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The seven-time Formula 1 champion’s shocking move could have major implications for the fashion industry and speaks to the sport's widespread growth in luxury sponsorships.

In Formula 1, there’s no bigger name than Lewis Hamilton. In many ways, Hamilton transcends the sport itself as a massive public figure in his own right. Hamilton is the sport’s first and only Black driver — currently tied with Michael Schumacher for seven-time world driver championships (WDC) — and boasts the record for the most wins and podium finishes (among countless others).

Off-the-track, Hamilton is a regular front-row fixture at fashion week, host for a Met Gala table to spotlight Black fashion leaders, owner of the clothing line +44 (Hamilton’s favored racing number) and nonalcoholic beverage company Almave, opened charitable STEM foundation Mission 44, serves as executive producer of the upcoming Formula 1 film starring Brad Pitt and Damson Idris and much more.

Unsurprisingly, the sporting world at large was shocked when Hamilton announced (coincidentally, on the first day of Black History Month) that he would be leaving Mercedes-AMG Petronas, his beloved team after a decade, to join Scuderia Ferrari, a team equivalent to religion in Italy for the 2025 season and beyond.

The move sent Hamilton fans and industry insiders alike into a tizzy; Ferrari’s social media account gained hundreds of thousands of followers and Ferrari’s share prices soared more than 10 percent and the company’s value rose to $10 billion on the stock market (in tangent with a strong earnings reports of 17 percent increased revenue for 2023 by Ferrari, released on the same day).

Representatives for Ferrari declined to comment on Lewis Hamilton until the end of the 2024 season, “out of respect for all parties, teams and drivers involved.”

Several motorsport insiders told WWD that they were simultaneously shocked and intrigued by the move; Hamilton made a similar move (seen as a gamble at the time) when he left McLaren in 2013 for Mercedes — where Hamilton was expected to end his career. Hamilton is seeking his eighth WDC and to indisputably become the best in Formula 1.

Luke Smith, senior writer at The Athletic, said this move doesn’t compare to any other in his decade-long motorsport reporting career. “There’s no bigger driver in Formula 1 than Hamilton, and no bigger team in Formula 1 than Ferrari. Ferrari has always been the most famous team in Formula 1 with a degree of prestige, history and exclusivity no other team gets close to matching. This will only escalate once Hamilton joins the team.”

Lily Herman, creator of the popular Formula 1 culture newsletter Engine Failure, noted that in the wake of two years of largely average excitement in the race for the WDC title and the overarching dominance of Max Verstappen and Red Bull, this move could be the shakeup the sport needs. Especially as the sport has looked to expand its reach — specifically in the U.S. — and has evolved to “engaging fans in every other part of Formula 1 — including aspects of the sport’s broader culture, like fashion, social impact, popular media and more.”

Meanwhile, Abby Rakshit, strategy consultant for Fortune 500 tech and auto firms and founder of Racing Forces Media, a thought leadership creative platform for and by women in sports, akins the move to historical sports deals such as Michael Jordan and Nike or David Beckham moving to LA Galaxy.

One big question that remains on countless minds: What does this move to Ferrari mean? As someone deeply intertwined with the fashion industry, Hamilton’s sartorial choices, styled by industry darling Eric McNeal (and previously, image architect Law Roach), are the talk of the paddock — with Instagram accounts such as Rashi Gaur’s @hamazinglew dedicated to decoding high fashion choices from Valentino to Louis Vuitton.

“Lewis has one of the strongest personal brands of any public figure worldwide — across any industry, not just sports,” explains Herman. “Several drivers [such as Pierre Gasly, Zhou Guanyu, Alex Albon and future teammate, Charles Leclerc] have already pointed to Lewis Hamilton raising the bar as far as how drivers can become societal tastemakers and cultural icons.”

With more than half of the grid including Fernando Alonso’s and Daniel Ricciardo’s contracts up after the 2024 season and Audi recently confirmed retain 100 percent ownership of Sauber’s team in 2026, this change spells a massive shakeup in Formula 1 fashion and sponsorship space.

India Roby, freelance fashion and Formula 1 writer, said Hamilton’s move greatly impacts other drivers’ success — and who have all started leaning toward becoming celebrities, through brand ambassadorships or starting their own merchandise line — and with the pressure to become more of a public figure in their own right, as Lewis at Ferrari will remain center stage for the foreseeable future.

“Similar to Lewis, teams will be thinking about what these individual drivers offer to the overall racing brand versus solely results on the track,” Roby noted. “At the end of the day, drivers need to provide teams with value and attract money and sponsors, and that means having a ‘face.’”

Sponsorships are critical for racing teams to fund their operations across research, personnel, logistics, marketing and facilities — with at least 100 people in addition to the two main drivers and reserve drivers traveling to more than 20 races in all four corners of the globe with company and factory numbers ranging upward of 300 to 1,200 people. Estimates put bigger name teams such as Mercedes, McLaren, Red Bull and Ferrari spending about $400 million per year.

James Vowels, team principal at Williams Racing, explained during their car launch at the Fifth Avenue Puma store in early February the importance of these partnerships to his team. “The first phone call I made when I joined the team was to Puma. I really like what they stand for as a brand and I wore their trainers for many years. The sponsors we are working with have meaning to us and to the world as well.”

When Formula 1 drivers move teams, it’s not always set in stone that sponsors will follow suit — especially as Ferrari carries its heavy weight of luxury brand sponsors: Giorgio Armani, Ray-Ban, Richard Mille and Ferrari Style.

“Naturally, Hamilton brings interest from brands in the U.K.,” explains Rakshit. “Ferrari hasn’t had a title sponsor in a while, but I wouldn’t be surprised if a big tech or finance company aligns with Ferrari moving forward. Title sponsors historically costs $50 million to $100 million a year. It will be much easier for Ferrari to get sponsorship conversations within that range with Hamilton now.”

LONDON, ENGLAND - DECEMBER 04: Grace Wales Bonner and Lewis Hamilton attend The Fashion Awards 2023 presented by Pandora at the Royal Albert Hall on December 04, 2023 in London, England. (Photo by Gareth Cattermole/Getty Images)

Grace Wales Bonner and Lewis Hamilton attend The Fashion Awards 2023 in London. GARETH CATTERMOLE/GETTY IMAGES

Chris Medland, Formula 1 journalist and broadcaster, concurs that budget constraints have often left brands deciding which of the two names synonymous with the sport to choose from: Hamilton or Ferrari. And now, brands don’t have to weigh their options; Medland observes that brand reputation and history in sport mean everything — especially as the allure of Ferrari is powerful enough to attract the sport’s most successful driver, despite not the team not winning a champion title since 2008.

Notably, during Hamilton’s championship-winning streak, Tommy Hilfiger reentered the space in 2018 as a sponsor of Mercedes. The eponymous brand previously worked with Hamilton’s future team, Ferrari, in a four-year apparel partnership from 1998-2002.

MILAN, ITALY - SEPTEMBER 16: Lewis Hamilton and the fashion designer Tommy Hilfiger pose during the Fall 2019 Tommy x Lewis Milan presentation during the Milan Fashion Week Spring/Summer 2020 on September 16, 2019 in Milan, Italy. (Photo by Jacopo Raule/Getty Images for Tommy Hilfiger)

Lewis Hamilton and Tommy Hilfiger at the Tommy x Lewis Spring 2020 presentation during Milan Fashion Week. JACOPO RAULE/GETTY IMAGES FOR TOMMY HILFIGER

The brand selected Hamilton to be an ambassador and design several capsule collections, which set a major precedent within the industry’s intersection. Mercedes’ watch sponsor since 2013, IWC Schaffhausen, has also collaboratively designed limited-edition watches with the champion.

IWC issued a statement to Instagram thanking Hamilton, an indicator that the two will be parting ways next year: “We would like to thank Lewis for his outstanding contribution as a brand ambassador and member of the worldwide IWC Schaffhausen family.…We look forward to another exciting season together. For his future endeavors, on and off the racetrack, we wish Lewis all the best.”

After reentering the motorsports world as a partner to Mercedes in 2018, Hilfiger has seen the rise in popularity between fashion, motorsport and entertainment. “The world of racing is developing at an incredible pace, and we are excited to be at the forefront in our continuing partnership with Mercedes-AMG Petronas Formula 1 Team,” Hilfiger told WWD. “We are excited to accelerate on this legacy into the 2024-25 season.”

