It’s Friday and we’ve got the drama behind Faraday Future, some upside for Warren Buffet’s Chinese EV adventure, a possible sale of an American icon, and more good news on used cars.
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.
Faraday Future Can’t Escape Faraday’s Past
We’re starting today with a story that picks up where one of my favorite Morning Dump headlines, “Faraday Future Continues To Produce More Drama Than Actual Cars,” leaves off. The Chinese-backed electric vehicle company has not delivered any cars as far as I can tell, but it has been the subject of increasingly awful stories, like “Chinese Tycoon Spent 8 Years, $3 Billion on EV That Went Unbuilt” from Bloomberg, which takes a deep-dive into death threats and all the cash-burn that’s been happening behind the scenes.
Here’s the lede from that story:
The image arrived in Susan Swenson’s inbox on a Wednesday evening. Her corporate headshot had been crudely crossed out in digital red ink, and the word “Kill” was written in the bottom left corner. In the hours that followed, some of her colleagues received similar threats, including messages that referenced the recent assassination of former Japanese prime minister Shinzo Abe.
It’s worth noting that Faraday Future released this statement back in February about threats, per Inside EVs:
Unfortunately, efforts to raise capital have been impacted by a misinformation campaign of completely baseless allegations that certain directors are conspiring to pursue an unnecessary bankruptcy for their own personal gain.
These unfounded allegations have nevertheless continued against certain of the company’s officers and directors. Threats that began with lawsuits have escalated to threats of physical violence and even death threats.
The Bloomberg story doesn’t get better from there; the article goes on to make the case that the company’s founder, Jia Yueting, has been working behind the scenes to regain power at the company. Who is this guy? He sort of modeled himself as a Chinese Jeff Bezos-Elon Musk hybrid who built a vast empire that imploded on itself (he fled China in 2017 after a series of alleged frauds).
Well, he’s apparently making a comeback. From Bloomberg:
Seven months ago, Faraday’s board sidelined Jia, who goes by YT, following an internal probe that examined his influence over day-to-day operations, as well as a series of loans employees made to the startup over the years. Now, he stands to benefit greatly from the impending board shakeup, which will be completed when Faraday holds its delayed annual meeting. He has been named an adviser to the board, and FF Global will have input on all six new members. As Faraday put it in a recent SEC filing, “YT Jia and FF Global have strengthened their already significant influence over the Company.”
But as YT reclaims power, it is over a company that’s under investigation by the US Securities and Exchange Commission in relation to the findings of the internal probe — information the Department of Justice has inquired about, too, according to Faraday. The startup also needs money, fast. After burning through more than $3 billion since it launched eight years ago, Faraday reported just $27 million in cash on Oct. 25th, and says it needs millions more if it hopes to finally ship its elusive SUV.
It’s also worth mentioning here that the car doesn’t seem to be close to production, at least based on this review of a car we saw at Pebble Beach by Abby Bassett. From the review:
None of the controls worked, and a friend who came along with me on the ride was forced to sit with her knees nearly touching her chest in the forward-folded seat without the seatbelt buckled because the latch was buried somewhere between the armrest and the seat. The rear passenger seat on the driver’s side was also unresponsive when I tried to make it more upright, so the specialist who tagged along with us lounged in a more horizontal position. It was comical and bizarre.
I’m glad I’m not a billionaire because it seems like there’s a larger than usual risk of you buying something you shouldn’t buy, fixating on that dream, and slowly watching it unravel. Though, I suppose, the same could be said of us and our project cars.
Berkshire Sells More BYD Shares
BYD recently announced a 350% increase in profit as their electric car sales continue to soar in China. So why is their major backer, Berkshire Hathway (i.e. Warren Buffett) selling some shares? Is he worried about the future of BYD? Is this all a house of cards on the verse of crumbling?
I don’t think it’s that serious.
According to this Reuters blip, the amount that Berkshire sold was worth about HK$560.05 million or $71.35 million, bringing the company’s total stake down to 17.92% from 18.22%
When Buffett bought into the company he spent about $230 million and, prior to this sale, had already made $600 million. Unlike some other billionaires, Buffett isn’t prone to making rash decisions and the slow sale likely reflects his philosophy.
