Will the Tesla Bubble Burst? I think so, sooner rather than later!

Below is an article that was published today on the Reuters website. Yesterday, I had an extended conversation with a writer from the "Financial Times" on the same subject. The discussion was about traditional auto manufacturers as being categorized as hardware assemblers, while Tesla as a software firm. And consequently, Tesla serves as the leading edge for an automotive revolution the likes we have not seen.

My opinion is that while Tesla cars are the real deal, they are the real deal only for a small niche upscale market. Americans are for the most part traditional in their so consumer habits and resistant to change. Witness the controversy over face masks. Or the fact that what Americans want are large vehicles, SUVs like the Tahoe and Escalade. Analysts seem to not give enough credit to the hardwire manufacturers from Germany, Japan, and yes, even the USA. These firms move slow because they understand consumer fickleness and risk.  Remember that a considerable amount of revenue coming to Tesla is due to credits paid to them by other manufacturers because their fleets do not have enough zero emission vehicles. Once the competition from Germany, Japan, and the US go more green, those payments will be reduced substantially.

So much of Musk's Tesla future lies with petroleum prices and better technology and supply lines. This bubble will burst, once the uncertain economic future crystallizes in more certain forms.

Tesla's best chance resides with the election of Joe Biden, and his vision for a new Green Economy. A dramatic cultural shift is necessary for electric cars to proliferate during the next ten years. If the global economy falters, and the USA retrenches, then Tesla's brightness might gradually fade, like a slowly dying star.

FRANKFURT/BEIJING/DETROIT (Reuters) - Tesla Inc’s (TSLA.O) rapid rise to become the world’s most valuable carmaker could mark the start of a new era for the global auto industry, defined by a Silicon Valley approach to software that is overtaking old-school manufacturing know-how.

 

Tesla’s ascent took many investors by surprise. But executives at Daimler AG (DAIGn.DE), the parent company of Mercedes-Benz, had a close-up view starting in 2009 of how Tesla and its chief executive Elon Musk were taking a new approach to building vehicles that challenged the established system. 

Daimler, which bears the name of the man who invented the modern car 134 years ago, bought a nearly 10% Tesla stake in May 2009 in a deal which provided a $50 million lifeline for the struggling start-up.   

That investment gave Mercedes engineers an inside view of how Musk was willing to launch technology that wasn’t perfect, and then repeatedly upgrade it, using smartphone style over-the-air updates, paying little regard to early profitability. 

Mercedes engineers helped Tesla develop its Model S luxury sedan in exchange for access to Tesla’s partially hand-assembled battery packs, but in 2014 Daimler decided to sell their stake amid doubts Tesla’s approach could be industrialized at scale. 

Tesla would go on to pioneer new approaches in manufacturing, designs in software and electronic architecture which enable it to introduce innovations faster than rivals, leaving analysts to draw comparisons with Apple (AAPL.O). 

Three people directly involved with the Mercedes side of the collaboration said the brief partnership highlighted the collision of old and new engineering cultures: the German obsession with long-term safety and control, which rewarded evolution, and the Silicon Valley carmaker’s experimental approach which embraced radical thinking and fast innovation. 

“Elon Musk has been walking on the edge of a razorblade in terms of the aggression with which he pushes some technologies,” said a former Mercedes engineer who worked on the partnership.

By contrast, Mercedes and other established automakers are still not comfortable about releasing a new technology, such as partially automated driving, without years of testing. 

Tesla did not respond to requests for comment. 

Investors favor the Tesla model, in an industry undergoing fundamental and dizzying change even though the U.S. carmaker will face an onslaught of competing electric vehicles from established automakers during the next few years. 

They are putting their money on Musk and his company, even though Mercedes-Benz alone sold 935,089 cars in the first half of 2020, dwarfing the 179,050 delivered by Tesla in the same period. 

Today, Tesla is worth nearly $304.6 billion, more than six times Daimler’s 41.5-billion-euro ($47.7 billion) market capitalization. 

The New Ford Bronco

Workers at Ford's Michigan Assembly plant see the Bronco they'll build up close

On Tuesday, Ford displayed a two-door version of the 2021 Bronco in Cyber Orange and a four-door model in Cactus Gray, in front of the plant. The automaker wanted the 2,900 workers there who will build those models to see them live and up close for the first time. 

 

The small Bronco Sport SUV, which Ford will build at its Hermosillo Assembly Plant in Mexico, will be in showrooms later this year.

But the two-door and four-door Bronco will be assembled at Michigan Assembly. The Broncos go on sale in the spring of 2021. 

