the cost of hybrid technology by 75 % since launching the first Prius in 1997. The car is now on its 4th generation. “Our next-generation hybrid technology will be more affordable still”, he said. Fuel cells are expected to become cheaper partly due to the reduction of the precious metal platinum, Bosch has said. The supplier’s future fuel cell design will only need the same amount of platinum as a current diesel catalytic convertor, which uses around 3-7 grams of platinum compared to about 30-60 grams in a fuel-cell stack. Bosch is developing a system with Powercell and expects to launch by 2022. The next generation of Toyota’s Mirai is expected to cut platinum by two-thirds to around 10 grams per vehicle, from 30 grams in the current model, David Hart, director of E4tech consultancy, based in Lausanne, told. “They (fuel cell makers) all have a pathway of using less platinum, which is fairly clear”, Hart said. +++ 

+++ VOLKSWAGEN is continuing to outperform the overall new light-vehicle market in China despite the group’s extended sales decline. In April, VW’s groupwide deliveries dropped 9.6 % to 302,600. Despite this, the automaker gained market share as overall new light-vehicle demand nosedived nearly 18 % to below 1.6 million in the month. April sales at VW brand dipped 6.5 % to 231,400 while Audi deliveries slumped 12 % to 46,364. Skoda sales shrank 41 % to 16,600. In the first 4 months, VW Group delivered 1.24 million light vehicles in China; a decrease of 7.1 % from the same period last year. By contrast, General Motors has lost market share in China this year. GM does not divulge monthly sales in China. But according to its local partner SAIC Motor, the Detroit automaker’s 2 joint ventures suffered steep declines in April volume. Combined April sales at SAIC-GM and SAIC-GM-Wuling fell 29 % to 231,204. Through April, aggregate deliveries of the 2 partnerships slumped 22 % to 1.08 million. SAIC-GM produces and markets Cadillac, Buick and Chevrolet cars and light trucks while SAIC-GM-Wuling builds and distributes cars for the entry-level Baojun brand and minibuses for the Wuling marque. +++

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