His firm can reap huge profits, cover his initial investment, and still own a substantial share of a company worth many many times what he paid for it.
Penske Pausing Its Used-Only Store Brands
The used car market isn’t going to suddenly get better, but there are some signs of improvement. In particular, a report from Automotive News today demonstrates that the big players in the space don’t think this used car boom will last forever:
Two of the public giants that operate stand alone used-vehicle stores — Penske and Sonic — said they’re taking a pause on opening new locations for their used-only brands in the near term.
Roger Penske is one of the smartest people in the industry and his view is one worth listening to. While used car sales are still good and potentially profitable, the fundamentals are starting to shift.
The best measure of the used car market is the Manheim Used Vehicle Value Index and right now it’s showing a mixed bag with wholesale prices declining from their pandemic highs but retail supply up nine days year-over-year.
American Axle Up For Sale?
There’s been a lot of buzz over American Axle, the Detroit-based Tier 1 supplier responsible for making the driveshaft and other drivetrain components in your car [Editor’s note: American Axle makes the entire drivetrain for the Jeep Cherokee Trailhawk; it’s impressive -DT]. In particular, Melrose industries might be into it. Why?
London-listed Melrose is weighing a combination of its GKN Automotive unit with American Axle, according to the people, who asked not to be identified because the information is private. A deal could help GKN Automotive build scale in the car-parts industry and gain a public listing in New York.
I’m curious to see what the price is for this given that the acquisition market is a little soft and American Axle has annual revenue of over $5 billion ayear.
The Flush
There were some great Live Mas responses yesterday so here’s another question: If you were a billionaire, what company would you foolishly buy and allow to destroy you? I would probably buy a baseball team.
Photos: BYD, Faraday Future, Penske, American Axle
I’d buy a cricket team and baseball the shit out of the experience. Like full on mythologized Field of Dreams stuff. Fairground food, seventh-inning stretch, incredibly loud organ music, mascots, bobbleheads, the works. The sheer energy from the UK, India, and Australia all setting aside their differences to destroy me would power this planet into a new golden age. I’d be the Ozymandias space squid of professional sports.
I’d buy some Senators and start a business renting them out to special interests.
I would buy up pasture and woodlands in Southeast Kansas (land is inexpensive if you give up your mineral rights. Then I would fence it and install private security. I would build a huge central compound done in “survival modern”. I would do nothing illegal. I would fly no flags, nor post any written communications.
There would be a first class road course along with a 1/4 mile strip down the straight in front of the stands. There would be at least two go-kart tracks, one simple, one competition grade. Good quality “demonstrators such as three year old 911’s, a sprinkling of Miatas etc. all for use by guests. Ditto on the cart tracks.
My small eclectic car garage would be filled with the cars of my life.
If I still have money, I will give away some to a worthwhile charity that benefits the widest possible good.
The flush: as much fun as it has been to watch the left blogosphere freak the f*ck out over twitter, I’m sure there’s more fun to be had in messing with Reddit. Think of the possibilities! So yeah, that’s where my money goes.
I’d design and build a top tier golf course.
Flush: movie studio. Just dump more and more money into increasingly absurd projects.
The best/worst investment as a billionaire has to be an individual, non-works F1 team. Haas or “Aston Martin”
Blockbuster, but reinvent it so that in addition to the aisles of movies you can “rent” I would add “personal viewing lounges” from 1 to say 15ish people where you can watch the movie.
Like a personal movie theater.
Awesome
What to buy? Well, since this is an automotive site, I should say something like TVR. That would lower my tax bracket in a year or less.
But what I’d really like to do is buy a peach orchard in the Texas hill country and start an American artisanal peach schnapps distillery to kick off the schnapps craze that is destined to take over bars in America, and then the world! Mwahhahahaa!
I’d buy something related to toilets. Most likely the company that makes flush valves for public and commercial toilets. Everybody poops and I want in on that money! I think about this every time I use the restroom at work. I want to be flush. Sorry, it’s Friday and I had to make that pun. I’ll leave now.
