AD #4342 – Why Penske Automotive Wants to Go Private; VW Engineers Made Killing on Insider Trading; Waymo To Uber: Get Lost

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

WHY PENSKE AUTOMOTIVE WANTS TO GO PRIVATE
Here’s an interesting development in the world of automotive retail. Penske Automotive, which is publicly traded on the New York Stock Exchange, is going to go private. 72% of the company’s stock is owned by Roger Penske himself, his company Penske Corporation and the Mitsui bank. They’re proposing to buy up the other 28% of shares and have the company delisted. There’s a lot of advantages to going private. You don’t have to deal with SEC regulations, which means you save a lot on legal and accounting fees. You can focus on long-term projects without worrying about how that might affect next quarter’s earnings. Management has the freedom to pursue what it wants, without a bunch of second guessing from pesky analysts or shareholders. And you can hide financial data and business strategies from your competition. The only downside is that it cuts off your access to raising capital through selling your shares in the market. But it seems to me that Roger Penske and the Mitsui bank are not worried about getting access to capital.

VW DEMANDS TARIFFS ON CHINESE PHEVS
German auto executives know their domestic industry faces an existential threat from Chinese competitors and they know they’re running out of time to do anything about it. Oliver Blume, the CEO of the Volkswagen Group, is demanding that the EU immediately put higher tariffs on imported Chinese plug-in hybrids. So far those tariffs only apply to battery electrics. But Chinese automakers have captured over 28% of PHEV sales in Europe this year, and the top 3 selling PHEVs were all Chinese. And they’re only getting started. But here’s the problem Blume faces. He needs at least 10 other EU members to approve the tariffs. And countries that don’t have any car factories are more interested in getting access to cheap Chinese cars, than they are in helping out Volkswagen or other European automakers. And here’s the biggest irony of all. Volkswagen strongly opposed any tariffs on Chinese EVs when that vote came up in 2024, and Germany voted against them. But now that VW is facing up to the fact that it has to close 4 assembly plants in Germany and get rid of 100,000 German workers, it suddenly sees the wisdom in applying tariffs to Chinese cars.

AUDI SINKS EVEN FURTHER
Audi released its second quarter numbers today, and the numbers are all going in the wrong direction. Sales fell more than 8% over the last three months. Revenue dropped more than 12%. Its operating profit fell 3% and its operating profit margin is now barely over 3%. Remember, only 4 years ago, Audi’s profit margin was over 16% and the company was minting money. And this is a good example of how quickly your fortunes can turn in the automotive industry. One day you’re sitting on top of the world, and the next day you’re searching for loose change under the couch cushions.

OLD VISTEON COMPARED TO TODAY
The future looks grim for the VW Group. But that doesn’t mean it’s going to go out of business. It’s really hard to kill any kind of car company. A good example is the supplier Visteon. When it was spun off from the Ford Motor Company in the year 2000 it had 70,000 employees. Then the wheels came off the cart. It lost business left right and backwards. Today it’s a much smaller company with a much smaller line of products and far fewer plants. Instead of 70,000 employees it now has 10,500. And yet its revenue today is $1 billion a year higher than it was back then. Its operating profit is 6 times higher. And its profit margin is over 13%. Investors like what they see. Visteon’s stock is up almost 7% this year.

VW ENGINEERS MADE KILLING ON INSIDER TRADING
Ok, back to Volkswagen for a minute. Two Volkswagen engineers were arrested for insider trading with Rivian stock. The two of them knew VW was about to sign a massive deal with Rivian, so they went out and bought Rivian stock, before the deal was announced. One of the engineers made $250,000 after Rivian’s stock jumped 23% after the JV was announced and the other made $50,000. One of the engineers also gave the info to a family member, who made $12,000. The engineers were charged with conspiracy and securities fraud and they face up to 25 years in prison if they’re convicted of the most serious counts. Both of them work at VW’s and Rivian’s software and engineering joint venture called RV Tech that’s based in Palo Alto.

WAYMO TO UBER: GET LOST
At first it looked like a marriage made in heaven. Waymo’s autonomous technology combined with Uber’s app and network for ridesharing. It was not a joint venture, only a commercial agreement, but now Waymo has decided it really doesn’t need Uber any more. Uber currently offers rides in Waymo vehicles through its platform in two cities, Atlanta and Austin. But Bloomberg reports Waymo told Uber it’s going to launch its own service in those cities with its own app starting in 2028. Waymo’s vehicles will remain in the Uber fleet through at least May 2028, which is the duration of their contract. This is a big blow to Uber’s robotaxi efforts. While it has formed partnerships with other autonomous companies, their services are at a smaller scale than Waymo. And Wall Street is also skeptical about Uber’s future with its stock falling 20% so far this year.

TOYOTA, VOLVO, DAIMLER TEAM UP ON FCEV TRUCKS
Are fuel cells ever going to catch on? Maybe in medium and heavy-duty trucks they will. That’s because most trucks run a specific route every day, so it’s a lot easier to provide hydrogen fueling exactly where it’s needed. For example, California says it would need thousands of hydrogen stations to satisfy the needs of passenger cars with fuel cells, but would only need a couple of hundred of them to handle all medium and heavy-duty commercial trucks. And that’s why we see companies in the commercial truck business continuing to develop fuel cells. The latest is Toyota, Daimler Truck and Volvo. They’re forming a joint venture called cellcentric. The three of them will jointly develop, produce and commercialize fuel cell systems for big trucks and other heavy-duty applications. Europe, China, Japan and South Korea continue to heavily subsidize development in fuel cells. While the U.S. has a lot of research going on, the first commercial applications of trucks with fuel cells will undoubtedly show up where the money is.

And that wraps up today’s report, thanks for watching Autoline Daily.