Elon Musk Naked

No, no pictures, I am referring to the fact that the emperor may have no clothes, and Elon Musk, in particular his Tesla Motors project, seems to be increasingly unmoored from reality:

If you’re a hedge fund analyst looking over a public company’s numbers and you see a troubling financial trend making itself evident in the data (like a company burning through cash while booking revenue for a product that is seems perhaps incapable of delivering in the volume promised in the timeframe laid out), you will feel the natural urge to short that company’s stock and wait quietly for the money and praise to roll in.

But we want you to pause for a moment and look at the top of that file. Does it say “Tesla Motors, Inc. (TSLA)”?

It does?

Yeah, you’re going to want to rethink that short, homie, because you have not factored “Blind Elon-ic Faith” into your Alpha.

But you wouldn’t be alone.

Tesla reported yesterday, and from a purely logical perspective it was a mixed bag:

Tesla’s reported a net loss of $336 million, or $2.04 per share, compared to a loss of $293 million, or $2.09 a share, a year ago.

Excluding stock based compensation, Tesla lost $1.33 a share, which was narrower than expected, according to a consensus estimate from Thomson Reuters.

Revenue climbed to $2.79 billion from $1.27 billion in the year-ago period, and outpacing Wall Street’s estimates of $2.51 billion.

Yeah, we said “mixed”:

Heading into the earnings report, analysts expressed concerns about whether Tesla would ramp up production of its Model 3, a more affordable electric car with a base cost of $35,000, quick enough. In the past, Tesla has struggled with production issues.

Musk also said that he hasn’t ruled out dipping a toe back into the debt market.

See, Tesla is currently promising that it can make 1,500 of these things in the entire third quarter of this year, but Elon is also telling anyone who will listen that he will be able to make 10,000 in a week by the end of 2018. That kind of ramp-up has led a lot of people in the asset management game to doubt Tesla’s long-term strength, what with logic dictating that cash will burn at the altar of Elon’s ambition, and that the fire might rage out of control while he’s busy glancing over at his rockets, his Hyperloop tunnels or putting the finishing touches on his dope-ass new solar roof. All those factors are causing David Einhorn and a legion of his fellow traders to go short on TSLA.

Just to remind you, their plant used to be the joint Toyota-GM NUMMI plant, and the most cars that it ever produced under that management was 428,633 units in 2006, or less than 8,500 units a week, and Tesla is saying that it can ramp up from about 120 units a week to 10,000 units a week over the next 18 months.

For his next trick, Elon Musk will appoint a horse to his board of directors.

But the underlying story here is that Tesla releases profoundly mixed numbers, reveals that its production ramp up plans are unrealistic, and they get shorted by speculators.

In response to an awful quarterly report, the stock goes up, and the speculators take it on the chin, because ……… Elon!

This is what happens when you short a cult. At this point, R Kelly has nothing on Elon Musk. And the notion that a short squeeze might put a shudder in Tesla’s rise seems – like all other rational ideas that come in contact with Tesla – to be neutered by whatever Tesla investors think of Tesla.

So, here’s our last word of caution to you hedgie analysts out there crunching numbers on TSLA: You’re wasting your time. Tesla isn’t about facts and figures, it’s about belief in the divinity of Elon f%$#ing Musk. You’ll never understand what is happening because the Kool-Aid is the stock and a lot of people can’t stop drinking it.

(%$# mine)

So, Tesla is facing a unionization effort from employees who say that their manufacturing facility is abusive and dangerous, and the corporate response has been (I am not kidding here) free frozen yogurt at their Freemont, CA plant.

So now Tesla is warning its workforce, one that already has issues with excessive mandatory overtime ans safety issues that they will be facing, "Production Hell".

Honestly, I'm half expecting a strike in the next 18 months:

When Tesla chief executive Elon Musk handed over the first 30 Model 3 sedans to reservation holders last Friday, he warned employees they’ll be in “production hell” for the next several months. It was a curious remark, as Tesla employees have been voicing concerns about workplace injuries since earlier this year. Employees reiterated those points in a letter to Tesla’s board Monday, and demanded answers to questions about pay transparency and safety.

