Tag Archives: Regulatory

Nikola Paying $125M to Settle with SEC

December 21, 2021 admin

Nikola Corp. agreed to pay $125 million to settle civil charges levied against the company by the Securities and Exchange Commission claiming it defrauded investors by making false claims about its vehicles.

Nikola CEO Trevor Milton t-shirt — Nikola’s settlement with the SEC still holds the company accountable for statements made by founder Trevor Milton.

The deal is separate from the civil and criminal charges against Trevor Milton, the company’s founder and now-former Chairman. In fact, the company’s agreed to cooperate with any current investigation and litigation, however, it didn’t admit or deny the SEC’s findings in the settlement.

The agency contends the company misled investors about the capabilities of its hydrogen fuel cell-powered vehicles, suggesting they were further along in development than they were. The focal point being a video of its Nikola One appearing to be driving under its own power, when it was actually rolling down a slight decline.

The video became the centerpiece of a report by short-selling research firm Hindenburg Research claiming Nikola was based on “intricate fraud built on dozen of lies” perpetrated by Milton. That quickly triggered an SEC probe and led to the decision by Milton to resign on Sept. 21.

Nikola agreed to pay the $125 million in five installments over two years. The first payment comes by the end of this year, with the remainder being paid in semi-annual installments in 2022 and 2023. The company previously disclosed Nov. 4, 2021 it took a $125 million reserve in its third quarter earnings to account for the expected settlement.

Nikola Motor Chairman Trevor Milton — Nikola Motor’s former Chairman Trevor Milton is facing civil and criminal charges in court.

Milton not off the hook

Nikola “is responsible both for Milton’s allegedly misleading statements and for other alleged deceptions, all of which falsely portrayed the true state of the company’s business and technology,” said Gurbir Grewal, the SEC’s enforcement director, in a statement.

Milton saw civil and criminal charges filed against in July, claiming he used social media to repeatedly mislead investors about the company’s technology, netting “tens of millions of dollars” in the process. Milton’s repeatedly denied wrongdoing and is in the midst of a court battle.

Audrey Strauss, the acting U.S. Attorney for the Southern District of New York, said during a press conference in late July, Milton deliberately set out to deceive what she described as “retail investors” by making claims he knew were false about Nikola products.

While Nikola’s settled up with the SEC, it’s now focused on its former leader.

Nikola Tre Class 8 semi — The company’s attempting to move on from the problems. In fact, it delivered its first battery-electric Tre Class 8 rigs last week.

“The company has taken action to seek reimbursement from its founder, Trevor Milton, for costs and damages in connection with the government and regulatory investigations,” the company said in a release.

Moving forward

“We are pleased to bring this chapter to a close as the company has now resolved all government investigations,” the company said in a statement.

“We will continue to execute on our strategy and vision to deliver on our business plan, including delivering trucks to customers, expanding our manufacturing facilities and our sales and service network, and building out our hydrogen infrastructure ecosystem including hydrogen production, distribution and dispensing stations.”

This is already happening as it delivered the first Nikola Tre battery-electric pilot trucks to Total Transportation Services Inc. (TTSI), a Southern California’s port trucking company, to expedite zero-emission transportation solutions at the ports of Los Angeles and Long Beach.

The company is engaged in a four-truck pilot program with the trucking company, involving two battery electric trucks with a range of 350 miles and two fuel cell-electric trucks with a range of 500 miles. If the vehicle trials go well and TTSI obtains government funding, the company will provide 30 BEVs in 2022, and 70 FCEVs are anticipated to start in 2023.

SEC Investigating VW Due to the “Voltswagen” Stunt

April 30, 2021 admin

The “Voltswagen” April Fool’s Day prank has led to an investigation by the SEC.

What started out as a “humorous” advertising and marketing ploy could land German automaker Volkswagen in serious trouble with the federal government.

The Securities and Exchange Commission (SEC) is apparently looking into VW’s “Voltswagen” marketing stunt to determine if it hurt company stock prices and may have broken any U.S. securities laws, according to German news outlet Der Spiegel.

