Aug 7, 2020

Axios Navigate

By Joann Muller
Joann Muller

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Flashback: 2 years ago today, Elon Musk tweeted his famous "funding secured" plan to take Tesla private at $420. Today Tesla shares opened at $1,500.

Please join Axios CEO Jim VandeHei and me next Tuesday, Aug. 11, at 12:30pm ET for a live, virtual event on the future of autonomous vehicles and transportation policy.

  • We'll speak with Hyundai-Aptiv self-driving joint venture CEO Karl Iagnemma; L.A. Department of Transportation GM Seleta Reynolds; American University policy expert Selika Josiah Talbott; and Mothers Against Drunk Driving national president Helen Witty.
  • Register here.

Smart Brevity count: 1,504 words, a 6-minute read.

1 big thing: GM lobs fresh bombs in old war with FCA

Illustration: Eniola Odetunde/Axios

General Motors is trying to revive an incendiary lawsuit against Fiat Chrysler Automobiles with explosive new allegations including bribes paid from secret offshore bank accounts and a union official acting as a double agent between the two automotive giants.

Why it matters: The extraordinary legal battle is occurring amid earth-shaking changes in the global auto industry — ones that threaten to turn both litigants into dinosaurs if they aren't nimble enough to pivot to a future where transportation is a service, cars run on electrons and robots handle the driving.

Quick take: GM contends former FCA CEO Sergio Marchionne, who died in 2018, orchestrated a multimillion-dollar racketeering conspiracy — including bribes — that corrupted labor negotiations with the United Auto Workers for more than a decade.

  • The reason: An attempt to financially weaken GM and force it into a global merger it had twice rejected, in 2008 and again in 2015.

Driving the news: GM this week asked a federal judge to reinstate its unprecedented lawsuit against FCA, citing new information about the tactics it says FCA used in order to gain a substantial labor cost advantage over GM worth billions of dollars.

  • Just last month, U.S. District Judge Paul Borman threw out GM's lawsuit, which had shocked the tight-knit industry when it was filed in November 2019.
  • Now GM says the alleged scheme "is much broader and deeper than previously suspected or revealed" and the judge should reconsider his dismissal.

GM's stunning new allegations include a claim that a top UAW official serving on GM's board of directors as a representative of the union's retiree health benefits trust was actually a "mole" who was being paid by FCA to feed them information about GM's business strategy.

  • GM also claims its investigators discovered evidence of offshore bank accounts in Switzerland, the Cayman Islands and other countries that were linked to senior UAW officials and Fiat Chrysler's former head of labor relations.
  • Of note: GM's lawsuit runs parallel to an ongoing corruption probe by the U.S. Justice Department that has already resulted in guilty pleas and jail terms for at least 10 former UAW and FCA officials.

What they're saying: FCA officials privately say they believe GM's legal bombshell was intended to disrupt FCA's pending merger with another global automaker, France's PSA Groupe.

"As we have said from the date the original lawsuit was filed, it is meritless. ... FCA will continue to defend itself vigorously and pursue all available remedies in response to GM's attempts to resurrect this groundless lawsuit."
— FCA statement
"The UAW is unaware of any allegations regarding illicit off-shore accounts as claimed by GM ... nor has the U.S. Attorney's Office, or anyone else, ever raised this type of allegation with the UAW. If GM actually has substantive information supporting its allegations, we ask that they provide it to us so we can take all appropriate actions."
— UAW statement

My thought bubble: Exploiting rivals' weaknesses to gain advantage is nothing new in the auto industry. But whether GM's lawsuit is a paranoid fantasy or the manifestation of a simmering grudge between two long-term rivals, the stakes couldn't be higher in an industry being turned upside-down.

Bonus: 15 years of bad blood between rivals

GM CEO Mary Barra, left, and the late Sergio Marchionne, then-CEO of FCA. Photo: Mark Wilson/Getty Images

The late Marchionne had been a thorn in GM's side for more than 15 years.

  • In 2005, as head of ailing Fiat SpA, he extracted a $2 billion payment from GM to settle a contract dispute between the one-time partners and then used it to fund the Italian carmaker's remarkable comeback.
  • GM, meanwhile, went bankrupt in 2009 and required a taxpayer bailout.

By then, Marchionne had positioned Fiat as Chrysler's White Knight, taking control of the smallest U.S. carmaker using American taxpayers' money and later merging it into Fiat to create a more powerful rival that competed with GM around the globe.

  • But in a rapidly changing industry, Marchionne wanted to get even bigger. So in 2015, he proposed a merger to GM CEO Mary Barra, who rejected the overture.
  • A month later, Marchionne made his famous "Confessions of a Capital Junkie" presentation to analysts, an impassioned plea for industry consolidation, citing a wasteful duplication of capital and resources among automakers.

Marchionne never got to see his plan through, but two years after his death, FCA is now poised to merge with PSA, the French parent of Peugeot.