“We’re tired of suffering preventable injury after preventable injury,” said Michael Catura, a production associate at Tesla, in a statement. “It impacts morale, it slows down production and it’s of course traumatizing and financially difficult for the affected person. We want to know what the company’s plan is to address this problem, and to see whether or not any progress is being made.”

The letter, signed by the Tesla Workers’ Organizing Committee, said it believes in Tesla’s mission to build a mass-market, emission-free electric vehicle. But the committee cites a number of ongoing issues, and it requests access to a safety plan and clarity on pay and non-retaliation agreements for employees trying to form a union. Earlier this month, a group of 10 factory employees presented a petition with questions about how workers are paid and how raises are distributed. BuzzFeed reported that about 400 employees had signed the petition.

So not a Surprise

Tesla is facing a unionization effort from employees who say that their manufacturing facility is abusive and dangerous:

Along Silicon Valley’s interlocking freeways, low-slung tech offices with obscure names like Way.com or Oorja are populated by fresh-faced technologists in badges and pleated slacks, striving to create the next great app. But off the I-880 in Fremont, a white colossus rises from the landscape, a 5.3-million-square-foot monster that stretches across two interchanges. The gray lettering is a full story high: TESLA.

Here, the company makes high-end, zero-emission vehicles, luxury cruisers for a climate emergency. Chief executive officer Elon Musk has cultivated a reputation as an economic visionary and has been hailed for solving the world’s great challenges with panache. Tesla’s Fremont factory brought hope to a blue-collar, racially diverse town with a manufacturing tradition. And this week, after reports of a 69 percent increase in first-quarter sales, the automaker passed Ford in market value. But though its products epitomize the future, workers like Richard Ortiz say Tesla’s labor conditions are mired in the past. Ortiz is a production associate in the closures department, assembling hoods, doors—“anything that opens or closes”—on Model S sedans and Model X SUVs. Though videos of the Tesla factory emphasize robotic automation, over 6,000 workers engage in intense manual labor to build the cars.

“I have an eight-pound rivnut gun,” Ortiz said, referring to a tool that installs rivet nuts. “I’m doing that all day long. I’m to the point where, if I pick something up with any weight, within 30 seconds I have to drop it. That scares me; I want to be able to use my arm when I retire.”

Tesla workers say circumstances like Ortiz’s are commonplace at a factory that prioritizes production goals over health and safety. Now they’re fighting back against low pay, hazardous conditions, and a culture of intimidation, seeking to unionize through the United Auto Workers. Tesla is the only U.S. automaker using nonunion workers at a stateside plant, and breaking through would give organized labor a foothold in the tech industry as well. Until then, the Tesla experience reveals that green jobs aren’t necessarily good jobs without worker power. “They want to make sustainable cars,” says Ortiz. “We need sustainable employment.”

………


But after originally describing Tesla as “union neutral,” Musk said on an earnings call in February that “there are really only disadvantages to someone to want the UAW here.” In a later email to workers, Musk delivered a point-by-point rebuttal to Moran’s Medium post, arguing that overtime had decreased and incident rates were below average. Instead of offering workers better wages and input on production, Musk promised “a really amazing party” for the launch of the Model 3, “free frozen yogurt stands” at the factory, and “a Tesla electric pod roller coaster” connecting the parking lots. “It’s going to get crazy good,” Musk concluded.

………

Labor historian Nelson Lichtenstein expressed horror at Musk’s rhetoric. “It was the worst kind of caricature of a capitalist, like it’s 1898,” he said. “They have these sophisticated systems of production and distribution, but their social arrangements are utterly retrograde.”

Mr. Lichtenstein may not know it, but his categorization of Musk's rhetoric can be more broadly applied to the tech industry.

Until the drones at places like Tesla, Facebook, Uber, and Google come to understand that providing free frozen yogurt is not a sign of respect from their employers, but rather an indicator that management thinks that the employees are easily manipulated rubes, this situation will not improve.

The autoworkers are sharper than the Stanford educated programmers when they say about this attidude is that, "It’s insulting, it shows you what he thinks of us."

Oh Crap

One of GM's suppliers just went chapter 11, and it has the potential to shut down automobile assembly across General Motors:

A Massachusetts supplier that filed for bankruptcy protection last week could disrupt production at nearly every General Motors North American plant in coming days, according to documents filed in bankruptcy court.