The incident in question dates back to March 29. As a sort of early April Fool’s Day prank (and marketing ploy), VW “accidentally” released a rough draft of a press release declaring the company was going to change its name to “Voltswagen” as part of a larger effort to promote its ever-growing line-up of electric vehicles (EVs).

This action was picked up by the worldwide automotive press and on March 30 VW issued an official press release to several news outlets, including the Associated Press, confirming the leaked statement from the day before.

This action resulted in VW’s stock price going up. At one point it was 12.5% above its price before the whole incident.

SEC looking at jump in stock price

VW of America President Scott Keogh took responsibility for the poorly received April Fools’ prank that wasn’t on April 1.

This is what caught the attention of the SEC, taking what many considered a fairly unfunny publicity ruse to a possible federal offense.

After the April Fool’s stunt failed in the eyes of the media and the public, VW issued a press statement saying the releases were actually part of a larger tradition in which companies often issue prank statements.

This one just meant to also focus the world’s attention on VW’s growing EV portfolio.

But public statements that affect stock prices usually don’t get an “April Fools” immunity. An SEC investigation could result in charges against the company.

Several news organizations, including The New York Times and Reuters, have asked for a comment from VW. So far, the company has declined to issue one.

Just one of many VW legal scandals

This is not the first time VW has gotten into trouble for the way it conducts its business.

Oh those wacky Germans!! As quickly as it got here, VW took it away: Voltswagen is the company that never was.

In October 2015, as Volkswagen struggled to deal with its diesel emissions scandal, new data raised questions about whether the automaker properly reported death and injury claims to U.S. regulators during the past decade.

A study by the financial advisory firm Stout Risius Ross Inc., found that Volkswagen of America reported nine times fewer deaths and injuries than the average of the 11 largest automakers operating in the U.S. market. Significantly, VW reported less than half as many incidents as either Fiat Chrysler or Honda, both of which have been fined for underreporting their own death and injury data.

Back in September 2015, the EPA accused the German maker of using a so-called “defeat devices,” software designed to fool government emissions tests, on a variety of luxury models from the Audi and Porsche brands. The feds charged VW took steps to cover up excess emissions on 482,000 vehicles sold in the U.S. during a 7-year period.

The end result was VW paying billions of dollars in fines to various governments around the world. The company also faced numerous consumer lawsuits that further cost the company money.

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Expect Tougher EPA Emissions Rules by July, Says Biden EPA Chief

April 7, 2021 admin

EPA Administrator Michael Regan said the agency will reveal tougher emissions standards by July.

Even before taking office in January, then President-elect Joe Biden faced heavy pressure to tighten federal tailpipe regulations, reversing cuts enacted by his predecessor, Donald Trump.

Michael Regan, the new EPA administrator, said this week updated emissions standards are coming and should be announced by July. While the nation’s environmental chief did not offer specific details, he also wouldn’t rule out the possibility that future mandates would lead to the phase out of vehicles using internal combustion engines, according to Bloomberg News.

“We need to go as far as we can to meet the demands of the day,” Regan told the news service. “The science indicates we have a short window in time to reverse the path that we’re on and mitigate against certain climate impacts.”

Trump rollback

The Trump administration CAFE rollback is facing a protracted legal battle.

Federal guidelines enacted during the Obama administration set a target for automakers to deliver an average 54 miles per gallon by the 2026 model year. The Trump administration implemented a rollback last year that has since been tied up in federal court. It also ended the waiver granted the State of California to set even tougher carbon emissions standards.

While a number of automakers backed the Trump move, others formed a coalition with the California Air Resources Board, or CARB, creating a compromise rule that many observers expect to serve as a model for what the Biden EPA ultimately announces. The administration is believed to be seeking some sort of compromise that could win support from both the environmental community and the auto industry — as did the original Obama-era guidelines.

For his part, Regan said he believes in “consensus building.”

Seeking compromise and consensus

“We are heavily engaged with the business community. We are heavily engaged with the labor community,” Regan said in his interview. “It’s a false option to choose between economic development and prosperity and environmental protection.”

President Joe Biden has been facing pressure to reduce emissions since he declared his intention to run for president. It’s ramped up since taking office.

