Musk's Jokes Aside, Tesla's Tumult Continues: DealBook Briefing

Good Monday. Here’s what we’re watching.

• Elon Musk finally responded to last week’s bad news about Tesla.

• Trump continues to go after Amazon.

• China retaliated to President Trump’s steel and aluminum tariffs.

• Tech leaders have been keeping mum on Facebook.

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Not Funny

A little humor has not cleared the clouds over Tesla.

Shares in the company were once again sliding on Monday after the company’s C.E.O., Elon Musk, joked on April 1 that Tesla had gone bankrupt, an apparent attempt to make light of concerns that the electric car maker is straining under its debt load.

Tesla Goes Bankrupt
Palo Alto, California, April 1, 2018 -- Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can't believe it.
— Elon Musk (@elonmusk) April 1, 2018

Tesla’s stock is now down 35 percent from its high of last year. A major reason for the slide is the company’s struggles to meet production targets for its lower-priced Model 3 car. Delays, of course, raise questions about Tesla’s ability to become an efficient mass producer of autos. The company needs to sell a significantly higher number of cars to generate the cash to finance its business and meet debt payments. Tesla is expected early this week to release its first-quarter production and delivery numbers.

Electrek, a publication that covers electric vehicles, reported late Monday morning that Mr. Musk had sent out an email to employees saying that the company was producing more than 2,000 Model 3s a week. Tesla’s stock bounced after the report.

Tesla’s technology is also facing intense scrutiny after one of its Model X cars crashed on March 23, killing the driver. Tesla said late Friday that its assisted driving system, called Autopilot, was engaged in the car before its collision with a concrete divider. As our colleague Neal E. Boudette wrote:

The accident renews questions about Autopilot, a signature feature of Tesla vehicles, and whether the company has gone far enough to ensure that it keeps drivers and passengers safe.

Tesla’s website says one of Autopilot’s safety features is “Automatic Emergency Braking.” But a Tesla owner’s manual warns riders that this feature “is not designed to avoid a collision.” Wired recently reported that systems like Autopilot are not necessarily designed to detect static obstacles. In the words of one expert:

Raj Rajkumar, who researches autonomous driving at Carnegie Mellon University, thinks those assumptions concern one of Tesla’s key sensors. “The radars they use are apparently meant for detecting moving objects (as typically used in adaptive cruise control systems), and seem to be not very good in detecting stationary objects,” he says.

Doubts about the fundamental capabilities of Tesla’s Autopilot could crimp demand for its cars among a customer base that is often seeking the best technology.

Questions are also swirling around the timing of Tesla’s announcement about the crash. In its first communication about the accident, the company said:

Out of respect for the privacy of our customer and his family, we do not plan to share any additional details until we conclude the investigation.

The investigation is not over. Yet Tesla went ahead and provided its update on Friday. The motive for doing so is not clear. The United States National Transportation Safety Board on Sunday said it was “unhappy” that Tesla had released information about the crash.

- Peter Eavis

Trump continues to go after Amazon.

President Trump attacked the e-commerce again on Monday morning.

Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country...not a level playing field!
— Donald J. Trump (@realDonaldTrump) April 2, 2018

Monday’s tweet is the latest over the past five days from Mr. Trump criticizing Amazon. Over that period, Mr. Trump has accused Amazon of not paying enough taxes, of putting thousands of local retailers out of business and of using the United States Postal Service as its “Delivery Boy.”

Mr. Trump’s willingness to again single out Amazon and characterize it as a tax cheat and a job killer is a remarkable use of the presidential bully pulpit that could have serious implications for the company even without any formal moves by the federal government.

Amazon’s shares are down 4 percent and are off nearly 11 percent since Axios reported on Wednesday about Mr. Trump’s anger toward the company.

Context

• Amazon has said that the Postal Regulatory Commission, which oversees the service, has consistently found that its contracts with Amazon are profitable.

• The internet giant collects sales taxes on its own products in all 45 states that have one, but third-party vendors who sell products on the site often do not collect sales tax, a fact that rivals say is unfair. In addition, some municipalities complain that the company does not collect local taxes.

Critic’s corner

DA Davidson analyst Tom Forte wrote in a note via Reuters:

“President Trump’s comments are consistent with industry sources we have spoken to in the shipping industry, who often label Amazon’s deal with the USPS as a sweetheart deal. An argument, however, could be made that the USPS was losing billions before it expanded its service offerings for Amazon and would, still, likely lose billions if Amazon discontinued its use of the USPS tomorrow.”

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Why Facebook’s rivals have stayed mum

As Facebook lurches from crisis to crisis, other tech leaders like Marc Benioff and Tim Cook have criticized the company. But, for the most part, it’s in their culture to stick together, Nick Wingfield writes.

Part of the silence, people in the industry say, comes from a desire to avoid the business equivalent of bad karma — knowing that they, too, may one day face the buzz saw of public censure.

Customers have less trouble speaking out, but those looking to punish major tech companies are finding that but boycotts are easier said than done.

At Facebook, the turmoil continued this weekend after a 2016 memo was leaked in which Andrew Bosworth, a vice president, wrote, “Maybe someone dies in a terrorist attack coordinated on our tools. And still we connect people. The ugly truth is that we believe in connecting people so deeply that anything that allows us to connect more people more often is *de factor* good.”

Mr. Bosworth and Mark Zuckerberg disavowed the memo, but the fallout has been wide, with employees calling for a hunt to find leakers.

Critic’s corner

“Mr. Zuckerberg’s comments suggest he still doesn’t get it: What matters is not whether internet companies ‘deserve’ our private information but why we as consumers do not have meaningful ways to protect that data from being siphoned for sale in the first place,” Tom Wheeler, a former F.C.C. chairman, writes in an NYT op-ed.

