Macron is apparently not happy with the Biden administration, Bird gives the bird to investors, Carvana cuts staff to try and save itself, and Ram 2500s have a little fire problem.
Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday
Looks Like Macron Doesn’t Want Automakers To Flee To The Land Of Freedom Fries
We’ve already covered how the Inflation Reduction Act is causing global automakers to move to the United States (along with cheaper energy and a market for EVs). Why? The sweet sweet tax credits that help automakers reduce the price of their cars are contingent upon production in the United States.
You know who doesn’t love this? European leaders already worried that disruptions from the war in Ukraine are already going to send automakers looking elsewhere to build things, apparently. To wit, Reuters is reporting that French President Emmanuel Macron is going to have a dinner for execs (including from Volvo and BMW) to try to convince them to say.
From the report:
French President Emmanuel Macron on Monday will host a dinner with a number of European chief executives to convince them not to move production to the United States, where lower energy prices and the Inflation Reduction Act is proving a lure.
European leaders have been alarmed by massive anti-inflation measures passed by Joe Biden’s administration, which make tax breaks conditional on U.S-manufactured content and which EU industries say make investment in Europe less competitive.
[…]
“We’re having difficulties with companies which are starting to consider offshoring their production or making future investment outside Europe,” a French official said, listing high energy costs and the U.S. legislation as reasons.
Carvana And The Lemonade Stand Problem
“Collapse of Carvana, the ‘Amazon of Used Cars’, Continues” is the how The Street puts it.
We’ve covered how the alt-car dealer has faced numerous lawsuits from state authorities and the risks that come with the securitization of its loans. Now Carvana is going to cut 1,500 jobs after cutting 2,500 positions in May. The Street has an email from Carvana’s CEO kind of explaining why.
“It is fair to ask why this is happening again, and yet I am not sure I can answer it as clearly as you deserve,” Chief Executive Officer Ernie Garcia told employees in an email on Nov. 18. “I think there are at least a couple of factors. The first is that the economic environment continues to face strong headwinds and the near future is uncertain. This is especially true for fast-growing companies and for businesses that sell expensive, often financed products where the purchase decision can be easily delayed like cars.”
In addition, “we failed to accurately predict how this would all play out and the impact it would have on our business. As a result, we find ourselves here.”
The underlying fundamental proposition of Carvana (mostly online, low pressure used car sales) isn’t a bad one. It’s basically CarMax 2.0. What Garcia isn’t saying here, though, is that the company benefited greatly from the pandemic economic environment (low interest rates, low unemployment, and federal stimulus checks) and used that tailwind to rapidly expand and “failed to accurately predict” what would happen when that environment shifted.
Think of a lemonade stand. You decide to sell lemonade in April and it’s a hit. By June the temperatures are super high and there’s been no rain for weeks. You sell more lemonade and make more money. With cold weather coming your best options are probably to diversify (hot cocoa stand?) or bank that profit to make investments over the winter to have more lemonade stands ready to go next summer. What Carvana seems to have done is… just keep building lemonade stands as fast as they could in the hopes it would stay warm forever.
Scooter Company Bird Is In Even Worse Shape
Micromobility (lol) company Bird probably wishes it had Carvana’s problems. Here’s a real quote from their latest filing with the SEC about their financial statements for the last two years:
[They] should no longer be relied upon. Similarly, any previously furnished or filed reports, related earnings releases, investor presentations or similar communications of the Company describing the Company’s financial results contained in the Original Filings should no longer be relied upon.
Ouch. The translation is: We screwed up and the money we said we made was more than the money we actually made.
What happened? According to TechCrunch, it seems like the company reported that they made money on trips that people took but didn’t actually pay for because the riders didn’t have enough money in their accounts. Bird went public with a SPAC (lol) last year and raised a bunch of money with a stock price as high as $8.29 per share last December.
The price as of this morning? $0.20. That gives the company a market cap of about $51 million. Double ouch.
Ram Is On Fire, In The Bad Way
If you have a Ram 2500 model built between 2020 and 2023 or a Ram 3500 built between 2020 and 2022 you might want to carry a fire extinguisher with you in the cab of your truck. Chrysler is recalling almost 250,000 of the trucks over a fire risk.
Here’s the full letter from Chrysler, explaining what’s probably happening:
A build-up of pressure and heat inside the transmission may result in a transmission fluid leak from the dipstick tube. Consequence: Leaking transmission fluid may contact an ignition source within the engine compartment, increasing the risk of a fire.
If you have one of these trucks you can expect a letter soon explaining how they’re going to fix this.
The Flush
Have you ever used a scooter rental service? What was your experience?
Photos: Emmanuel Macron/France, Carvana, Google, Stellantis
