Elon Musk Sues California County, Vows to Move Tesla to Texas
Will the Tesla CEO make good on this threat?
Good morning and welcome back to Speed Lines, The Drive's morning roundup of what matters in cars and transportation. Today we're talking about Tesla firing back at California, and the rest of the auto industry's cautious reopening of North American car factories.
'I'm Not Messing Around'
Elon Musk desperately wants to get his Fremont, Calif. factory open again. It's turning out to be not that simple, as the government of Alameda County has told him and Tesla they cannot do so quite yet. Now, in typical Musk-ian fashion, the whole thing is escalating to lawsuits and Twitter fights.
To recap briefly: California Gov. Gavin Newsom is allowing for businesses and manufacturing sites to reopen, but he's deferring to regulations from local governments. Last week Musk sought to have the Tesla plant up and running by Friday, but the county put a halt to it. After tweeting he'd file a lawsuit and examine moving the automaker to "Texas/Nevada" on Saturday, he made good on the first promise.
A federal lawsuit was filed against the county in the Northern District of California on Saturday afternoon (the case number starts with 4:20, too, because Musk never misses an opportunity to troll) seeking to void the county's decision and alleging various constitutional violations.
As for Musk, he says he's done with California now. Tesla remains California's last automaker and one of its biggest manufacturers; his threats were met with a mix of support and hostility from various elected officials.
Tesla insists that it's taking aggressive safety precautions as it seeks to reopen its factory, and says that it has experience in doing so from running its Shanghai factory closer to the source of the viral outbreak. Having said that, it's crucial to remember that this is a vital year for Tesla with the release of the Model Y, and Musk—who has been consistently wrong on coronavirus matters so far—remains on the verge of a $750 million payday that won't happen if his factory stays closed. So what matters most here: that, or the safety of the people who actually build the cars?
Meanwhile, At The Big 2.5
General Motors, Ford and Fiat Chrysler are all poised to slowly reopen their North American plants next Monday, May 18. Ahead of that, the supplier companies that make various parts and components are starting up sooner.
This will not be an immediate and full restart. Caution is the name of the game at OEMs and suppliers alike, and, spurred on by a tough auto industry union, safety measures will be aggressive. Here's The Detroit News on some of that:
Manufacturing's activation, however, is a slow one. Detroit's three automakers won't begin making vehicles until next week, but their suppliers and other manufacturers this week are reopening facilities, retraining employees and restarting production. And they're phasing in the process in hopes of avoiding new virus cases.
“We don’t want to jump in right away with everybody back and then things go haywire," said Trent DeSenglau, United Auto Workers Local 155 chairman for Detroit-based American Axle & Manufacturing Holdings Inc.'s Fraser plant that makes transmission components, shafts, gears and other metal parts for the auto industry. "They are doing a measured approach, which is what we asked them to do."
American Axle recalled at the Macomb County plant one shift of three for the week starting at 6:45 a.m., DeSenglau said. A tent outside had workers drive through to get their temperatures checked and pick up masks and other protective equipment before entering the facility. The new measures inside the plant, including hand sanitizing stations, helped ease some of the workers' concerns.
"My facility is doing a good job," DeSenglau said. "They are listening to us."
This is going to end up being a bellwether for the rest of U.S. manufacturing. If the auto industry can do this right, without surges in infections or expensive stops and restarts, perhaps it can be the playbook for the rest of the manufacturing sector.
GM Holds The Line Better Than Most
You can't say that GM is having a "good" year in all of this; no one is, really, and it's suffering from the same factory closures and plummeting new car sales like every other automaker. But it came into this year off a strong performance in 2019, posted a surprise profit in Q1, and is actually posting decent truck sales at the moment. (The trucks will save America's automakers, remember?)
As a result, GM is getting some rare praise from Wall Street—something that hasn't been the case in recent years, as analysts doubted the legacy giant's ability to weather such a downturn. And that same love isn't being extended to GM's competitors.
Here's Automotive News:
GM's ability to stay in the black during a challenging first quarter earned the company rare plaudits from Wall Street. Deutsche Bank analyst Emmanuel Rosner upgraded his rating of GM's stock to "buy" last week.
"GM's strong 1Q performance and forward-looking outlook, in our view demonstrate the benefit from its proactive actions to transform the business, right size its costs and boost profitability," Rosner said in a report to clients.
After drawing $16 billion from its existing credit lines in March, GM sold $4 billion in bonds last week and was talking with banks to borrow $2 billion more in an effort to maintain an investment-grade credit rating, Bloomberg reported. GM is rated one notch above junk status, and falling below that threshold could rattle shareholders and make it harder for the company to continue making all of its planned investments.
S&P Global Ratings downgraded Ford to junk status in March and placed GM on credit watch. Ford has since postponed its planned launch of an autonomous vehicle commercial service from 2021 to 2022. Ford also canceled a project to jointly develop an EV with Rivian.
Though product reveals and debut events are being postponed, that story says GM remains full steam ahead on its expensive investments into electrification. Expect a deeper dive on that soon here at The Drive.
On Our Radar
Coronavirus Slump Is Worst Since Great Depression. Will It Be as Painful? (Wall Street Journal)
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What Happens When the Only Restaurants Left Are Chains? (Grub Street)
Your Turn
What's your take on Musk's decision? What about Tesla's workers in all this?
