TheChek News Flow

Pain will be unevenly spread among carmakers, with analysts identifying bedraggled Volkswagen as the most exposed

In most sectors, a single road bump is enough to send stocks skidding. The European car industry, however, is in the middle of a pile-up of jolts, including sluggish domestic demand, faltering electric vehicle sales, fierce competition from Chinese automakers, enduring overcapacity and plummeting profits. On top of all of this, it also faces the possibility of having to pay billions of euros in fines for carbon dioxide emissions. 

The scale of the potential charges is dizzying. The EU requires carmakers to cut the CO₂ emitted by the average of the vehicles they sell — measured in grammes per kilometre — by 15 per cent by 2025. For the industry as a whole, that works out to a target of 95g/km.

The trouble is, that is far lower than the average car sold in Europe, which emitted 107g/km in 2023 according to the International Council on Clean Transportation. On these numbers, EU carmakers would face an average excess of 12g/km on each of the roughly 11mn vehicles they sell. Fined at €95 each, that is a total charge of €12.5bn. 

Given EU carmakers’ declining profitability, these are big numbers. Collective operating profits are set to fall from almost €90bn in the 2023 fiscal year to nearer €60bn this year, thinks Harald Hendrikse at Citigroup. The pain will be unevenly spread, with analysts identifying bedraggled Volkswagen as the most exposed. 

These numbers may well change by 2025. Slowing demand for EVs worsens the mix. But carmakers may be able to offset this by fiddling their sales line-up to exclude the most polluting vehicles and launch new, cheaper EV models. The objective, here, will be to pick the lesser of the two evils between a margin hit and the CO₂ fine, in a sort of carbon catch-22. Carmakers — and some politicians — may also be hoping that they can convince regulators to soften the blow.

By any reckoning, this looms as a large threat, for the carmakers themselves and for a continent that relies on them to maintain employment and invest in an EV sector in which US and Chinese companies already have a solid lead.

Carmakers must shoulder a share of the responsibility for this state of affairs. They could have done more to produce better and cheaper EVs, and manage their cost base to protect margins. Yet supply-side targets are difficult to achieve when they are not accompanied by incentives to stimulate demand; consumers are not willing to buy climate-friendly products on merit alone. Blame for this, additional, obstacle is shared. But that will be little consolation for investors in the banged-up sector.

Regulator’s decision puts one type of contract at risk, but won’t close the door on nuclear power plants looking to sign agreements with data centers

Owners of nuclear power plants had been riding high on hopes that they could sign lucrative contracts with tech companies to sell always-available power. A ruling from the Federal Energy Regulatory Commission won’t extinguish those prospects, but does throw a bit of cold water on them.

Late on Friday, the Federal Energy Regulatory Commission rejected Talen Energy’s TLN -2.23%decrease; red down pointing triangle request to increase the amount of power that it could provide directly from its existing Susquehanna nuclear power plant to Amazon’s data center from 300 megawatts to 480 MW. That hamstrings Talen’s ability to step up the amount of power it sells directly to Amazon, whose co-located data center has a potential capacity of up to 960 MW.

By denying Talen’s revised agreement, FERC is emphasizing that it would “continue to prioritize grid reliability and existing stakeholders over rapid load growth and new power market entrants,” renewable energy-focused financial service firm Karbone wrote in a note to clients.

The ruling follows objections from utilities including Exelon EXC -0.47%decrease; red down pointing triangle and American Electric Power AEP 1.18%increase; green up pointing triangle, who argued that the nuclear power plant would benefit from the grid’s transmission system without paying for it. FERC didn’t address the transmission cost aspect in its rejection, but simply said the parties didn’t meet the “high burden” to justify the change.

Talen Energy’s shares, after plunging as much as 8% Monday morning, recovered somewhat and were down about 2% by market close. Constellation Energy’s CEG -12.46%decrease; red down pointing triangle shares fell 12%, while Vistra’s VST -3.15%decrease; red down pointing triangle stock shed 3%. Constellation has the biggest risk because so much of the stock’s gains in recent months were tied to hopes that it would sign contracts with tech companies for its existing nuclear power plants, according to a research note from Julien Dumoulin-Smith, equity analyst at Jefferies.

