Elliott Management to acquire Barnes & Noble for $683 million - CNBC

Barnes & Noble

Michael Nagle | Bloomberg | Getty Images

Activist firm Elliott Management announced Friday it plans to acquire bookseller Barnes & Noble for roughly $683 million, including debt.

The deal values Barnes & Noble at $6.50 a share, a 43% premium to the retailer's 10-day volume weighted average closing share price before news of an imminent deal leaked Thursday.

After the announcement, the stock was up 10% to $6.56 per share, in premarket trading.

Barnes & Noble has faced continued pressure from Amazon and independent booksellers. Its shares had fallen roughly 25% year to date before the news leak. Within the past five years, Barnes & Noble has lost more than $1 billion in market value.

Amazon holds nearly half of new book sales, a report by audience research Codex Group said last year, while Walmart has about 4.2 percent of the market

In search of a turnaround, Barnes & Noble said last year it was exploring a sale after having received "expressions of interest" from "multiple parties," including its chairman, Leonard Riggio, who founded the company in 1965.

Riggio has entered into a voting agreement in support of the transaction, the company said Friday.

As a private company, Barnes & Noble will likely be more free to make the changes and investment that can be unwieldy under a public spotlight. Part of the bookseller's turnaround plan has included closing some of its more than 600 stores across the U.S. and relocating to smaller spaces that receive a fresh and modern look. The company has said its prototype stores encourage shoppers to buy books online or from a tablet.

The retailer has shown small signs of upturn. In March, it reported that over the holidays, sales at locations open for at least a year during the quarter rose 1.1 percent — its best quarterly performance in three years. As of January, it had $15 million in cash and cash equivalents.

For its part, Elliott, the firm founded and led by billionaire Paul Singer, acquired Britain's biggest bookseller, Waterstones, last year. Owning the two book retailing giants could give Elliott synergies and buying leverage with publishers, people familiar with the industry say.

Elliott will operate the two retailers independently, the company said on Friday, though Waterstones CEO James Daunt will oversee both retailers as chief executive.

The deal, which will be structured as a merger, is expected to close in the third quarter, the company said. Elliott and Barnes & Noble expect to amend the agreement to utilize a tender offer structure, thereby likely reducing closing time by several weeks.

Barnes & Noble also will pay out a quarterly cash dividend of 15 cents per share, payable on Aug. 2.

CNBC's Lauren Thomas contributed to this report

Let's block ads! (Why?)

https://www.cnbc.com/2019/06/07/elliott-management-to-acquire-barnes-noble-for-683-million.html

2019-06-07 11:21:58Z
52780310551578

National Doughnut Day's best deals - Fox News

So, whether you’re a regular Homer Simpson type and can’t get enough of the sugary treat, or you’re more of an in moderation consumer – here are all the places offering up the best bargains for the day. (iStock)

National Doughnut Day is here – and with it has comes some deals too sweet to pass up.

So, whether you’re a regular Homer Simpson type and can’t get enough of the sugary treat, or you’re more of an in moderation consumer – here are all the places offering up the best bargains for the day.

Dunkin’

America’s gotta run on more than just coffee. So all day on June 7, visitors can get a free Dunkin’ doughnut with the purchase of any beverage at the chain, while supplies last.

Krispy Kreme

For those who want a doughnut – hold the coffee – the nationwide chain known for its fluffy baked goods is offering just that. Stop by any Krispy Kreme and choose your favorite doughnut for free. Pink sprinkles? Chocolate glazed? Original? They’re all up for grabs, no purchase necessary – but only one per person.

CLICK HERE TO GET THE FOX NEWS APP

Walmart

While you’re picking up some groceries, make sure to swing by the bakery and grab a little sweet treat for yourself. In honor of the decadent day, Walmart is giving away 1.2 million doughnuts at 4,000 stores across the nation. Limit one per customer at participating locations.

FOLLOW US ON FACEBOOK FOR MORE FOX LIFESTYLE NEWS

Salvation Army

The organization that started it all -- Salvation Army established the first National Doughnut Day in 1938 in Chicago -- is pairing up with favorite baked good brand, Entenmanns, to deliver sweets throughout the day. According to its website, the charity organization will be handing out the packaged doughnuts at select areas around the country. However, there is a catch – most of the free doughnut events are for veterans.

Hardee’s

Though not traditionally associated with doughnuts, the hamburger chain is getting in on the special food holiday by offering up its unique Fruit Loop Mini Donuts for free with any purchase. Unlike the other chains, Hardee’s is offering its free doughnuts through Sunday. So if you are full of doughnuts on Friday, you've still got the weekend to take advantage of the deal. Though you do have to present this coupon, and it is only available at participating locations.