More on data and privacy

Hackers have stolen more than five million credit and debit card numbers from Saks and Lord & Taylor, a cybersecurity firm said. Amazon and other companies have filed patents that show how assistants could monitor what people say, information that could then be used for ads and product recommendations. For critics, this highlights the need for regulators to get more involved in data collection. Entrepreneurs, companies and governments are looking into whether blockchain could be the answer to fears about personal data being shared too liberally.

The tech flyaround

• President Trump accused The Washington Post of operating as a lobbyist for Amazon, escalating his assault on the company. He also accused Amazon of a “Post Office scam,” although Amazon brings in money for the Postal Service. (WaPo)

• A global race to automate stores is underway as retailers seek to prevent Amazon from dominating their market. China has been an especially fertile place for these experiments. (NYT)

• The tech industry has warmed to the White House. (NYT)

• The European Commission is preparing to crack down on social media companies accused of spreading fake news. (FT)

• A Russian man accused of hacking three U.S. technology companies in 2012 has been extradited from the Czech Republic. (NYT)

• Alibaba is taking full control of the food delivery start-up Ele.me. (Bloomberg)

• Dara Khosrowshahi is trying to change Uber’s image, but can he do it without sacrificing elements that made the company successful? (The New Yorker)

• 3-D printing technology is moving into the construction business. (WSJ)

• Beijing has unveiled a pilot program that would allow Chinese tech giants to see their shares bought and sold at home. (Bloomberg)

• Magic Leap is requiring software developers to keep its mysterious augmented reality headsets under tight security. (LAT)

China hits back at U.S. tariffs

The Chinese government said on Monday that it would place tariffs on the imports of 128 American-made products in retaliation for to President Trump’s tariffs on steel and aluminum.

Beijing appeared to go a step beyond its initial threat, Chris Buckley reported. On the list is pork, an important moneymaker in many states that voted for President Trump.

The Washington flyaround

• Mr. Trump tweeted on Sunday that there would be no deal to protects thousands of young immigrants brought to the country as children and threatened to walk away from the North American Free Trade Agreement.

• The FirstEnergy bankruptcy could be an important moment for the Trump administration and its commitment to the coal industry. (WSJ)

• Ties to the White House have proven to be a wellspring of trouble for the Kushner family. (NYT)

• Are undersea cables used to communicate around the world under risk of attack? (AP)

• The bankruptcy of Remington, one of the country’s oldest gunmakers, has stalled a ruling in a lawsuit by family members of those killed in the Sandy Hook shooting. (NYT)

• Would firing special counsel Robert Mueller lead to impeachment proceedings? (NYT)

• John Bolton, the incoming national security adviser, has argued repeatedly that the United States should engage in cyber warfare. (Politico)

How Live Nation flexes its ticketing muscles

When the Justice Department allowed Live Nation to merge with Ticketmaster, it tried to assuage concerns that the deal would cripple competitors.

But critics have reason to be skeptical. Here’s how Beau Buffier, the chief of the New York Attorney General’s Antitrust Bureau, described Live Nation:

“It is now widely seen as the poster child for the problems that arise when enforcers adopt these temporary fixes to limit the anticompetitive effects of deeply problematic vertical mergers.”

The Justice Department is looking into complaints that Live Nation has used its control over concert tours to pressure venues into contracting with Ticketmaster, a possible violation of antitrust law.

The inquiries come as the department is reviewing two more mergers, between AT&T and Time Warner, and Disney and Fox.

The department’s new antitrust chief has said that the Live Nation deal and several other deals posed problems because they relied too much on the federal government’s ability to police corporate behavior.

“Even if we wanted to do that, we often don’t have the skills or the tools to do so effectively,” the antitrust chief, Assistant Attorney General Makan Delrahim, said in a speech.

More for your playlist

Spotify’s shares begin trading on Tuesday with a valuation that could exceed $20 billion. But the company still hasn’t turned a profit, and its direct listing could spook investors. The streaming service also is looking to take on music labels directly by “building a two-sided marketplace for users and artists.”

The deals flyaround

• Walmart’s takeover of Humana isn’t guaranteed, but hospitals are already worried that the deal could hit their bottom lines at a difficult time. (WSJ)

• Protectionist policies are increasing barriers to deal making. (WSJ)

• Looking to merge asset management divisions, UBS is asking for discounts from fund managers. (FT)

The speed read

• The corporate raider Samuel Belzberg has died at 89. (NYT)

• Steve Schwarzman has discovered that $25 million doesn’t necessarily buy naming rights for a public high school. (The Philadelphia Inquirer)

• The South China Morning Post has long been Hong Kong’s English-language paper of record. Alibaba has made it part of Beijing’s efforts to project soft power abroad. (NYT)

• The accrediting council at center of a for-profit college fraud scandal is looking for a comeback. (NYT)

• Coffee sellers are trying to fight a California judge’s ruling that would require the beverage to carry cancer warning labels. (NYT)

• Bill Gross is struggling to attract investors to Janus Henderson. (FT)

• Nike is reviewing its human resources department after employees raised concerns about pay equity and corporate culture. (WSJ)

• In a tight labor market, employers are recruiting refugees to fill undesirable jobs. (NYT)

• Is the storied guitar maker Gibson headed for a bankruptcy filing? (NYT)

• The new chairman of the Motion Picture Association of America is a Hollywood insider and Washington influencer. (NYT)

• Companies are loading up on debt in what could be another area of concern for financial markets. (WSJ)

• Some arbitrage funds are struggling to benefit from a boom in mergers. (WSJ)

• Devet Capital keeps costs low by flying economy and using Airbnb for business travel. (WSJ)

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