Clark-Cutler-McDermott, based in Franklin, Mass., supplies acoustic insulation and interior trim products for automobiles, textiles and other transportation manufacturers. But GM is its largest customer and Clark-Cutler-McDermott is losing more than $30,000 a day — and more than $12 million since 2013 — partly because what GM pays for those components "usually decreases annually," CEO James McDermott stated in a court filing.

But GM has no other supplier for the parts CCM provided and any interruption in delivery of those parts would cost the automaker "millions of dollars per day per plant," GM said in another filing.

GM obtained a restraining order last month compelling CCM to continue supplying those items specified in its purchase orders with GM. But that order expired July 1. CCM filed for protection under Chapter 11 of federal bankruptcy law on July 7.

………

In a separate dispute, CCM wants to use $1.9 million of cash it held when it filed for bankruptcy to pay its workers. GM contends it provided most of that cash as part of its temporary restraining order.

GM doesn't object to CCM paying workers for what was produced before the bankruptcy filing, but it does not want its cash used to pay workers if they aren't making GM's parts.

This could get very messy very quickly.

A lot of plants are retooling for the new model year right now, but if they lack the parts to reopen, we are going to see some major issues with the economy just as the presidential election ramps up, particularly in the Midwest.

It's the Insurance, Stupid

We have yet another article wondering why fewer people are getting drivers licenses these days:

………

Young people are not getting driver’s licenses so much anymore. In fact, no one is. According to a new study by Michael Sivak and Brandon Schoettle at the University of Michigan Transportation Research Institute, the percentage of people with a driver’s license decreased between 2011 and 2014, across all age groups. For people aged 16 to 44, that percentage has been decreasing steadily since 1983.

It’s especially pronounced for the teens—in 2014, just 24.5 percent of 16-year-olds had a license, a 47-percent decrease from 1983, when 46.2 percent did. And at the tail end of the teen years, 69 percent of 19-year-olds had licenses in 2014, compared to 87.3 percent in 1983, a 21-percent decrease.

Among young adults, the declines are smaller but still significant—16.4 percent fewer 20-to-24-year-olds had licenses in 2014 than in 1983, 11 percent fewer 25-to-29-year-olds, 10.3 percent fewer 30-to-34-year-olds, and 7.4 percent fewer 35-to-39-year-olds. For people between 40 and 54, the declines were small, less than 5 percent.

………

Maybe it’s just that people today have more things they’d rather do than practice parallel parking between traffic cones. Or maybe it’s because the photos on those plastic cards are almost never flattering. Sivak and Schoettle are hoping to soon study possible reasons for the drop in driver’s licenses. But regardless of the cause, it seems that if you want to insult a teen today, shaming them for not being able to operate a motor vehicle might not be the way to go.

It's not difficult to understand.

The FIRE (Finance, Insurance, and Real Estate) sector has been sitting athwart our economy sucking the marrow out of its bones for a very long time, and it appears that the insurance industry has finally reached a level where it's breaking up America's love affair with the automobile.

All in all, it's king of a mixed emotions thing here.  The insurance industry and auto industry have both done a lot to f%$# up our country.

If only they could both lose.

There May Still Be Some Utility Left in the Mk. 1 Human

Toyota has discovered that robots cannot do it all, and that they need highly experienced experts to maximize the productivity at their plants:

Inside Toyota Motor Corp.’s oldest plant, there’s a corner where humans have taken over from robots in thwacking glowing lumps of metal into crankshafts. This is Mitsuru Kawai’s vision of the future.

“We need to become more solid and get back to basics, to sharpen our manual skills and further develop them,” said Kawai, a half century-long company veteran tapped by President Akio Toyoda to promote craftsmanship at Toyota’s plants. “When I was a novice, experienced masters used to be called gods, and they could make anything.”

These gods, or “kami-sama” in Japanese, are making a comeback at Toyota, the company that long set the pace for manufacturing prowess in the auto industry and beyond. Toyota’s next step forward is counterintuitive in an age of automation: Humans are taking the place of machines in plants across the nation so workers can develop new skills and figure out ways to improve production lines and the car-building process.

“Toyota views their people who work in a plant like this as craftsmen who need to continue to refine their art and skill level,” said Jeff Liker, who has written eight books on Toyota and visited Kawai last year. “In almost every company you would visit, the workers’ jobs are to feed parts into a machine and call somebody for help when it breaks down.”