Let's block ads! (Why?)

https://www.foxnews.com/food-drink/national-doughnut-days-best-deals

2019-06-07 09:01:18Z
52780308816577

Report: Google arguing to U.S. that forked Huawei OS is security threat - 9to5Google

While tech companies have complied with the Commerce Department’s ban on Huawei, many are in discussion with U.S. officials on a possible resolution. A report today reveals that Google’s argument is centered around Huawei’s forked OS possibly being the bigger security threat.

The reputable Financial Times has just published a report detailing Google’s push for another extension to update existing Huawei phones in the market, or preferably an exemption to continue working with the Chinese company and release new devices.

According to sources, Google senior executives are making the case that the lack of updates after the August exemption would force Huawei to use an alternative operating system. Of course, Google and other tech companies, especially chip vendors, are concerned about the business impact of losing Huawei and ultimately the broader Chinese market.

Notably, this FT report described the immediate replacement OS as a “Huawei-modified version of Android” instead of being built from the ground up — a long-term project by the Chinese company known as Project Z.

Google is arguing to the U.S. government that the forked Huawei OS would have more bugs and be “more at risk of being hacked, not least by China.” Compared to the “genuine version,” the hybrid would lack Google’s Play Protect and Play Services, while a rush to market could result in vulnerabilities emerging.

Huawei confirmed last month that its Android alternative could launch in late 2019 or early 2020 for the Chinese market. Meanwhile, other reports suggest that the Play Store could be replaced with an in-house “App Gallery” amid talks with Aptoide.

More about Huawei:

---

Check out 9to5Google on YouTube for more news:

Let's block ads! (Why?)

https://9to5google.com/2019/06/07/forked-huawei-os-security/

2019-06-07 07:22:00Z
CAIiEFULiMH4FdXqYjWeDvtZ5x4qGQgEKhAIACoHCAowyoD5CjD5z-ACMM_rvwU

Google is reportedly arguing that cutting Huawei off from Android threatens US security - The Verge

According to a new report by the Financial Times, Google is trying to make the case to the Trump administration that it needs to be able to provide technology to Huawei in the name of US national security. According to one FT source, the central point of the argument is that Huawei would be forced to fork Android into a “hybrid” version that would be “more at risk of being hacked, not least by China.”

Google, like all US companies, has been banned from having business dealings with Huawei. In the long term, that would mean that Google would not be able to provide any of its services on Huawei phones. In the short term, the company has secured a temporary license to continue to supply software updates to existing phones.

Because Huawei phones are already banned in the US, understanding how Google is making that case that a forked version of Android being sold elsewhere in the world is a serious threat to US national security might seem like a bit of a jump. Although the Financial Times’ sources don’t explicitly lay out Google’s argument, it’s not difficult to imagine how it would go.

Step one: Huawei forks Android, creating a version that no longer includes Google’s services. One of the most important features of those services is Google Play Protect, software that automatically scans for malware, viruses, and security threats. Another is that people who buy phones with Google Services generally stick to apps available in the Google Play Store, which are more rigorously checked for security than what you’ll find on other stores.

Step two: those Huawei phones with a forked version of Android are sold globally. They are less secure and get hacked.

Step three: somebody in the US unknowingly sends sensitive information to somebody who is using one of those hacked Huawei phones. No matter how secure end-to-end encryption is, if there’s malware directly on a phone there’s a risk it could see information sent to it. And many people don’t check to see what phones they’re sending information to.

Step four: US national security it compromised.

Whether or not Google can convincingly make that argument could mean the difference between a fast resolution to this ongoing dispute or something much more complicated. Huawei is by some measures the number one or number two top seller of phones worldwide, and if it suddenly rushed into creating its own OS, things would get messy very quickly.

Huawei has said that it could roll out a custom operating system “very quickly,” though whether it would be based on the version of Android (sans Google services) it currently uses in China or on something else is not very clear — just like everything else in this complicated situation.

Even if you discount Google’s reported argument about security, there’s no question that it and other US companies stand to lose a significant amount of money if they can no longer do business with a company as large as Huawei. Just as it’s difficult to separate the Trump administration’s security concerns from its trade war, it’s equally difficult to separate Google’s reported security motivations from the potential effect on its bottom line.

As Bloomberg notes, Huawei itself has said that it “has not negotiated directly with the US government and is waiting to see how Google talks evolve.” That means Google’s reported talks with the US government are the center of the action right now.

That action is likely to intensify over the summer: Google’s temporary license to supply Huawei phones with updates is set to expire on August 19th.