FERC’s decision isn’t a cause for panic, though. It could delay some power purchase agreement negotiations between nuclear power plant owners and data center developers, but it doesn’t shut the door on future contracts. For one, FERC hasn’t completely rejected deals directly connecting power plants to data centers, also known as behind-the-meter contracts. It might just need some time to deliberate on certain aspects, such as how much such power plants should pay for transmission services. Notably, FERC rejected the filing without prejudice, which means the companies could still submit a revised filing.

Even if the ruling holds, it would only limit companies’ ability to sign co-located, behind-the-meter contracts where the nuclear power is connected directly to the data center. Such contracts can command a premium because of how quickly the power can be connected, according to Steve Fleishman, equity analyst at Wolfe Research. Behind-the-meter contracts also come with lower transmission and other grid-related charges.

But there are other ways in which existing nuclear power plants can sell power to data centers. One example is the deal Constellation Energy reached with Microsoft to restart its Three Mile Island nuclear power plant. That deal is in front of the meter, which means Microsoft MSFT -0.47%decrease; red down pointing triangle pays Constellation for power from the restarted nuclear power plant but doesn’t directly get electricity from that plant. Instead, the power plant delivers power to the grid and Microsoft gets to offset the additional power it will draw from the grid for its data centers with clean nuclear energy.

Such contracts don’t look so shabby either. Analysts at Morgan Stanley estimated that Constellation’s power purchase agreement with Microsoft was about $100 per megawatt-hour, about $20 lower than what a behind-the-meter deal would be worth but a big premium to the market rate of about $50/MWh for other in-front-of-the-meter contracts. One advantage of such contracts is that it allows the nuclear power plant to sell its full capacity rather than having to reserve half of the capacity as backup for refueling outages, according to industry analysts. The downside, of course, is that in-front-of-the-meter deals tend to take more time.

In an earnings call on Monday, Constellation Chief Executive Joseph Dominguez said the FERC ruling was “very narrow” and said co-location and competitive power markets remain “one of the best ways for the U.S. to build the large data centers that are necessary to lead on AI.” Talen Energy said in a press release that it will continue to pursue approval to increase the capacity connected to Amazon’s data center campus. Even if Talen can’t get that agreement approved, industry analysts think the company could come up with other ways to sell power to Amazon (for example, through a deal that resembles Microsoft’s).

FERC’s decision is no reason for panic selling of independent power producer stocks, but it is a reminder that speedy, round-the-clock power isn’t easy to come by for tech companies—especially when the grid is already so tight.

Joining at the end of December from Givenchy, Valérie Leberichel will hold the role of SVP of global communications, and is one of the several key hires masterminded by Stefano Cantino.

MILAN — Gucci’s new structure under the lead of Stefano Cantino is taking shape.

Cantino may not be taking over as chief executive officer until Jan. 1, but as deputy CEO since May he has been leaving his mark, making strategic decisions to create a new organization at the Italian luxury brand, whose collections are designed by creative director Sabato De Sarno.

As part of Gucci‘s turnaround, Cantino is developing new teams in key areas, looking at streamlining operations and sharpening the decision-making process.

At the end of December, Valérie Leberichel will join Gucci as senior vice president of global communications, reporting directly to Cantino. Gucci is leveraging her 27 years of experience in marketing and communication strategy. Since April 2022, she has been global vice president of communications at Givenchy, which is in the midst of its own turnaround with the arrival of former Alexander McQueen creative director Sarah Burton.

Leberichel began her career as PR manager at Jean Louis Scherrer and later became communications director at Issey Miyake Europe. In 2002, she joined Celine as communication manager for more than 10 years before moving to the Prada Group in 2013 as worldwide communications and external relations director for Miu Miu. By 2019, she oversaw global communications for Miu Miu and headed communications for Prada France. Cantino and Leberichel are no strangers since the former spent much of his 22-year career at Prada in various business development, merchandising and marketing roles, involved in everything from retail to industrial processes, working closely with Prada CEO Patrizio Bertelli and designer Miuccia Prada.