California has long had the ability to set its own standards for traditionally defined automotive pollutants, such as carbon monoxide and oxides of nitrogen. These have typically been tougher than the federal standards. Under Obama, however, the state received a waiver allowing it to set carbon emissions mandates, as well. Carbon dioxide output is directly related to fuel consumption, so, the rule provided a back-door method for CARB to set stricter mileage targets.

And 13 other states adopted the tougher California rules, meaning higher fuel economy standards for about 40% of the U.S. population.

Outright ban on ICE vehicles under study

California took things a next step when, last year, Governor Gavin Newsom signed an executive order banning the sale of new vehicles using internal combustion engines after 2035. New Jersey followed with a similar order a few months later.

Pete Buttigieg, Biden’s new Transportation secretary, took a cautious position during confirmation hearings when asked about whether a similar federal ban could follow. For his part, EPA Chief Regan left that possibility open.

California Governor Gavin Newsome signs the order for a ban the sale of gas-powered cars by 2035 on the hood of a Mustang Mach-E.

“We’re taking a strong look at what the science is urging us to do. We’re looking at where technologies are,” Regan said. “We’re marrying our regulatory policy and what we have the statutory authority to do with where the science directs us and where the markets and technology are.”

Taking politics out of science

Regan, like Buttigieg and new Energy Secretary Jennifer Granholm, have collectively emphasized the need to set federal guidelines that are based on science, critics saying their Trump administration predecessors frequently focused on rulemaking-as-politics, or as a way to curry favor with their boss, President Trump.

Tailpipe emissions and fuel economy rules could be two of the highest-profile issues Regan will deal with during his time at the EPA. But the agency is “laser focused” on another transportation-related issue: the release of greenhouse gases, like methane from oil and natural gas wells and pipelines.

Those and other steps are believed critical for the U.S. to meet its global warming commitments as Biden brings the country back into the Paris Climate Agreement.

“EPA,” said Regan, “has a critical role to play in delivering on President Biden’s aggressive climate agenda to achieve a carbon-pollution-free power sector by 2035 and put the United States on path to a net-zero economy by 2050.”

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Honda Ups Its Game with Level 3 Autonomous Technology Suite

March 9, 2021 admin

Honda just launched its next-generation Honda SENSING Elite safety system with Level 3 automated driving features in Japan.

Honda revealed it’s taking the next step in the development of its autonomous technology, announcing plans to begin leasing a vehicle in Japan equipped with Honda SENSING Elite.

The Japanese automaker is offering the system in the new Honda Legend EX, which in the U.S. is part of the Acura brand. The automaker claims the move is part of the effort “to realize a collision-free society based on its global safety slogan, ‘Safety for Everyone.’” Honda enjoys a reputation for the research and development of innovative safety technologies.

Honda SENSING Elite is a variation of Honda SENSING, a suite of safety and driver-assistive technologies currently available on Honda vehicles around the world.

Automaker improves technology

The technology suite qualifies as a Level 3 autonomous driving system, for which Honda received the designation from the Japanese Ministry of Land, Infrastructure, Transport and Tourism (MLIT) late last year. This system lets the vehicle “drive” itself under very specific traffic circumstances.

Honda’s new Level 3 automated driving system uses a camera to monitor the driver.

The Society of Automotive Engineers (SAE) defines Level 3 autonomy as “able to detect the environment around them, Level 3 vehicles contain the lowest-tier system that is classified as an automated driving system as opposed to a manual system.” Tesla’s Autopilot and Cadillac’s Super Cruise systems are considered Level 2.

How it works

The system uses a combination of 3-D high-definition maps as well as satellite positioning to determine the vehicle’s position and road conditions at any given moment. Additional data is collected from external sensors and cameras providing information about the vehicle’s surroundings and the driver’s condition for the system as well.