Let's block ads! (Why?)

https://www.theverge.com/2019/6/7/18656163/google-huawei-android-security-ban-claims

2019-06-07 06:04:23Z
CAIiEFRkC9whe-H91necZMN_DSwqFwgEKg4IACoGCAow3O8nMMqOBjCd2ugF

The Car Industry Is Under Siege and in Survival Mode - The New York Times

FRANKFURT — It’s a scary time to be in the car business.

The internal combustion engine is under attack from electric challengers. Car ownership is becoming optional in the age of Uber. Regulators around the world are fining companies that don’t do enough to cut CO2 emissions, even as buyers demand gas-guzzling S.U.V.s. Global auto sales are slipping for the first time in a decade, disrupted by President Trump’s escalating trade war.

With so much bearing down on them simultaneously, it’s little wonder that companies like Fiat Chrysler and Renault were considering joining forces to survive. Fiat Chrysler’s decision Wednesday night to withdraw its offer to merge with Renault, citing government demands in France, was another reminder that change is complicated for traditional carmakers.

The aborted proposal to create the world’s third-largest automaker was a response to the disruption threatening an industry that accounts for many of the world’s factory jobs and is crucial to the economic fortunes of the United States, Japan and Europe.

New technology has unraveled industries like entertainment, media, telecommunications and retailing, weakening the job security of millions of workers and helping to fuel populism. Carmakers, clearly, are next.

“It’s going to be the biggest change we’ve seen in the last 100 years and it’s going to be really expensive even for the biggest companies,” said Erik Gordon, a professor at the University of Michigan Ross School of Business.

The major auto companies will spend well over $400 billion during the next five years developing electric cars equipped with technology that automates much of the task of driving, according to AlixPartners, a consulting firm. They must retool factories, retrain workers, reorganize their supplier networks and rethink the whole idea of car ownership.

Image

A Volkswagen factory in Wolfsburg, Germany. Carmakers globally are among the last employers that operate vast, bustling plants.CreditSean Gallup/Getty Images

For the auto manufacturers, this upfront investment is a matter of survival. If they don’t adapt, they could become obsolete. Yet no one is even sure whether customers are really willing to pay for the technology and whether it will ever earn a profit.

Investors have already signaled who they think will come out ahead of this transformation. The electric carmaker Tesla, despite all its problems, is still worth more on the stock market than either Fiat Chrysler or Renault. Uber is worth much more than the two combined, even after reporting a $1 billion quarterly loss.

[Read more about how the Fiat Chrysler talks with Renault fell apart.]

The stakes for society from this industrial realignment are high. Car companies like Volkswagen, General Motors or Toyota are among the last employers that operate vast factories where thousands of workers pour in and out of the gates at shift changes.

Worldwide, eight million people work directly for auto manufacturers, and many times more work for companies that supply brakes, tires, sensors and other components.

Those jobs are threatened. Last year global car sales declined for the first time since 2009. Though small, the decrease may signal the onset of a global recession because the auto industry is such an important economic catalyst, analysts at Fitch Ratings said in a recent report.

The immediate cause of the dip in sales was President Trump’s tariffs on Chinese goods last year, which hurt the Chinese economy and brought sales growth there, the world’s largest car market, to a standstill. American carmakers suffered too. Ford’s sales in China plunged 36 percent in the first three months of 2019, to 136,000 vehicles, because of the tariffs, the company said. But there are also ominous long-term trends at work.

Image

European carmakers are well behind on achieving emissions goals, in part because European consumers have developed a taste for thirsty S.U.V.s.CreditCarlos Osorio/Associated Press

China increasingly rules the global auto market and determines its course. In recent years, China’s voracious appetite for vehicles has accounted for almost all of the growth in global sales. Chinese consumers bought 24 million cars last year, far more than any other nation. Americans were a distant second with 17 million cars. General Motors sells far more cars in Asia — 947,000 in the first three months of this year — than it does in the United States.

Auto sales in America and Europe are stagnant and the growth in potential drivers is not encouraging. The number of young Americans acquiring driver’s licenses has been falling since the 1980s, according to research by Michael Sivak, a former professor at the University of Michigan.

Increasingly car ownership is a luxury rather than a necessity. In urban areas, where more and more of the population lives, people can avoid parking costs and the expense of insurance by relying on ride services like Uber or Lyft or hourly rentals with services like Zipcar.

The wavering relationship between consumers and cars has been hastened by the emergence of climate change as a potent political issue, as well as worsening air quality in major cities. Transportation accounts for about one-fifth of carbon dioxide emissions worldwide, according to the World Bank. Policymakers, responding to public opinion, have been forcing auto companies to improve fuel efficiency and reduce emissions. Carmakers’ ability to push back has been weakened since emissions cheating scandals were uncovered at Volkswagen and other carmakers including Fiat Chrysler.

