#ferrari

Tesla worth more than major brands with 1,046 years of combined experience

Wonderful to see Wall St bull at its finest. Trip Chowdhry of Global Equities Research put a 2030 price target of $4,000 on Tesla or around 10x the current price.

Amazing to think that he believes that Tesla would be worth 25% more than Toyota, VW, BMW, Daimler, Ferrari, Honda, Nissan, Mazda, Ford, GM & Fiat-Chrysler combined.

Sure, that’s plausible. Who wouldn’t believe that the industrial might of the aforementioned world’s most respected brands – with a combined 1,046 years of production expertise – will be worth less than a company who is led by a dope smoking CEO who cares little for corporate governance?

That isn’t to say innovation and disruption can’t end a millennia of progress. The only problem is the market fails to realize is that Toyota invests 10x what Tesla does in electric vehicle R&D every year and had its research geeks develop solid state lithium ion batteries for fun.

More auto marriages have ended in divorce

Auto mergers were once thought of as the best things since sliced bread. Massive operating capacity leverage, shared platforms to reduce cost and a reduction of R&D spend per vehicle. The word “synergy” gets bandied about more than Casanova whispers “I love you“on Valentines Day! Yet why is the auto industry littered with divorces from these romances?

Lets list them.

Daimler bought Chrysler in 1998. Divorced in 2007.

Daimler alliance with Mitsubishi Motors founded in 2000. Divorce in 2005.

Daimler alliance with Hyundai founded in 2000. Divorce in 2004.

Honda – Rover JV. Started 1980. Divorced 1994

BMW – Rover – Started 1994. Deceased 2000.

Nissan – Renault – Started 1999. Currently providing real headaches due to Carlos Ghosn saga. Nissan wants full independence

Ford forms Premier Automotive Group (PAG) comprising Land Rover, Aston Martin, Volvo, Lincoln and Jaguar. Set up in 1999.

Ford sells Aston Martin in 2007.

Ford sells Land Rover & Jaguar to Tata in 2008

Ford sells Volvo to Geely in 2010.

Fiat Chrysler (FCA) formed in 2014 – including Fiat, Abarth, Chrysler, Jeep, RAM, Dodge, Lancia, Maserati & Ferrari brands.

FCA spins Ferrari off in 2016.

This isn’t an exhaustive list but one can be guaranteed that more money has been lost in auto mergers in aggregate than made. Daimler paid $45bn for Chrysler. Almost all of the Mercedes profits plugged the losses of Chrysler. Mercedes quality suffered through cost cutting sending it down toward the bottom of surveys. Daimler’s shares lost over $80bn in market cap as this disaster unfolded.

FCA and Nissan/Renault have been amongst the more successful marriages but global markets have turned many a honeymoon period into separation with fights over custody.

Forming a merger at the top of a cycle seems fraught with risks. Global auto sales are slowing. Renault and Fiat bring a lot of overlap in product lines. Nissan is such an unclear part of the puzzle.

One can argue that synergies which will lower the costs of future production have merit. Investing in battery technology does make sense across multiple product lines.

The biggest problem for the auto industry is that should a slowdown hit mid-merger, which brand suffers the hits? Which marketing team gets culled? Which R&D projects get scuppered? Too many cooks spoil the broth is the end result. There is no way a merger can be locked down in a short timeframe unless one of the parties is facing bankruptcy and has no choice but to comply. That is why Nissan-Renault worked.

Renault-FCA would be better conceived after markets have imploded. Marriages built on tough times stand a far bigger chance of survival than those that are built when things are the rosiest. Shareholders will be the biggest losers if conceived now.

Gillette – from toxic masculinity to transgender & morbid obesity

Gillette is free to advertise how it wishes. After the monster backlash against the toxic masculinity campaign which wiped 6% in value from the brand and caused a 22% fall in the following quarter’s profits, it is hard to see how the radical social justice warriors in the marketing department have not been fired. To shareholders, it was a massive fail. A YouGov poll of household grooming products before the campaign saw Gillette fall from 7th out of 45 brands to dead last after it. Yet the company has chosen to bet the house on more virtue signalling hoping it will eventually cut through to the masses. Get woke, go broke.

While there is absolutely nothing wrong with a transgender kid shaving for the first time, most will likely see this ad as nothing more than Gillette doubling down on the roulette wheel of “identity politics”. What point is Gillette trying to prove? The bulk of society is growing tired of being told how to think and what to say.

Yes, there are serious transgender issues in America. 130 transgender people have been murdered since 2013. It is a damning statistic. However, it is unlikely that anyone small minded enough to commit such a heinous crime will be swayed by a Gillette ad featuring a trans actor. Why does Gillette seek to force feed its version of socially acceptable behaviours on the 99.9% of its clientele that does not require it? It is patronising in the extreme. It is like attacking NRA members as murderers.

The only company in the world that can treat its customers with disdain is Ferrari. It wields so much power that it selects customers if they are deemed worthy of owning some of its limited edition offerings. Sadly Gillette is not Ferrari.