Based on this wide range of information, the main electronic control unit, or ECU, recognizes current and anticipates future conditions to help the driver with all aspects of driving, such as acceleration, braking and steering. Some of the key features of the system include:

Hands-off functionality with adaptive in-lane driving and active lane-change assist with hands-off function (driver and system assessment)

Honda’s Hands-off functionality features a variety of capabilities, including active lane-change assist.
Traffic Jam Pilot with emergency stop assist
Human-Machine Interface that instantly tells the driver the system’s operating status

Honda simulated about 10 million patterns of possible real-world situations during system development. Additionally, the automaker conduced real-world demonstration tests on expressways for a total of approximately 800,000 miles. And the system incorporates a redundant system design to ensure safety and reliability in the event of a problem with any of the devices.

Industry looking to make inroads

Honda’s announcement is just the latest made by OEMs concerning the development of AI tech. On Feb. 1, Ford and Google unveiled a strategic partnership to accelerate Ford’s transformation in the form of a new collaborative group, Team Upshift.

Ford also named Google Cloud its preferred cloud provider to use Google’s expertise in data, artificial intelligence (AI), and machine learning (ML).

Honda’s Level 3 technology provides plenty of feedback to the driver.

On Jan. 19, GM revealed that the company along with tech developer Cruise entered a long-term strategic relationship with Microsoft to accelerate the commercialization of self-driving vehicles.

To realize the potential of cloud computing for self-driving vehicles, Cruise will use Azure, Microsoft’s cloud and edge computing platform, to commercialize its unique autonomous vehicle solutions at scale.

Microsoft, as Cruise’s preferred cloud provider, will also use the autonomous tech company’s expertise in product development. Microsoft joined GM, Honda and institutional investors in a combined new equity investment of more than $2 billion in Cruise, bringing the post-money valuation of Cruise to $30 billion.

Stellantis Enjoys Warm Welcome from European Investors

January 18, 2021 admin

Stellantis Chairman John Elkann is meeting with the media tomorrow to talk about the company’s future.

Not every merger involving an automaker these days involves a blank-check company. The newly minted tie-up between Fiat Chrysler Automobiles N.V. and Peugeot S.A. was finalized over the weekend and the resulting company, Stellantis N.V., is enjoying a warm welcome.

At least on the stock market.

The new company’s stock trades on three exchanges and it finished the day on the Paris exchange up nearly 7%, closing at €13.14. It also jumped up 7.7% on the Milan exchange.

The New York Stock Exchange, the third exchange it’s traded on, was not open today due to the Martin Luther King Jr. holiday.

(Chrysler is no more as Stellantis comes to life.)

CEO Carlos Tavares has a lot on his corporate plate now that the merger is complete.

The $52 billion merger of near equals creates a massive enterprise with operations on six continents, employs about 400,000 people, sells – at least for the time being – 14 vehicle brands and sells 8.1 million vehicles annually, making it the fourth-largest automaker in the world behind Volkswagen, Toyota and the Renault-Nissan-Mitsubishi Alliance.

With all of those possibilities, it’s going to take a press conference Tuesday to start revealing what Stellantis will look like now that’s it’s a living, breathing entity. What brands will stay? How many workers will keep their jobs?

People are nervous because the CEO of the new enterprise, Carlos Tavares, has a history of being fearless when it comes to eliminating unprofitable operations and processes in the pursuit of corporate profit. One need only look at how what he did with former General Motors’ subsidiary Opel. A money-loser for a decade, he had it in the black in one year.

(FCA CEO Manley gets new assignment following Stellantis merger.)

“Stellantis faces a mixed outlook as U.S. stimulus plans may buoy Chrysler vs. a more uncertain outlook for Peugeot in Europe,” Michael Dean, BI automotive analyst told Bloomberg. “Former PSA CEO Carlos Tavares takes the helm and, similar to his handling of PSA’s takeover of Opel in 2017, we anticipate a new strategy in the first 100 days of his stewardship. All regions face a difficult 1H amid continued lockdowns.”

Quirky name aside, investors gave Stellantis a warm welcome when it began trading Monday.

The two companies have worked to allay fears of major cutbacks in France and Italy. While top managers have outlined plans to trim costs by $6 billion following the merger, they insist they will be able to do that without closing any plants. They have outlined 40% of those cost savings coming from purchasing, 40% from combining product development efforts, and 20% from marketing and other operations.

