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A year of living badly

7 min read

The past year had its shining moments of achievement and success. But 2018 might also have earned the label “The Year of Living Badly.”

It was peppered with quarrels, smackdowns, mishaps, regrettable comments and all of the usual ill-advised goofs that make the auto industry the daily drama it is.

Frank Stronach built a multibillion-dollar fortune in auto parts before retiring as chairman of Magna International in 2011. But leaving his daughter, Belinda, in charge of running the family’s other diverse holdings, an entertainment and horse-racing conglomerate of 253 businesses called the Stronach Group, has not suited the Magna founder. In October, Stronach, 86, filed a $397 million lawsuit in Ontario against Belinda, 52, a former Magna executive and Canadian politician, alleging mismanagement of the assets. Stronach also named two of his grandchildren as defendants. In November, Stronach’s son, Andrew, 50, filed his own lawsuit against his sister with similar complaints. According to the suits, the Stronach Group has faced liquidity problems in recent years and has been the source of father-daughter management squabbles.

Tesla CEO and founder Elon Musk was stripped of his chairman role after setting Wall Street ablaze with a casual statement via Twitter that he was considering taking Tesla private for $82 billion. The stunning assertion could have had colossal impact on investors holding Tesla stock. Musk indicated that he had the “funding secured” to do the deal. The Securities and Exchange Commission responded by filing suit in federal court in New York accusing Musk of misleading investors with a false public statement. In September, the SEC settled with Musk, who agreed to step down as chairman and pay a $20 million fine without admitting wrongdoing.

If the SEC lawsuit wasn’t enough, Musk dared to stir up more trouble for himself by appearing in a YouTube podcast interview while smoking weed. Recreational marijuana use is legal in California. But that legal point did not stop all hell from breaking loose for Tesla — again. First, the resulting public reaction sent the company’s stock price down by 6 percent. Critics also pointed out that smoking weed was a violation of Tesla’s own employee conduct policy, and one ex-Tesla worker surfaced in the news complaining about the hypocrisy of her own firing by the company for medical use of cannabis.

For the past 19 years, Nissan Motor Co. has become the shadow of the man who pulled it back from ruin in 1999, Carlos Ghosn, its long-serving CEO and chairman. In November, all fuzzy affection went out the window when Ghosn’s handpicked successor as CEO, Hiroto Saikawa, 65, accused Ghosn of several years of financial improprieties. Ghosn was arrested and taken to jail in Tokyo, where he was later charged. Ghosn, 64, was locked in a spartan cell with a straw mat to sleep on through the holiday season, undergoing daily police interrogations and living on a meager diet of mostly rice. Ghosn is accused of deferring about one-half of his compensation package until some unspecified time in the future, thereby keeping it out of Nissan’s public disclosure documents and away from public scrutiny and possible criticism. It is not clear whether that practice, which Ghosn allegedly followed for several years, was illegal. What is clear is that Nissan is probably no longer wondering how to thank Ghosn at his retirement party for his 19 years of leadership.

The Germans were no less forgiving of one of their prominent industry leaders in 2018. Authorities took Audi CEO Rupert Stadler into custody in June, holding him personally responsible for a diesel emissions scandal and cover-up that has boiled at Volkswagen and its affiliated companies for years. Stadler, who had run the luxury automaker since 2007, was taken to the slammer over his alleged role in dieselgate, the automaker’s admitted practice of relying on illegal “defeat devices” that allow its vehicles to improperly pass pollution emission tests. Audi also agreed to pay a fine to the German government of approximately $925 million over the scandal.

Industry executives have been biting their lip ever since President Donald Trump took office, with his tweeted vows to throw out the North American Free Trade Agreement, challenge vehicle importers and roll back the drive to higher fuel economy standards. In 2018, he lived up to his promises — even as many around the industry trembled in anxiety. POTUS pain point No. 1 was the imposition of tariffs on imported steel and aluminum. Trump championed U.S. production, much to the delight of domestic producers, but not so much to automakers and suppliers who rely on complex supply lines of metal objects passing back and forth across American borders. Tariffs added higher costs to products ranging from raw aluminum ingots to finished production tools coming out of Ontario mom and pop shops.