A market source said Leberichel is expected to “establish a strategic vision for brand positioning and craft a comprehensive marketing and communications strategy designed to enhance brand awareness, strengthen emotional connections with audiences across all channels, and drive product demand.”

Following the exit last week of Alessio Vannetti, Gucci’s executive vice president and chief brand officer, his role will be part of Leberichel’s purview. Vannetti returned to Gucci in September last year, taking over duties from Susan Chokachi, who left the company after 25 years. Vannetti was previously Gucci’s worldwide communications director from 2015 to 2019, then spent 3.5 years at Valentino as its chief brand officer.

Luca Bozzo, chief people officer, is also said to be leaving Gucci.

Reporting to Leberichel will be the existing PR and communications, events and special projects, entertainment industry relations, and art buying teams, along with the newly established VP of digital marketing and media role, which will be filled by Marcello Mastrogiacomo, who is joining Gucci on Nov. 25.

Mastrogiacomo has more than 17 years of experience in global marketing, most recently serving as SVP communication, media and image at Armani Beauty Global within L’Oréal, the Italian designer’s longtime beauty licensee.

He began his career at P&G Prestige France as communications director before expanding his scope to include media, digital and social communication strategy at Coty as worldwide communication director for Coty prestige fragrance brands, including Gucci, before moving on to Dior Parfums as global digital and consumer engagement director.

The source said Mastrogiacomo is expected to “craft a unique and cohesive brand narrative, defining Gucci’s voice, and overseeing content creation across all digital platforms.”

Joining Gucci on Thursday as global media director, Daniela Raganato will report directly to Mastrogiacomo. She spent 12 years at Valentino, where she most recently served as director of media and integrated marketing, expanding her expertise to include product marketing strategies, commercial marketing and media planning. “In her new role, she will be pivotal in developing a cohesive global media plan, leveraging data-driven insights and digital optimization to ensure Gucci’s continued relevance in the industry,” the source continued.

With more than 17 years of experience in international communication and global marketing, Raganato began her career at BMW Italy before transitioning into the communications agency sector with Bitmama Reply and LBI, now part of Publicis.

These three key roles build on the appointment of Davide Buzzoni, who joined Gucci from Loro Piana as global communications director in September. He succeeded Benjamin Cercio, who left in March and has since formed his own communications agency.

Previous key hires include Massimo Vian, who joined from Prada as chief industrial and supply chain officer, and Cayetano Fabry as chief commercial officer, a new role for the company. Fabry is tasked with leading all Gucci teams dedicated to defining and implementing client-centric retail and digital experiences. He joined Gucci after spending more than four years at Saint Laurent as president of the Europe, Middle East and Africa region.

Cantino in January will succeed Jean-François Palus, who had been appointed CEO of Gucci in July 2023, and will report to Francesca Bellettini, deputy CEO of parent Kering in charge of brand development.

A Louis Vuitton communications executive, Cantino brought to Gucci his vast experience in communications, merchandising and managing relationships with the creative studio. But it is understood he has since been sharing some CEO functions, such as brand strategy, with Palus. He joined Louis Vuitton in 2018 as SVP of communications, recruited by then-chairman and CEO Michael Burke. Cantino’s scope on communications and events extended to retail touch points.

During his tenure Cantino helped the company navigate through the death of Virgil Abloh, Vuitton’s artistic director of men’s collections; the arrival of Pietro Beccari as Burke’s successor; the appointment of Abloh’s eventual successor Pharrell Williams, and the expanded remit of Nicolas Ghesquière, who last year added destination pre-fall shows to his workload.

As reported, amid a sharp slowdown in China and Japan, organic sales at Gucci declined 25 percent in the third quarter, versus analysts’ predictions for a 21 percent drop. In reported terms, revenues fell 26 percent to 1.64 billion euros. “Our absolute priority is to build the conditions for a return to sound, sustainable growth, while further tightening control over our costs and the selectivity of our investments,” François-Henri Pinault, chairman and CEO of Kering, said in a statement on the release of third-quarter figures last month.