However, it’s unclear how Tavares plans to tackle other issues such as improving the company’s performance in China, the world’s largest automotive market, and bolstering its electrification efforts, especially in the aforementioned China as well as in the U.S. Just addressing those two issues are likely to require billions of dollars and euros. Some of plans for these things and more may get touched on Tuesday, Marco Santino, a partner at consulting firm Oliver Wyman, told Reuters.

(Fiat Chrysler and PSA not exactly a “merger of equals.”)

“He has proven to be the kind of person who prefers action to words, so I don’t think he will make loud statements or try to over-sell targets,” he said.

Chrysler is No More as Stellantis Comes to Life

January 16, 2021 admin

Is this the last logo that will use the Chrysler name?

Chrysler is dead.

Perhaps a bit dramatic, but nevertheless, the merger between Fiat Chrysler Automobiles N.V. and Peugeot S.A. became effective today, resulting in Stellantis N.V. Shares of the newly formed Stellantis begin trading on exchanges in France, Italy and the U.S. starting Monday. All will use the ticker symbol STLA.

The deal has been going through extensive regulatory approvals, twin shareholder votes and the necessary dottings of i’s and crossings of t’s for more than a year.

As of today, that means that for the first time since June 6, 1925, when it was founded by Walter P. Chrysler, the Chrysler name will no longer exist as a corporate entity.

(FCA CEO Manley gets new assignment following Stellantis merger.)

Stellantis is alive! The company’s stock begins trading on three exchanges Monday.

In many ways, the Chrysler name was a survivor. The company’s been through a variety of mergers, potential mergers and bankruptcies. It escaped the “merger of equals,” DaimlerChrysler from the late 1990s.

It was essentially spared its life when the late Sergio Marchionne swooped in and offered to keep it going if the U.S. government would help it through bankruptcy in 2009. The final deal got done with Chrysler Group LLC becoming part of FCA US LLC to follow

the naming convention of Fiat Chrysler Automobiles N.V. on Dec. 16, 2014.

Chrysler Corp. fought its way through several near misses when it came to mergers as potential deals with Japanese automaker Mitsubishi, China’s GAC and most recently an effort to merge with Peugeot’s French rival, Renault S.A., a deal that was reportedly scuttled after demands by the French government, which holds an ownership stake in Renault, were too much for then FCA CEO Mike Manley to accept.

(Fiat, PSA set to get EU go-ahead to complete Stellantis merger.)

Then there was the effort by the aforementioned Marchionne to find a partner for FCA, seemingly almost any partner would do. He approached General Motors and was promptly rebuffed. He reportedly got the same treatment from Volkswagen. There was even a rumored dalliance with EV behemoth Tesla, which would have bolstered FCA’s basically non-existent electric vehicle program.

The arrival of Stellantis means for the first time in 95 years the Chrysler name won’t be on a corporate marquee.

It also survived a previous bankruptcy in the late 1970s, paying off the loans early with its charismatic CEO Lee Iacocca, who came over from Ford, helping to lead the company’s charge back to prosperity. Chrysler did enjoy one major merger success when it acquired American Motors in 1987, including – and especially – the Jeep brand.

In fact, no one seems certain what the future holds for the Chrysler name period. Early in the process, officials said that all brands would be retained, but time and economics often change the equation and currently, the Chrysler brand offers just two products: the Chrysler Pacifica minivan and 300 sedan. Neither are in segments that are seeing sales gains.

To be fair, there’s been some speculation about the survival of the Fiat name in the same vein. Fiat’s been around even longer, founded in Turin, Italy in 1899. In the U.S., it’s only offering the 500X in 2021.

(Fiat Chrysler and PSA not exactly a “merger of equals.”)

The Chrysler name isn’t the only vestige of FCA seemingly taking a step back as its CEO Mike Manley is no longer in charge, that duty going to PSA’s Carlos Tavares nor will he be on the board of directors as John Elkann, FCA’s chairman, will take that spot as the chairman of the new Stellantis. Manley, 56, is now Head of the Americas.

