TheChek News Flow

Automaker says driver in 2018 accident wasn’t properly engaged; family says company oversold the software’s capabilities

Tesla TSLA -3.63%decrease; red down pointing triangle is preparing for one of the biggest tests of its driver-assistant Autopilot: defending the company’s position that drivers, not the automaker, are ultimately responsible for crashes that involve the technology.

In a wrongful-death suit set for trial this week, a jury will determine who is at fault in the 2018 fatal crash involving 38-year-old Apple engineer Walter Huang. The driver died on Highway 101 in California after his Model X sport-utility vehicle crashed into a highway barrier while he was using Tesla’s driver-assistance technology.

Huang’s family is going after Tesla in a distinctive fashion by questioning whether the automaker oversold Autopilot’s capabilities and didn’t take sufficient actions to prevent customers from misusing the technology.

Tesla says Huang is responsible because he was playing a videogame while the vehicle was engaged in Autopilot. Government investigators and the Huangs agree that he was distracted in the moments leading up to the crash, but the family says Tesla is at fault because of its marketing of Autopilot.

If the Huangs prevail, the suit could represent a major financial liability for Tesla, potentially spurring additional cases that seek notable awards. The automaker is facing other disputes involving Autopilot.

“Every plaintiff’s lawyer that has one of these cases will be watching this,” said Matthew Wansley, associate professor at Yeshiva University’s Cardozo School of Law, who has researched automated-driving systems and criticized Tesla’s marketing of the technology.

“The damage award could be significant here,” he said, adding that juries in these cases typically award damages based on the victim’s lost income.

Tesla didn’t respond to requests for comment from The Wall Street Journal. Jury selection for the case starts Monday in San Jose, Calif., with opening arguments to follow as early as Thursday. The trial is expected to last several weeks.

A history of scrutiny

Several agencies have been investigating Autopilot, including the Justice Department and Securities and Exchange Commission, which have launched separate probes examining whether Tesla misled customers and investors about how Autopilot performs.

The National Highway Traffic Safety Administration has also been examining Autopilot and the automaker’s more expansive tech called “Full Self-Driving Capability” for years, raising concerns that not enough guardrails are built-in to ensure drivers use the systems appropriately. The regulator has launched more than 40 investigations into accidents suspected to be tied to Tesla’s Autopilot that resulted in 23 deaths.

Autopilot is available on all new Teslas and is designed to help with driving tasks such as steering and lane changes typically on highways. The Full Self-Driving upgrade features navigation on city streets.

Tesla sells subscriptions to enhanced versions of Autopilot as well as to Full Self-Driving. Tesla Chief Executive Elon Musk has said such sales could be significant profit drivers for the company.

The automaker says the Autopilot software isn’t designed for fully autonomous driving and allows for drivers to take control when the technology is engaged. Tesla says its website and user manuals make clear that the software requires active driver supervision.

The system deploys a series of warnings to alert drivers if they aren’t paying attention to the road. In December, Tesla issued a safety recall that updated the software underpinning Autopilot, adding more warnings for drivers to ensure they “adhere to their continuous driving responsibility,” the company wrote in a regulatory filing.

Tesla said it made the changes to resolve an investigation by regulators.

The automaker has prevailed in the last two trials, with jurors in the most recent one finding the company wasn’t responsible for the crash because they found no manufacturing defect with Autopilot.

In the Huang case, the family alleges Tesla drivers were sold on the idea that Autopilot was safer than a human-operated car, but the automaker knew the technology had serious flaws that customers wouldn’t expect to encounter based on how Autopilot was marketed.

On the morning of the March 2018 crash, Huang was making his commute to work after dropping his son off at preschool. With Autopilot engaged while on the highway, Huang’s Model X approached a dividing area that sits between travel lanes of the highway and an exit ramp.

The Autopilot system moved the vehicle off the highway and into the dividing area, and then struck a barrier at about 70 miles an hour. Huang died as a result of blunt force trauma injuries sustained in the crash.

