Wednesday 08/11/23

1. In AUTOMOTIVE-RELATED NEWS, the car industry dips, Japanese carmakers face a dilemma, chipmakers try to adapt, EV makers turn to discounts, GM stops production of its driverless van and Rivian plans to increase production
2. In REAL ESTATE-RELATED NEWS, WeWork files for bankruptcy, IWG hopes to profit from it, the housing market looks like it’s past the worst but rents still look tricky and Persimmon gets more confident
3. In EMPLOYMENT, CONSUMER & RETAIL NEWS, recruiters see more jobseekers, grocery inflation eases, Lidl and Aldi attract the middle classes, Direct Line ups premiums, Christmas predictions begin, Watches of Switzerland is upbeat about the future and Naked Wines has a nightmare
4. In INDIVIDUAL COMPANY NEWS, UBS announces its first quarterly loss since 2017, N26 withdraws from Brazil, Metro Bank calms nerves, a contrast emerges between KKR and Carlyle and Saudi Aramco beats expectations
5. AND FINALLY, I bring you the future of the human race…

So the car industry hits a speed bump, Japan faces a China dilemma, chipmakers try to adapt, EV makers use discounts, GM stops production of its driverless van and Rivian plans to make more…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

I’ll be conducting a commercial awareness bootcamp on Saturday 18th November with Jake Schogger of the Commercial Law Academy! If you’re looking for something to turbo-boost your commercial awareness, why not give it a go?? Just register HERE.

Car industry dip drags German factory output to three-year low (Daily Telegraph, Howard Mustoe) highlights Germany’s ongoing woes as official figures showed that factory output sunk to a three-year low in September thanks to a drop in car production. They have been suffering badly from slowing sales of EVs.

Then in Japanese Automakers Face Stay-or-Go Decision in China (Wall Street Journal, River Davis) we see that Japanese automakers including Toyota, Honda and Nissan have made headcount reductions and/or production cuts in China as foreign carmakers face increasingly stiff competition from local rivals. One of these companies, BYD, earlier this year overtook VW for the first time to become the best selling car brand in China. * SO WHAT? * Japanese carmakers are now becoming more reliant on the US market, so the question is whether to try and hang on in what is becoming a very difficult market or just go with it and play to its strengths in America and southeast Asia! Given that Japanese

makers are due to release more EVs in China maybe it’s best to see how they fare before admitting defeat and pulling the plug on China…

In Auto Chip Makers Try to Avoid a Pileup (Wall Street Journal, Dan Gallagher) we see that chipmakers who are more exposed to automotive-use chips – such as NXP, Infineon, Texas Instruments, Microchip and ST Microelectronics – are falling behind companies who make them for PCs and smartphones due to the slowdown in EV sales. This means that stocks of chips are piling up, which will lead to falling prices as there’s less need to buy. Chipmakers such as NXP are now “intentionally under-shipping demand” in autos so as not to add to existing inventories at car manufacturers. In the meantime, EV Makers Turn to Discounts to Combat Waning Demand (Wall Street Journal, Sean McLain) shows that some makers, such as Hyundai and Ford, are offering discounts to clear unsold inventory as demand for EVs has become sluggish.

The gloom continues in GM halts production of its self-driving van (Daily Telegraph, Howard Mustoe) as the automaker has decided to stop production of its fully driverless “Origin” van in the latest blow to its autonomous car programme. * SO WHAT? * This is unsurprising considering the problems it’s been having recently with its Cruise-branded driverless cars. California recently banned Cruise’s vehicles due to safety concerns and it has had to pause operations in the US in order to “take steps to rebuild public trust”.

Then in Rivian Plans to Make More EV Trucks, SUVs in 2023 (Wall Street Journal, Sean McLain) we see that the much-hyped EV start-up Rivian has increased its production forecast for the year and reported smaller losses in Q3 after a tough couple of years. It also announced that it no longer had to sell its electric vans exclusively to Amazon and was free to sell to other customers. * SO WHAT? * Amazon owns almost 17% of Rivian, so I guess that it’s in Amazon’s own interest for Rivian to get more orders, particularly as it didn’t order as many itself as it thought it might do initially. Let’s not get too excited, though. Rivian reckons that it will produce 54,000 vehicles this year versus the 52,000 it had previously predicted. This is tiny – and the company still makes a loss on every vehicle! Gross loss per vehicle “improved” from $33,000 in Q2 to $31,000 in Q3. Call me old-fashioned but that sounds like a nightmare to me!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

WeWork files for bankruptcy, IWG aims to take advantage, the housing market is past the worst (but it’s still going to be bad for rentals) and Persimmon gets more confident…

WeWork files for bankruptcy amid office market downturn (Financial Times, Sujeet Indap, Eric Platt and Joshua Oliver) just confirms what we all expected yesterday as the company filed for Chapter 11 bankruptcy which is a process in the US that, among other things, enables WeWork to terminate leases before they reach their full term without incurring massive financial penalties. In the meantime, IWG sees opportunity in WeWork woes (The Times, Tom Howard) shows that the British flexible workspace brand is taking on some of the buildings leased by WeWork. When asked whether IWG would suffer the same fate as its younger rival, the CEO responded that the company work “more in partnership with landlords” than WeWork, but I’d also add that it was not nearly as hyped as WeWork was! Its Q3 revenues rose by 7% year-on-year but occupancy slipped slightly from 73.7% in the spring to 73.5% in the summer.

In residential property news, Housing market past ‘peak pain’ but rental crisis set to continue (The Times, David Byers) cites estate

agent Savills as saying that the market has now gone through the worst and that property prices will bottom out next year before rising again. Although it predicted that prices would fall further from here it said that demand would start to come back again once mortgage rates start to drop. Unfortunately, it said that the rental market will be problematic for years to come thanks to higher rents and “old” landlords not being replaced by new ones when the former sell out. On a separate note, Halifax – which is Britain’s biggest mortgage provider – showed that house prices actually increased last month although on an annualised basis they fell by 3.2%. An ongoing shortage of new properties on the market has helped to support prices despite predictions at the beginning of the year that they were going to crater.

Then in Confidence is building at Persimmon (The Times, Tom Howard) we see that the property market has bounced in the last five weeks, albeit from a low base. The summer has been a tough one for developers thanks to higher mortgage rates but the sales rate has improved in the last five weeks, although some of that is made up of bulk sales to investors. That said, the company’s chief executive said that “the near term is likely to remain challenging”.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Recruiters see more jobseekers, grocery inflation slows down, Lidl and Aldi win over the middle classes, Direct Line increases premiums, Christmas predictions appear, Watches of Switzerland talk a good game and Naked Wines faces a nightmare…

In employment news, UK recruiters register sharp rise in jobseekers as employers cut back (Financial Times, Delphine Strauss) shows that, according to a survey by the recruiter trading body REC and advisory firm KPMG, there has been a sudden rise in the number of jobseekers over the last month. * SO WHAT? * This is no doubt a mix of more people being made redundant and increasing fears of those who are in employment currently that they may be in danger. It is a classic balancing act facing all recruiters – that there are either too many candidates and not enough jobs or too many jobs and not enough candidates! It looks like the power is starting to swing back in favour of employers although there are still some areas where there is still strong demand, e.g. hospitality and healthcare.

Embattled consumers will be relieved to see UK grocery inflation falls to single digits for first time in 16 months, data shows (Financial Times, Valentina Romei) as the latest figures from Kantar show that the annual rate of supermarket price rises was 9.7% in the four weeks to October 29th, down from 11% in September and way down from its peak of 17.5% in March. UK food inflation may be gone by Easter, claims boss of major retailer (The Guardian, Sarah Butler and Julia Kollewe) shows that the boss of Associated British Foods – which owns brands such as Kingsmill Bread, Twinings tea and Silver Spoon sugar – reckons that “by the middle of next year, and even by Easter, most of the big price inflation [will have] gone away”. While we’re on the subject of ABF’s success, it looks like its apparel retail business is also doing well in Primark cashes in on price rises and the star appeal of Barbie (The Times, Lara Wildenberg) as price increases and popular product ranges (including a Barbie summer collection!) helped to power revenues and profit.