Gillette is rife with double standards. It has brazenly sponsored a Dutch racing car series with the brand embossed across the backsides of supermodels.

Chick-fil-A, on the other hand, was established on its Southern Baptist principles. It has never hijacked a social movement to boost sales.  That is why it has seen sales treble on a doubling of stores to become the third largest fast-food chain in America. It never rams its beliefs down the throats of others.

The toxic masculinity campaign should have been a big enough lesson for the marketing team to stay in its lane. The consumer spurned Gillette at the supermarket cash register. It would have been better coming out and apologizing and praising men for all the good things they do, like the Egard Watch company.

Virtually no customers will see that trans ad and think to buy Gillette razors out of a sense of moral guilt at the treatment of this minority. Consumers buy razors to groom – period. When will the company get it?

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It wasn’t so long ago that Gillette promoted a morbidly obese woman to push female shaving products. There is a difference between standing against fat-shaming and being realistic about the many chronic health issues and massive costs related to obesity.

The American Medical Association (AMA) wrote, “the nation’s obesity rate is approaching 40% after holding around 34–35% between 2005 and 2012, according to data in The State of Obesity: Better Policies for a Healthier America 2018. No state has had a statistically significant drop in its obesity rate in the past five years...the National Health and Nutrition Examination Survey (NHANES) showed that 39.6% of adults and 18.5% of children ages 2 to 19 in America have obesity, the State of Obesity report noted that “these are the highest rates ever documented“…the AMA is working to prevent and control chronic diseases, many of which are associated with obesity…”

We covered obesity in the previous post. Obesity increases the risk of developing type 2 diabetes, high blood pressure, heart disease, stroke, arthritis, sleep apnea, liver disease, kidney disease, gallbladder disease, and certain types of cancer yet Gillette wants to celebrate it as something to be proud of.

Corporations that pursue woke marketing risk alienating their customers. There is no upside to it. Consumers are not stupid and the more companies run campaigns that fly in the face of their intelligence, will only get a backlash at the point of sale.

Don’t forget that the toxic masculinity campaign had a 10:1 negative response ratio on the millions of views it had. One can be sure Gillette will try to massage a positive response on this latest campaign. Yet, like most polls, the most accurate measure is consumer response. If sales aren’t arrested, no matter how many positive clickbait statistics they can show their bosses internally, the sales and profit figures won’t lie. That is all that ultimately matters to P&G shareholders.

Vale Nikki Lauda – A wise man gets more from his enemies than a fool from his friends

A wise man gets more from his enemies than a fool from his friends”

An amazing F1 World Champion. To survive that horrible Nurburgring fire and return to be a champion again.

Ron Howard’s Rush was a great film which captured the meticulous nature of Lauda.

Is Musk losing it?

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Is Tesla CEO Elon Musk losing it? More senior resignations from accounting and HR this week  reveal more cracks in the automaker. He emailed a journalist, calling him a “mother f*cker”. He went further to say he hoped the cave rescuer he called a “”pedo” sued him because a UK man who is single and spent so much time in Thailand must be a child rapist.

He rattled off he had “secured” funding of $420/share to go private and then all of a sudden he didn’t, prompting the SEC to investigate. He was then on radio with comedian Joe Rogan toking what is reportedly a mixture of tobacco and marijuana. Are these the actions of a man running a $50bn market cap company?

Clearly his board can’t control him.  With the shares collapsing and bond prices falling, refinancing will become problematic. Chief  Accounting Officer Dave Morton quit the company after revealing his concerns about the various obstacles Tesla faces.

Tesla’s Chief People Officer, Gabrielle Toledano, took leave in August and said she wouldn’t be returning to Tesla.

Musk has been a genius and visionary to get Tesla where it is today. Yet he is a direct victim of his own hubris. Sleeping under boxes with Tesla bankrupt written on them to living on the factory roof to rattling off about production hell while accusing families of drivers dead due to over reliance in a system he aggressively promoted.Tesla was technically asking for suppliers to refund a portion of the monies they were paid since 2016 to the EV maker so it could post a profit which is borderline accounting manipulation in an attempt to give the impression of an ongoing concern.

He also complained at the lack of support in the media despite being called out on this nonsense.

Musk’s compensation is also linked to a $650bn market cap, which is effectively saying to the market that his company will be worth more than Daimler, BMW, VW, GM, Ford, Toyota, Nissan, Honda, Renault, Fiat-Chrysler, Ferrari and Porsche combined. Just read that last sentence again. Do investors honestly believe that Tesla which consistently misses and is going up against companies that have been in the game for decades, seen brutal cycles, invest multiples more in technology and forgotten more than they remembered will somehow all become slaves to a company which has no technological advantages whatsoever?

The Tesla story is on the ropes. Expect more mega-releases on new products to try to keep the dream alive and the disciples faithful. I guess ‘Lucy in the sky with diamonds’ worked for The Beatles…