POTUS pain point No. 2 came as Trump turned the whip onto China as a manufacturing base, slapping tariffs on $250 billion worth of Chinese goods, including car parts, and threatening tariffs on $267 billion more.

POTUS pain point No. 3 came in the form of public tongue lashings against automakers. After branding Germany’s auto exporters as a threat to U.S. security, Trump took General Motors CEO Mary Barra to task for GM’s decision to close plants in the Midwest — tacking on the threat of a punitive action against GM. Citing the automaker’s 2009 federal bailout, Trump tweeted, “The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including … for electric cars.”

It was a fresh marketing pitch for consumers with more than a little money: Instead of buying a new vehicle and being locked into the purchase for two or three or more years, why not let buyers have a subscription? They could pay one monthly price for a vehicle that includes insurance and maintenance coverage, and they could trade the car for a different model when the mood struck. There was a certain allure to the idea, and luxury brands glommed onto it in 2018. But the high program fees — ranging from $800 to $2,000 a month — found fewer takers than expected. By year end, Lincoln was admitting surprise at how little interest its subscription plan was seeing, and Cadillac was reportedly on the verge of phasing it out. Volvo’s Care by Volvo subscription program, which has been a relative success, triggered a rebellion in California, where dealers complained to state regulators that Volvo’s program was violating its dealer franchise agreements.

One dark night in March, a 49-year-old woman in dark clothes was crossing a multilane street in Tempe, Ariz., walking her bicycle out of a cluster of roadside trees, not in a designated pedestrian crosswalk and under less than favorable street light, when one of Uber’s autonomous-drive test vehicles — rolling along below the speed limit in self-driving mode with a human driver behind the wheel — struck and killed her. It was a tragic accident, but the news quickly became a publicity headache for an auto industry that has put all of its chips on the future of self-driving vehicles. Testing immediately halted at Uber and Toyota, and advocacy groups spent the next several months questioning the soundness of autonomous driving in general, and the degree to which it could or should be regulated. Police later claimed the Uber backup driver had been streaming a TV show on a cellphone at the time of the collision. Observers still noted the specific difficulties of the Tempe accident — the dark night, the poor street lighting — and reasoned that even a fully engaged human driver would have been challenged to avoid the pedestrian. But that was precisely the problem, critics responded: Autonomous technologies are supposed to deliver safety beyond human error.

Meridian Magnesium Products of America has done well in the past few years landing contracts for its magnesium dashboards — large, lightweight cross members that help automakers trim vehicle weight. Meridian has been supplying the Ford F-150 pickup, BMW X5, Mercedes-Benz crossovers and FCA vans, among others. But on May 2, a fire at Meridian’s Eaton Rapids, Mich., plant halted production. Whose fault the accident was or what started the fire at a plant with no record of previous safety violations has not been reported. Two Meridian workers were injured, and the production crash caused supply chain problems across the U.S. industry, including a halt in customer vehicle output. Chief among them was Ford, which had to mobilize logistics teams to get its all-important profit-making F-150s back into production using alternative suppliers and backup supplies out of Europe. By summer’s end, Ford would blame the fire for a $600 million drag on earnings.

Bad luck seemed to stalk Faraday Future’s billionaire CEO Jia Yueting all year. For the record, good luck has been in short supply for the China-based U.S. automaking startup’s founder for some time, as financial problems from old ventures dog him. In 2017, Jia backed out of a plan to construct a billion-dollar plant in Las Vegas for Faraday electric vehicles, instead opting to renovate a former tire factory in Silicon Valley for the project. Faraday’s cash ran out in 2018 and it laid off hundreds of its California work force of 1,000. Faraday, seen as a Chinese-backed direct competitor to luxury EV maker Tesla, attracted $2 billion in new equity from the Chinese insurance company Evergrande Health, with the first $800 million arriving in cash in early 2018. But by midyear, almost all of those funds had been spent and Jia was recently found fighting Evergrande in court over its effort to force him to step down.

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