While plans for the brand’s future with Hamilton remain under wraps, the brand has continued to double down on its Mercedes ties. The company named both Mercedes driver, George Russell, and his long-term girlfriend, Carmen Montero Mundt, ambassadors last year. WAG culture and power couples have been a major part of pop culture; interest in Taylor Swift and Travis Kelce and Victoria Beckham and David Beckham has never been higher.

Mercedes reserve driver and Alpine’s FIA World Endurance Championship driver, Mick Schumacher, son of Michael Schumacher, was similarly named an ambassador in 2023 — F1 Academy driver Nerea Martí, Mundt, Schumacher, and Schumacher’s girlfriend and social media influencer Laila Hasanovic were all recently in attendance at Tommy Hilfiger’s fall winter 2024 show at NYFW.

Over time, Hamilton helped turn the paddock into a version of the red carpet, similar to the NBA and NFL tunnels. Hilfiger said the company will continue to explore this crossover within the fashion and entertainment space; the brand is a partner to the upcoming Formula 1 feature film starring Tommy Hilfiger menswear ambassador, Damson Idris.

As for what’s next on the horizon for Hamilton? Joshua Robinson, European sports reporter at The Wall Street Journal and coauthor of the novel, “The Formula: How Rogues, Geniuses and Speed Freaks Reengineered F1 Into the World’s Fastest-Growing Sport,” foresees Hamilton’s name and image on top of “an already timeless brand like Ferrari” will lead to “unprecedented reach for a Formula 1 driver.” Moreover, Robinson notes that the combination of Hamilton and Ferrari will equate to a “compelling package” for new and returning sponsors as they both “represent the pinnacle of the sport.”

The “Lewis Hamilton effect” is an indicator of the rapidly changing tides in sponsorship space and what it means to be a Formula 1 driver today. Medland explains, “Lewis is looking at life after Formula 1 as well as his racing career and will not have moved to Ferrari if it restricted him from tackling the other projects he already does. For a long time now, Lewis has shown he performs at his best when he’s allowed to dedicate time and energy to his other business and fashion ventures too — and that has already helped other drivers get the opportunity to do similar.”

Rakshit points to the rumors of a joint investment fund set up by Ferrari’s parent company Exor N.V. with a $250 million contribution to act as “Hamilton’s personal private equity or venture capital firm to invest as he sees fit.” If proven true, the move would be a much bigger scale feat than recent news of Tiger Woods’ ownership stake and partnership in his namesake-branded TaylorMade golf apparel.

Moreover, Rakshit predicts that plans for a Ferrari with a Hamilton moniker or association, similar to the McLaren sports car named after Brazilian Formula 1 racer Ayrton Senna, will hit the market within the next couple of years of Ferrari’s vehicle developments. After all, Hamilton famously kept Ferraris in his collection, even while he was driving for Mercedes.

Likewise, Tim Malachard, marketing director at Richard Mille, told WWD that Hamilton transcends Formula 1 as being a multiworld winning champion in the sport. In joining Ferrari, Malachard anticipates deeper involvement from Hamilton in the Italian fashion scene as major houses get ready to roll out the red carpet for him.

“Drivers are followed by millions on social media and can’t just depend on their performances at Grand Prix races,” Malachard said. “Fans follow their lives daily. All teams and sponsors are now very sensitive to the image portrayed by each driver.”

Smith has also seen how the landscape of Formula 1 fans has changed over time. “We’re increasingly in an era where fans — especially the younger fans flocking to the sport — follow drivers and personalities, not necessarily teams. It’ll be curious to see how fans react to their loyalties being tested.” To that end, companies will also be much more aware of how to properly craft their deals to ensure they get the best driver and/or team that aligns with their brand identity.

Like Hilfiger and IWC with Hamilton, the brand relationships drivers keep can often run deep. Richard Mille has sponsored Leclerc since his go-karting days more than 10 years ago and sees him as a part of their family; Sainz has also been a Richard Mille watch wearer since his time at McLaren.

While Richard Mille executives have yet to meet with Hamilton, the formal announcement between the exclusive Swiss watchmakers and Hamilton is inevitable. Malachard said that while it’s too early to comment on the state of ambassador contracts after this season finishes, they noted that they will continue to remain in contact with Sainz.