Tesla Cleared of Sudden Unintended Acceleration by NHTSA

January 11, 2021 admin

This 2016 Model X crashed into an exterior wall, allegedly due to sudden unintended acceleration. (Photo credit: Puzant/Tesla Owner Forum)

Having initiated an investigation into complaints of sudden acceleration in Teslas a year ago, the National Highway Traffic Safety Administration closed that query last week after absolving the California-based EV maker of blame.

NHTSA’s inquiry found that 246 crashes involving Teslas came as a result of drivers confusing the accelerator and brake pedal, aka pedal misapplication, and not from any manufacturing defect.

The analysis came as a result of a petition, filed Dec. 19, 2019 by independent investor Brian Sparks, alleging, “Tesla vehicles have a structural flaw which puts their drivers and the public at risk. I further believe Tesla must know of this flaw and be unresponsive to it.”

(Tesla chief Musk now world’s wealthiest person due to record-setting stock price.)

Sparks’ complaint involved 2012-2020 Tesla Model S, Model X, Model 3 and Model Y vehicles crashing through walls of restaurants, banks, garage doors and other stationary objects. NHTSA closed its investigation, noting, “the theory provided of a potential electronic cause of SUA (sudden unintended acceleration) in the subject vehicles is based upon inaccurate assumptions about system design and log data.”

Even the Tesla Model Y was suspected of being plagued by the problem.

The report goes on to state that, “there is no evidence of any fault in the accelerator pedal assemblies, motor control systems, or brake systems that has contributed to any of the cited incidents. There is no evidence of a design factor contributing to increased likelihood of pedal misapplication.”

Tesla, in response to the petition nearly a year ago, stated that, “this petition is completely false and was brought by a Tesla short-seller. We investigate every single incident where the driver alleges to us that their vehicle accelerated contrary to their input.”

(Tesla narrowly 500K delivery target for 2020.)

But Tesla has a combative history with safety regulators, and not merely for its automated driving system.

In November, NHTSA expanded their probe into flash memory failure on Tesla touchscreens, which would cause the car to lose many functions, including the rear backup camera, a federally mandated safety feature, on 2012-18 Model S and 2016-18 Model X vehicles.

Tesla’s was cleared by NHTSA after the investigation.

That same month, the agency launched a formal inquiry into front suspension failure on 2015-2017 Model S and 2016-2017 Model X vehicles.

And in July, the Los Angeles Times reported that NHTSA is investigating the 2012-2016 Model S’s battery packs for cooling system problems that could render the batteries useless, or cause them to catch fire. This, and the growing chorus of quality complaints concerning the Model Y, seems to suggest that Tesla hasn’t fully conquered its manufacturing gremlins.

(Tesla’s Musk offering big incentive to drum up end-of-year sales: free FSD.)

Yet none of this seems to have affected Tesla’s stock price, which is hovering near 52-week highs; nor its sales, which amounted to 499,550 vehicles in 2020, or chief executive Elon Musk’s net worth, which was estimated last week at $185 billion, making Musk the richest man in the world, just ahead of Amazon’s Jeff Bezos.

GM Looking to Grow its Finance Arm’s Capabilities

November 27, 2020 admin

GM is reportedly looking to apply for a banking charter for its financing unit, GM Financial.

General Motors has been generating plenty of attention for its plans to shift to battery-electric vehicle production; however, the auto company has also been looking to get back into some old businesses too, namely banking.

It’s an oversimplification, but the Wall Street Journal reported today that GM’s captive financing unit, General Motors Financial Company Inc. is seeking to apply for a banking charter. The move would allow the company to accept deposits — like a bank. The move is part of a strategy allowing it to form an industrial loan company.

The specialized charter gives a company the ability to own a commercial firm and banks — typically a no-no with a traditional banking license, the newspaper noted. GM has done this before with its GMAC unit, which not only offered auto loans, but also home mortgages and other types of lending options.

(GM financial arm strengthens loan portfolio.)

GM’s financing arm, GM Financial, has contributed to the auto company’s bottom line in growing amounts of significance during the past decade.