GM has some history with PSA, too: In 2017, it unloaded its unprofitable European division, Opel, on PSA for $2.2 billion.

2. GM toys with spinning off EV business

Coming in 2022: the electric Cadillac LYRIQ. Photo: GM

GM would love to be counted among the cool kids — Tesla and a crop of electric vehicle startups drawing huge valuations — but despite its massive investment in EV technology, Wall Street still views GM as yesterday's news.

Why it matters: Pure plays on electric vehicles are all the rage among investors. One way for GM to get credit for its in-house capability is to spin off its EV operations as a stand-alone business.

Driving the news: GM on Thursday unveiled the Cadillac LYRIQ show car, a luxury crossover SUV that will be among the first based on GM's new modular electric vehicle platform and Ultium battery propulsion system.

  • It's among 20 EVs that GM plans to launch by 2023, including a reborn Hummer EV.

Context: The reveal came just a week after GM CEO Mary Barra opened the door to a potential EV spinoff in response to a question during a call with investment analysts.

  • "We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value," she said, adding that "nothing is off the table."
  • In fact, GM had already floated the idea internally back in 2018, according to Bloomberg.
  • Today, the motivation looks even stronger with aspiring EV makers like Nikola, Fisker and Rivian attracting vast amounts of capital in both the public and private markets.

Yes, but: The downside is that if GM does lop off its EV business as a standalone entity, its core manufacturing business could look even less attractive to investors.

3. New Hampshire passes Jetson law

Terrafugia's Transition, a plane you can drive on roads and park in your garage. Photo: Terrafugia

New Hampshire is touting itself as the first state in the country to authorize flying cars, which is a bit of an overstatement.

Why it matters: The bill signed by Gov. Chris Sununu, dubbed "the Jetson law," makes it legal for "roadable aircraft" to drive on the state's roads.

  • That's not the same as authorizing urban air taxis to fly above those same roadways, something only the Federal Aviation Administration can do, and remains a long way off.

Yes, but: It's still an interesting development on the road to future mobility.

  • It applies to small planes that can also be driven as cars.
  • A handful of companies are working on such flexible aircraft, including Terrafugia, Samson Sky and PAL-V.
  • The law allows pilots to drive these aircraft to and from airports but prohibits landing or taking off on public roads.
  • Terrafugia and PAL-V both have operations in New Hampshire, and all three companies helped shape the legislation.

How it works: Terrafugia's Transition, for example, seats two and converts from drive mode to flight mode in less than a minute by pushing a button.

  • It runs on automotive grade gasoline and the wings fold inward so it can be parked in your garage instead of an airport hangar.
4. Driving the conversation

Anthony Levandowski. Photo: Justin Sullivan/Getty Images

Levandowski gets 18 months in prison for stealing Google files (Paresh Dave — Reuters)

  • Why it matters: The Silicon Valley judge described the former Google engineer's conviction for stealing self-driving technology as the "biggest trade secret crime I have ever seen."

Used-car dealers really, really want to buy your vehicle (Nora Naughton — Wall Street Journal)

  • The big picture: Coronavirus-related shutdowns have led to a shortage of used vehicles on dealer lots, which means if you're looking to make a trade-in, for once you're in the driver's seat.

Modern driver-assistance technology "far from reliable": AAA study (Tina Bellon — Reuters)

  • Why it matters: AAA found that driving assistance systems do not perform consistently, especially in real-word scenarios, which could lead consumers to mistrust increasing vehicle automation in the future.
5. What I'm driving

2020 Nissan Leaf. Photo: Nissan

This week I'm driving the all-electric Nissan Leaf SL Plus, with a sticker price of $46,045.

The big picture: The Leaf has been around since 2010, but has long since been eclipsed by the Tesla Model 3, and other battery powered entries like the Chevrolet Bolt EV, Kia Niro EV and the Hyundai Ioniq.

  • But the 2020 Leaf, especially the Plus model with a longer driving range, is worth another look.

The Leaf is available with two battery sizes, and a full array of standard driver-assistance features.

  • the standard Leaf has a 40-kWh battery that provides a driving range of about 150 miles.
  • The Leaf Plus features a larger 62-kWh battery pack that can go up to 226 miles before recharging — at least on the mid-range S trim level.
  • Higher priced versions like my SL Plus are only rated for 215 miles, probably due to the added weight of extra features.
  • The $39,125 S Plus seems to be the sweet spot — it's well-equipped and has the longest range, though it still falls short of the 250-mile range on the standard Tesla Model 3.

The Leaf also features a new, louder sound — something that's required under new regulations that go into effect Sept. 1 for otherwise-silent electric vehicles.

  • When driving forward, under 18.6 mph, the Leaf emits a tone called "Canto" (Latin for "I sing").
  • In reverse, it emits a pulsing chime.

The bottom line: I liked the Leaf; the singing I could do without.

Joann Muller