“Lewis is a superstar in every way and extremely sensitive to creativity in fashion and lifestyle,” Malachard said. “We look forward to meeting with him and that he will enjoy joining our family of partners. We are sure many creative ideas will emerge from talking to each other.”

Similarly, Ray Ban representatives told WWD that as part of its dedicated partnership with Ferrari and “[they] would welcome the opportunity to work with Lewis.” The sunglass company also isn’t counting out further sponsorships down the line with Sainz just yet, adding that they “welcome all opportunities to support [the] historical brand.”

“Lewis is the quintessential 21st-century sports star — who crosses over easily into other worlds — from culture to fashion to music,” Robinson said. “Meanwhile, Ferrari truly [represents] racing heritage. Sponsors will see plenty to like with Ferrari and Lewis complementing each other’s images. By bringing some much-needed diversity and outspokenness to the team, Lewis gives Ferrari a modern edge that it hasn’t always had.”

Company says it is also continuing to negotiate with a large automaker for a potential transaction

Fisker FSR -12.94%decrease; red down pointing triangle is pausing production for six weeks as it continues deal talks with a large automaker and works to keep the business running.

The embattled electric-vehicle maker disclosed the stoppage Monday amid a series of updates on its efforts to avoid potential bankruptcy, saying the pause will allow it to “align inventory levels” and focus on strategic and financing initiatives.

After warning last month that there was “substantial doubt” about its ability to stay in business, Fisker hired restructuring advisers to assist with a possible bankruptcy filing, according to an exclusive report last week from The Wall Street Journal.

Fisker said Monday it has secured $150 million in financing by selling $166.7 million worth of notes to an existing investor at a 10% discount.

The company is also continuing to negotiate with a large automaker for a potential transaction, which could include an investment in Fisker, joint development for one or more EV platforms, or a North American manufacturing deal.

Fisker shares sank 11% in morning trading Monday. They have fallen about 90% this year.

The Manhattan Beach, Calif.-based startup has struggled with sluggish sales growth that left it with around 5,000 unsold vehicles at the end of last year.

Fisker is the latest EV startup to face the possibility of running out of cash. Electric-truck maker Lordstown Motors and electric-van company Arrival have both filed for bankruptcy protection.

Auto startups that once commanded multibillion-dollar valuations from investors have seen their market values plummet as the young companies struggled to increase their manufacturing and losses piled up.

Now, Fisker and other EV makers face additional challenges amid cooling sales growth for battery-powered models, particularly in the U.S.

The startup’s chief executive, Henrik Fisker, has said the company’s strategy was intended to better weather the financial pressures that other new EV companies face. Instead of owning its own assembly plant and employing factory workers, Fisker pays other manufacturers to build the cars. The decision was supposed to keep Fisker’s operating costs lower and boost profitability.

In a separate filing, Fisker disclosed that it didn’t file its annual report for 2024 with the Securities and Exchange Commission on time and is working to get it filed “as quickly as possible.”

Fisker also disclosed that it didn’t make a required $8.4 million interest payment on certain bonds. The company said it would take advantage of a 30-day grace period for that payment while it works out a plan with stakeholders and enhances its liquidity.

Ford, Spirit AeroSystems and other companies are using artificial intelligence and other tools in pursuit of zero defects

Imagine a world in which every product that leaves a factory is flawless, every time.

What sounds like a plant manager’s dream is the end goal of zero-defect manufacturing, an idea that is gaining traction among industry executives. Surging recalls and high-profile problems like the door plug that blew off a Boeing jet midflight in January have cast a harsh light on the quality of American manufacturing. But some companies say a combination of technology, training and focus can eliminate errors.

Ford Chief Executive Jim Farley has said the automaker must reach “a zero defect destination,” telling investors last year the company has used assembly-line artificial intelligence and extensive test drives to catch problems in Super Duty trucks. Stellantis, which is similarly targeting zero defects, said more than 100 new quality standards have led to a double-digit percentage drop in warranty claims.

Companies in industries as varied as pharmaceuticals and snack foods have announced zero-defect goals, as has Brewer Science, a Missouri-based maker of chemicals and materials used in semiconductors that calls itself “a pioneer of perfection” in a promotional video.