In the European Union, carmakers must achieve average fuel economy equivalent to about 57 miles per gallon by 2021 or pay substantial fines. But European carmakers are behind on achieving the goals, in part because European consumers, like people in the United States and Asia, have developed a taste for thirsty S.U.V.s. As a result, the car companies face penalties of 34 billion euros, or about $37 billion, the research firm JATO Dynamics estimates.

The potential fines were one of the reasons that Fiat Chrysler sought a merger with Renault, which already has a longtime (if lately troubled) alliance with the Japanese carmaker Nissan. The French company offers battery-powered cars like the subcompact Zoe that would have made it easier for Fiat to hit the emissions targets.

Image

Renault’s battery-powered cars, like the subcompact Zoe, helped make the French automaker an attractive merger partner with Fiat.CreditSamuel Zeller for The New York Times

The Trump administration has been rolling back air quality regulations, but even in the United States carmakers are under pressure. California and nine other states are requiring manufacturers to meet quotas for zero-emission car sales.

Regulators and a growing segment of environmentally conscious car buyers are pushing the internal combustion engine toward obsolescence. China, Britain and France lead a list of countries aiming to phase out cars that burn gasoline or diesel by 2040. Norway is trying to convert entirely to electric vehicles by 2025.

Auto executives in Detroit, Stuttgart, Yokohama and other carmaking capitals foresaw these seismic shifts years ago and have been preparing.

BMW has been selling an electric car, the i3, since 2013. Nissan introduced the battery-powered Leaf in 2010. Traditional carmakers like G.M., Daimler, BMW and Volkswagen responded to the decline in car ownership with their own ride-sharing services, albeit with mixed success.

But despite their size, automakers like Fiat Chrysler, Ford or Volkswagen are at a disadvantage to newcomers like Uber or Dyson, the vacuum cleaner maker that is developing an electric car. The old-line carmakers still get almost all of their revenue from cars with internal combustion engines, and must maintain factory networks that quickly become a financial drain when not running at capacity.

China is emerging as a new competitor — and it is battling saturation even in its domestic market. China is absorbing only half the cars that Chinese plants churn out each year. Big producers like Guangzhou Auto had been preparing to enter the United States until President Trump imposed 25 percent tariffs on Chinese cars.

Image

China is another looming precipice. Its domestic market is absorbing only half the cars that Chinese assembly plants churn out each year.CreditLam Yik Fei for The New York Times

So far Chinese automakers have made some inroads to European markets. Zhejiang Geely Holding Group has a foothold after buying the Swedish carmaker Volvo from Ford in 2010. Geely also owns the British sports car maker Lotus and the company that makes London taxi cabs, while its chairman, Li Shufu, owns about 10 percent of Daimler, the maker of Mercedes-Benz cars.

The shifting balance of power in the auto industry is already squeezing the lives of thousands of workers. General Motors, girding for a possible downturn, shut down its plant in Lordstown, Ohio, in March, one of four factories in the United States that it plans to mothball by the end of this year, eliminating more than 10,000 factory and white-collar jobs. Volkswagen said Wednesday it would create 2,000 new jobs in digital technologies while gradually cutting 4,000 jobs that would no longer be necessary because of automation.

By some estimates, half of all auto industry jobs in Germany are at risk. Battery-powered cars have far fewer parts than cars reliant on gasoline or diesel, endangering suppliers of valves, pistons and other parts in conventional engines. The most important part of an electric car, the battery cells, usually comes from Asia.

Mergers as big as Fiat Chrysler and Renault may prove too difficult to pull off but carmakers are already forming dozens of smaller alliances. This year, Ford and Volkswagen agreed to develop new commercial vans and pickups together to go to market by 2022 and cooperate on technologies like electric cars and autonomous driving. BMW and Jaguar said Wednesday they would cooperate to develop drive systems for electric cars.

These partnerships can be difficult to manage, as Renault’s recent experience with Nissan shows. The alliance of those carmakers survived for nearly two decades but is wobbly after the arrest in November of Carlos Ghosn, its chairman, on charges of financial wrongdoing. Mr. Ghosn denies the accusations.

Mr. Ghosn was keenly aware of the need for automakers to combine forces and, in part, his fervor undid his relationship with Nissan. In many ways John Elkann, the Fiat Chrysler chairman, and Jean-Dominique Senard, the chairman of Renault, were attempting to take his vision a big step further.

Large-scale alliances are essential “to have a path for success in this transformative era,” said Jim Press, former deputy chief executive of Chrysler.

“The companies aren’t going to do it alone.”

Let's block ads! (Why?)

https://www.nytimes.com/2019/06/06/business/auto-industry-fiat-renault.html

2019-06-06 17:38:17Z
52780307348417

The Car Industry Is Under Siege and in Survival Mode - The New York Times

FRANKFURT — It’s a scary time to be in the car business.