His family’s attorneys say Tesla is to blame for the incident because reasonable drivers believe Autopilot is safe and can navigate highway roads, according to court filings, citing statements and advertising by Musk and the carmaker.

Among the family’s evidence is an email from former Tesla President Jon McNeill. Two years before Huang’s crash, McNeill emailed the company’s head of Autopilot and Musk, saying he had driven several hundred miles in a Model X with the technology activated.

“I got so comfortable under Autopilot, that I ended up blowing by exits because I was immersed in emails or calls (I know, I know, not a recommended use),” McNeill wrote in a March 25 email that year.

One of the Huang family’s attorneys read the email during a deposition, according to a transcript reviewed by the Journal. The Journal couldn’t obtain the full text of his message.

Prove your case

The Huangs will have to demonstrate that Tesla could have improved its warning system for drivers who used Autopilot, which by then had been in use for a little more than two years, said Richard Cupp, law professor at Pepperdine’s Caruso School of Law.

Tesla has said Huang’s hands weren’t detected on the wheel for six seconds before the crash, and that he knew his vehicle had trouble using Autopilot at this particular spot on the highway before, citing testimony from Huang’s wife and text messages. The company also says Huang was playing a videogame on his phone at the moment of impact.

“The sole cause of this crash was his highly extraordinary misuse of his vehicle and its Autopilot features so that he could play a videogame,” Tesla said in a recent court brief.

Tesla has strong support for its argument that Huang was misusing Autopilot in the seconds before the crash, Wansley said, a point his family’s attorneys concede in court filings.

But the case highlights the issue of drivers becoming too complacent with partially automated technology, Wansley said.

“These crashes are happening because misuse happens all the time,” said Wansley, adding that a significant verdict could force the company to do more to ensure drivers are responsible.

World’s biggest chipmaker will build cutting-edge facilities in Arizona in exchange for billions in subsidies

The world’s biggest chipmaker, Taiwan Semiconductor Manufacturing Co, has agreed to make its most advanced products in Arizona from 2028, in a boost to the Biden administration’s efforts to bring the semiconductor supply chain on to home soil.

TSMC will make the latest cutting-edge 2-nanometre chips in a second fabrication plant, or fab, it is building in Phoenix, marking an upgrade from its previous plans.

It will also increase its investment in the US from $40bn to $65bn to build a third fab, with 2nm or even more advanced technology, that will be operational by 2030.

The Taiwanese company and the US commerce department said on Monday that Washington would provide it with $6.6bn in grants and up to $5bn in loans.

The subsidies fall under the Chips Act, which was passed in 2022 to boost the US industry. Last month the Biden administration unveiled a deal for $8.5bn in grants and up to $11bn in loans for Silicon Valley’s Intel, which has pledged $100bn in new investment.

TSMC’s commitment helps the White House move towards its goal of bringing 20 per cent of the world’s advanced semiconductor manufacturing onshore by 2030. Ninety per cent of cutting-edge chips are currently made in Taiwan, with the US initiative partly driven by fears of a Chinese invasion of the island.

“TSMC is expanding its manufacturing capabilities in Arizona such that for the first time ever we will be making, at scale, the most advanced semiconductor chips on the planet here in the United States of America,” said US commerce secretary Gina Raimondo. “[We are] massively strengthening our national security position.”

The deal means that some of the most advanced chips used in AI could be made in the US by the end of the decade, instead of chipmakers such as Nvidia and AMD having to rely on Asian production.

“Our US operations allow us to better support our US customers, which include several of the world’s leading technology companies,” said Mark Liu, chair of the leading contract chipmaker.

TSMC previously planned to run its US fabs on manufacturing technology that was a generation older than the most advanced used in mass production in Taiwan. Its first Arizona plant is due to start 4nm production next year, and its second one would have offered 3nm two or three years later.

