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The CEOs of General Motors and Ford claim the business world needs a shift in priorities, Geely’s hard hits in the home market foretell of more bad things to come, Walmart is suing Tesla and much more on The Morning Shift of Wednesday, August 21, 2019.


1st Gear: Doesn’t That Sound Nice

Let’s start the day with the thing you all come to Jalopnik for: a big discussion about shareholder primacy.


This concerns us because this week, General Motors CEO Mary Barra and Ford CEO Jim Hackett were among 181 signatories of a declaration by something called the Business Roundtable that says now, unlike in decades past, maximizing value for shareholders and owners should not be the main priority of a corporation.

From The Detroit News:

The heads of General Motors Co., Ford Motor Co. and dozens of other leaders at some of the world’s largest companies are abandoning the long-held view that shareholders’ interests should come first. The purpose of a corporation is to serve all of its constituents, including employees, customers, investors and society at large, the Business Roundtable said Monday in a statement. Jamie Dimon, the CEO of JPMorgan Chase & Co., heads the group. “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group said in the statement. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.” The 181 signatories include the heads of several Michigan-based companies: GM’s Mary Barra; Ford’s Jim Hackett; Dow Inc.’s Jim Fitterling; Steelcase Inc.’s James Keane; and Whirlpool Corp.’s Marc Bitzer. The CEOs of the six of the biggest U.S. banks signed the statement.

Some context here is important, because the car industry has a lot to do with this one.

For the past century—but especially since the 1970s or so—most big businesses have operated under the principle that the only thing that matters at the end of the day is making money for the shareholders and/or owners. That’s it. That’s the only real responsibilities businesses have, beyond any pesky legal or regulatory ones. (And there’s ways to deal with those things, too.)

Milton Friedman was a champion of this in the 1960s. But it could be argued it actually starts with Dodge V. Ford, a 1919 legal case over what to do with a capital surplus at Ford. You can and should read more about this in depth here, but the important takeaway is that the Michigan State Supreme Court ruled “a business corporation is organized and carried on primarily for the profit of the stockholders.”


That idea has dominated the business world for decades now. Proponents say it’s easy, it’s common sense and it enables businesses to do what businesses are supposed to do: make money for the people who provided you with capital in the first place.


But the idea’s come under fire more and more in recent years, especially as average wages remain stagnant. Critics say the philosophy is too short-sighted, too centered around quarterly returns instead of long-term value, and that it ignores environmental and social responsibility as well as the welfare of workers and customers. To many people, it doesn’t feel like capitalism—let alone totally unrestricted capitalism—is lifting people out of poverty en masse anymore, or even out of the middle class.

Lest you jump into the comments to call me an angry socialist, here is Jamie Dimon, who definitely cannot be described as an angry socialist:

The latest shift in thinking is an implicit recognition that corporations have a larger responsibility than a return on investment and also that more Americans are living under duress today. Wage gains have been nonexistent to moderate for years. Economic research as well as government data point to an era in which Americans must do more for less. “The American dream is alive, but fraying,” Dimon said in a prepared statement.

So this statement, signed by the heads of Apple, Bank of America, Chevron and a bunch of other companies is, on its face, a big deal. It says companies have a responsibility to workers, their communities, their suppliers and their customers. It recognizes that businesses need to do more than just make already wealthy people more wealthy. In theory, at least.


In practice? You’re right to be deeply skeptical of this, as I am. From a New York Times report on the statement:

There was no mention at the Roundtable of curbing executive compensation, a lightning-rod topic when the highest-paid 100 chief executives make 254 times the salary of an employee receiving the median pay at their company. And hardly a week goes by without a major company getting drawn into a contentious political debate. As consumers and employees hold companies to higher ethical standards, big brands increasingly have to defend their positions on worker pay, guns, immigration, President Trump and more. “They’re responding to something in the zeitgeist,” said Nancy Koehn, a historian at Harvard Business School. “They perceive that business as usual is no longer acceptable. It’s an open question whether any of these companies will change the way they do business.”


(The word “climate” also isn’t mentioned in that statement at all, though “protect the environment” is in there. )

I suppose it’s “good” that the heads of GM and Ford are saying out loud that many of their actions are serving to only benefit owners and stockholders on a quarterly basis, and that that probably hasn’t been stellar for their workers or for the people who are supposed to actually buy their products. But I’ll believe a turnaround when I see it. This is still the guiding ethos taught in most every business school in America. GM’s been closing American plants and moving jobs to other countries despite being handsomely profitable. Ford flubbed a major mechanical problem over a number of years. And I don’t expect negotiations with the United Auto Workers to be full of some newfound benevolence and kindness overnight.