The return of the kami-sama is emblematic of how Toyoda, 57, is remaking the company founded by his grandfather as the chief executive officer has pledged to tilt priorities back toward quality and efficiency from a growth mentality. He’s reining in expansion at the world’s-largest automaker with a three-year freeze on new car plants.

………

“What Akio Toyoda feared the company lost when it was growing so fast was the time to struggle and learn,” said Liker, who met with Toyoda in November. “He felt Toyota got big-company disease and was too busy getting product out.”

………

Learning how to make car parts from scratch gives younger workers insights they otherwise wouldn’t get from picking parts from bins and conveyor belts, or pressing buttons on machines. At about 100 manual-intensive workspaces introduced over the last three years across Toyota’s factories in Japan, these lessons can then be applied to reprogram machines to cut down on waste and improve processes, Kawai said.

In an area Kawai directly supervises at the forging division of Toyota’s Honsha plant, workers twist, turn and hammer metal into crankshafts instead of using the typically automated process. Experiences there have led to innovations in reducing levels of scrap and shortening the production line 96 percent from its length three years ago.

Toyota has eliminated about 10 percent of material-related waste from building crankshafts at Honsha. Kawai said the aim is to apply those savings to the next-generation Prius hybrid.

The work extends beyond crankshafts. Kawai credits manual labor for helping workers at Honsha improve production of axle beams and cut the costs of making chassis parts.

Though Kawai doesn’t envision the day his employer will rid itself of robots — 760 of them take part in 96 percent of the production process at its Motomachi plant in Japan — he has introduced multiple lines dedicated to manual labor in each of Toyota’s factories in its home country, he said.

“We cannot simply depend on the machines that only repeat the same task over and over again,” Kawai said. “To be the master of the machine, you have to have the knowledge and the skills to teach the machine.”

True dat.

Guys on the shop floor are an invaluable source of knowledge and wisdom.

Today in IP Insanity

Automakers are petitioning the Library of Congress prevent backyard mechanics from repairing their own cars:

Automakers are supporting provisions in copyright law that could prohibit home mechanics and car enthusiasts from repairing and modifying their own vehicles.

In comments filed with a federal agency that will determine whether tinkering with a car constitutes a copyright violation, OEMs and their main lobbying organization say cars have become too complex and dangerous for consumers and third parties to handle.

Allowing them to continue to fix their cars has become "legally problematic," according to a written statement from the Auto Alliance, the main lobbying arm of automakers.

The dispute arises from a section of the Digital Millennium Copyright Act that no one thought could apply to vehicles when it was signed into law in 1998. But now, in an era where cars are rolling computing platforms, the U.S. Copyright Office is examining whether provisions of the law that protect intellectual property should prohibit people from modifying and tuning their cars.

Every three years, the office holds hearings on whether certain activities should be exempt from the DMCA's section 1201, which governs technological measures that protect copyrighted work. The Electronic Frontier Foundation, a nonprofit organization that advocates for individual rights in the digital world, has asked the office to ensure that enthusiasts can continue working on cars by providing exemptions that would give them the right to access necessary car components.

This is under the anti-counterfeiting provisions of the DMCA, which not only prevents copying, it prevents "unauthorized access", and the auto industry is attempting to lock down their cars to the backyard mechanic, and possibly the independent mechanics as well.

Do you want to have no alternative to price gouging by the dealer on maintenance?

Buy a Truck, Because Your Penis is Too Small

Advertising, Exploiting People with Insecurity About Their Manhood for more than a Century

In the conflation of automobiles and manhood that is the American car advertisement, the latest GM ad, which doesn't even bother making the juxtaposition between one's choice in transportation and one's manhood, and they pretty explicitly state it.

The video attached shows hoe they bring in a "focus group" of young women who look at pictures, and they universally find the guy in front of a truck sexier than the same guy in front of a hatchback.

First, they obviously had to find a group of women dumb enough not to think, "Hey, these are the same guys?  Are you trying to imply that I am a vacuous shallow bitch?"

Seriously. Just how tiny does a potential car buyer's penis have to be for this ad to work?