The company said it has reduced impurities such as aluminum ions to less than one part per billion through exhaustive measurement and testing. Chief Operating Officer Srikanth Kommu said its definition of defects is growing more stringent.

“What’s good enough today is not good enough for tomorrow,” Kommu said.

More manufacturers say they are aiming for perfection as quality-control problems have mounted. The newsletter Warranty Week found that in 2022, vehicle makers spent record amounts on warranty claims. Recalls announced by the Consumer Product Safety Commission, a federal agency, hit a six-year high in 2023.

Sedgwick, a firm that assists companies with recalls, found recalls jumped last year among pharmaceutical and food manufacturers. Sedgwick Senior Vice President Chris Harvey said undertrained workers, the increasing complexity of products and more sprawling supply chains are contributing to quality problems.

Spirit AeroSystems SPR -0.06%decrease; red down pointing triangle, which makes fuselages for Boeing BA -1.38%decrease; red down pointing triangle, has been battered by quality issues. CEO Pat Shanahan has said the company’s goal is “to achieve perfection,” and it has begun an initiative to get there within the next 12 months.

Sean Black, Spirit’s chief technology officer, said the program aims to simplify the manufacturing process. The company will use drill templates that are color-coded, with the appropriate tool, preset at the correct speed, matching that color.

Spirit will also automate manual tasks, such as attaching thousands of fasteners in the nose and tail sections. Scanners will search for deviations in the final product while capturing every inch of the fuselage.

“Instead of giving an inspection report, we can actually provide that digital image directly to our customer,” Black said.

The zero-defects philosophy took shape in the early 1960s when defense contractor Martin sought to eliminate errors from Pershing missiles. The company had relied on inspections to find problems as small as a loose valve but refocused on prevention, exhorting workers with posters and rallies to do their jobs right the first time—followed by extensive audits.

Martin’s quality director, James Halpin, wrote in a book about the initiative that errors plunged as hundreds of employees racked up long streaks of perfection. One solderer made nearly 500,000 connections without a mistake, he wrote, while another worker put together 50,000 defect-free assemblies.

Many companies adopted the practices, but decades later quality control remains problematic. Robert Leachman, a professor of industrial engineering and operations research at the University of California, Berkeley, said while quality programs helped U.S. companies improve their products considerably in the 1980s and 1990s, the effort stalled when businesses began outsourcing much of their work to low-cost regions.

“Roughly speaking, I suppose we are about where we were at the end of the 1990s with respect to quality,” he said.

Joseph Delaney, vice president of quality at Hatch Stamping, said the Michigan-based auto-industry manufacturer has made huge strides. Hatch uses robotic vision systems and sophisticated sensors to find and contain defective parts.

The company is exploring AI applications that could further improve error detection, though Delaney said getting to absolute zero will be challenging given the complexity of the parts and the number of things that could go wrong.

The technology and processes adopted in pursuit of zero defects can be expensive, though some companies, such as industrial-parts maker Parker Hannifin, have said their initiatives save money. Mary Litteral, an auto-industry veteran and consultant who trains companies in zero-defect principles, said the cost of poor quality can equate to at least 10% of sales once all factors, including the time spent dealing with problems, are taken into account.

The zero-defect regimen of Schneider Electric, which makes products for the energy industry, includes torque wrenches that indicate when the correct tension is reached and AI tools that find anomalies. Aamir Paul, the company’s president of North America operations, said the company encourages employees to speak up—anonymously, if they prefer.

Human error is a perennial cause of defects, but Litteral said it can be taken out of manufacturing systems. A machine can be built so it is impossible to load a tool backward, she said, or an adhesive dispenser designed so it shuts off when it runs dry.

Daniella Picciotti, a quality auditor and the incoming chair of the American Society for Quality, a professional group, said companies usually focus on critical parts, with others inspected via sampling. That makes catching everything a huge challenge, she said, and even well-run manufacturing systems can be undone by new suppliers, new materials or new employees.

“The risk of failure is inherent,” she said. “It’s always going to be there.”

Buyers find more to choose from as automakers expand options for those looking beyond gas-powered cars

Automakers have been working for years to transcend the image of hybrid cars as stodgy fuel sippers, remaking them with sportier designs and extra pep. Now, the once-niche hybrid is the hottest car on the lot.