So if the goal is to “redefine the role of business in society,” as the Times put it, it’s going to take a lot more than a press release.

2nd Gear: Geely Getting Nervous

Now, back to your regularly scheduled programming: the auto sales downturn in China.


Reuters reports China’s Geely—owner of Volvo, Lotus, Polestar and its homegrown brands—claims a 40 percent net profit decline for the first half of 2019. The decline in demand in the world’s biggest new car market has hit every automaker hard lately. From the story:

China’s overall auto sales fell 4.3% in July, down for a 13th consecutive month, according to data from the country’s top industry body, the China Association of Automobile Manufacturers (CAAM). Although the Chinese government had started to introduce measures to stimulate automobile demand, the passenger vehicle market in China has shown little sign of improvement. Recently, the China-U.S. trade dispute appears to have worsened further, resulting in more uncertainty for passenger vehicle demand in China in the remainder of the year, the filing said. Last month, Geely cut its sales target for the year to 1.36 million units from 1.51 million units, seeking to reduce dealers’ inventories amid uncertainty in the overall car market.


Considering the extent to which every automaker put eggs in the China basket, this is not good.

3rd Gear: Walmart Sues Tesla

I feel like there’s a lot of jokes I could make here, but I used up all my cleverness on the shareholder primacy stuff. Anyway, the lawsuit is about solar panels. Via Reuters:

Walmart Inc on Tuesday sued Tesla Inc, accusing it of “widespread negligence” that led to repeated fires of its solar systems and asking a court to force Tesla to remove solar panels from more than 240 of its U.S. stores. Solar energy systems installed and maintained by the electric car maker were responsible for fires at seven locations, with dozens showing hazardous problems such as loose wiring and “hot spots” on panels, according to court papers filed in New York State Supreme Court.


Tesla didn’t respond to Reuters for comment, but I’m sure if we had asked, they would have come back with some kind of statement about how non-solar panel roofs catch fire all the time and those are never news, so this isn’t a story either.

4th Gear: Dieselgate Makes Daimler Revisit Its Van Game

As we’ve reported extensively, Dieselgate has been much more than just a Volkswagen problem. Many automakers have been slammed with fines, lawsuits and ever-tightening emissions standards since the diesel cheating scandal broke. Lately at Daimler, that’s meant a review of the truck and van portfolio. Via Reuters:

“In order to optimize our performance, this also means reviewing and realigning our strategic orientation,” Breitschwerdt, head of Mercedes-Benz Vans, said at the launch of an electric Mercedes-Benz van on Tuesday. Daimler will seek cost-saving opportunities, including through a review of the company’s’ product portfolio, he said. “We are looking at what we have and what we could have,” Breitschwerdt said, adding that the X-Class midsize pickup truck was not delivering the sales volumes the company had hoped for. “The X-Class is a niche product,” the Daimler manager said at an event in Sindelfingen near Stuttgart. Furthermore Mercedes-Benz was not interested in entering the full-sized pickup truck segment, Breitschwerdt said.


RIP the X-Class, a truck I maintain would’ve sold well here in America.

But the new electric Mercedes-Benz EQV makes a ton of sense in this light. People need vans with range and hauling prowess. EVs could take the place of certain workhorse diesel vehicles.


5th Gear: Nissan And Infiniti Dealers Hit With Computer Outage

From Automotive News:

A power outage on Sunday at a Nissan North America data center in Denver has shut down a key communications system that Nissan and Infiniti dealers rely on to order cars and parts, obtain product rebate information, check on recalls, and file warranty claims. A Nissan North America spokesman on Tuesday could not say when the system, referred to as NNANet, will be restored. The outage has hobbled Nissan and Infiniti dealer operations, leaving them unable to report sales, process warranty claims or locate available vehicles at other dealerships. It was not clear late Tuesday how many of the automaker’s approximately 1,280 Nissan and Infiniti dealers are affected. “I’ve never seen anything like this,” said Dave Wright, dealer principal at Dave Wright Nissan-Subaru in Hiawatha, Iowa.


Our deepest condolences.

Reverse: Oldsmobile Was Cool

Olds Motor Works founded Ransom Eli Olds of Lansing, Michigan, founds Olds Motors Works–which will later become… Read more


One of my favorite dead American brands. A 442 is a muscle car with some class. It says, “I love smoky burnouts, but I’ve also read at least one book.”

Neutral: What Needs To Change?

Okay, let’s say GM and Ford—we’ll start with them—decide to really act on this statement. Hackett and Barra wake up today with changed hearts like Scrooge on Christmas morning.


What has to happen for things to get better? Wage hikes for workers? Capping executive pay? More CSR initiatives?