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Fiat Chrysler Automobiles Negotiating to Settle UAW Case

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Rising Ethical Pressures on the Automotive Industry

Federal regulatory filing revealed a years-long conspiracy between Fiat Chrysler Automobiles (NYSE:FCA) and United Auto Workers. Now, Fiat Chrysler Automobiles NV is negotiating a settlement aimed at resolving a federal criminal investigation into whether executives conspired to pay bribes and break labor laws, according to a federal regulatory filing.

In addition to tax fraud, the investigation has led to charges of conspiracy to provide money or other things of value to both a UAW officer and UAW employees while acting in the interests of Fiat Chrysler Automobiles US, which is a direct violation of federal labor laws. Negotiations “are focused on Fiat Chrysler submitting to government oversight for up to five years, paying less than $50 million in penalties and agreeing to make broad institutional changes to emerge from a bribery scandal that has led to eight convictions, including former FCA Vice President Alphons Iacobelli.” Detroit News reported that negotiations have continued and greatly depend on whether Fiat Chrysler agrees to admit guilt. Fiat Chrysler declined to comment but already revealed these settlement negotiations in a May 3 filing with the Securities and Exchange Commission in a required disclosure to shareholders of information that could affect financial performance and share prices.

The investigation has led to charges of tax fraud and other crimes against former FCA US LLC employees and UAW members. Fiat Chrysler CFO Richard Palmer wrote in the filing that the outcome is uncertain, but the resolution could involve payment of penalties and other sanctions. But on the upside, a penalty of $50 million or less to settle FCA’s role in the federal criminal investigation, even if the agreement would include government oversight,  would be  only a fraction of the $800 million FCA paid early this year to settle diesel claims, or the billions Volkswagen AG (VWAPY:OTC)  paid as redemption for its global diesel scandal. Speaking of, Volkswagen just announced on Wednesday that it opened up a 100% carbon-neutral data center in Norway. This is a very important piece of the puzzle when it comes to decreasing the company’s footprint, showing that lower carbon emission go far beyond just producing pollution-free vehicles. By depending fully on hydropower, the result of this effort will equate to taking more than 1,000 vehicles off the road as this kind of working will save more than 5,800 tons of carbon dioxide from entering the atmosphere each and every year. The company already has one similar data center in Iceland, another location with favorable conditions. But going back to Fiat, even with the potential fee being realised, it will still be dramatically less than the $900 million its fierce competitor General Motors (NYSE: GM) paid to settle claims for faulty ignition switches implicated in 400 deaths.

But the ongoing corruption scandal entangling union training centers funded by all three Detroit automakers also has demonstrated that FCA executives wooed union leaders with cash, gifts and other benefits. The scandal involves even the late CEO Sergio Marchionne and has shaken up the top ranks of the Detroit-based auto industry.

As for UAW, the status of any federal negotiations is unclear. Vice President Norwood Jewell, head of the union’s FCA department, along with several other officials, has been convicted on charges of violating federal labor laws and receiving illegal payments, gifts and benefits from FCA executives. So Fiat Chrysler is definitely stuck and doesn’t have room to manoeuvre so it will just have to drink its medicine at some point. But, things aren’t looking up for the overall industry either.

On June 6, 17 of the world’s largest automakers sent a letter to President Trump. They asked him to compromise with California on vehicle-emission standards. But Fiat was not among those companies and a holdout stance is not a usual position for the automaker.

General Motors even suggested a national mandate for electric vehicles in 2021 in its written comments to regulators. Honda Motor Co NYSE: HMC Honda Motor Co. called for “strong 2025 targets” and said it did not support a Trump administration proposal to freeze the standards.  Ford Motor Co (NYSE: F) top executives publicly increased clean-car standards through 2025 without asking for any sort of slowdown or a pause.

When it comes to fuel policies, Fiat Chrysler Automobiles (NYSE: FCAU) ‘s model lineup has the lowest average fuel economy among the six biggest automakers. Fiat ranked last among 13 car companies for both fuel economy and carbon emissions in the EPA’s evaluation of 2017 model-year sales. Almost every major manufacturer is boosting production of higher-emission SUVs and trucks for the U.S. market to counteract the dropping regular car sales. Fiat Chrysler has ramped up plans to electrify its lineup, but mostly to stay competitive in China and Europe where emissions standards are tougher. The Italian-American company is expected to benefit from Trump’s freeze as it has been a slacker as far as industry standards go.

Two years ago, automakers have appealed to Trump, seeking relief and asking for a compromise between California and federal regulators. Their desire was to avoid long years of uncertainty that these court-room battles bring. Fiat Chrysler only asks for the final word that defines the final rule to be based on the realities of the market as hybrid and plug-in electric vehicles accounted for only 1.5% of U.S. vehicle sales through July of last year, according to IHS estimate.

Fiat is going electric with Europe. Even PSA Group’s Peugeot (NASDAQ:PSA) has revealed an electric version of its new 2008 urban crossover with a range near 200 miles and fast charging properties, making it perfect for the city and beyond. As for the industry as a whole, the norms regarding fuel and carbon dioxide emissions, but also concerning ethical behaviour, are getting stricter day by day no matter which continent you are at, and auto makers will have to find a way to adjust. Future is guaranteed to no one, but without adhering to these higher standards, there are zero odds for profitability and perhaps even survival to enter the equation.

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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