Hybrids, which combine a gas engine with a battery-propelled motor to boost fuel efficiency, have been a small but steady slice of the U.S. car market since the Toyota Prius ushered in the technology more than two decades ago. In recent years, they have taken a back seat to fully electric vehicles, as automakers introduced many EVs to challenge Tesla.

But car brands have been methodically expanding their hybrid offerings—partly to help meet tougher tailpipe-emissions rules—and for some, they have become a competitive edge. Hybrid leader Toyota Motor 7203 2.26%increase; green up pointing triangle, for example, offers a hybrid version of nearly every gas-powered model in its U.S. showrooms. In some cases, such as Toyota’s new Camry sedan or Sienna minivan, a hybrid is the only option.

The number of hybrid models on sale in the U.S. grew 40% over five years, to about 70 for the 2024 model year, Cox Automotive estimates. Hybrids now are available across more vehicle sizes and body styles than in past years: larger SUVs, pickups, jeeps and even sports cars.

“Hybrids now have very few compromises compared to their gas alternatives,” said Andrew Frick, head of Ford Motor’s gas and hybrid vehicle business. The hybrid version of the Ford F-150 pickup, for example, is now more powerful than most gas versions of the truck.

U.S. sales of hybrids jumped 50% in the first two months of the year. That surge outpaced EV sales, which grew 13%, in both growth and volume. Hybrids flew off dealer lots in 25 days on average, nearly three times faster than EVs and twice as fast as gas-powered cars, according to research site Edmunds.

The buzz surrounding battery-powered vehicles also has fueled interest. Some EV-curious shoppers are stopping short of going fully electric and are driving off in hybrids instead, dealers and car executives say. The boom in demand is happening despite modest marketing compared with EVs, and during a time of relatively tame gas prices.

“I think there is a halo effect from EVs,” said Doug Eroh, president of Longo Toyota in El Monte, Calif. Customers often inquire about an EV but are hung up on concerns about driving range and charger availability, Eroh said.

Another factor propelling hybrid sales is the introduction of several plug-in models in recent years by Volvo Cars, BMW, Hyundai Motor, Kia and Stellantis-owned Jeep. Plug-in hybrids travel solely on electric power, typically for 20 to 40 miles, before the gas engine comes on.

For years, many auto executives played down their hybrid offerings—or even bypassed the technology altogether—to invest heavily in fully electric models as Wall Street cheered all things EV.

Some are playing catch-up. General Motors once dismissed hybrids in favor of a more aggressive electric-car push, but now plans to introduce some plug-in hybrid models in North America. Nissan Motor said it was examining ways to bring hybrids it sells in other markets to the U.S.

Volkswagen North American Chief Pablo Di Si has said VW was looking at adding a plug-in hybrid to its lineup of vehicles in the U.S

The snapback in hybrid demand is a boon for Toyota, which has been criticized by environmental groups for sticking with the gas-electric technology. The Japanese carmaker has said EVs aren’t practical for many customers, and hybrids help reduce carbon emissions.

Early on, Toyota drew a fan base of environmentally conscious buyers and celebrities including Leonardo DiCaprio and Natalie Portman. Hybrid sales continued to grow but were seen as cars for the green-minded buyer, dealers say.

Toyota set out to change that perception. Starting around 2018, it began launching new versions of its hybrids, aiming to make them both better looking and more powerful. For example, the revamped Prius, unveiled in 2022, has roughly the same fuel economy—57 miles a gallon—as the previous generation but delivers an additional 70 horsepower.

Designers also wanted to give the Prius a sportier look, even if the features—such as larger tires or a less aerodynamic body—sacrificed a bit of fuel economy. Toyota wanted people to buy the Prius because it was beautiful, Toyota design chief Simon Humphries said.

Other carmakers are also leaning into their hybrids.

Beginning in 2021, the Stellantis Jeep brand rolled out a plug-in hybrid version of its popular Wrangler, backed by commercials featuring the cars foraging through muddy rivers.

Ford said it plans to quadruple hybrid sales over the next five years, and has had trouble keeping pace with demand for the hybrid version of the Maverick, a compact pickup truck it rolled out in late 2021.