But most AI chips will run on 3nm from next year or 2026. “So these chips will have to be built in Taiwan,” said Randy Abrams, head of Taiwan research at UBS.

By the time TSMC’s second Arizona fab opens, Nvidia and other AI chip vendors are likely to have migrated to 2nm, said an engineer familiar with the process. Therefore, TSMC’s original plan to have that plant run on 3nm “didn’t make sense”, a company executive said.

“The chips that TSMC makes . . . underpin all AI. Tens of thousands of leading-edge chips are required to train a single frontier AI model,” Raimondo said. “And now, because of this announcement, these chips will be made in the United States of America.”

Giving clients the right to choose which plant at least some of their made-to-order chips are made at would depart from TSMC’s established practice. It would reduce the flexibility in allocating capacity which has helped it generate gross profit margins of more than 50 per cent.

Industry executives and analysts said US tech companies would still source some of their production abroad. “Having 2nm in the second fab doesn’t mean Nvidia will not be buying chips made in Taiwan any more,” said a person familiar with TSMC’s plans, “it just means that they will have an option to issue a special requirement that a certain amount of their chips come from that [Arizona] fab.”

TSMC’s leading-edge fab investment at home continues to far outpace that in the US. It will start 2nm mass production next year and plans to build “multiple” more fabs operating on that technology in three locations in Taiwan, Liu told investors in January.

Family business behind Charlotte Tilbury and Paco Rabanne plans to list in Madrid and other Spanish stock exchanges

Puig, a family-owned Spanish beauty group, is preparing an initial public offering through which it aims to raise more than €2.5bn, in the biggest flotation in the sector in years.

The Barcelona-based company, which owns perfume and make-up brands ranging from Paco Rabanne to Charlotte Tilbury, announced its plans to list in Madrid and on other Spanish stock exchanges in a regulatory filing on Monday.

Bankers have valued the 110-year-old business at between €8bn and €10bn. The company said it wanted to raise about €1.25bn through a primary offering, followed by a “larger” secondary share sale that would take the total sum raised to more than €2.5bn.

The filing did not specify the portion of shares that the founding family wants to sell to investors.

The flotation of Puig, which bills itself as a “premium beauty” group, is likely to be the biggest in luxury since Ermenegildo Zegna in 2021.

It comes as Europe’s market for initial public offerings has enjoyed the strongest start to a year since the pandemic, following a prolonged slowdown. Rising stock indices and the prospect of interest rate cuts have encouraged more companies to seek listings, including dermatology group Galderma, controlled by Swedish buyout group EQT, which raised SFr2.3bn ($2.5bn) in March.

However, not every deal has gone smoothly. Shares in German beauty retailer Douglas fell as much as 9 per cent in their Frankfurt debut last month.

Puig’s move comes as the luxury sector grapples with the end of a post-pandemic spending boom. But the group insists that it is resilient in the face of retrenching consumers because the unit price of its fragrances and make-up is lower than for watches, handbags and other luxury products.

Marc Puig, chair, chief executive and the third generation of his family to lead the business, said it was “important for any family business to have the right checks and balances in place, particularly during generational transitions”.

“We believe that the balance of being a family-owned company that is also subject to market accountability will allow us to better compete in the international beauty market during the next phase of the company’s development,” he added.

Puig has led the company since 2004 and said he would be the last generation of the family to head the business, even though he has no plans to step down. He signalled that the family’s involvement in the business would remain strong.

“We strongly believe that building premium brands requires long-term thinking and having a family behind a company fosters this long-term approach, because they tend to care in equal measure about the time horizon of the next generation and the next quarter,” he said.

Puig is small compared with sector-leading peers L’Oréal and Estée Lauder but has grown rapidly through acquisitions in the past decade, striking 11 deals in the past 12 years.

Those included the purchases of British make-up business Charlotte Tilbury, French brand Jean Paul Gaultier and Belgian fashion house Dries Van Noten.

DAX:

MDAX:

SDAX: