• Mike V.

Weekend Reading


Bloomberg: PSA Group and Fiat Chrysler Explore European Venture


PSA Group and Fiat Chrysler Automobiles are exploring a partnership to share investments to build cars in Europe. The French carmaker and its Italian-American peer have been holding preliminary discussions to collaborate on a “super platform” -- the basic underpinning of a car model -- to reduce their investment costs in the highly competitive region.


PSA Chief Executive Officer Carlos Tavares said his company is ready to seize opportunities for growth, less than a year after integrating the Opel and Vauxhall brands that it purchased from General Motors. Fiat Chrysler CEO Mike Manley said at the same time that he’d “clearly look into” a deal that would make the Italian-American carmaker stronger, including an alliance or a merger.


Reuters: GM, Ford and Toyota join to advance self-driving testing, standards


General Motors Co, Ford Motor Co and Toyota Motor Corp said in a statement they were joining forces with automotive engineering group SAE International to establish autonomous vehicle “safety guiding principles to help inform standards development.” The group will also “work to safely advance testing, pre-competitive development and deployment,” they added. Regulators in the United States have been grappling with how to regulate self-driving cars, with other countries watching closely to see how implementation of the emerging technology pans out. Last year, U.S. lawmakers, unable to agree on a way forward, abandoned a bid to pass sweeping legislation to speed the introduction of vehicles without steering wheels and human controls onto roads, but may resurrect the effort later this year. The new group, dubbed the Automated Vehicle Safety Consortium, will begin by deciding priorities, with a focus on data sharing, vehicle interaction with other road users and safe testing guidelines. Randy Visintainer, chief technology officer at Ford’s Autonomous Vehicles unit, said the goal was to work with companies and government “to expedite development of standards that can lead to rule making.” Last month, the National Highway Traffic Safety Administration asked the public if robotic cars should be allowed on streets without steering wheels or brake pedals as they try to set the first legal boundaries for their design. NHTSA’s existing rules prohibit vehicles without human controls. The regulator will for the first time compare a vehicle in which all driving decisions are made by a computer versus a human driver. A fatal 2018 accident involving a self-driving vehicle operated by Uber Technologies Inc and two deadly plane crashes involving highly automated Boeing 737 MAX airliners have put a spotlight on the ability of regulators to assess the safety of advanced systems that substitute machine intelligence for human judgment. The new consortium cited as a successful model a standards group that helped create a collection of some 4,500 aerospace standards covering airframe, engine and other aircraft parts.


Business Insider: China is lulling the market into a false sense of security


Positive economic data from China has markets around the world rallying, but the country's rebound will be fleeting. That's because the recovery was built on unsustainably looser credit conditions. "To sustain that next year they're going to have to post in nominal terms a record flow of credit," Autonomous Research. China's purchasing managers index (PMI) rebounded unexpectedly last month, so the market — taking this as a sign that the worst is over in the world's second largest economy — is rejoicing with a glorious global rally. After the print on Sunday night, the Shanghai Composite closed its session up 2.6% and markets in the US and Europe rallied as well.

Enjoy it while it lasts. Underlying all the ecstasy is a story that should sound familiar to China watchers. In the face of a potentially debilitating slowdown, Chinese policymakers eased credit conditions in order to keep money flowing through the economy. However, that credit is buying China less growth than it did in the past, showing that the risk will eventually swallow up the rewards. "Credit has turned and that means we don't have to put a floor on growth," Autonomous Research.


China's companies borrowed at levels unseen since mid-2013, when credit was booming and the country's shadow-banking sector was expanding. No sector went untouched either, and there was no targeting specific industries or regions. "Just a few months ago the PBOC was still paying lip service to deleveraging, but our data show this as the second consecutive quarter where shadow banking use expanded as a share of total borrowing," the China Beige Book analysts wrote in a recent report. "It's also the highest level of shadow bank use since the stimulus-fueled recovery/commodities rally of 2016." "The lesson from 2018 is that China’s post-global crisis economy and financial sector cannot deleverage without an extremely high cost to growth that the authorities are unwilling to incur."


Have you ever driven in a snowstorm?


Driving in a snowstorm is perilous, but there is a technique to it. Since the roads are slippery, instead of keeping your foot on the accelerator, you keep your foot by the brakes. And when things get dicey you pump the brakes gently to ensure the car doesn't slide out of control. It seems like that's where China's policymakers are now. Conditions are so slippery that their feet have moved off the gas and are now hovering over the brakes. They may be sliding forward at the moment, but eventually they're going to have pump the brakes to avoid spinning out of control.


Reuters: Tesla shares skid after first-quarter deliveries disappoint


At least four Wall Street brokerages cut their price targets on the company’s stock, citing concerns about profitability and revenue after deliveries of the higher-priced luxury cars more than halved compared to the fourth quarter. RBC analysts called Model S/X deliveries “very disappointing” and estimated the numbers would translate to a more than $1 billion shortfall in revenue compared to previous estimates. The company had already flagged in February that it expected to post a first-quarter loss as it launched its cheaper $35,000 version of the Model 3 sedan. In the quarter, Tesla delivered 50,900 Model 3s, the linchpin of its growth strategy, falling short of analysts’ estimates of 58,900, according to IBES data from Refinitiv. The company said it had delivered only half of the quarter’s numbers by March 21, with 10,600 vehicles still in transit at the end of the quarter. By comparison, only 1,900 vehicles were in transit at the end of the fourth quarter. Cowen and Co analysts said that the delivery and transit details suggested “cash was likely dangerously low” after Tesla paid off a $920 million convertible bond obligation in cash in the beginning of March.

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