"We have some more tooling in the plant that will be going on the last two weeks of August and first week of September when we're on shutdown," said Erik Williams, plant manager. "Then we'll be ready to start making trial vehicles in November."

The workers' anticipation is mounting, he said. Even his daughter, who Williams said works for "a competitor," has asked him when she can get her Bronco.

The two-door 2021 Bronco begins at $29,995, including destination fees. The four-door model starts at $34,695 including fees. 

"It's in a class all its own with the styling and so many other attributes. It's what people want," Williams said, admiring the SUVs in the sunlight. "It's an honor to build one of the most iconic brands in our legacy."

Indeed, the Bronco does have a cult following. Ford made it from 1966 to 1996 and it has become so legendary that vintage models command high prices from collectors. Used models are nearly nonexistent.

"My son and I have been looking for a used one to buy, but they are really hard to find," said Kristin Fitch, 49, a key programmer at Michigan Assembly. 

But when Fitch eyed the two new models in front of Michigan Assembly, where she has worked 20 years, she said she and her son will buy a new one, if they can agree on a color: She likes gray and her son prefers orange.

The trucks aren't just pretty faces though, they are tough too, designed for off-roading. They offer 35-inch off-road tires, standard all-wheel drive, 270-hp four-cylinder or 310-hp V6 turbocharged engine and a 10-speed automatic transmission or seven-speed manual with first gear crawl ratio.

Bringing a dream to life

Overseeing the display Tuesday was Ford's Ryan Olsson, lead interior designer on the Bronco. He wanted to meet the workers who'll bring his drawings to life. 

"Once a design leaves my hands, it's just a sketch," Olsson said. "This is chance to meet some of the people who will make my dream a reality."

At age 36, Olsson remembers the Bronco of the 1990s. He said some of his childhood associations of it influenced his interior touches, especially those around the nostalgia of camping and the outdoors. 

Here are his five favorite features he designed for the interior:

·  Modular grab handles on the center console and instrument panel. These help people get in and out of the vehicle. And, Olsson said, "If you're going over heavy terrain, they're gold."

·  Hero switches: A row of buttons on top of the instrument panel accessible to both the driver and passenger or "co-pilot" of sorts when off-roading, Olsson said. 

·  Accessory rail on the top of the instrument panel to plug in items.

·  Removable top and doors: "I really like the open-air experience," he said. 

·  Bronco bolts: "BRONCO" is stamped on the head of all the bolts in the vehicle.

·       The Bronco bolts are a nod to the truck's heritage, Olsson said, when in the past the word was stamped on some of the bolt heads. 

·       "I had a sketch on the wall, a zoomed-in shot of this area," Olsson said, pointing to the corner grab handle on the dashboard. "I drew BRONCO on the sketch of the bolt just to add texture. Now it's proliferated across the vehicle. It'll delight the customer when they find it."

·       Contact Jamie L. LaReau: 313-222-2149 or jlareau@freepress.com.

 

Malcolm Bricklin's First Big Automotive Venture: The Subaru 360

 You can see one at Wagner Subaru just north of Dayton. In 1969 Malcolm Bricklin envisioned it as a solution to smog and safety problems (really?). It was a micro car, and with a market for these vehicles saturated in Japan, why not bring it into the United Sates on a loophole. It would solve parking congestion and garage space.

It had a small 2-stroke engine two cylinder engine, 360 cc. Its 4 speed transmission was non-synchro in first gear, and had to handle a mere 25 horsepower. You would think it got great gas mileage, but Road & Track was surprised to get only 28.9 mpg. 

Top speed was 56 mph and it took forever to get there. 

Subaru stayed with the American market and you can see where it got them. Moral of the story -- "all's well that ends well!" 

I wonder how many of the van and truck survive in the US today?

Interview about Coronavirus and Economic Recovery with Mary Barra, June 18, 2020

Interview by Tom Krisher, in Detroit Free Press, June 18, 2020

The auto business used to be pretty simple. Crank out vehicles that people want to buy and collect profits.

It’s gotten a whole lot more complicated since Mary Barra took over as CEO of General Motors in 2014.

She has cut costs and streamlined management, closed factories and sold off money-losing operations in Europe, partly in preparation for the next downturn.

Thanks to the coronavirus, it’s here. Barra talked with The Associated Press about steering GM through the crisis. Answers are edited for length and clarity.

Q: Coronavirus cases are rising, and you’re going to cancel the third shift at a factory in Wentzville, Missouri, because you don't have enough workers. Are you worried that factories could be shut down again?

