Canoo Spent Double Its Revenue On CEO’s Private Jet

Good morning! It’s Thursday, April 4, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

1st Gear: Canoo’s Money Takes Off

Canoo is in a real financial mess and is struggling to stay afloat. Despite these facts, the nascent electric vehicle maker spent twice as much as its 2023 revenue on private jet usage for its CEO. This is what we in the business call “a bad look” and “financially stupid.” From Automotive News:

The company spent $1.7 million reimbursing Aquila Family Ventures, an entity owned and operated by CEO Tony Aquila, for the usage of a private aircraft for purposes related to the business, Canoo said in its annual 10-Q filed with the SEC on Tuesday. The figure represents about twice the $886,000 the company brought in as revenue in 2023.

[…]

On its website, Canoo pitches the sustainability of EVs and says that it “is passionate about the creation of a Net Positive transportation economy — one that goes beyond Net Zero to put more back into society, the environment, and the global economy than it takes out.”

Environmental activists, however, have become vocal critics of private jet use because of greenhouse gases and other emissions.

A study by Transport & Environment, a European clean transport nonprofit, found that private jets are five to 14 times more polluting than commercial planes per passenger.

This private jet fiasco comes at a really bad time for Canoo, an automaker that is facing a “growing concern for management” as it blasts through its capital. Its cash and cash equivalents reportedly fell 20 percent from the prior quarter. That’s good for just $6.4 million in the fourth quarter of 2023.

Canoo’s financial struggles underscore growing challenges among EV manufacturers as they face slowing demand.

[…]

“We believe that our existing cash resources and additional sources of liquidity are not sufficient to support planned operations for the next 12 months,” the company said in its 10-Q. “Our ability to continue as a going concern will depend on our ability to obtain additional capital.”

Canoo has roughly six months left of working capital to cover its free cash flows, according to an Automotive News analysis.

The company has some access to cash, including approximately $115 million of nondilutive financial incentives from the state of Oklahoma and Oklahoma City, subject to milestone-based objectives.

Canoo said it plans to raise more capital through pursue equity and debt financings to fund expenditures.

Canoo’s share prices fell from a high of $5.80 on January 8, 2024, to $2.47 at close on April 3. That’s, uh, not great, if I’m being honest.

Listen, I’m no business wiz or anything, but if I were running a company that I wanted to not fall apart, I’d probably try not to spend double its revenue on private jet flights. I don’t know. That’s just me.

2nd Gear: It’s The End Of Days For The 2024 Chevy Bolt

2024 Chevrolet Bolt and Bolt EUVs are just about gone from U.S. dealerships lots. There are just a few thousand left, and they’re mostly on the West Coast. To date, the Bolt and Bolt EUV have been GM’s best-selling electric vehicles, and they’re dying at a time when GM is struggling to get its next generation of EVs out the door. From the Detroit Free Press:

But the Bolt EVs use General Motors’ previous generation propulsion technology. GM’s newer EVs, such as the GMC Hummer, Chevrolet Blazer EV or Cadillac Lyriq, use the automaker’s proprietary Ultium propulsion system. Therefore, GM stopped production of the Bolt and Bolt EUV — an SUV-styling of the all-electric vehicle — at Orion Assembly plant in Orion Township, in December.

The nameplate will continue. CEO Mary Barra said the next generation of Bolt EVs will arrive in 2025 using Ultium. She did not provide vehicle details or say where it would be built. GM is retooling the Orion Assembly plant to build future Chevrolet Silverado electric pickups by late 2025.

But don’t expect the current iteration of the vehicle to be available for long.

“Last year’s production of the Bolt and EUV barely outpaced sales in the U.S., not including exports to Canada or Mexico,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “With sales averaging just over 4,000 units a month at the end of 2023, any over-build last year will be absorbed shortly. Since production ended in December, only a handful of leftover Bolts should remain in dealer hands by the start of summer.”

Earlier this week, a Chevy spokesperson told Freep that GM ended 2023 with about 10,000 Bolts and Bolt EUVs in stock across the country. GM’s original plan was to sell them all off in the first quarter of this year, and that goal was nearly completed. We’re at the very beginning of Q2, and there are only a few thousand of the cheap EVs left.

“Bolt EV and EUV sell-down is going as planned and expected,” Lyons said in an email. “We have modest availability in all regions still, with the Western Region having the most available inventory (by design) given the region’s affinity for EVs. The Bolt sell-down coincides well with the ramp up of (Chevrolet) Blazer EV and the launch of (Chevrolet) Equinox EV and Silverado EV RST in coming months.”

For all of last year, GM reported a record of 62,045 sales of the Bolt and Bolt EUV. That’s a 63% increase over 2022 sales of the cars. The Bolt has served as an entry vehicle for Chevrolet with over 70% of buyers trading in a non-GM vehicle for a Bolt, Lyons said.