The internal combustion engine is under attack from electric challengers. Car ownership is becoming optional in the age of Uber. Regulators around the world are fining companies that don’t do enough to cut CO2 emissions, even as buyers demand gas-guzzling S.U.V.s. Global auto sales are slipping for the first time in a decade, disrupted by President Trump’s escalating trade war.

With so much bearing down on them simultaneously, it’s little wonder that companies like Fiat Chrysler and Renault were considering joining forces to survive. Fiat Chrysler’s decision Wednesday night to withdraw its offer to merge with Renault, citing government demands in France, was another reminder that change is complicated for traditional carmakers.

The aborted proposal to create the world’s third-largest automaker was a response to the disruption threatening an industry that accounts for many of the world’s factory jobs and is crucial to the economic fortunes of the United States, Japan and Europe.

New technology has unraveled industries like entertainment, media, telecommunications and retailing, weakening the job security of millions of workers and helping to fuel populism. Carmakers, clearly, are next.

“It’s going to be the biggest change we’ve seen in the last 100 years and it’s going to be really expensive even for the biggest companies,” said Erik Gordon, a professor at the University of Michigan Ross School of Business.

The major auto companies will spend well over $400 billion during the next five years developing electric cars equipped with technology that automates much of the task of driving, according to AlixPartners, a consulting firm. They must retool factories, retrain workers, reorganize their supplier networks and rethink the whole idea of car ownership.

Image

A Volkswagen factory in Wolfsburg, Germany. Carmakers globally are among the last employers that operate vast, bustling plants.CreditSean Gallup/Getty Images

For the auto manufacturers, this upfront investment is a matter of survival. If they don’t adapt, they could become obsolete. Yet no one is even sure whether customers are really willing to pay for the technology and whether it will ever earn a profit.

Investors have already signaled who they think will come out ahead of this transformation. The electric carmaker Tesla, despite all its problems, is still worth more on the stock market than either Fiat Chrysler or Renault. Uber is worth much more than the two combined, even after reporting a $1 billion quarterly loss.

[Read more about how the Fiat Chrysler talks with Renault fell apart.]

The stakes for society from this industrial realignment are high. Car companies like Volkswagen, General Motors or Toyota are among the last employers that operate vast factories where thousands of workers pour in and out of the gates at shift changes.

Worldwide, eight million people work directly for auto manufacturers, and many times more work for companies that supply brakes, tires, sensors and other components.

Those jobs are threatened. Last year global car sales declined for the first time since 2009. Though small, the decrease may signal the onset of a global recession because the auto industry is such an important economic catalyst, analysts at Fitch Ratings said in a recent report.

The immediate cause of the dip in sales was President Trump’s tariffs on Chinese goods last year, which hurt the Chinese economy and brought sales growth there, the world’s largest car market, to a standstill. American carmakers suffered too. Ford’s sales in China plunged 36 percent in the first three months of 2019, to 136,000 vehicles, because of the tariffs, the company said. But there are also ominous long-term trends at work.

Image

European carmakers are well behind on achieving emissions goals, in part because European consumers have developed a taste for thirsty S.U.V.s.CreditCarlos Osorio/Associated Press

China increasingly rules the global auto market and determines its course. In recent years, China’s voracious appetite for vehicles has accounted for almost all of the growth in global sales. Chinese consumers bought 24 million cars last year, far more than any other nation. Americans were a distant second with 17 million cars. General Motors sells far more cars in Asia — 947,000 in the first three months of this year — than it does in the United States.

Auto sales in America and Europe are stagnant and the growth in potential drivers is not encouraging. The number of young Americans acquiring driver’s licenses has been falling since the 1980s, according to research by Michael Sivak, a former professor at the University of Michigan.

Increasingly car ownership is a luxury rather than a necessity. In urban areas, where more and more of the population lives, people can avoid parking costs and the expense of insurance by relying on ride services like Uber or Lyft or hourly rentals with services like Zipcar.

The wavering relationship between consumers and cars has been hastened by the emergence of climate change as a potent political issue, as well as worsening air quality in major cities. Transportation accounts for about one-fifth of carbon dioxide emissions worldwide, according to the World Bank. Policymakers, responding to public opinion, have been forcing auto companies to improve fuel efficiency and reduce emissions. Carmakers’ ability to push back has been weakened since emissions cheating scandals were uncovered at Volkswagen and other carmakers including Fiat Chrysler.