For consumers, the financial benefits of owning a hybrid are easier to understand than those of EVs, say dealers and car executives. EV shoppers have more to consider, such as the expense of a home charger, uncertainty about resale values and the cost of maintenance and repairs.

“Customers don’t have to change their habit on hybrid,” Ford Chief Executive Jim Farley said at an investor conference last month. “They can immediately do the math.”

Hybrid prices also have fallen relative to gas or diesel models. For the 2024 model year, the average sticker price on hybrids was about 9% more than the comparable internal-combustion-engine vehicle, down from a 43% premium in 2007, according to data from private-equity firm Mobility Impact Partners.

Randall Snider traded in two gasoline vehicles, a pickup and an SUV, for two Ford Maverick hybrid pickups last year. “My thought process was, ‘What’s the most economical?’” said Snider, a retired Orange County resident.

He considered an EV but didn’t think the additional cost made sense. “You might go on two vacations for the price difference between a Maverick and a Tesla,” he said.

Returns on equity are far higher than those elsewhere in the banking sector

Storm clouds are gathering over the credit card industry. Americans have run through their savings and are falling behind on their loans. Regulators want to cap the late fees that large card issuers can charge to $8 — less than a third of their current levels. Yet you wouldn’t know it from the share prices of the card companies.

American Express shares are close to record highs, up 40 per cent over the past year. Synchrony Financial, which provides cards for stores such as JC Penney and American Eagle Outfitters, has gained 45 per cent. Capital One Financial, which is buying rival Discover Financial Services, is up 50 per cent.

Americans held more than $1.1tn on their credit cards at the end of 2023, an all-time high. Nearly 10 per cent of this balance was in serious delinquency (defined as 90 days or more late), according to the Federal Reserve Bank of New York. 

More alarming is the rate at which people are becoming seriously delinquent. This surged to 6.4 per cent in the fourth quarter, up from just over 4 per cent at the end of 2022 and the highest level in more than a decade. 

The stress is most acute for younger borrowers and those with poor credit scores. Amex, with wealthier borrowers, reported the lowest 30-plus-day delinquency rate among the six major US card issuers during the fourth quarter, at 1.3 per cent. JPMorgan Chase and Bank of America were at 2.1 per cent and 2.3 per cent. At Capital One and Discover this was nearly 4 per cent.

Cutting late fees also won’t affect companies equally. These revenues grew to more than $14bn in 2022 of the $130bn issuers charged consumers in interest and fees, according to the Consumer Financial Protection Bureau.

Smaller, standalone credit card companies such as Bread Financial look most vulnerable, suggests S&P Global. Subprime borrowers account for about 43 per cent of Bread’s balances last year. The cap could reduce its revenue by about 25 per cent.

But Synchrony is also exposed, with late fees responsible for nearly a fifth of its operating revenue in 2023. Nonprime borrowers account for about 28 per cent of its credit card balances. Its partner agreements with retailers means some of the impact from loss of late fees will be shared.

Credit card companies are high-margin businesses, with returns on equity far above those elsewhere in the banking sector. Amex reported a 33 per cent fourth-quarter return on average common equity. In the coming storm, not everyone will get a soaking.

Chinese and western scientists identify ‘red lines’ on AI risks

Top experts warn existential threat from AI requires collaboration akin to cold war efforts to avoid nuclear war

Leading western and Chinese artificial intelligence scientists have issued a stark warning that tackling risks around the powerful technology requires global co-operation similar to the cold war effort to avoid nuclear conflict.

A group of renowned international experts met in Beijing last week, where they identified “red lines” on the development of AI, including around the making of bioweapons and launching cyber attacks.

In a statement seen by the Financial Times, issued in the days after the meeting, the academics warned that a joint approach to AI safety was needed to stop “catastrophic or even existential risks to humanity within our lifetimes”.

“In the depths of the cold war, international scientific and governmental co-ordination helped avert thermonuclear catastrophe. Humanity again needs to co-ordinate to avert a catastrophe that could arise from unprecedented technology,” the statement said.

Signatories include Geoffrey Hinton and Yoshua Bengio, who won a Turing Award for their work on neural networks and are often described as “godfathers” of AI; Stuart Russell, a professor of computer science at the University of California, Berkeley; and Andrew Yao, one of China’s most prominent computer scientists.