The Bolt’s temporary replacement, the 2024 Blazer EV, started shipping to dealerships in late July 2023. But GM had to put a stop-sale on the vehicle on Dec. 22 until March 8 to fix software problems. The vehicle is built in Ramos Arizpe, Mexico. Since restarting sales, GM also lowered the price of the Blazer EV. For example, the LT all-wheel-drive Blazer EV had an original starting price of $56,715; it now starts at $50,195. After the $7,500 tax credit, the price would be $42,695.

The Equinox EV, another offering until the new Bolt arrives next year, is due out later this year and the first trim will be heavily loaded with content and start at $48,995. The base model, which will start at $34,995, not including the $7,500 federal tax credit, will arrive this year, after the first, more heavily contented trims.

It’s just about the end of the road for our little electric friends. May they traverse the road to Valhalla peacefully.

3rd Gear: Key Bridge Disaster Costs Auto Shipper $10 Million

Wallenius Wilhelmsen ASA, a Norwegian automotive shipping company (and one of the largest in the world) said it expects to take a $5 million to $10 million hit on its earnings following the collapse of the Francis Scott Key Bridge. From Automotive News:

The impact is a result of the reduction in logistics operations in Baltimore, one of its ships being unable to exit the port and other disruptions to operations, the company said in a statement. Some of the effects have been mitigated by the rerouting of cargo to and from other US terminals.

East Coast ports have been modifying their operations to absorb cargo diverted from Baltimore harbor, where salvage specialists have been clearing debris from the destroyed Francis Scott Key Bridge.

The company said its vessel Carmen — which according to shipping data is among the biggest car carriers in its fleet — remained stuck in Baltimore’s port, with the ship and its crew ready to sail as soon as the channel was reopened.

Recovery teams opened a second channel enabling smaller vessels to navigate the Port of Baltimore on Tuesday, but most commercial shipping remains blocked by the collapsed bridge and stranded container ship Dali that brought the structure down a week ago.

“We have estimated that the aggregated provisional total financial impact on EBITDA of the situation is in the range of $5-10 million, assuming the disruptions last for up to a month,” Wallenius said in a statement on Wednesday.

“We currently expect the closure to last for weeks and have based our impact estimates on that assumption,” it said.

“Once open, we anticipate the terminal will also promptly resume normal cargo operations as vessels begin to make port calls as previously scheduled.”

“There is of course risk of delays to the anticipated reopening, or unforeseen challenges in the salvage operations.”

The Port of Baltimore handles more volume in cars and trucks, farm equipment and heavy machinery than any other port in the U.S. Now, those shipments are being sent to Newport News, Virginia; Newark, New Jersey and Savannah, Georgia.

Insurance companies could end up paying big for the situation. Analysts tell AutoNews it could cost as much as $4 billion. It would be a record for shipping insurance loss.

4th Gear: Elon Musk Boosts Tesla Pay To Stop AI Poaching

Tesla CEO Elon Musk has acknowledged that the automaker is making a special effort to keep its artificial intelligence specialists at the company. A number of them have left Tesla in the past year to join Musk’s AI venture. From Bloomberg:

Tesla is increasing compensation for its AI engineering team, contingent on performance milestones, Musk wrote on X, his social media network. In responding to a report by The Information on how his startup xAI has poached four engineers from Tesla, the chief executive officer blamed “the craziest talent war I’ve ever seen!”

An exodus of personnel from Musk’s most valuable company to his newest may exacerbate concerns about conflicts and governance within the billionaire’s empire. In January, Musk said that unless he’s awarded around 25% voting control at Tesla, he prefers to develop AI and robotics products elsewhere. Two weeks later, a Delaware judge voided a massive stock award that Tesla’s board arranged for him in 2018.

Musk announced the formation of xAI in July of last year, after months of hinting that he wanted to build an alternative to the hit product ChatGPT. He played a pivotal role in co-founding OpenAI, the chatbot’s developer, but fell out with other leaders at the startup.

“As Tesla continues to become more focused on AI, this will eliminate a potential future conflict for Elon,” OpenAI said in a February 2018 blog post announcing his departure from the board.

After The Information reported on Wednesday that Ethan Knight, a member of Tesla’s team working on computer vision for advanced driving systems, left last month to join xAI, Musk said that OpenAI had tried to hire him.

“Ethan was going to join OpenAI, so it was either xAI or them,” Musk wrote on X. “They have been aggressively recruiting Tesla engineers with massive compensation offers and have unfortunately been successful in a few cases.”

Months after Tesla lost Andrej Karpathy, its senior director of AI, in July 2022, he rejoined OpenAI and worked on ChatGPT’s large-language model. Karpathy left the company early this year.

In November, Musk launched a ChatGPT competitor called Grok, and he has said that X investors (whoever those guys are) will own a 25 percent stake in xAI.

“There are over 200 excellent engineers in the Tesla AI/Autonomy team,” Musk wrote Wednesday in a post downplaying Knight leaving for xAI. “Tesla’s pace of progress with autonomy is accelerating.”

Now just imagine for a second if Musk paid Tesla line workers a more competitive rate. That would really be something, wouldn’t it?

Reverse: Harrison, That Loser