In the European Union, carmakers must achieve average fuel economy equivalent to about 57 miles per gallon by 2021 or pay substantial fines. But European carmakers are behind on achieving the goals, in part because European consumers, like people in the United States and Asia, have developed a taste for thirsty S.U.V.s. As a result, the car companies face penalties of 34 billion euros, or about $37 billion, the research firm JATO Dynamics estimates.

The potential fines were one of the reasons that Fiat Chrysler sought a merger with Renault, which already has a longtime (if lately troubled) alliance with the Japanese carmaker Nissan. The French company offers battery-powered cars like the subcompact Zoe that would have made it easier for Fiat to hit the emissions targets.

Image

Renault’s battery-powered cars, like the subcompact Zoe, helped make the French automaker an attractive merger partner with Fiat.CreditSamuel Zeller for The New York Times

The Trump administration has been rolling back air quality regulations, but even in the United States carmakers are under pressure. California and nine other states are requiring manufacturers to meet quotas for zero-emission car sales.

Regulators and a growing segment of environmentally conscious car buyers are pushing the internal combustion engine toward obsolescence. China, Britain and France lead a list of countries aiming to phase out cars that burn gasoline or diesel by 2040. Norway is trying to convert entirely to electric vehicles by 2025.

Auto executives in Detroit, Stuttgart, Yokohama and other carmaking capitals foresaw these seismic shifts years ago and have been preparing.

BMW has been selling an electric car, the i3, since 2013. Nissan introduced the battery-powered Leaf in 2010. Traditional carmakers like G.M., Daimler, BMW and Volkswagen responded to the decline in car ownership with their own ride-sharing services, albeit with mixed success.

But despite their size, automakers like Fiat Chrysler, Ford or Volkswagen are at a disadvantage to newcomers like Uber or Dyson, the vacuum cleaner maker that is developing an electric car. The old-line carmakers still get almost all of their revenue from cars with internal combustion engines, and must maintain factory networks that quickly become a financial drain when not running at capacity.

China is emerging as a new competitor — and it is battling saturation even in its domestic market. China is absorbing only half the cars that Chinese plants churn out each year. Big producers like Guangzhou Auto had been preparing to enter the United States until President Trump imposed 25 percent tariffs on Chinese cars.

Image

China is another looming precipice. Its domestic market is absorbing only half the cars that Chinese assembly plants churn out each year.CreditLam Yik Fei for The New York Times

So far Chinese automakers have made some inroads to European markets. Zhejiang Geely Holding Group has a foothold after buying the Swedish carmaker Volvo from Ford in 2010. Geely also owns the British sports car maker Lotus and the company that makes London taxi cabs, while its chairman, Li Shufu, owns about 10 percent of Daimler, the maker of Mercedes-Benz cars.

The shifting balance of power in the auto industry is already squeezing the lives of thousands of workers. General Motors, girding for a possible downturn, shut down its plant in Lordstown, Ohio, in March, one of four factories in the United States that it plans to mothball by the end of this year, eliminating more than 10,000 factory and white-collar jobs. Volkswagen said Wednesday it would create 2,000 new jobs in digital technologies while gradually cutting 4,000 jobs that would no longer be necessary because of automation.

By some estimates, half of all auto industry jobs in Germany are at risk. Battery-powered cars have far fewer parts than cars reliant on gasoline or diesel, endangering suppliers of valves, pistons and other parts in conventional engines. The most important part of an electric car, the battery cells, usually comes from Asia.

Mergers as big as Fiat Chrysler and Renault may prove too difficult to pull off but carmakers are already forming dozens of smaller alliances. This year, Ford and Volkswagen agreed to develop new commercial vans and pickups together to go to market by 2022 and cooperate on technologies like electric cars and autonomous driving. BMW and Jaguar said Wednesday they would cooperate to develop drive systems for electric cars.

These partnerships can be difficult to manage, as Renault’s recent experience with Nissan shows. The alliance of those carmakers survived for nearly two decades but is wobbly after the arrest in November of Carlos Ghosn, its chairman, on charges of financial wrongdoing. Mr. Ghosn denies the accusations.

Mr. Ghosn was keenly aware of the need for automakers to combine forces and, in part, his fervor undid his relationship with Nissan. In many ways John Elkann, the Fiat Chrysler chairman, and Jean-Dominique Senard, the chairman of Renault, were attempting to take his vision a big step further.

Large-scale alliances are essential “to have a path for success in this transformative era,” said Jim Press, former deputy chief executive of Chrysler.

“The companies aren’t going to do it alone.”

Let's block ads! (Why?)

https://www.nytimes.com/2019/06/06/business/auto-industry-fiat-renault.html

2019-06-06 17:13:11Z
52780307348417

The Car Industry Is Under Siege and in Survival Mode - The New York Times

FRANKFURT — It’s a scary time to be in the car business.