Still, given ongoing pressures on household budgets, Middle classes flock to Lidl and Aldi (Daily Telegraph, Chris Price) highlights Kantar figures which show that customers in the ABC1

social group make up  54% of the spending at the two German discounters. This group includes white-collar managers, doctors, teachers and specialist clerical staff and represents about 55% of the population. Lidl was the fastest growing supermarket in the last quarter while Aldi and Waitrose were the only two supermarkets to have more shoppers than this time last year! * SO WHAT? * Again, this is not surprising. The perception that Aldi and Lidl are cheaper than the other supermarkets continues to grow and, let’s face it, a lot of their stuff is pretty good quality-wise. Consumers are looking to save money wherever they can…

However, they’re going to be facing higher insurance costs, as per Direct Line motor insurance premiums climb by 36% in a year (The Times, Patrick Hosking) which shows that one of Britain’s biggest motor insurers has decided to increase premiums across its Direct Line, Churchill, Privilege and Green Flag brands as it tries to catch up with rising repair costs.

Those who do have money to spend might get some inspiration from AI Pictionary and a ‘robo-dog’ make UK shops’ hottest Christmas toy lists (The Guardian, Zoe Wood) which gives us a rundown of the “hot” toys on the list this Christmas – which range from “Dog-E” (a £90 robot dog), to Pictionary vs AI (£24) to Squishmallow (a £9 soft toy) but it seems that some may already be spending on expensive watches, according to Second-hand is in Watches of Switzerland’s favour (The Times, Lottie Hayton) which shows that the world’s leading seller of watches has laid out plans to more than double its sales and profits in less than five years by expanding in the US and getting involved in the second-hand market where it will launch a Rolex-certified, pre-owned programme. UK revenues were a touch weaker, but that was due to the impact of some key Goldsmiths and Mappin & Webb showrooms being closed for refurbishment, but US revenues were up.

Then in retail news, Naked Wines boss outsted as crisis deepens (Daily Telegraph, Daniel Woolfson) shows that the ongoing disaster at Naked Wines has claimed the scalp of its chief exec, Nick Devlin, as founder and chairman Rowan Gormley has had to step in to take over executive responsibilities. The company has struggled since the pandemic as online sales continued to drop. The share price of Naked Wines fell by over 35% yesterday but they are down by a whopping 74% over the last year. Will it see the year out??

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

UBS falls into quarterly loss, N26 ditches Brazil, Metro Bank calms nerves, KKR and Carlyle’s fortunes diverge and Saudi Aramco beats expectations…

In a quick scoot around some of today’s other interesting stories, UBS posts first quarterly loss since 2017 on costs of Credit Suisse deal (Financial Times, Owen Walker) shows how much it suffered from integrating rival Credit Suisse  – it reported a net loss of $785m in Q3 – but UBS: bank seeks rich pickings amid intensifying competition (Financial Times, Lex) suggests that things could have been worse in terms of clients leaving – and that the increased scale that Credit Suisse gives them could help the bank in the long term catch up with rivals in the wealth management space.

In other news on banks, N26 to withdraw from Brazil as German fintech ditches overseas ambitions (Financial Times, Olaf Storbeck) shows that the Berlin-based bank declared yesterday that it would shut down its Brazilian operations over the next two months leaving it to focus on its continental European business. It had already pulled out of the UK and US. Back in the UK, Refinancing calms nerves and withdrawals at Metro (The Times, Ben Martin) shows that a refinancing of the lender has helped to

stem deposit withdrawals that were initially prompted by the company saying that it needed to raise hundreds of millions of pounds to shore up its balance sheet. I guess that focus will now be on how the bank progresses from here!

Then in Private equity fortunes diverge as KKR prospers while Carlyle cuts jobs (Financial Times, Antoine Gara) we see that two of the world’s biggest private equity firms are experiencing contrasting fortunes as KKR talked about building out its investments in infrastructure and property while Carlyle announced imminent job cuts due to poor fundraising performance. A lot of Carlyle’s problems stemmed from succession problems in top management and it seems like the ex-Goldman chief exec Harvey Schwartz is still getting his feet under the table.

In oil, Saudi Aramco profits exceed expectations on back of buoyed oil price (Financial Times, David Sheppard) shows that the oil giant managed to post net profits above analyst expectations despite production cuts made this summer designed to prop up the oil price. Higher for longer oil prices will continue to keep inflation at higher levels for a while yet, it seems…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

When I was a kid, if my mum thought I’d been watching TV for too long she said that I’d get square eyes. At this point, although I wondered what I’d actually look like if I did get square eyes, I would turn the telly off and go and do something else. A new threat is emerging in Disturbing image of how humans could evolve by 3000 – second eyelid, text claw and tech neck (The Mirror, John Bett). Poor old Mindy. You’ll see what I mean when you read the article!