That could occur as early as next month, according to sources cited by the WSJ. The company has been nosing around the subject with federal and state regulators for several months. The Federal Deposit Insurance Corp. and Utah Department of Financial Institutions are reportedly on board with this.

GMAC nearly failed during the Great Recession in 2008 due to subprime mortgages. The government bailed the unit it out and it was renamed Ally Financial, and GM eventually sold its stake in 2013. Ally Financial currently offers auto loans for several automakers, including Fiat Chrysler and Hyundai, as well as offering online banking resources.

According to WSJ sources, this would not be round two of GMAC, rather the deposits would be used to help with the automotive loan business. It would essentially act as a low-cost form of capital for those auto loans. Currently, the unit has to issue debt in order to provide financing for its customers. It’s possible the newly chartered unit would offer high-yield savings accounts as well as other deposit-based accounts to consumers.

(Treasury adds capital to GMAC Financial Services.)

GM isn’t alone in offering financing to potential buyers. In fact, it’s often part of the marketing push to draw customers into dealerships by advertising low rates on new car loans and leases. It gives dealers a chance to secure sales to buyers with less-than-ideal credit scores.

The move to accept deposits would give GM Financial a low-cost form of capital for auto loans.

In the case of GM Financial, it’s added some green to the company’s bottom line. It generated $14.5 billion in 2019, accounting for 10.6% of GM’s overall revenue, WSJ noted. In 2010, the unit’s revenue was less than 1% of auto company’s revenue while it rose to 4.2% in 2015.

Getting the industrial loan company structure in place wouldn’t make it unique in the auto industry, the newspaper noted. Toyota Motor Co. and BMW AG employ similar units to not only offer auto financing, but home mortgages and credit cards. What is different is that few companies have attempted to get back into that business since the 2008 banking collapse.

(GM delivers $4B in Q3 earnings as auto market rebounds.)

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New Recalls, Class Action Lawsuit, Add to Tesla Quality Woes, Raise New Questions About Long-Term

November 25, 2020 admin

Tesla continues to be plagued by quality issues across all four of its vehicles.

Nearly 10,000 Tesla Model X and Model Y SUVs are being recalled for a series of safety-related defects underscoring the automaker’s ongoing problems with quality and reliability.

Tesla has faced an array of issues affecting its four product lines, ranging from defective paint to faulty suspension systems and failing touchscreens used to control vehicle operations. Federal safety regulators recently launched a probe into one of the problems, while Consumer Reports and J.D. Power have slammed Tesla for having some of the worst quality and reliability in the industry. The automaker was also hit with a class-action lawsuit alleging a quality cover-up on Friday.

Those problems have largely been ignored by Wall Street, however, Tesla’s market capitalization now topping $525 billion, or about the same as Toyota, Volkswagen, General Motors, Nissan, Honda and Daimler combined.

(Mazda tops annual Consumer Reports reliability study, Tesla slammed.)

Tesla has been battling a problem with its touchscreens going blank, making it impossible access many functions.

For the moment, at least, Tesla owners have been reasonably forgiving, said Stephanie Brinley, principal auto analyst with IHS Markit, reflecting an early adopter mindset. But, longer term, Brinley said “Tesla is at risk.” The company “needs to get quality and recalls under control.”

Tesla has faced problems with quality from Day One. While Consumer Reports initially called the automaker’s first volume product, the Model S, the best vehicle it ever tested it quickly withdrew its coveted “Recommended Buy” endorsement due to serious quality issues.

In the annual Consumer Reports Automotive Reliability Study released last week, Tesla ranked second to last among 26 brands. Some of the problems were high-tech, such as faltering touchscreens, but others were much more basic, such as ill-fitting body panels, paint defects and seats not properly attached.

“A focus on the basics would help them a lot,” said the influential magazine’s auto testing chief Jake Fisher. Tesla continues to struggle with problems, he said, that “other automakers worked out 50 years ago.”

Tesla’s problems with fit-and-finish have been so common, and occasionally so severe that one new owner last month had the roof of his new Model Y fly off as he drove home from the showroom last month.

The Model X and its gull-wing doors have been one of the bigger quality problems plaguing the ute.

Each of the automaker’s four product lines appear to have its own unique – and ongoing – issues. With the Model X, for example, that includes “Falcon Wing” doors that can’t close properly. The Model Y has similar problems with its hatchback, according to Fisher, along with rear seats that have been improperly mounted.

Some issues stretch across the entire Tesla line-up, notably problems with paint and body trim. And then there are the faulty touchscreens.

Earlier this year, the National Highway Traffic Safety Administration began probing reports that the automaker’s touchscreens, especially those on older Model S sedans and Model X SUVs, would suddenly start to malfunction and even “brick,’ or go completely dead, unexpectedly. The issue appears to be related to a faulty eMMC, or embedded Multi-Media Memory Card. Though the issue has been widely reported on Tesla owner forums, the company only acknowledged it publicly this month, announcing plans to make free repairs.

“This malfunction may result in a blank or intermittently blank touchscreen but will not impact the ability to drive your car,” the automaker said in a note to impacted owners.

(NHTSA expands probe into Tesla touchscreen issue.)

But the statement isn’t entirely accurate, according to Fisher. While the vehicles won’t shut down, he explained during an online meeting with the Automotive Press Association, a driver won’t be able to operate many vehicle functions, since the screen replaces most traditional buttons and knobs. And motorists won’t be able to see how fast they are going or even be sure what gear they are in.

There are reports of problems with the lift gate on the Model Y.

Tesla’s latest safety recalls are relatively minor in terms of the numbers. NHTSA today said the larger one covers 9,136 Model X SUVs from the 2016 model-year. They have roof trim that may not have been properly adhered and which could fly off while being driven, striking other vehicles or pedestrians.

The second recall covers just 401 of the new Model Y SUVs. Bolts connecting the front upper control arm and steering knuckle may not have been properly assembled. They could detach and cause a loss of control.

Separately, a new class-action lawsuit filed in federal court in California last Friday claims Tesla has covered up suspension issues on older Models S and X vehicles. “Tesla is gambling with the lives and safety of hundreds of thousands of additional drivers and passengers whose vehicles suspension parts [are] at an imminent risk of failure,” the lawsuit stated, adding that the automaker has recalled most of those models sold in China for the same defect.

Time and again, Tesla has been hammered for quality and reliability problems. The automaker has limited access to the data normally used by J.D. Power to assess out-of-the-factory problems. Until this year, the research firm left Tesla out of its widely followed Initial Quality Study. This year, however, it decided to use what information it could track down and, though the results were marked with an asterisk, it came in dead last – and by a wide margin, according to Power’s auto research chief Dave Sargent.

Complicating matters, Tesla operates in a hodgepodge of states and vehicles often have to be trucked long distances in order to undergo repairs. Tesla forums are filled with reports of lengthy waits for parts and service.

Tesla is by no means the only automaker with quality problems. Ford’s Lincoln division fared even worse in this year’s Consumer Reports Auto Reliability Study, and research chief Fisher noted there were problems plaguing several other battery-car models. But while “there are a couple of EVs that gave us pause, there were many other very good models.”

Tesla’s production problems have been well documented. One observer suggested the company would be well served to focus on the basics.

Until recently, Tesla had the market pretty much all to itself, at least in terms of long-range battery-electric vehicles. But there’s a tsunami of new models coming from manufacturers as diverse as Ford, Hyundai, Volkswagen, General Motors, BMW and Mercedes-Benz.

In China, the Wuling Mini, produced by a GM joint venture, recently displaced Tesla as the country’s best-selling EV. The California company has also been losing ground in several key European markets, though it remains, by a wide margin, the best-selling EV brand in North America.

(Tesla Model Y hammered by quality issues.)

“Consumers are often forgiving” when they have to get repairs, “as long as they feel they’re taken care of,” said analyst Brinley. That’s especially true, she added, for early adopters, many Tesla owners feeling an almost cult-like devotion to the brand. But with more competition coming, and with no sign Tesla has yet begun to get its quality and reliability issues under control, she and other analysts warn that could pose problems going forward.

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