Looking at the news of the day, a theme emerged: bosses. Specifically, many people wonder if certain CEOs/Presidents should have their jobs. This, of course, comes after record profits for most automakers.
Leaders are judged by the present In the present, and yet the true measure of success is how they will behave in the future, in the judgment of someone looking at the past. This can create competing incentives, especially in the case of a publicly traded company whose value is recalculated every millisecond.
We’ll start today with Carlos Tavares, CEO of Stellantis (pictured above), who admits that his North American operations are far from ideal. He takes responsibility, which is what a good leader does. But is his concern about the past consistent with the reality of the present? I’m not so sure.
And what about VW + Porsche CEO Oliver Blume? Porsche is extremely valuable and I think Blume has done a good job dealing with its different groups, but one observer points out that maybe doing both at the same time doesn’t work. And what about Akio Toyoda? Given all the tsuritwo major proxy groups are saying to drop it.
Finally, Tesla CEO Elon Musk is set to receive the largest payday in human history and it’s interesting to see who ended up pushing him across the finish line.
Does Carlos Tavares understand the problem
https://www.youtube.com/watch?v=viUiDAntRJc
Michael Lewis, through his books and films like The big short And silver ball, often suggests that collective wisdom may not be so wise. Perhaps it’s easier to persuade ourselves and others that if we win money and win games, we are doing the right thing, which works until the point where it fails in comical and tragic ways .
This is an extremely white-nerd online viewpoint to quote silver ballbut be true to yourself, I suppose.
I will say that I believe Stellantis CEO Carlos Tavares when he says his company is bankrupt in North America and that part of that is due to his “arrogance.” This quote is from an investor presentation yesterday, and here’s some context from Detroit News (Stellantis has not yet released the transcript):
Stellantis NV CEO Carlos Tavares said Thursday his company was “arrogant” when it failed to respond quickly to a convergence of several problems in the United States in recent months, including manufacturing problems and soaring stocks.
“When I say we were arrogant, I’m talking about myself. Nobody else. I’m talking about how I should have acted immediately,” Tavares said at an investor gathering Thursday at the automaker’s North American headquarters in Auburn Hills.
He said he should have formed a task force to tackle the problems, including manufacturing problems at a few unnamed U.S. factories that are “not working the way they should.”
Car manufacturing has indeed been a problem for Stellantis. The company has been extremely profitable, but it has been so because it sells old cars on old platforms. There are plenty of new cars on the horizon, including the Charger Daytona and Ram Ramcharger, and these need to work to justify the investment.
Crediting Tavares for his humility in this situation, and while I’m sure he’s trying to solve the Stellantis problem in North America, I’m not sure he’s looking at the problem. RIGHT problem, and I say this because of what is said later in this article:
“(There will be) questions about where we are in terms of cost reduction, and are we at the limits or not? It’s the same as asking: do we have limits to our imagination? Tavares talked about finding areas of savings in the company.
Beyond downsizing, Stellantis executives also discussed efforts Thursday to save money by moving more of its engineering departments to so-called “lowest cost” countries, such as Morocco, India and Brazil.
Reducing platforms and reducing costs through shared platforms is how every modern automaker tries to operate and it probably makes sense for a company with so many regional operations to pursue this strategy. Laying off engineers in America and finding cheaper engineering elsewhere, however, seems unacceptable to me.
The part of Stellantis that used to be Dodge didn’t succeed because of accounting, it succeeded because it made products that people found desirable. Offshoring all the engineering needed to achieve these goals doesn’t seem to me to be an ideal solution to the company’s biggest current problem, which is that it doesn’t make competitive cars in the United States.
Should Oliver Blume run both VW and Porsche?
Volkswagen and Porsche have a crazy history dating back to when Porsche thought it could buy Volkswagen and then, surprise, things got so derailed that the opposite happened and now Volkswagen owns Porsche.
This arrangement has been beneficial for both, as Porsche has managed to become a much better company that still produces world-class cars and does so profitably and at much higher volumes than when it was on its own.
So what is the problem? Financial journalist and observer Chris Bryant points out in a column this week that having Oliver Blume running both VW and Porsche doesn’t work. Here is the gist of his argument:
VW’s preferred shares have fallen about 20% since Blume’s appointment, further reducing VW’s market capitalization to a paltry 59 billion euros, less than its smaller rival Stellantis NV.
After deducting VW’s majority stake in Porsche and truck maker Traton SE, this implies that the rest of VW’s sprawling auto empire is actually worthless. My hope that Porsche’s listing would help reveal VW’s hidden value proved far too optimistic. VW investors still have many concerns, ranging from the company’s loss of relevance in China and software delays, to the lack of competitive electric vehicles and the poor performance of the Audi division.
It’s a good argument, even if I don’t agree.
When Blume took over from Herbert Diess, Volkswagen was not in great shape, still reeling from Dieselgate and the rather apathetic tenure of Matthias Müller. I don’t think the company’s current vision is perfect and that China is a legitimate concern, but the sheer amount of experimentation with brands like Cupra and Porsche’s continued appeal globally makes me think that the dual role is not so important. a deal.
It’s a shit job running VW and somehow this guy runs both companies for about $10.8 million a year, which is way less than most auto executives . I think running Porsche is a fun perk and it’s bad management to take away a job that people find enjoyable if they’re good at it.
Ditch Akio?
We had a column suggesting that Blume should perhaps give up his position as CEO at Porsche so he can focus on his position as boss of VW. So here is a column arguing that Toyota President Akio Toyoda should keep his job.
Why, after helping the automaker become the most profitable state-owned company in Japanese history, would people want to dump it? All the major errors surrounding fake crash tests and rigged powertrain figures have led to large groups of activist investors calling for Toyoda’s head.
Hans Griemel, in his column, gives a number of arguments for why Toyoda should keep his job, but I prefer this one:
Back then, Toyotas were durable and reliable. But they were also ho-hum.
On his first day in power, Toyoda decided to change that and he worked miracles. Under its banner of “ever better cars,” Toyota delivered vehicles that were better looking and easier to drive.
Toyoda has reorganized its portfolio around successful vehicle families, such as the Crown, Corolla and Yaris series. It also rebalanced the regional sales mix.
Maybe Bob Lutz was right about that?
Tesla CEO Elon Musk Gets Vanguard Vote
According to Reuters, it was major investor Vanguard (which has the second largest stake in the company with 7%) that helped Musk cross the finish line to secure the largest payday in history. It’s funny because Vanguard actually voted against the salary program when it was initially proposed in 2018.
What made Vanguard change its mind?
In its note, Vanguard said that while Musk’s salary was “a substantial outlier” among CEOs, Tesla’s shareholder return was in the 98th percentile of all Russell 3000 companies from 2018 to 2023. “Few companies have created so much absolute appreciation in market value. like Tesla,” Vanguard said.
The man said he could eat 50 eggs and he ate 50 eggs, so pay up.
What I’m listening to today while writing TMD
Whether you’re a No Limit soldier or a Cash Money millionaire, you have to appreciate Juvenile’s surprise crossover hit “Back Dat Azz Up”, released 25 years ago this week?!? Man, I’m older than I thought. NOLA celebrated “Back Dat Azz Up Day” on Tuesday. The best part about this video is that they clearly shot it under the title “BACK DAT THING UP”, which is the cleaner version, and then just dubbed it and said “AZZ”.
The big question
Classify them:
Flower
Tavares
Musk
To Toyoda