A grass-fed dairy farm. We would sell 100% grass-fed cow produced ice cream, milk and cheese.
If I had the money, a RV manufacturer. The market will crash but I can take “demos” whenever I want.
A strip club!
Of course, a non exploitive strip club.
If you are going to destroy yourself with a business, might as well be destroyed surrounded by boobies.
So, like, you’d set up the business, hire the staff, and turn it into an employee-ran co-op? And then you’d just hang out, being respectful and stuff? I don’t care for strip clubs, but I’d go to that one just for the fair labour practices.
I’d buy a mid-tier guitar brand like Guild or one that a bigger brand bought and killed like DeArmond.
Probably the Buffalo Sabres.
Or a music hall. “How do you make a small fortune in music? Start with a big one.”
The Flush:
My football* team is like €70M in the hole, so that would be it. Reliving my Football Manager glories IRL. Turning Boavista FC into a football powerhouse and going broke in the process.
Even better: I’d buy the rights to the Saab name and revive the company, using the football team as a way to market cars the all-new 90, 900 and 9000. I can already see the SAAB sponsorship emblazoned across our beautiful chequered jerseys. Hmm, you know what, get Diadora on the phone while we’re at it, I wouldn’t mind buying our most iconic kit manufacturer ever.
Shit, now I went and pretend-bought not one but three failing/failed enterprises. Thanks a lot guys.
(*) football as in soccer when you refer to it by its proper name.
I’d buy an F1 team.
Only if it’s the Rich Energy team, right?
You know what they say: the only way to make a small fortune in F1 is starting with a big fortune.
Might as well burn through the cash as quickly as possible, so refuse all offers of sponsorship, too.
I’d buy the Sacramento Kings.
When you are a billionaire, you don’t use your own money to buy things.
this is the correct answer.
Were I a billionaire, I’d probably muck it up by buying something that seems way too simple and foolproof, like a utility services company or other “always see them but not sure what they do” business. Then there’d be some major innovation in the business model and I’d be stuck with a proverbil buggy whip maker.
If I were a billionaire I’d probably buy VIR or make a track similar.
Richard Branson said it was easy to become a Millionaire. Start out as a Billionaire, then start (or buy) an airline. Anything that is capital intensive will be more problematic in the coming higher interest rate environment. So, let’s start a seaplane airline in the Caribbean!
I would buy Faraday Future, and turn it into sex-toy/adult entertainment. And have the Chinese President Winnie-XI-Pooh’s face on every single blow-up doll and battery=operated-boyfreinds.
Too late now, but probably Radio Shack. My first computer was a Tandy (RadioShack’s inhouse computer brand back in the day). I used to love going in and looking at all the electronics stuff, and was my goto when I needed a random LED, switch, or whatever.
Ooo, you gave me a great idea. Bring back dead stores like Service Merchandise or Circuit City. If I were really insane, buy out Sears and then sell it to Amazon so it can be a hybrid store/distribution center.
Or, reincarnate Woolworths as a slightly nicer version of Dollar General with an in-store coffee shop
Target has that on lock already. They rent Starbucks space to operate a storefront.
Small format in downtown areas of smaller communities?
Target actually operates the Starbucks locations that live inside Target stores. My daughter has worked at two of them, and in both cases she was (still is) a Target employee.
My brother did that with Safeway in college, same deal, the Starbucks was a franchise run as part of the store, he hated it – they’d schedule him for front end, then randomly send him over to the Starbucks counter, had no idea what he was doing and got reprimanded a few times over constantly trying to pressure customers to order regular coffee instead of the complicated drinks
Your son is a bright one.
Service Merchandise? OMG, how could I have forgotten them? They got so much of my money. Look, that’s my Casio digital watch coming down the conveyor belt!
Oh, good idea! Anybody remember the store called Best? (Their catalogs were fun to look through) Also loved Nobody Beats The Wiz!
(Seinfeld- “I’m the Wiz!- Nobody beats me + “You’re not Penske material!”)
I agree on the MLB team, I would buy the Reds.