The statement followed the International Dialogue on AI Safety in Beijing last week, a meeting that included officials from the Chinese government in a signal of tacit official endorsement for the forum and its outcomes.

The gathering forms part of the pressure from the academic community for tech companies and governments to collaborate on AI safety, in particular by bringing together the world’s two technology superpowers, China and the US.

US President Joe Biden and his Chinese counterpart Xi Jinping met in November and discussed AI safety and agreed to establish a dialogue on the issue. Leading AI companies around the world have also met Chinese AI experts behind closed doors in recent months.

In November, 28 nations, including China, and leading AI companies agreed broad commitments to work together to tackle the existential risks stemming from advanced AI during UK Prime Minister Rishi Sunak’s AI safety summit.

In Beijing last week, experts discussed threats regarding the development of “artificial general intelligence”, or AI systems that are equal to or superior to humans.

“A core focus of the discussion were the red lines that no powerful AI system should cross and that governments around the world should impose in the development and deployment of AI,” said Bengio.

These red lines relate to increasingly autonomous systems, with the statement saying that “no AI system should be able to copy or improve itself without explicit human approval and assistance” or “take actions to unduly increase its power and influence”.

The scientists added that no systems should “substantially increase the ability of actors to design weapons of mass destruction, violate the biological or chemical weapons convention” or be able to “autonomously execute cyber attacks resulting in serious financial losses or equivalent harm”.

Private equity group will acquire majority stake from Bluegem as beauty market remains buoyant

French private equity group PAI Partners is to buy a majority stake in professional hair products maker Beautynova as it seeks to capitalise on the buoyant beauty market. 

Paris-based PAI will acquire a 51 per cent stake in Beautynova for about €330mn from consumer-focused private equity firm Bluegem.

Bluegem, which originally bought its 79 per cent stake in 2020 for €52mn, will sell its position to PAI and then buy back in for about 47 per cent.

Milan-based Beautynova brands include Medavita and Urban Tribe. The company also develops haircare products aimed at professionals for treatments, colouring and styling, with 18,000 formulas so far.  

It had sales of €130mn in 2023 and earnings before interest, taxes, depreciation and amortisation of €30mn — valuing the company at a multiple of 11 to 12 times ebitda. 

“Beautynova has evolved into a leading professional haircare platform, more than tripling its sales and experiencing substantial geographical expansion, with a particular focus on the US,’’ the private equity firms said in a statement on Monday. They plan to accelerate the growth of Beautynova across the US and Europe.

The deal is the latest in a string of mooted transactions in the beauty sector after private equity-owned German beauty retailer Douglas announced earlier this month plans to list in Frankfurt. Spanish luxury and beauty group Puig, which owns brands including Paco Rabanne and Charlotte Tilbury, said at the end of 2023 that it would explore a listing. 

Following the transaction, Bluegem will retain a 47 per cent stake in the beauty company with the remaining 2 per cent held by Beautynova’s management.

The environment for private equity exits has been tough on both sides of the Atlantic as rising interest rates and market volatility have severely curtailed the market for listings. A report by consultancy Bain said private equity groups globally were sitting on a record 28,000 unsold companies worth more than $3tn.

However, the announcement of the Douglas listing, as well as Puig’s plans and UK buyout firm Permira’s exploration of a listing for luxury Italian sports shoe company Golden Goose, has raised hopes that the market is regaining momentum in Europe. 

At the same time, demand for beauty products remains buoyant globally despite pressures on household spending and an uncertain outlook in China, the sector’s fastest-growing market. In the US — beauty’s biggest market — sales of high-end hair products were the fastest-growing category last year, with dollar sales up 24 per cent, according to consumer research company Circana. 

Deals for beauty companies that cater to higher-spending consumers fetched substantial price tags last year despite the more subdued global dealmaking environment. French luxury group Kering’s€3.5bn acquisition of fragrance brand Creed fetched a multiple of about 23 times ebitda, while L’Oréal snapped up Aesop — the minimalist maker of high-end soaps — in a $2.5bn deal. 

L’Oréal’s specialist beauty division, which caters to professionals and is largely focused on haircare, delivered €4.6bn in sales after growing 7.6 per cent on a like-for-like basis last year. 

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