Pig Felching Rat Bastards of the Day

Ford Motor Company, who fired about 100 workers by robocall over this weekend:

Nearly 100 workers at Ford's Chicago Assembly Plant got a robocall on Halloween telling them their services were no longer needed and they were terminated.

It wasn't a trick or a morbid prank.

Dozens of workers missed the call or didn't believe it, so they showed up to work Saturday anyway, according to an autoworker who wished to remain anonymous. They found their ID badges had been disabled and were told by security they had been fired.

"As part of our normal business process, we've temporarily adjusted our workforce numbers at Chicago Assembly Plant," Ford Motor Co. said in a statement.

Remember what I said about honey and rabid wolverines?

HR at Ford should get this treatment too.

What, You Mean that the Union has Seats on the VW Board of Directors?!?!?!?

The head of the union at Volkswagon is saying that the the labor environment in the South means that VW should conduct future expansion elsewhere.

Seeing as how labor unions effectively control a majority of the seats on the board, this looks to revealing Senator Bob Corker, who claimed that VW told him that not having a union was key to expansion, to be a lying sack of sh%$:

Volkswagen's top labor representative threatened on Wednesday to try to block further investments by the German carmaker in the southern United States if its workers there are not unionized.

Workers at VW's factory in Chattanooga, Tennessee, last Friday voted against representation by the United Auto Workers union (UAW), rejecting efforts by VW representatives to set up a German-style works council at the plant.

German workers enjoy considerable influence over company decisions under the legally enshrined "co-determination" principle which is anathema to many politicians in the U.S. who see organized labor as a threat to profits and job growth.

Chattanooga is VW's only factory in the U.S. and one of the company's few in the world without a works council.

"I can imagine fairly well that another VW factory in the United States, provided that one more should still be set up there, does not necessarily have to be assigned to the south again," said Bernd Osterloh, head of VW's works council.

"If co-determination isn't guaranteed in the first place, we as workers will hardly be able to vote in favor" of potentially building another plant in the U.S. south, Osterloh, who is also on VW's supervisory board, said.

The 20-member panel - evenly split between labor and management - has to approve any decision on closing plants or building new ones.

Here's a thought: If you want to locate a plant in a 3^rd world country, actually set it up in a real 3^rd world country, as opposed to the 3^rd world country wannabees in the south.

Yeah, This is a Cool Window Tint Job

H/t DC at the Stellar Parthenon BBS

10½ Years?

Duncan Black teases out this rather alarming factoid:

Bernanke Money Policy Seen Achieving Goal as Savers Become Consumers Again

………

The average age of cars and light trucks on the road today has risen to 10.6 years, Jenny Lin, senior U.S. economist at Dearborn, Michigan-based Ford Motor Co., said on a Dec. 1 conference call. That’s above the seven-to-7.5 years Ballew says is the long-term average.

The number has been trending up for years, notwithstanding what Ms. Lin said, but a 1.2 year increase since 2008 is a big jump for just 3 years.

Here's something to think about: That number is never going back, because people are used to keeping their cars longer now, and the technological advances over the past couple of decades allow them to.

Cars are a lot better than they were 20 years ago, and they last a lot longer.

And Still, They Blather About the Deficit

ADP's private payroll report showed an increase of only 38,000 in May, which, when you consider the obvious cuts in state and local payrolls, and lord knows what in the non-profit sector, means that we are looking about a decline in the workforce if the federal numbers come close to matching this report.

Additionally, the Conference Board's consumer confidence report fell, and auto sales fell for all the major auto manufacturers.

And still the Democrats are buying into the Republican meme that our problem is the deficit.

To quote Robin Williams, "Shazbat!"

You Have Got to Love Live TV

A late night live TV ad from the 1970s.

I might actually buy the car, it certainly sounds like the guy is telling the truth.

NSFW.

Credit Where Credit is Due

The White House has come out against letting auto dealers cheat their customers.

To quote the first few 'graphs of the official statement:

Later this afternoon, the Senate will vote on a motion to instruct conferees on the Brownback Amendment. That basically means members of the Senate will cast a nonbinding vote on whether or not they think the House and Senate conferees should consider carving out a loophole for auto dealers that make auto loans from the financial reform bill.

The President has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections. The fact is, auto dealer-lending is an $850 billion industry, which is larger than the entire credit card industry and they make nearly 80 percent of the automobile loans in our country.

Is there any question that these lenders should be subject to the same standards as any local or community bank that provides loans?

This is the right thing to do.

Economics Update (For the Week)

Click for full size

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Employment/Population Ratio Still at 1983 Levels


Long-term unemployment is still at a 40+ Year high


Personal bankruptcies on level with pre-bankruptcy reform numbers (H/t Calculated Risk)

Well, we have the employment numbers for March out now, and the March non-farm payroll numbers (NFP) rose by 162,000, with unemployment (U3)remaining at 9.7%, and the broader U6 unemployment number remained basically flat, increasing from 16.8% to 16.9% (seasonally adjusted).

This is an improvement. It's the largest NFP jump in 3 years.

That being said, some things to note:

• The US Census hired 48,000 temp employees in March.
• You need about 150,000 new jobs each month to accommodate people entering the workforce.
• Some of this may be hiring from prior months that was delayed because of the various snowpocalypse weather events that occurred.
• Long term unemployment increased.
• Involuntary part time employment increased (largely why U6 is up)
  

About 8 million people have lost jobs in this recessions, and at a NFP payroll increase of 162K a month, it would take more than 50 years for everyone who lost their jobs to get another job, so while it is an improvement, things are at best treading water, but the trend does appear to be getting better.

Still, the employment/population ratio is at a 27 year low, and long term unemployment is at a 40+ year high.

Also, we have

• A decrease in first time unemployment claims this week to 439,000, the lowest level since August 2008, with the 4-week moving average and the continuing claims falling as well, though emergency claims (26+ weeks) increased.
• State tax receipts are showing improvement as well, with collections expected to improve for the first time in 2 years.
• The Institute for Supply Management's Manufacturing Diffusion Index rose to its highest reading in nearly 6 years.
• Automobile sales in the United States posted double digit year over year growth.

Still, all in all, I have to say that we are seeing a recovery, but it's a feeble and fragile recovery.

We still have some areas of concern, most notably that construction spending fell once again, and personal bankruptcies rose sharply.

Chinese Automaker Buys Volvo Auto from Ford

The price was $1.8 billion, which, once again, is not much more than a few magic beans.

Unfortunate Advertising

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H/t despair.com

My memory is by no means perfect, but I do recall it being an actual slogan for the embattled car maker at one point.

Can anyone confirm this?

Update on GM's Soon to Be Former Brands

It looks like GM’s sale of Saab to the Dutch sports car manufacturer will close in the next week or so, and the Hummer sale to as Sichuan Tengzhong has fallen through.

This is good, Saab has always been an innovative, safe, and slightly oddball auto make, and Hummer, has been, well Hummer.

The Chinese government has a small car policy, and they shot down Hummer.

I Said that This Would Happen

I said that there would be blowback when GM decided not to sell Opel and suck up all the state aid itself, and it appears taht I was right

We are now seeing that the taskforce reviewing GM's plans with Opel is saying that, they are inadequate, and aid should not be awarded:

General Motors’ restructuring plan for Opel/Vauxhall has been dealt a potentially serious setback on Wednesday after a German government taskforce said it had doubts about the scheme.

The US carmaker presented the turnaround plan for its lossmaking European operations last week and formally applied to Berlin for €1.5bn ($2bn) in loans or guarantees – the biggest portion of the €3.3bn it says it needs to finance its plan.

However, the federal task force advising Berlin on GM’s plans has deemed the proposals “unqualified for government loan guarantees”, three officials in German states with GM plants told the Financial Times on Wednesday.

(emphasis mine)

Part of the reason for this, though it is not explicitly spoken, is the belief that GM will strip mine Opel to support its US operations.

There has been a tepid denial from the board about this report, but I'm inclined to believe that they want guarantees that the money is not going to Detroit.

Wicked Stupid

As a result of the blow-back from their spate of problems and associated recalls, Toyota is considering US automaker style incentives to move its cars.

They are talking about the various "invoice pricing" and "rebate" programs, and this is a bad thing, because they push down resale value.

One of the things that drives people to Toyotas is the fact that depreciation is much less than in similar American cars.

If they go the rebate programs, they won't get out easily, and they lose one of their market advantages.