A: If you step back to March, and even before then, we had a lot of learnings from China, from Korea and the United States. We believe we do a very good job of keeping people safe by reducing the possibility that someone with COVID can enter our plants. And then all the work we do within the facilities to prevent the spread. We took time and we trained everybody. People understood that we’re working hard to keep the environment safe for them. One of the things we’re trying to do now is really encourage people to use those same protocols when they’re not at work. They’re wearing masks, they’re handwashing, hand sanitizer and that they’re social distancing. We feel that we’ve got a safe environment at work. At Wentzville, one of the things we do is screen. We are taking the precaution to say that you need to quarantine until we know that you don’t have the virus. I’ve been at 10 plants since we started back up, and I’m continuing to go to plants. When I talk to people, they understand the protocol. To a person, they tell me I feel safer here than I do at the grocery store Q: Does it concern you that states might go back to stay-home orders?

A: We are watching everything very carefully. The conversation I’ve had with many different officials is they understand with the protocols that people are safe at work. I think we’re seeing steps being taken across many of these areas with lessons learned about maybe what worked well in reopenings and what didn’t. In Michigan now you see the requirement that people wear masks. I think you’re seeing steps being taken in more places. That allows the numbers to go back down and we start on the road back to normal anytime soon, in the U.S. and globally?

A: We are seeing a recovery. We think it’s going to be a relatively short-lived recession. But we have a long way to go because we went to a pretty low base. The new outbreaks do pose potential setbacks, but we’re hopeful that the U.S. economy will be back to 90% of pre-pandemic levels early next year. There’s a lot of uncertainty.

Q: After George Floyd’s death, you took a strong stance to fight racism. Usually companies don’t do this. In today’s politically charged atmosphere, are you worried about alienating some customers?

A: We felt it warranted a very strong statement, but more than words: actions. That’s why we formed the Inclusion Advisory Board. And we’ll have our first meeting yet this month. I’m very proud of General Motors' leadership in supplier diversity, dealer diversity. We have over a dozen employee resource groups. And so we look at all the work we’ve done, what we want to do now is build on that. We want to create an inclusive environment where everybody can bring their true self to work, because we believe that is what really empowers people and leads to the most engaged workforce. It’s hard to argue against wanting to create an environment where everybody can be themselves.

Q: Tesla has said it has 400 miles of battery range on some of its vehicles. Is that within reach for for General Motors?

A: A lot of the customer research we’ve done, we know 300 mile range is a sweet spot. With the flexibility of the Ultium platform, we have the capability to go higher than 300. We’ll be looking at what the value equation is for the customer.

The Isotta Fraschini as a Star in Sunset Blvd

It was a pivotal moment in the 1950 Billy Wilder film "Sunset Boulevard." Silent film star Norma Desmond, played by actress Gloria Swanson mistakes the studio's interest for her 1929 Isotta Fraschini for her. After all, in her won words, it was "Not one of those cheap things made of chromium and spit but Isotta Fraschini. Have you ever heard of Isotta Fraschini? All and-made. It cost me twenty eight thousand dollars."

The car was a product of Fabbrica Automobile Isotta Fraschini, founded in 1900. In its first decade it was a technological pioneer with 4-wheel brakes (1909), direct-acting overhead camshafts (1908), 100 hp engines (1910) and V-8 aircraft engines.

It was in the prosperous 1920s that Isotta Fraschini enjoyed its greatest success and prestige. The type 8A was introduced in 1925 to compete with its arch-rival, Hispano-Suiza. The bore was enlarged, twin carburetors were fitted, and horsepower climbed to 120. Mechanical; brakes were given a vacuum-servo to lower pedal effort and the car's heavy steering was improved. About 1350 Type 8 and 8As were built to 1931.

The great depression destroyed many of the fortunes that made cars like the Isotta Fraschini possible. During WWII the country supported the country's war effort by producing aircraft and truck engines In 1947 automobile production restarted with a type 8C Monterosa, a rear-engined, aerodynamic sedan with a single overhead cam 90 degree V-8 developing 125 horsepower. The model enjoyed little success, and in 1949 Isotta Fraschini went into bankruptcy.

When Dayton, Ohio Became a General Motors Town

Ed pulled these Dayton Daily News pages from a newspaper database.  Note that these pages capture precisely the time and the key people involved in the move of Dayton from local industries (albeit quite significant regionally and nationally) to being organizationally a part of General Motors. It is clear who the real players were -- Kettering, Deeds, Grant, Talbot. 1919 was  the year Dayton emerged as one of the most important GM cities world-wide, second only to Flint, Michigan.  That relationship would gradually end, culminating in 2008 with the closing of the truck factory in Moraine, Ohio. But the slide began in 1958, with the death of Charles Franklin Kettering, the man who did. so much to make Dayton dynamic.