The internal combustion engine is under attack from electric challengers. Car ownership is becoming optional in the age of Uber. Regulators around the world are fining companies that don’t do enough to cut CO2 emissions, even as buyers demand gas-guzzling S.U.V.s. Global auto sales are slipping for the first time in a decade, disrupted by President Trump’s escalating trade war.

With so much bearing down on them simultaneously, it’s little wonder that companies like Fiat Chrysler and Renault were considering joining forces to survive. Fiat Chrysler’s decision Wednesday night to withdraw its offer to merge with Renault, citing government demands in France, was another reminder that change is complicated for traditional carmakers.

The aborted proposal to create the world’s third-largest automaker was a response to the disruption threatening an industry that accounts for many of the world’s factory jobs and is crucial to the economic fortunes of the United States, Japan and Europe.

New technology has unraveled industries like entertainment, media, telecommunications and retailing, weakening the job security of millions of workers and helping to fuel populism. Carmakers, clearly, are next.

“It’s going to be the biggest change we’ve seen in the last 100 years and it’s going to be really expensive even for the biggest companies,” said Erik Gordon, a professor at the University of Michigan Ross School of Business.

The major auto companies will spend well over $400 billion during the next five years developing electric cars equipped with technology that automates much of the task of driving, according to AlixPartners, a consulting firm. They must retool factories, retrain workers, reorganize their supplier networks and rethink the whole idea of car ownership.

Image

A Volkswagen factory in Wolfsburg, Germany. Carmakers globally are among the last employers that operate vast, bustling plants.CreditSean Gallup/Getty Images

For the auto manufacturers, this upfront investment is a matter of survival. If they don’t adapt, they could become obsolete. Yet no one is even sure whether customers are really willing to pay for the technology and whether it will ever earn a profit.

Investors have already signaled who they think will come out ahead of this transformation. The electric carmaker Tesla, despite all its problems, is still worth more on the stock market than either Fiat Chrysler or Renault. Uber is worth much more than the two combined, even after reporting a $1 billion quarterly loss.

[Read more about how the Fiat Chrysler talks with Renault fell apart.]

The stakes for society from this industrial realignment are high. Car companies like Volkswagen, General Motors or Toyota are among the last employers that operate vast factories where thousands of workers pour in and out of the gates at shift changes.

Worldwide, eight million people work directly for auto manufacturers, and many times more work for companies that supply brakes, tires, sensors and other components.

Those jobs are threatened. Last year global car sales declined for the first time since 2009. Though small, the decrease may signal the onset of a global recession because the auto industry is such an important economic catalyst, analysts at Fitch Ratings said in a recent report.

The immediate cause of the dip in sales was President Trump’s tariffs on Chinese goods last year, which hurt the Chinese economy and brought sales growth there, the world’s largest car market, to a standstill. American carmakers suffered too. Ford’s sales in China plunged 36 percent in the first three months of 2019, to 136,000 vehicles, because of the tariffs, the company said. But there are also ominous long-term trends at work.

Image

European carmakers are well behind on achieving emissions goals, in part because European consumers have developed a taste for thirsty S.U.V.s.CreditCarlos Osorio/Associated Press

China increasingly rules the global auto market and determines its course. In recent years, China’s voracious appetite for vehicles has accounted for almost all of the growth in global sales. Chinese consumers bought 24 million cars last year, far more than any other nation. Americans were a distant second with 17 million cars. General Motors sells far more cars in Asia — 947,000 in the first three months of this year — than it does in the United States.

Auto sales in America and Europe are stagnant and the growth in potential drivers is not encouraging. The number of young Americans acquiring driver’s licenses has been falling since the 1980s, according to research by Michael Sivak, a former professor at the University of Michigan.

Increasingly car ownership is a luxury rather than a necessity. In urban areas, where more and more of the population lives, people can avoid parking costs and the expense of insurance by relying on ride services like Uber or Lyft or hourly rentals with services like Zipcar.

The wavering relationship between consumers and cars has been hastened by the emergence of climate change as a potent political issue, as well as worsening air quality in major cities. Transportation accounts for about one-fifth of carbon dioxide emissions worldwide, according to the World Bank. Policymakers, responding to public opinion, have been forcing auto companies to improve fuel efficiency and reduce emissions. Carmakers’ ability to push back has been weakened since emissions cheating scandals were uncovered at Volkswagen and other carmakers including Fiat Chrysler.

In the European Union, carmakers must achieve average fuel economy equivalent to about 57 miles per gallon by 2021 or pay substantial fines. But European carmakers are behind on achieving the goals, in part because European consumers, like people in the United States and Asia, have developed a taste for thirsty S.U.V.s. As a result, the car companies face penalties of 34 billion euros, or about $37 billion, the research firm JATO Dynamics estimates.

The potential fines were one of the reasons that Fiat Chrysler sought a merger with Renault, which already has a longtime (if lately troubled) alliance with the Japanese carmaker Nissan. The French company offers battery-powered cars like the subcompact Zoe that would have made it easier for Fiat to hit the emissions targets.

Image

Renault’s battery-powered cars, like the subcompact Zoe, helped make the French automaker an attractive merger partner with Fiat.CreditSamuel Zeller for The New York Times

The Trump administration has been rolling back air quality regulations, but even in the United States carmakers are under pressure. California and nine other states are requiring manufacturers to meet quotas for zero-emission car sales.

Regulators and a growing segment of environmentally conscious car buyers are pushing the internal combustion engine toward obsolescence. China, Britain and France lead a list of countries aiming to phase out cars that burn gasoline or diesel by 2040. Norway is trying to convert entirely to electric vehicles by 2025.

Auto executives in Detroit, Stuttgart, Yokohama and other carmaking capitals foresaw these seismic shifts years ago and have been preparing.

BMW has been selling an electric car, the i3, since 2013. Nissan introduced the battery-powered Leaf in 2010. Traditional carmakers like G.M., Daimler, BMW and Volkswagen responded to the decline in car ownership with their own ride-sharing services, albeit with mixed success.

But despite their size, automakers like Fiat Chrysler, Ford or Volkswagen are at a disadvantage to newcomers like Uber or Dyson, the vacuum cleaner maker that is developing an electric car. The old-line carmakers still get almost all of their revenue from cars with internal combustion engines, and must maintain factory networks that quickly become a financial drain when not running at capacity.

China is emerging as a new competitor — and it is battling saturation even in its domestic market. China is absorbing only half the cars that Chinese plants churn out each year. Big producers like Guangzhou Auto had been preparing to enter the United States until President Trump imposed 25 percent tariffs on Chinese cars.

Image

China is another looming precipice. Its domestic market is absorbing only half the cars that Chinese assembly plants churn out each year.CreditLam Yik Fei for The New York Times

So far Chinese automakers have made some inroads to European markets. Zhejiang Geely Holding Group has a foothold after buying the Swedish carmaker Volvo from Ford in 2010. Geely also owns the British sports car maker Lotus and the company that makes London taxi cabs, while its chairman, Li Shufu, owns about 10 percent of Daimler, the maker of Mercedes-Benz cars.

The shifting balance of power in the auto industry is already squeezing the lives of thousands of workers. General Motors, girding for a possible downturn, shut down its plant in Lordstown, Ohio, in March, one of four factories in the United States that it plans to mothball by the end of this year, eliminating more than 10,000 factory and white-collar jobs. Volkswagen said Wednesday it would create 2,000 new jobs in digital technologies while gradually cutting 4,000 jobs that would no longer be necessary because of automation.

By some estimates, half of all auto industry jobs in Germany are at risk. Battery-powered cars have far fewer parts than cars reliant on gasoline or diesel, endangering suppliers of valves, pistons and other parts in conventional engines. The most important part of an electric car, the battery cells, usually comes from Asia.

Mergers as big as Fiat Chrysler and Renault may prove too difficult to pull off but carmakers are already forming dozens of smaller alliances. This year, Ford and Volkswagen agreed to develop new commercial vans and pickups together to go to market by 2022 and cooperate on technologies like electric cars and autonomous driving. BMW and Jaguar said Wednesday they would cooperate to develop drive systems for electric cars.

These partnerships can be difficult to manage, as Renault’s recent experience with Nissan shows. The alliance of those carmakers survived for nearly two decades but is wobbly after the arrest in November of Carlos Ghosn, its chairman, on charges of financial wrongdoing. Mr. Ghosn denies the accusations.

Mr. Ghosn was keenly aware of the need for automakers to combine forces and, in part, his fervor undid his relationship with Nissan. In many ways John Elkann, the Fiat Chrysler chairman, and Jean-Dominique Senard, the chairman of Renault, were attempting to take his vision a big step further.

Large-scale alliances are essential “to have a path for success in this transformative era,” said Jim Press, former deputy chief executive of Chrysler.

“The companies aren’t going to do it alone.”

Let's block ads! (Why?)

https://www.nytimes.com/2019/06/06/business/auto-industry-fiat-renault.html

2019-06-06 16:58:05Z
CBMiS2h0dHBzOi8vd3d3Lm55dGltZXMuY29tLzIwMTkvMDYvMDYvYnVzaW5lc3MvYXV0by1pbmR1c3RyeS1maWF0LXJlbmF1bHQuaHRtbNIBAA